Tuesday PM October 19th, 2010
by: Ed Mayberry, October 19, 2010 4:10:00 pm
Home construction rose slightly last month on the strength of single-family homes, but the market was still too weak to propel growth in the battered industry. The Commerce Department says construction of new homes and apartments rose 0.3 percent in September from a month earlier to a seasonally adjusted annual rate of 610,000. August's figure was revised upward to an annual rate of 608,000 from an earlier estimate of 598,000. Construction was driven by a 4.4 percent monthly increase in single-family homes, which are about 80 percent of the market. Construction of condominiums and apartments fell by nearly ten percent. The number of building permits issued to build new homes, a sign of future activity, fell 5.6 percent from a month earlier.
Single-family home sales in Houston declined in September for the fourth consecutive month, according to the Houston Association of Realtors. Some 3,903 homes sold, down from 4,208 sold in August and the peak month of May with 5,718 homes sold. Luxury homes in the half-million dollar range and above rose 6.6 per cent from the same month in 2009, and sales of homes priced below $80,000 increased 6.3 percent.
The pace of U.S. home foreclosures may not be slowing down much after all. Bank of America says it plans to resume seizing more than 100,000 homes in 23 states that require judicial authorization to restart the foreclosure process, but not in Texas. It says it has a legal right to foreclose despite accusations that documents used in the process were flawed. The bank says it will resume next week. Bank of America says it's confident of its foreclosure decisions in most of the questionable cases. The bank is still delaying foreclosures in the 27 other states, which don't require a judge's approval. Two weeks earlier, the bank began halting foreclosures nationwide amid allegations that bank employees signed but didn't read documents that may have contained errors. It's not yet clear if other major leaders will follow suit and resume foreclosures in the states that require a judge's approval. The move by the nation's biggest bank could give way to an industry-wide effort to push ahead with a wave of foreclosures that have depressed the housing market. Meanwhile, Ally Financial's GMAC mortgage unit will also resume foreclosures once documents are fixed. A spokeswoman for Ally says as GMAC reviews the affected files and takes any remediation needed, “the foreclosure process then resumes.” Analysts expect other lenders to correct problems with the way they handled documents and proceed with a wave of foreclosures. Nancy Bush of NAB Research says they're likely to follow because foreclosure practices are similar from bank to bank. As she puts it “we'll be back to square one by the end of the year.”
The White House says federal agencies are investigating allegations of widespread errors in foreclosure documents. White House Press Secretary Robert Gibbs says in a statement that an interagency task force on financial fraud has launched an investigation into the foreclosure process. He also says the Federal Housing Administration, a federal agency that guarantees mortgages, is investigating, too. “We remain committed to holding accountable any bank that has violated the law,” Gibbs says. Gibbs says the administration supports an effort by attorneys general in 50 states to investigate the matter. Several administration officials, however, have said over the past week that they don't back a nationwide halt to foreclosures.
A BP executive says the company and industry will be drilling in deeper waters and go farther in their search for oil reserves, and must understand the risks so they can mitigate them in the future. Mike Utsler, the chief of BP's restoration effort along the oil-stained Gulf Coast, also admitted to a standing-room-only crowd at an industry-sponsored conference in Tampa, Florida, that the oil giant was slow to engage local leaders in its response to the Gulf spill. However, he defended the use of dispersants to break down the oil and blamed a piece of equipment maintained by another company for failing to act as the last line of defense.
BP's new chief executive has told the oil company's employees that their performance on safety issues will be the sole measure for awarding fourth-quarter bonuses. Chief Executive Bob Dudley said in a statement to workers that this was intended to reinforce the message that the company's top priorities are safety, compliance and operational risk management. BP is struggling to restore its image following the disastrous oil spill in the Gulf of Mexico. BP spokesman Robert Wine says that the new bonus policy applies to employees in operational roles, who are the largest part of BP's 80,000 work force.
Scientists say that six months after the largest offshore oil spill in U.S. history, damage to the Gulf of Mexico is less dramatic than some had predicted. In an informal Associated Press survey, 35 researchers who study the Gulf lowered their rating of its ecological health by several points. On a scale of 0 to 100, the overall average grade was 65--down from 71 before the spill. This reflects scientists' views that the spilled oil further eroded a beleaguered body of water tainted for years by farm runoff, overfishing, oil from smaller spills and natural seepage. Scientists and the government are shifting their focus from the surface to deeper waters and the ocean bottom. Scientists worry the oil deep below will cause genetic mutations, stress or weaken some species, with unknown or delayed effects.
Scientists studying the aftermath of BP's oil spill are looking at whether the pollution is a renewed threat to peregrine falcons, which rebounded from the brink of extinction a generation ago. The research may also help determine the health of species lower down the food chain in the Gulf of Mexico. The peregrine fund, an Idaho-based nonprofit, and others are capturing the birds on South Padre Island in Texas and taking blood samples. They want to see if the falcons show signs of eating prey that's contaminated by the oil spill. Peregrine falcons nearly died out before the pesticide DDT was banned in 1972. Scientists are concerned that falcons migrating through the Gulf from their homes in Alaska and Greenland may consume toxins from the oil spill.
