President Barack Obama says it’s time to begin “the work of remaking America.” In his inaugural address, Obama speaks of the nation’s economic crisis, saying the “time of standing pat, of protecting narrow interests and putting off unpleasant decisions” has passed. Saying the state of the economy calls for “bold, swift action,” he’s pledging to not only create jobs, but “lay a new foundation for growth.” He says his economic plans will support a broad range of projects from road building to solar energy, and “restore science to its rightful place.” Obama is dismissing critics who question the scale of his economic recovery plan, saying, “the question we ask today is not whether our government is too big or too small, but whether it works.”
Traders on the floor of the New York Stock Exchange paused at times to watch the inauguration ceremony, but the transition of power didn’t erase investors’ concerns about the struggling economy. The major indexes changed little as Obama was sworn in and began his inaugural address; investors waited to hear what he would say about the economy. The three admitted a conflict of interest and a breach of fiduciary duty by not informing their employer that they were considering investing in a company owned by Enron.
Lawyers for former Enron CEO Jeffrey Skilling appealed a decision that upheld his convictions for his role in the collapse of the company. Skilling’s attorneys filed a motion to have a three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans rehear his case. The panel earlier this month disagreed with Skilling’s claims of incorrect legal theory, faulty jury instructions, a biased jury and prosecutorial misconduct. The former Enron executive’s attorneys also filed a motion for a hearing before the entire court in New Orleans. The appellate panel ordered that Skilling be resentenced, saying a sentencing guideline was improperly applied, resulting in a longer prison term. But legal experts believe whenever Skilling is resentenced, he will still get a lengthy prison term. Skilling in 2006 was convicted on 19 counts of fraud, conspiracy, insider trading and lying to auditors. Skilling began serving his time in a federal prison in Minnesota, but has since been moved to a facility near Denver.
The so-called “NatWest Three” bankers jailed for a $3.5 million Enron-related fraud have been returned to the UK to finish their sentences. Gary Mulgrew, David Bermingham and Giles Darby each received 37-month sentences in Houston almost a year ago. They could be freed from English jails by November under the early release system.
Houston-area home sales fell 16 per cent last year. That’s the second annual drop after seven years of steady gains, according the Houston Association of Realtors. Over 58,000 homes were sold in 2008, despite tighter lending standards and consumer anxiety about the economy. The median price in Houston last year for a single-family home was $152,000.
Just how effective will the economic stimulus package be when it comes to pumping up the economy through old-fashioned public works? The Congressional Budget Office says less than half of $30 billion in highway construction funds detailed by House Democrats would be released into the economy over the next four years. Less than $4 billion in highway construction money would reach the economy by September 2010. Just seven per cent of the $274 billion in infrastructure spending would make its way into the economy by September 30th. Only a fraction of the billions marked for energy efficiency and renewable energy programs would be spent within a year-and-a-half. The CBO analysis doesn’t cover tax cuts or efforts to rush aid to cash-strapped state governments, money which will get pumped into the economy faster.
The federal government’s heavy involvement in bailouts for business is adding to questions about overseas tax havens. A report by the Government Accountability Office says 83 of the nation’s top 100 corporations have offshore subsidiaries, including some who’ve received billions in bailout funding. As of 2007, Bank of America, Citigroup and Morgan Stanley, for instance, had more than 100 units in countries that have low or no taxes. The Congressional watchdog report was requested by Democratic Senators Carl Levin and Byron Dorgan. It notes that there are plenty of reasons for overseas subsidiaries other than skirting taxes. But the senators say they’ll be introducing legislation aimed at stopping the dodging. Levin estimates abusive tax havens and offshore accounts cost Washington at least $100 billion a year in lost revenue.
Fiat and Chrysler have signed a nonbinding agreement for a strategic alliance that would give the Italian auto empire a 35 per cent stake in the troubled U.S carmaker. The two companies said in a joint statement they would share technologies and vehicle platforms. Under the proposed alliance, Fiat would not invest cash in Chrysler but would provide access to its products and platforms.
Toyota says it sold 8.972 million vehicles worldwide last year, down four per cent from the previous year. The number is being closely watched as Toyota had been on track to overtake American rival General Motors as the world’s biggest automaker. Detroit-based General Motors is scheduled to give its global vehicles sales tally Wednesday. Toyota had been booming in recent years, but it has been hammered by the global downturn. The U.S. financial crisis sent auto demand plunging last year in the key North American market. Toyota is forecasting its first operating loss in 70 years for the fiscal year ending March 31st.
