The House on Monday defeated a $700 billion emergency rescue package, ignoring urgent pleas from President Bush and bipartisan Congressional leaders to quickly bail out the financial industry. Stocks started plummeting on Wall Street even before 228-205 to reject the bill was announced on the House floor. A White House spokesman says President Bush is very disappointed in the vote rejecting the administration’s rescue plan for the nation’s financial industry. Bush will meet with advisers to decide what next steps should be taken. The Senate had planned a Wednesday vote on the measure. Congress has been trying to adjourn so that its members can go out and campaign, but the House has decided to reconvene Thursday instead of adjourning for the year.
Several Republican aides say House Speaker Nancy Pelosi ended any spirit of bipartisanship surrounding the bill with a scathing speech near the close of today’s debate. Her remarks blamed President Bush for the current financial industry turmoil. Without mentioning her by name, Florida Congressman Adam Putnam said “the partisan tone at the end of the debate” affected votes for the measure. House Minority Leader John Boehner was more specific, saying Pelosi’s words “poisoned” the situation, alienating lawmakers they’d hoped would back the bill. Massachusetts Congressman Barney Frank scoffed at the idea. The Democrat who chairs the Financial Services Committee says if Pelosi’s remarks “stopped people from voting, then shame on them.” He said if a speech hurt their feelings then “they really don’t belong here. They’re not tough enough.”
Wall Street’s meltdown isn’t just America’s problem. Asia’s export-driven manufacturers face the prospect of their biggest market — the United States — drying up. Retailers could see a slow Christmas in Europe and America. And spooked lenders around the world may drastically reduce the amount of credit doled out to consumers and corporations, which in turn could send other economies into a tailspin. The World Economic Forum says now is not the time to panic, but serious problems still loom. It warned that the world faces a “heightened risk of widespread contagion” and of “massive consumer credit defaults.” Consultancy global insight expects things “to get worse before they get better” and doesn’t expect a global recovery until 2010.
The Federal Reserve and other countries’ central banks have announced fresh steps to battle a worsening credit crisis that threatens to unhinge the U.S. economy. The Fed says the action is intended to “expand significantly” the availability of cash available to squeezed banks and other financial institutions in an effort to provide relief to the worst credit crisis since the Great Depression. The Fed cited “continued strains” in the demand for short-term funding.
The government says Citigroup will acquire the banking operations of Wachovia in a deal facilitated by the Federal Deposit Insurance Corporation. The FDIC says Wachovia didn’t fail, and that all depositors are protected and there will be no cost to the deposit insurance fund. The sale of Wachovia comes just days after the government’s seizure of Seattle-based Washington Mutual — the largest bank failure in U.S. history. Wachovia has been among the banks hardest hit by the ongoing crisis in the mortgage market. Its current problems stem largely from its acquisition of mortgage lender Golden West Financial in 2006 for roughly $25 billion at the height of the nation’s housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of pick-a-payment loans — Golden West’s specialty — which let borrowers skip some payments. Citigroup says it will sell $10 billion worth of common stock and slash its quarterly dividend in half to maintain a strong capital position, in the wake of its takeover of Wachovia’s banking operations. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.
The agency that seized Washington Mutual last week and brokered its sale to JPMorgan Chase for $1.9 billion says the deal stands whether the government’s $700 billion banking bailout proceeds or not. Federal Deposit Insurance Corporation spokesman David Barr says Citigroup’s $2.1 billion purchase of Wachovia — also arranged by the FDIC — hasn’t closed yet. The proposed federal bailout would allow JPMorgan to sell WAMU’s troubled mortgage-related assets to the government–at a profit. Spokesmen for Citigroup, Wachovia and JPMorgan didn’t immediately return phone calls seeking comment.
The 2008 Clinton Global Initiative concluded its annual meeting in New York City last week after three-and-a-half days of sessions. Some 250 new commitments totaling around $8 billion were made, impacting some 160 million people worldwide, according to CGI CEO Bob Harrison.
“Commitments are made by individuals, by companies, by philanthropic organizations like foundations, by universities and by wealthy human beings who want to make commitments to act in the four areas that President Clinton focuses on at the Clinton Global Initiative, which are poverty alleviation, global health, energy and climate change and education.”
Harrison says former President Clinton is expanding the concept of his Clinton Global Initiative.
“He launched last year CGI University, which is the way of reaching the next generation of activists—college students. People make commitments to act in the areas that we focus o—energy and climate change and global health, et cetera. And he’s going to hold the second of those — which we just literally announced — at the University of Texas in Austin this coming February. It will be February 13, 14 and 15 at the University of Texas in Austin and we’ll probably have about 1400 students from around the world.”
The Clinton Global Initiatives began in 2005, and involves hundreds of current and former heads of state, hundreds of CEOs, philanthropists and celebrities.
House Democrats are refusing to back down in their fight with their Senate on tax policy, increasing the odds that Congress will adjourn without acting to shield millions of people from the alternative minimum tax. The House adjourns for the year this evening. Without a compromise, tax legislation to fix the AMT, provide tax credits to disaster victims and extend tax credits to businesses, individuals and developers of renewable energy resources would die. Without legislation, those exposed to the AMT could grow in 2008 from about four million to up to 26 million, with an increased tax bill of around $2,000. The House on Sunday introduced two tax bills with a couple of concessions to the Senate, but it was pulled after just an hour of debate. A Senator who helped craft the Senate compromise had warned the House bill would not make it through his chamber. The divide between the Senate and House is partly over $42 billion in extensions for expired business and individual tax breaks. Fiscal conservatives in the House want to come up with revenue to fund it. Senate Republicans and the White House say anything that can be considered a tax increase has no chance.
