A rig drilling a relief well meant to stanch a gushing flow of oil into the Gulf of Mexico is ahead of schedule and could reach its target over the next three to four weeks. That’s according to Coast Guard Admiral Thad Allen. He says that a drill from a rig near the ruptured well is nearly 10,000 feet below the seafloor. He says it should come within ten feet of the existing well within the next few weeks. Afterward, the drill bit will bore down about 1,000 feet and then intersect with the damaged well farther underground. Allen says the final push of drilling is the most difficult. The drilling was originally slated for completion in mid-August. Once the drill reaches its target, BP will pump heavy mud down the relief well in an attempt to stop the flow.
There was some praise for BP’s pledge to establish a $20 billion victims’ compensation fund. Otherwise, it’s been a rough day for CEO Tony Hayward as he testifies before Congress about the oil spill in the Gulf of Mexico. Hayward told a House panel that he’s “deeply sorry” for the spill and “personally devastated” by the explosion on the Deepwater Horizon rig that killed 11 workers and triggered the spill. But he maintained the company was committed to safety and putting the situation right. Panel members did not appear satisfied, repeatedly questioning BP’s safety record. Chairman Bart Stupak noted that 26 people have been died and 700 injured in BP accidents over the past five years. Congressman Henry Waxman said that a review of some 30,000 documents showed no evidence Hayward paid “even the slightest attention to the dangers” at the well. As Hayward began his testimony, a protester disrupted the hearing, shouting that Hayward should be charged with a crime.
Republican Representative Joe Barton of Texas is issuing an apology–of sorts–about his apology to oil company BP. Barton had complained at a hearing that the Obama administration was forcing BP to set up a $20 billion “slush Fund” for oil spill victims. Barton said he was ashamed of the White House’s actions–and he apologized to BP. Vice President Joe Biden called those remarks “outrageous.” Hours after making the comments, Barton said his remarks had been “misconstrued.” He said, “I want to apologize for that misconstruction.” Barton says that he considers BP responsible for the catastrophic oil spill and that the company should “do everything possible to make good.”
President Barack Obama says that a three-person panel will decide appeals of rejected claims, as part of the $20 billion compensation fund. Obama, speaking at the White House, said every effort will be made to expedite claims. And he said he was confident that Kenneth Feinberg, who will run the independent fund, will ensure claims are handled “as quickly, fairly and transparently as possible.” The president said that BP will be able to meet its obligations. He called BP “strong and viable”–and said it was in everyone’s interest that it remain so.
President Obama says BP has agreed to establish a $100 million fund to compensate unemployed oil rig workers affected by a six-month moratorium on deepwater drilling imposed in the wake of the Gulf oil spill. Mr. Obama said the fund is in addition to $20 billion the company will set aside to pay victims of the massive Gulf spill, the nation’s worst environmental disaster. Obama imposed a six-month moratorium on new deepwater drilling last month while a commission reviews the April 20th explosion of the Deepwater Horizon rig.
Homeowners in areas of the Gulf affected by the BP spill are getting mortgage relief from Citigroup and government sponsored mortgage purchaser Fannie Mae. Citigroup says it is suspending loan foreclosures in the region through September 17th. Fannie Mae says companies servicing its home loans may suspend or reduce borrower payments for up to 90 days. Additional time may be granted after a review of individual circumstances. The eight-week-old oil disaster is affecting the coasts of Louisiana, Mississippi, Alabama and Florida.
The number of people filing new claims for jobless benefits jumped last week after three straight declines, another sign that hiring remains weak. The Labor Department says initial claims for jobless benefits rose by 12,000 to a seasonally adjusted 472,000, the highest level in a month. Economists had expected claims would fall to a seasonally adjusted 450,000, according to Thomson Reuters. First-time claims have hovered near 450,000 since the beginning of the year after falling steadily in the second half of 2009. That has raised concerns that hiring is lackluster and could slow the recovery. The number of people continuing to claim benefits rose by 88,000 to 4.57 million.
