The Federal Reserve has cut its target for a key interest rate to the lowest level on record and pledged to use “all available tools” to combat a severe financial crisis and prolonged recession. The central bank says it reduced the federal funds rate, the interest that banks charge each other, to a range of zero to 0.25 per cent. That is down from the one per cent target rate in effect since the last meeting in October. Federal Reserve Chairman Ben Bernanke and his colleagues also pledged to use “all available tools” as they struggle to contain a financial crisis that is the worst since the 1930s and a recession that is already the longest in a quarter-century. Wall Street is applauding the unusual move from the Federal Reserve. Stocks extended their gains following the central bank’s decision.
The White House is downplaying any expectations that an auto rescue plan will happen soon. Press Secretary Dana Perino says the Bush administration is still working out details of the package and is “not going to be rushed into it.” She says the White House wants to hear more from all those involved, including key lawmakers and those in the industry. She also says concessions will need to be made in exchange for a rescue package that reportedly could reach $15 billion for General Motors and Chrysler. Perino says the goal is preventing a “disorderly bankruptcy.”
Treasury Secretary Henry Paulson says he does not expect any more major financial institutions to fail during the current credit crisis. Paulson also says that he has no plans to ask Congress to make the second half of the $700 billion financial rescue fund available before the Bush administration leaves office on January 20th. Paulson said in an interview on CNBC that he believes the actions taken by financial authorities in the U.S. and other countries will allow all the systemically important institutions to remain viable. There have been 25 U.S. bank failures so far this year compared with three for all of 2007.
Consumer prices in November plunged by the largest amount on records going back 61 years as energy costs posted nearly double the decline of the previous month. The Labor Department reported that consumer prices fell 1.7 per cent in November, surpassing the previous record decline of one per cent set in October. Both drops were the largest one-month declines on records dating to February 1947. The big declines reflect the severe recession gripping the country and raise the pressure for the Federal Reserve to act decisively to guard against a debilitating bout of deflation.
The government says the construction of new homes plummeted in November by the largest amount in a quarter-century as builders slashed production in the face of a recessionary economy. The Commerce Department reported that new home starts fell by 18.9 per cent to a seasonally adjusted annual rate of 625,000. That’s down from a revised level of 771,000 in October. It is also far below the 740,000 pace that Wall Street economists expected and is the lowest level since records began in 1959. It says applications for building permits, considered a good sign of future activity, fell by 15.6 per cent to 616,000, from an upwardly revised figure of 730,000 in October.
OPEC says world oil demand will fall in 2009, dragged down by the global economic meltdown that has pummeled developed countries’ economies. In its December monthly oil report, the 13-member Organization of Petroleum Exporting Countries said world oil demand was forecast to average 85.7 million barrels per day in 2009. That’s down 150,000 barrels per day from 2008 levels. Last month, it predicted 2009 demand would be 86.68 million barrels per day, or 1 million barrels per day higher. The report was released a day ahead of the group’s meeting in Algeria in which it was expected to cut production in a bid to support crude prices that have fallen by over 65 per cent from a mid-July record of nearly $150 per barrel.
Federal statistics show fuel spending accounted for 36.1 per cent of operating expenses at the big U.S. airlines over the summer. That’s almost triple the 13.6 per cent five years ago. The new report from the Transportation Department’s Bureau of Transportation Statistics shows fuel prices peaked in July but have fallen off sharply since then. The report says six hub-and-spoke carriers spent 6.2 cents per available seat mile on fuel during the quarter, up from 1.47 cents five years ago. The lowest unit costs were reported by Dallas-based Southwest Airlines.
Two companies that competed against each other in a contested bid to design the next-generation space suit for NASA will now work together in a joint enterprise. Dan Coulom, a spokesman for Hamilton Sundstrand, which is a partner of ILC Dover in the project, said the venture will bid for the $745 million contract with Oceaneering International. Houston-based Oceaneering International was selected in June for the project. NASA terminated its contract with the company after the venture with Hamilton Sundstrand, a subsidiary of Hartford-based United Technologies Corporation, and ILC Dover protested the contract award to Oceaneering. Exploration Systems & Technology has supplied space suits and components since the 1960s. A message seeking comment was left with Oceaneering International. The three-phase contract calls for 109 suits.
Two energy companies proposing a $3 billion coal-to-gas plant want to build it in western Kentucky near Central City. Peabody energy of St. Louis and Houston-based ConocoPhillips announced that they have filed for an air permit with the state. The permit is part of the state’s approval process. The facility would be called Kentucky NewGas and built in Muhlenberg County. The companies say it would use a gasification process to turn coal into clean-burning natural gas and have less than five per cent of the emissions of a traditional coal plant. Company officials say the plant would create 500 jobs and produce enough energy for nearly 750,000 homes. It would take four years to build.
Texas energy Tycoon T. Boone Pickens has brought his campaign for energy independence to Ohio. The head of Dallas-based hedge fund BP Capital Management was in Toledo to talk about his proposals for reducing America’s dependence on foreign oil. His so-called “Pickens Plan” would rely on energy efficiency and investments in renewable sources, such as wind power. Pickens met with executives at Owens Corning, a Toledo company that makes building insulation and windmill blades. He was embraced by a person costumed as Owens Corning’s pink panther mascot. The billionaire who made his name in the oil business warned that the U.S. could find itself spending $300 per barrel on imported oil within ten years.
A review finds Texas movie and video producers have spent up to $300,000 on lobby contracts as they plan to seek more state financial incentives. The Texas legislature convenes next month. The Texas Motion Picture Alliance, in disclosing its lobby contracts for 2007 and 2008, said it spent between $100,000 and $300,000 to hire several state government veterans. Details come from the non-profit Texans for Public Justice>. Texans for Public Justice is circulating an opinion article, based on the report, saying the state can’t afford to offer movie incentives. Governor Rick Perry has said luring movie, television and video game producers is part of his effort to create jobs. The 2007 legislature set aside $24 million for film, television and video industry incentives. Perry is requesting another $40 million for the coming two years.