Monday PM March 24th, 2008
by: Ed Mayberry, March 24, 2008 5:03:00 pm
The Justice Department has approved Sirius Satellite Radio's $5 billion buyout of rival XM Satellite Radio. The merger was approved despite opposition from consumer groups and an intense lobbying campaign by the land-based radio industry. Regulators said the merger is not likely to substantially hurt competition or consumers. Shareholders approved the purchase last November and the companies say the merger will save hundreds of millions of dollars in operating costs--savings that will ultimately benefit their customers. In explaining its decision, the Justice Department said the two companies compete not just with each other but also with other forms of radio and entertainment. It noted that the likely evolution of technology in the future makes it "unlikely that the transaction would harm consumers in the longer term.''
After falling for six straight months, sales of existing homes posted an unexpected increase in February. But the median home price tumbled by the largest amount on record. The National Association of Realtors said that sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of 5.03 million units. It was the biggest increase in a year and caught economists by surprise. They had been expecting a small decline. Part of the sales improvement may have reflected more aggressive price cutting. The median home price fell to $195,900, a decline of 8.2 percent. That was the largest year-over-year drop on records that go back to 1999. Last week, the Houston Association of Realtors reports a 10.2 percent decline in home sales while the median price actually rose 3.1 percent to $151,430.
Bear Stearns shares went up on news that JPMorgan Chase is increasing its offer to acquire the ailing investment bank to $10 per share from the bargain basement price of $2 per share. The move follows a backlash last week among bear shareholders who thought the offer undervalued the 85-year-old institution. The new deal values Bear Stearns at about $1.19 billion--still a tiny fraction of what the company was worth before its near-collapse earlier this month. It also includes a provision for JPMorgan to buy 95 million new Bear Stearns shares immediately. That gives it a 39.5 percent stake in bear before shareholders have even voted. The Federal Reserve Bank of New York's $30 billion special financing linked to the transaction also has been amended so that JPMorgan will take on the first billion dollars of any losses suffered by Bear Stearns.
The national average price of a gallon of gasoline has climbed by seven cents over the last two weeks. The latest Lundberg Survey says the average price of self-serve regular was $3.26 a gallon Friday. Mid-grade was $3.38 and premium was $3.50. Of the cities surveyed, the cheapest price was in Newark, New Jersey, where a gallon of regular cost $3.03, on average. The highest average price was in San Francisco at $3.66.
A Republican Senator says lawmakers need to cut short their break, and get to work on fixing the economy. Arlen Specter told CNN this weekend that lawmakers need to work on proposals to tighten regulation of investment banks and help people facing foreclosure. He says it would send the message from Congress that "we're in this, too.'' Lawmakers aren't scheduled to be back at work until March 31st. Specter says it's "entirely likely'' that Congress will push for more significant oversight of Wall Street. On ABC, Democratic Senator Charles Schumer of New York said Senate Democrats plan to push a "modest'' and "thoughtful'' plan that would be aimed partly at helping people who are threatened with foreclosure refinance. Republican Jon Kyl of Arizona said Republicans might oppose some parts of the proposal, but that they could support changes in the regulation of financial markets.
The focus of this week's economic reports will be on the consumer and the housing market. Tomorrow, the Conference Board reports on consumer confidence. Later in the week, reports are scheduled on February new home sales and on fourth quarter economic growth.