Vice President Joe Biden says the Economic Recovery Act deserves credit for creating or saving upward of 2.8 million jobs so far, with thousands more projects coming soon in a busy summer of construction. At the White House, the vice president told reporters: “folks, the act is working.” But the success of the law remains a point of political contention. To help counter the critics, President Barack Obama’s team is promoting what it calls a surge of infrastructure projects, paid for by taxpayers, across the country over the summer. The vast economic stimulus package has a long-term cost of $862 billion.
U.S. Cellular has announced plans to move 160 jobs from its call center in Tulsa to Wisconsin and Texas while adding 100 jobs in Tulsa. The company says that the jobs being moved will go to a call center in Madison, Wisconsin, and to a contract partner here in Houston. The statement said the jobs being moved will result in lower costs. The company says it will use the space in the call center to add 100 jobs to its Tulsa customer care center. The call center employees who lose their jobs will be eligible to apply for the new positions. The company will also offer a severance package to employees who are not rehired but stay until the job cuts start next March. U.S. Cellular currently has about 400 employees in Tulsa.
The Labor Department is sharply increasing the penalties against employers who illegally use child workers. Anyone illegally employing 12-and 13-year-olds will now face a penalty of $6,000 for each violation. The maximum fine previously was $900. Those employing children under 12 will face a penalty of $8,000 per violation. That’s up from a previous maximum of $1,150. Labor Secretary Hilda Solis says the new fines are part of a stepped up effort to crack down on illegal child labor. The penalties could go as high as $11,000 per violation in cases that involve injury or willful and repeated offenders. The stiffer penalties are effective immediately and apply to any violation after June 1st.
Consumer prices fell for the second straight month, extending a break for Americans’ pocketbooks. Less expensive energy was the main factor pulling down prices. The Labor Department says the consumer price index, the government’s most closely watched inflation barometer, dropped 0.2 percent in May, following a 0.1 percent dip in April. So-called “core” prices, which strip out energy and food, edged up 0.1 percent in May, after a flat reading the month before.
A private research group says its gauge of future economic activity rose 0.4 percent in May, signaling slow growth in the U.S. economy in the summer and fall. The Conference Board’s leading economic index is designed to forecast economic activity in the next three to six months. Economists polled by Thomson Reuters had expected a reading of 0.5 percent in May. Turmoil in stock markets and a troubled housing market weighed on the index, while measures related to interest rates and an increasing amount of money in the economy tugged it higher. The Conference Board revised its reading for April to no change from a 0.1 percent drop. It also revised its March reading to a 1.4 percent gain from a 1.3 percent rise.
The deficit in the broadest measure of U.S. trade rose in the first quarter to the highest point in more than a year as rising global oil prices and a rebounding economy pushed up imports sharply. The Commerce Department says that the deficit in the current account increased to $109 billion in the January-March period, compared to a revised $100.9 billion in the fourth quarter of last year. The current account deficit narrowed to $378.4 billion in 2009, down a sharp 43.4 percent from the 2008 deficit of $668.9 billion. The big drop reflected a deep recession in the United States which cut demand for imported goods. But with the U.S. economy recovering, analysts believe the trade deficit will increase this year.
Rates on 30-year fixed mortgages backed off from yearly lows this week, but still remain historically cheap. Mortgage finance company Freddie Mac says the average rate rose to 4.75 percent, up from 4.72 percent last week. That’s above 4.71 percent, the lowest level dating back to 1071 when Freddie Mac began keeping records. The average rate on a 15-year fixed-rate mortgage edged up to 4.2 percent, up from its all-time low of 4.17 percent set last week. Mortgage rates have fallen over the past two months. Investors have shifted money into the safety of U.S. Treasury bonds because of concerns over the European debt crisis and the volatile stock market. Mortgage rates tend to follow the yield on U.S. Treasury debt.
The House has passed a bill authorizing a $30 billion fund for community banks to increase lending to small businesses. Banks that tap the fund must issue preferred stock to the Treasury Department, paying dividends based on how much they increase lending to small businesses. The more they lend, the lower the divided payments. House Democrats projected that community banks would use the fund to leverage up to $300 billion in loans to small businesses. Republicans argued the bill would do little to increase lending with no guarantee the money would go to small businesses. The bill is being merged with a package of tax breaks to encourage investment in small businesses that passed the House. The package now goes to the Senate.
