President Bush is voicing confidence that close cooperation between the United States and other nations will help move the world past the financial crisis. Bush made the declaration in a joint appearance at the White House with visiting Italian premier Silvio Berlusconi. Bush said that “people all over the world are understandably concerned” about the economic problems spanning the globe. The president said he welcomed “bold” actions the countries are taking to help banks gain access to capital, strengthen the worldwide credit system and restore public confidence in it.
Top U.S. government officials and leading bank executives met in Washington today to nail down details of the $700 billion financial rescue plan. The goal is to thaw out frozen credit markets. The strategy includes having the government buy up financial firms’ bad debt and taking partial ownership of certain banks. A Treasury Department spokeswoman says officials from treasury and the Federal Reserve were invited to the meeting, along with executives from Goldman Sachs, Morgan Stanley, Citigroup, JPMorgan Chase and Bank of America. Invitations may also have gone to regional bank CEOs. The administration also announced the selection of interim managers and an outside firm to help run the rescue program. Federal Reserve Chairman Ben Bernanke has been tapped to head an oversight board guarding against conflicts of interest.
An assistant treasury secretary says a private law firm has been hired to help structure the purchase of bank stock, which is intended to help thaw a lending freeze-up and get the economy moving again. Assistant Treasury Secretary Neel Kashkari, interim head of the program, says right now administration officials are still developing the guidelines that’ll govern the purchase of bad assets. But in a speech to a bankers’ group, he says he’s confident the administration is “building the foundation for a strong, decisive and effective program.” Kashkari provided few other details about how the program will actually work.
Five central banks, including the Federal Reserve and the European Central Bank, announced new measures aimed at thawing frozen credit markets and bolstering funding to banks. The Bank of England, the European Central Bank and the Swiss National Bank said in a joint statement they will provide unlimited short-term U.S. dollar funds to financial institutions through tenders at seven-day, 28-day and 84-day maturities at fixed interest rates. To accommodate the operations, the Federal Reserve says it will increase the sizes of its temporary currency swap facilities “so that these central banks can provide U.S. dollar funding in quantities sufficient to meet demand.” The swap arrangements have been authorized through April 30th. The Bank of Japan said it is considering similar measures.
European governments are putting nearly $2 trillion on the line to protect the continent’s banks through guarantees and other emergency measures. Pledges by Britain, Germany, France, Spain, Austria and Portugal in recent days have reached a total of $1.96 trillion. The sums are considered a maximum, and might not all be spent if the financial crisis eases. Many of the pledges came Monday, a day after the 15 nations that use the Euro currency agreed on an unprecedented bank rescue plan. Europe’s most unified response yet to the financial crisis dwarfs the Bush administration’s $700 billion rescue program. The plan is helping calm markets after they dived last week. European and Asian stocks are up.
President Nicolas Sarkozy of France says his government will provide up to ?360 billion ($491 billion) to help banks stay afloat through the financial crisis. The measure is part of a raft of proposals agreed with other governments sharing the euro currency on Sunday to unblock frozen credit markets. Germany, Italy and others plan or have announced similar measures. Sarkozy says the money includes ?320 billion ($436 billion) to guarantee bank refinancing and another ?40 billion ($54 billion) for a government-backed financing vehicle to provide banks with the capital they need. Sarkozy said the figure he announced Monday is a maximum, which may not be reached if the market starts functioning normally again.
Austria’s government says it’s prepared to prop up troubled banks with up to ?85 billion ($114 billion) in guarantees, if they need it to survive the global financial crisis. Chancellor Alfred Gusenbauer says his government is also ready to provide an additional ?15 billion ($20 billion) in capital. The pledges come a day after leaders of the 15 European Union nations that use the euro currency–which includes Austria–agreed to guarantee banks’ debt and prevent banks from failing. Last week, Austria also decided to guarantee bank deposits up to their full value, going well beyond the EU minimum insurance of ?20,000 ($26,835) per account.
The government of the United Arab Emirates says it’s extending a new guarantee on domestic banking deposits to international banks with “significant operations” in the country. State news agency WAM reports the guarantees on banking deposits in the rapidly growing Persian Gulf nation will last for three years. Monday’s decision to protect multinational banks’ deposits follows measures approved a day earlier to guarantee local deposits, stand behind lending between financial institutions and inject additional cash into the banking system as necessary. Officials are eager to shore up the Emirates banking sector as credit markets tighten and rattled foreign investors pull money out of developing markets like the Gulf.
Iceland suspended trading on its stock exchange for the third consecutive trading day, citing “unusual market conditions.” Monday’s decision follows a turbulent week in Iceland, where the government has taken control of the country’s three major banks. NASDAQ OMX Iceland says trading will resume on Tuesday. The exchange’s fixed income market remains open. Iceland has been particularly hard hit by the global credit squeeze because of its heavyweight banking sector. Its troubles are also having repercussions elsewhere in Europe where tens of thousands of private savers have accounts worth millions of pounds with branches or subsidiaries of those banks.
The Mexican peso is rebounding after taking a beating in the global financial crisis. Mexico’s central bank says the peso gained about five per cent to 12.4 per dollar on news of coordinated European and U.S. attempts to rescue the banking system. The peso had opened at about 12.8 per dollar. On friday, the bank auctioned $6.4 billion in foreign currency reserves to help the currency. The central bank put another $400 million in foreign reserves up for auction Monday, but there were no bidders as the peso rallied. The peso declined by 20 per cent last week, falling more against the greenback than any currency other than the Australian dollar.
