President Bush has lifted an executive ban on offshore drilling as U.S. drivers struggle with higher fuel prices. But the move, by itself, will do nothing unless Congress acts as well. There are two prohibitions on offshore drilling — one imposed by Congress and another by executive order signed by the first President Bush in 1990. The current president, trying to ease market tensions and boost supply, last month called for Congress to lift its prohibition before he did so himself. Congressional Democrats, joined by some GOP lawmakers from coastal states, have opposed lifting the ban that’s barred energy companies from waters along the east and west coasts and in the eastern Gulf of Mexico. Critics raise concerns about protecting beaches and the tourism economies of coastal states. Senate Environment Committee Chairwoman Barbara Boxer of California says Bush’s proposal is “something you’d expect from an oil company CEO.”
It’s a signal from the government that it’s ready to do what’s necessary to help mortgage giants Fannie Mae and Freddie Mac. The Federal Reserve says it’s giving its New York bank the power to lend to the companies, if necessary. And the Treasury is looking for an OK from Congress to expand its credit to them, and perhaps even make an equity investment. The most powerful people in Washington are making it clear they’ll support efforts to shore up the mortgage giants. The Senate’s Majority Leader and the House Republican Leader have used almost identical language to say they “stand ready” to work with the administration to calm fears about the mortgage markets. The White House says President Bush has told Treasury to “immediately work with Congress”‘ to get the plan passed. John McCain and Barack Obama say they support the stabilization efforts.
Indymac’s assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures. Regulators say the bank is the largest regulated thrift to fail and the second-largest financial institution to close in U.S. history. The office of thrift supervision said it transferred Indymac’s operations to the Federal Deposit Insurance Corporation because it did not think the lender could meet its depositors’ demands. OTS Director John Reich says the institution failed “due to a liquidity crisis.” The FDIC has reopened the bank as Indymac Federal Bank. According to regulators, Indymac customers with funds in the bank were limited to taking out money via automated teller machines over the weekend, debit card transactions or checks. Indymac had $32.01 billion in assets as of March 31st. Total deposits are $19.06 billion. The FDIC estimates its takeover of Indymac will cost between $4 billion and $8 billion.
The Federal Reserve has adopted rules to give home buyers more protection from the types of shady lending practices that have contributed to the housing crisis and propelled foreclosures to record highs. Fed Chairman Ben Bernanke and his central bank colleagues approved a plan Monday that would crack down on dubious lending practices that have hurt many of the riskiest “subprime” borrowers — people with tarnished credit histories or low incomes. The new rules would restrict prepayment penalties imposed on borrowers who pay off a loan early. Bernanke says “unfair or deceptive acts and practices by lenders” led to many credit-challenged borrowers winding up with “particularly high-cost loans.” The Fed is also barring mortgage companies and brokers from making loans without proof of a borrower’s income. And they have to make sure that risky clients have set aside money for property taxes and insurance. Wharton School of Business Real Estate and Finance professor Susan Wachter says, while the damage to the country’s mortgage system has already been done, the Fed’s action “absolutely will make a difference going forward.”
Belgian brewer Inbev has announced it will buy its American rival Anheuser-Busch for $52 billion. The acquisition means control over America’s largest brewer — and the number-two worldwide — moves overseas. Based in St. Louis, Anheuser-Busch has more than 48 percent of the American market share with beers that include Bud Light. Inbev first bid for Anheuser-Busch on June 11th. Its beers include Stella Artois and Becks. The deal must be approved by shareholders and European and U.S. antitrust regulators. The merger will produce the world’s largest brewer and the fourth-largest consumer product company worldwide.
A national survey shows consumers across the nation are paying an average of 1.5 cents a gallon more for gasoline than they were three weeks ago. According to the Lundberg Survey, the average price of regular gasoline at self-serve stations was $4.11 a gallon on Friday. Mid-grade was $4.24 a gallon and premium went for $4.35. The survey shows the average U.S. price for gas is $1.05 higher than it was a year ago. The cheapest gas was in Tucson, Arizona, where the price for regular was $3.82 a gallon. San Francisco ranked the nation’s highest for gas prices: $4.53 a gallon for regular.
Investors this week will be looking at fresh data on inflation and retail sales. Tuesday, the Labor Department releases the June producer price index as well as the monthly snapshot of retail sales. The consumer price index follows on Wednesday along with the Federal Reserve’s monthly reading on industrial production. We’ll also have June housing starts from the Commerce Department as well as the minutes from the Federal Reserve’s June 25th policy-setting session.