Wednesday PM March 19th, 2008
by: Ed Mayberry, March 19, 2008 12:03:00 pm
New steps are being taken by the government to try to break the logjam in the housing market. It's relaxing capital requirements for Fannie Mae and Freddie Mac to provide an additional $200 billion in financing for home loans. The initiative is part of a broader government strategy to ease a credit crisis that has made it difficult for consumers and businesses to borrow, resulting in recent fear spreading in the global financial markets. The Office of Federal Housing Enterprise Oversight, which oversees the government-sponsored companies, says the mandatory cash cushion for Fannie and Freddie--now nearly $20 billion for the two--will be reduced by a third under the new plan. The freed-up money will go toward buying mortgages of struggling homeowners, enabling them to refinance into more affordable loans.
The latest annual Houston Board Index is out from Spencer Stuart, with statistics on the boards of Houston's 100 largest public companies. Tom Simmons with Spencer Stuart's Houston office says more companies are instituting a mandatory retirement age for directors.
"All 72-year-olds are not created equal, as we know, and that some 72-year-olds have been on the board for a while and they're just not as fully engaged as they used to be, so it's advantageous for the company to have a mandatory age in place to ease that conversation that is necessary. On other cases, some other board members are very active and engage into their 80's, so it's almost by a case-by-case situation. But more companies do have retirement, mandatory retirement age."
There are other changes in how boards typically operate.
"Well, it's interesting, because after the changes of the early 2000's, the whole director nomination process itself has become independent. Years ago, the CEO would say ‘I need a new director,' and he would control that process. But because of Sarbanes-Oxley and the other changes, that nominating process has now been put in the nominating and/or governance committee of the board. And while the CEO will participate, this truly has become an independent process. And so it's not only do they go out and hire firms such as Spencer Stuart to help them to recruit new directors, they are also very keen on the independence of those directors for all the reasons that we've stated. So we vet individuals very clearly and very deeply, to make sure that they are independent from any potential conflicts with other board members, any business that they do, and just make sure that they are independent."
Spencer Stuart is a headhunting firm that is hired by corporations to find senior executives.
Air fares to Europe are going up. Fort Worth-based American Airlines and Northwest Airlines have raised their fuel surcharges for flights to Europe by an additional $20 per round trip effective today. Tom Parsons, who operates the travel Web site bestfares.com, says that brings the total fuel surcharge on U.S. flights to London on those carriers to a whopping $242. That's on top of fares that are rising sharply as U.S. airlines try to recoup some of their extra expenses due to soaring fuel prices. Parsons says total costs of U.S.-to-Europe flights this summer will be two to three times what they are now. He says Americans traveling to Europe will face a triple whammy of higher fuel surcharges, higher air fares and the high cost of the Euro.
A pair of airlines are looking to cut back on service in reaction to soaring fuel costs. United Airlines plans to ground as many as 20 airplanes, or four percent of its fleet. It will further cut capacity in 2008 to soften the blow of soaring oil prices that could add $1 billion to its fuel tab over last year. The nation's second-largest carrier says it will ground and sell back to lessors 15 to 20 older, narrow-body 737s that are less fuel-efficient than others in its 460-plane fleet. It did not immediately specify what domestic flights or routes could be trimmed. Delta Air Lines says it will offer voluntary severance payouts to roughly 30,000 employees, or more than half its work force, along with cutting domestic capacity another five percent because of skyrocketing fuel prices.
Visa has raised $17.9 billion to complete the largest initial public offering in U.S. history and help prop up the wobbly financial services industry. The world's largest processor of credit and debit cards sold 406 million shares at $44 apiece on Tuesday to easily eclipse the previous U.S. record IPO of $10.6 billion set by AT&T Wireless eight years ago. The IPO price topped the range of $37 to $42 per share that Visa set three weeks ago just before its executives began meeting with institutional investors and analysts to drum up interest. If investment bankers exercise an option on another 40.6 million shares, Visa's IPO will end up raising $19.7 billion before expenses. Visa shares, trading on under the "V'' ticker symbol, began trading on the New York Stock Exchange. The San Francisco-based company will debut with a market value of about $36 billion. JPMorgan Chase, Visa's biggest customer and shareholder, is in line for the biggest payoff from Tuesday's IPO--about $1.25 billion, based on figures provided in Securities and Exchange Commission documents. That's five times more than New York-based JPMorgan has agreed to pay in a proposed takeover of investment bank Bear Stearns.
Federal officials opened bids today on 615 offshore tracts from at least 78 petroleum exploration companies. The companies put up 1,057 bids on central Gulf of Mexico leases auctioned by the Minerals Management Service in New Orleans. A central Gulf auction last October had been delayed for months because of a dispute between the state and federal government over Louisiana's share of offshore royalties. This sale marks the first time that Alabama, Mississippi, Louisiana and Texas will get a cut of the revenue generated from the eastern region. Congress in 2006 ordered the states get 37.5 percent of future royalties from Gulf oil and gas production in federal waters off their coastlines. The money is earmarked for coastal restoration and hurricane recovery. The auction yielded 1,428 bids on 723 tracts off the coasts of Louisiana, Mississippi and Alabama. Bids also were opened from five companies bidding on 36 tracts in the eastern Gulf--an area south of Alabama and to the far west of the Florida coast.