The Treasury Department has announced a $1.5 billion loan to Chrysler. And the automaker promptly said it’s going to use the money to float zero-percent loans for selected models including gas-guzzlers. Part of it will also go to expand lending to car buyers who have less than ideal credit. Treasury says the loan to Chrysler’s financing arm is in addition to the $17.5 billion earmarked for loans to Chrysler and General Motors last month. That money was intended as a bridge loan to help them weather the financial crisis while they reorganize their way back to profitability. Chrysler Financial’s CEO says the new loan will “better position” the automaker to “withstand the current economic challenges” until regular commercial funding is once again available. The zero-per cent financing will cover a variety of Chrysler vehicles, including minivans, SUVs, Chargers, Magnums, Challengers and Ram heavy duty pickups.
United Auto Workers President Ron Gettelfinger is suggesting that a mid-February deadline for General Motors and Chrysler to complete their restructuring plans may be “almost unattainable” and no formal talks had commenced between the union and car makers. The Treasury Department provided $17.4 billion in loans to General Motors and Chrysler last month, but the companies need to file detailed restructuring plans by February 17th that include concessions from the UAW and bondholders. The bailout engineered by the outgoing Bush administration requires GM and Chrysler to achieve “viability” by March 31st. The loans may be called back if the government determines the automakers haven’t meet that goal. GM spokesman Greg Martin says the company is “working hard to meet the terms of the loan and to comply with all deadlines.” Chrysler spokeswoman Shawn Morgan says the automaker would continue to work toward “the dates as outlined by the government.”
U.S Airways has sent $5,000 checks to each of the 150 passengers on Flight 1549 to compensate them for lost luggage and other belongings. That was the flight that crash-landed in the Hudson River last week after losing power simultaneously in both engines shortly after takeoff. All 155 people aboard survived. In a letter sent to passengers, an airline executive said she was “truly sorry.” The letter also explained that passengers’ belongings left in the plane could be stuck with investigators for months. The airline also said it would reimburse passengers for their ticket costs.
Comcast is being investigated by the Federal Communications Commission over concerns that it is giving preferential treatment to its phone service at the expense of Internet voice services from competitors. In a letter to Comcast on Sunday, the FCC said it wanted Comcast to justify this “disparate treatment.” Comcast has changed the way it handles internet traffic after the FCC cracked down on its practice of delaying peer-to-peer file sharing. The FCC said Comcast’s latest regulatory filings had “omitted” the effects that its new network management technique would have on Internet voice services. Philadelphia-based Comcast said it is reviewing the FCC’s letter. Comcast is the nation’s biggest cable TV operator.
More food companies and retailers are pulling items with peanut butter amid a salmonella outbreak that has killed at least six people and sickened more than 470 others in 43 states. General Mills and grocers Kroger and Meijer are the latest additions to the list. The Food and Drug Administration has traced the outbreak to a Georgia plant owned by Peanut Corporation of America and the government has advised consumers to avoid foods containing peanut butter for now. Officials say most peanut butter sold in jars at supermarkets appears to be safe. Meijer operates 181 stores in five states. Kroger, the nation’s largest traditional grocery chain, recalled Private Selection Peanut Butter Passion Ice Cream sold in 11 states. General Mills is recalling two flavors of snack bars: Larabar Peanut Butter Cookie and Jamfrakas Peanut Butter Blisscrisp.
Free cosmetics are being given away at some department stores in Texas as part of a national class-action lawsuit settlement. A 2003 California lawsuit filed against department stores and cosmetics manufacturers alleged the businesses conspired to keep prestige cosmetics prices high. The case was settled with no wrong doing admitted. The result was a $175 million giveaway in which each eligible consumer gets one free piece of make up or fragrance worth from $18 to $25–on the honor system. Ginger Reeder, a Dallas-based spokeswoman for Neiman Marcus, tells the Houston Chronicle that there will be one table, flanked by signs full of legalese, where the products will be available. Anyone is eligible for one freebie from Chanel, Christian Dior, Lancome or others if they purchased department store cosmetics between May 1994 and July 2003. The freebies will stop in seven days or when they are all gone, whichever comes first.
This is a light week for economic reports. All of the action is focused on Thursday, when there will be readings on housing starts and building permits, as well as the weekly jobless claims. Also Thursday, the Energy Department releases weekly figures on fuel inventories, amid indications that demand has been weakening because of the recession.