House Republicans and Democrats are jockeying for political advantage as they push their versions of a second stimulus bill that both agree is needed. Democrats are talking of returning after the election to work on a plan. A top Republican urged that Congress return before that, but quickly backed down. House Speaker Nancy Pelosi is ordering hearings on what should be in the package. She says priorities include extending jobless benefits, pumping money into infrastructure projects, and sending food aid to the poor and money to states to pay their Medicaid bills. Officials say the price tag could reach $150 billion. Republicans are calling for corporate and investment tax cuts, more energy exploration, and federally insuring 100 per cent of bank transaction accounts, among other measures.
A month after Hurricane Ike, piles of sheetrock, appliances, furniture and family mementos are dotting most streets around Galveston. Electronic road signs in southeast Texas warn drivers to “watch for cows next 20 miles,” a reminder that few fences remain to hem in livestock. Blue tarps cover 11,000 roofs for 100 miles from Houston to the Louisiana line, and hundreds of people still aren’t accounted for. Ike is the most expensive storm in Texas history, with an estimated price tag of $11.4 billion so far. A local official in Galveston thinks it’s going to take a couple of years to completely recover. Even now, about 10,000 homes don’t have electricity. It may be at least another month before some people can turn the lights on again.
Owners and property managers of apartment complexes and commercial property owners in the Near Northwest Management District can learn more about percentage deductibles for hurricane damage at the District’s office on Hollister tomorrow morning at ten. In the wake of Hurricane Ike, many business owners are discovering that their insurance policy calculates deductibles on a percentage basis, and percentage deductibles are based on the insured value or property value. The head estimator for All Atlas Roofing will provide tips for working with your insurance company.
The tumbling price of crude oil has turned into a price break at the pump. The Lundberg survey released this weekend shows the average price of a gallon of self-serve regular has gone down by 35 cents over the past two weeks. It’s now $3.31. Mid-grade was $3.45 as of Friday and premium was $3.57. The cheapest gas is in Wichita, Kansas, at $2.79 for a gallon of regular. Honolulu is the most expensive at $3.91. The Lundberg survey averages prices from 5,000 gas stations around the country. The price of crude last week dropped below $78 a barrel, reflecting investor pessimism.
Waste Management, the nation’s largest garbage hauler, is withdrawing its $6.73 billion proposal to acquire smaller rival Republic Services, saying the move wouldn’t be prudent given current financial market turmoil. Republic Services, the nation’s number three trash hauler, is trying to buy Phoenix-based Allied Waste Industries, the second-largest in the industry. But Houston-based Waste Management had proposed a takeover of Fort Lauderdale, Florida-based Republic in what had been seen as an effort to derail the Republic-allied deal.
Kuwait National Petroleum says it has temporarily shut down the country’s three oil refineries because of a power surge, but that exports have not been affected. Mohammed Al-Ajmi, spokesman for the state-owned company that owns the refineries, says the surge occurred early Monday morning. He says the refineries were shut down as a precaution but that exports of stored oil continued smoothly. The cause of the surge was not immediately known. The refineries have a combined capacity of around 900,000 barrels a day. He says it will take three to four days for the Shuabia, Mina Al-Ahmedi and Mina Abdullah refineries to be back to normal. Oil is the mainstay of the Kuwait economy.
The U.S. Air Force will spend $900 million on new residential, dining and training facilities for incoming recruits at San Antonio’s Lackland Air Force Base. The airmen training complex project is set to begin construction next spring. Construction is expected to last for more than six years and replace some buildings that date back to the 1960s. Colonel Robert Labrutta commands the base’s 37th Mission Support Group. He says the project underscores the USAF’s plan to keep Lackland as a crucial training center. The base on the southwest side of San Antonio serves as the basic training center for new airmen. The Lackland building is separate from the $1.8 billion to be spent on construction at the army’s Fort Sam Houston because of the 2005 defense base closure and realignment mandated by Congress.
Chesapeake Energy cited economic conditions as it abandoned plans for shale.tv, marketed as an online education program on natural gas. A statement from Fort Worth-based Chesapeake Energy cited “economic challenges faced by our country and industry.” Spokesperson Jerri Robbins says the company will focus its time and resources on exploration and production. Chesapeake Energy drew attention last summer with plans for a September debut of shale.tv, an online video channel including veteran journalist and anchor Tracy Rowlett. The company has featured Oscar-winning actor and Texas native Tommy Lee Jones in some of its commercials.
Paul Krugman, a Princeton University scholar, New York Times columnist and unabashed liberal, has won the Nobel prize in economics. It is for his analysis of how economies of scale can affect international trade patterns. Krugman has been a harsh critic of the Bush administration and the Republican party in the Times, where he writes a regular column and has a blog called “Conscience of a Liberal.” He’s also taken the Bush administration to task over the current financial meltdown, blaming its pursuit of deregulation and unencumbered fiscal policies for the financial crisis that has threatened the global economy with recession. The 55-year-old American is the lone winner of the $1.4 million award and the latest in a string of American researchers to be honored. It was only the second time since 2000 that a single laureate won the prize, which is typically shared by two or three researchers.