Shares of Houston-based oil and gas company Oasis Petroleum are rising after the company raised $588 million in the largest initial public offering so far this year. Oasis and its stockholders priced 42 million shares at $14, the middle of the expected range. Oasis is selling 30.4 million shares, and private equity firm Encap Investment’s funds are selling 11.6 million shares. Net proceeds for the company were expected to be about $394.6 million after expenses. Oasis will use the funds to pay debt and explore and drill for oil and gas.
General Motors says it will keep most of its U.S. factories open through the normal two-week summer shutdown to meet demand for some of its vehicles. The automaker says it will keep nine of 11 assembly plants open to make 56,000 more vehicles that are in high demand, such as the Buick LaCrosse luxury sedan and the Chevrolet Traverse large crossover vehicle. GM says that the company is trying to reduce waiting time for dealers and customers to get vehicles. Plants that will stay open from June 28th to July 9th include the one in Arlington.
U.S. automakers have surpassed imported brands for the first time on a survey of the quality of new cars. J.D. Power and Associates says that owners of domestic cars reported fewer problems on average during the first 90 days of ownership than foreign cars and trucks. It’s the first time that has happened in the 24 years the industry research group has conducted the annual quality study. J.D. Power says Ford showed some of the biggest gains in quality. Porsche was the top scorer among individual brands.
The Senate has approved a plan to give homebuyers an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring. The move by Senate Majority Leader Harry Reid would give buyers until September 30th to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30th to get a signed sales contract and until June 30th to complete the sale. The proposal would only allow people who already have signed contracts to finish at the later date. About 180,000 homebuyers who already signed purchase agreements would otherwise miss the deadline. The Nevada Democrat added the proposal to a bill extending jobless benefits through the end of November.
The number of customers applying for mortgages jumped last week, a sign that the market could be reviving after dropping off sharply last month. The Mortgage Bankers Association says overall applications were up nearly 18 percent from a week earlier. Applications to refinance home loans were up 21 percent to the highest level since May 2009. That’s because buyers have been taking advantage of near-record-low mortgage rates. New mortgages taken out to purchase homes increased for the first time in six weeks, rising seven percent. That’s an encouraging sign for the housing market, as applications had dropped off sharply when federal tax credits expired.
The Department of Justice has charged 17 people with mortgage fraud in the Southern District of Texas as part of a nationwide sweep against related financial crimes. U.S. Attorney Jose Angel Moreno says four defendants have pleaded guilty and two have been sentenced to prison and must pay $4.1 million in restitution in this three-month investigation. The remaining 11 have been indicted and are awaiting trial. The alleged crimes include investment schemes and equity skimming, and the defendants include settlement attorneys, loan processors and real estate agents. Earlier in the day, Attorney General Eric Holder announced the arrests of 485 people of 1,215 indentified defendants in connection with this initiative.
A new program being spearheaded by Microsoft is designed to provide a trusted way for researchers to report stolen data they’ve found in the dark corners of the Internet. Establishing that link is important because when a researcher finds stolen data, it can be hard to convince a bank or another affected institution that the data is legitimate. The lost time can mean the difference between someone’s identity being used for fraud, and stopping a fraud before it occurs. The program Microsoft is spearheading is being managed by the National Cyber-Forensics & Training Alliance, a nonprofit organization focused on cybercrime. Other participating organizations include the American Bankers Association and eBay.
Federal regulators are reconsidering the rules that govern high-speed Internet connections. It’s a bitter policy dispute that could be tied up in court for years. The Federal Communications Commission is taking public comments on three different paths for regulating broadband. One of them is a proposal by FCC Chairman Julius Genachowski to define broadband access as a telecommunications service subject to “common carrier” obligations to treat all traffic equally. The plan has the backing of big Internet companies that want to be sure the FCC can prevent phone and cable companies from using their control over broadband connections to determine what subscribers can do online. The idea faces stiff resistance from the broadband providers.