Centerpoint Energy reports that about 145,000 customers remain without power, or about six per cent of 2.15 million customers affected by Hurricane Ike. In just over two weeks of around-the-clock repairs, power has been restored to about 94 per cent of Centerpoint’s customers. Most remaining outages are isolated transformers or service drops, which are targeted for service restoration this week. The company says in two weeks, some 12,000 workers reinstalled tens of thousands of feet of power lines that took decades to build.
A group of 81 low-income high school seniors are marking the completion of professional training with Genesys Works. Their “Breaking Through” event his afternoon at the Hobby Center for the Performing Arts on Bagby marks the beginning of their year-long professional internship in Fortune 500 companies in Houston. Corporate partners include El Paso Corporation, JPMorgan Chase, United Space Alliance, Reliant Energy, ExxonMobil, Chevron and others. Genesys Works trains and employs high school students to perform technical services for major corporations and provided the opportunity to work during their senior year.
Government data shows consumer spending in August turned in the weakest performance in six months, underscoring the threat the economy faces as the government’s stimulus program fades into the past. The Commerce Department reports that consumer spending was unchanged in August, even worse than the small 0.2 per cent gain economists had expected. It was the weakest showing since spending was also flat in February. Personal incomes were up a better-than-expected 0.5 per cent, a rebound after a 0.6 per cent drop in July. However, after-tax incomes, which felt the impact of the stimulus program to a greater extent, dropped by 0.9 per cent.
There have been 22 air fare increases this year. But fares in some cities are flat or even down, as fierce competition keeps airlines from charging as much as they would like. Business fares in early September were down five per cent in Phoenix and four per cent in New York compared to the same week last year, according to research by Bob Harrell of Harrell Associates. In many other cities ticket prices were up only marginally — one per cent in Orlando, three per cent in Atlanta, four per cent in Denver and Las Vegas. The good news in those cities doesn’t change the bad news for everyone else: overall, fares are up — 11 per cent for leisure travel, six per cent for business fares, according to Harrell. Many individual cities are worse. He found year-over-year increases of 26 per cent in Philadelphia, 17 per cent in Minneapolis, 15 per cent in Newark, N.J., 12 per cent in Dallas.
A consortium of ten northeast states says the right to pump carbon dioxide into the atmosphere sold for $3.07 per ton at the nation’s first-of-its-kind auction of pollution credits aimed at curbing global warming. The Regional Greenhouse Gas Initiative
Global oil production capacity will be insufficient within six years, according to the International Energy Agency. Capacity will improve over the next two years, but after 2013, the picture changes. The executive director of the IEA says there is not enough capacity or expansion.
Experts say the shortage of gasoline in the southeast after Hurricane Ike may have been driven, in part, by human nature. The hurricane-related disruption in gasoline supplies prompted jittery drivers from Atlanta to Nashville to top off their fuel tanks more than usual. That caused sporadic shortages and temporary shutdowns of stations. These closures only magnified the problem, leading to more shortages and skyrocketing local prices. The same protective instinct is what drove large-scale withdrawals from U.S. money-market mutual funds earlier this month, jeopardizing the industry until the government stepped in to prop it up.
As early as next spring, U.S. automakers may be able to tap into a $25 billion low-interest line of government credit. The arrangement is aimed at helping them modernize plants and build more fuel-efficient vehicles. Congress approved the plan over the weekend as part of a giant spending bill. The Energy Department says it will take at least six months, and possibly up to 18 months, to get the program running. The 25-year loans are expected to carry an interest rate of around five per cent. With weak sales, poor bond ratings and tighter credit markets, U.S. automakers would otherwise have to pay double-digit interest rates.
Freddie Mac, the failing housing giant central to the nation’s credit crisis, has received a federal grand jury subpoena from the U.S. Attorney’s Office for the Southern District of New York and an order from the Securities and Exchange Commission to preserve documents for an investigation. Both notices were received Friday, September 26th, Freddie Mac and Fannie Mae were placed into government conservatorship this month because of their precarious financial condition. The struggling mortgage lender says it will comply with the SEC Enforcement Division’s request for documents related to accounting, disclosure and corporate governance matters from January 1st, 2007 to the present.
This week brings the most-closely watched of the monthly economic reports–the jobs report. Amid signs that the economy has been slowing because of the financial crunch, the September unemployment numbers will be mined for indications of further deterioration. That’s due from the Labor Department on Friday. Consumer Confidence is due Tuesday from the Conference Board.
Halliburton says disruptions from Hurricanes Gustav and Ike in the Gulf of Mexico will probably cut into third-quarter earnings. The oilfield services company, which has corporate offices in Houston and Dubai, said the impact of the two storms will likely reduce revenue by about $80 million in the July-September period. Halliburton says the late-summer hurricanes caused minor damage to some of its facilities along the Gulf Coast and interrupted operations in the Gulf and parts of Louisiana and Texas.