A government-funded study says airline flight delays cost passengers a lot more than grief--$16.7 billion more, to be precise. That's the price a study delivered to the Federal Aviation Administration puts on the cost to passengers for flight delays in 2007. That was the latest year for which complete data was available when researchers began working on the study. The cost to airlines for delays was $8.3 billion, mostly for crew, fuel and maintenance. Overall, the cost was $33 billion, including to other parts of the economy. The things the researchers looked at included passengers' lost time waiting for flights and then scrambling to make other arrangements when flights are canceled.
Federal investigators say they have evidence an Oregon defense contractor sold phony replacement parts to the military that could cause attack helicopters to crash. In affidavits filed in federal court in Eugene, Oregon, Defense Department investigators say they have evidence Coos Bay, Oregon-based Kustom Products and related companies owned by Harold Bettencourt II sold fake replacement parts to the military. The affidavits say the companies, including Coloc Manufacturing in Canton, Texas, provided lock nuts meant for tanks and trucks in place of more expensive and differently designed lock nuts that secure the rotors on Kiowa attack helicopters. The investigation is ongoing, and no charges have been filed. A man answering the phone at Kustom Products said they had no comment on the investigation.
Christine Todd Whitman, former administrator of the Environmental Protection Agency, says Congress should include nuclear power in any requirement aimed at producing more clean energy. Lawmakers are weighing a renewable electricity standard, which would require utilities to get a minimum percentage of their power from sources such as wind, solar and geothermal. But Whitman tells the Associated Press she'd like to see it broadened to a “green” standard that includes nuclear power. She argues that renewable sources alone won't be able to meet the country's growing energy needs. Whitman co-chairs a nuclear energy-financed group, the Clean and Safe Energy Coalition.
The president of the Federal Reserve Bank of Kansas City says keeping interest rates too low for too long would not be in the best long-term interest of the economy. Thomas Hoenig, who's been the bank's president for 20 years, has been a critic of the Federal Reserve maintaining interest rates at record lows, saying that doing so could lead to inflation or create speculative bubbles. He opened a speech at Oklahoma City University by saying he does not favor high interest rates, but he is in favor of non-zero interest rates.
Federal regulators have lowered the estimated cost of bank failures by $8 billion over four years and are proposing no increase in the fees banks pay to replenish the fund that insures deposits. The Federal Deposit Insurance Corporation provided the new estimate of $52 billion in losses from 2010 to 2014, down from a previous projection of $60 billion. The FDIC said that losses to the insurance fund from failures this year, around $20 billion, have been less than expected. The financial overhaul law enacted last summer mandates that the insurance fund be restored to at least 1.35 percent of total insured bank deposits by 2020. With 297 banks having failed since the start of 2008, the fund was in the red by $20.7 billion as of June 30th and was at 0.28 percent of total deposits.
Federal Regulators have proposed rules giving shareholders at all public companies a nonbinding vote on executive compensation packages. The Securities and Exchange Commission has opened to public comment the so-called “say-on-pay” proposals. They also would give shareholders an advisory vote on the “golden parachute” deals that executives get when their companies are acquired by others in mergers. The SEC could formally adopt the new rules sometime after the 30-day comment period. They were mandated under the financial overhaul law enacted last summer. Investor advocates, union pension funds and shareholder groups have pushed for such a change. A public outcry over lavish executive compensation was raised during the financial crisis.
A federal judge will consider a government offer to settle with American Indian farmers who say the Agriculture Department discriminated against them for decades. The two sides are meeting in U.S. District Judge Emmet Sullivan's courtroom to discuss a proposed deal. The government and the plaintiffs both declined to disclose the terms of the would-be settlement ahead of hearing. The lawsuit filed in 1999 contends Indian farmers and ranchers lost about $500 million because they were denied USDA loans. The government settled a similar lawsuit filed by black farmers more than a decade ago. American Indian farmers have said that local USDA officials tried to squeeze them out of business by denying them loans that instead went to their white neighbors.
Many of the nation's cattle producers are struggling to get reasonable prices for their animals--a trend they say could eventually mean lesser-quality meat on dinner tables across the United States. The Associated Press interviewed cattle producers who reported having no choice but to sell the vast majority of their cattle to the single buyer who submitted a competitive bid. An AP analysis of shipping logs and sales receipts confirmed their accounts. The producers say the struggle to get a decent price is helping to push ranchers and feedlot owners out of business. The complaints have also drawn the interest of federal regulators, who are investigating possible antitrust violations.
The U.N. Telecommunications Agency says the number of new mobile phone contracts is slowing as cell phone usage reaches saturation point. The International Telecommunication Union says developed countries already have 116 contracts for every 100 inhabitants. ITU predicts there will be some 5.3 billion mobile subscriptions by the end of the year including 940 million for high-speed connections. The Geneva-based agency says over 90 percent of the world's 6.7 billion people now live in areas with access to mobile phone networks and 143 countries offer high-speed mobile services that can be used for mobile broadband. The figures released by ITU also forecast that two billion people worldwide will have access to the internet by the end of the year.