A settlement has been approved to distribute more than $7.2 billion to shareholders whose Enron holdings became worthless with the company's collapse. About 1.5 million individuals and entities are eligible to share in the distribution. The settlement is the largest ever in U.S. securities litigation, according to the Securities Class Action Clearinghouse at Stanford University. The largest-ever settlement also includes the largest-ever request for attorney fees. U.S. District Judge Melinda Harmon also approved a $688 million payout — plus interest — to a California-based law firm that ran Enron litigation for more than six years. The distribution is the result of a $40 billion lawsuit claiming financial institutions participated in the accounting fraud that led to Enron's downfall. Funds comes mostly from settlements made with Bank of America, JPMorgan Chase and Citigroup and other financial institutions. The money could be distributed by the end of the year.
Texas and Louisiana are getting ready for Hurricane Ike, which is forecast to make landfall along the Gulf Coast by the weekend. A disaster has been pre-declared in 88 Texas counties and Governor Rick Perry has put 7,500 National Guard troops on standby. Forecasters warn paths are hard to predict this far out.
Hurricane Ike has ExxonMobil, Royal Dutch Shell and other companies removing thousands of workers today from production platforms and other facilities in the Gulf of Mexico. That's less than two weeks after those same workers were removed from their offshore posts before the advance of Hurricane Gustav. Refineries along the Texas Gulf Coast are being secured a little over a week after Gustav shut down a dozen refineries in Louisiana. Gustav halted nearly all oil and natural gas production in the Gulf, and Ike is expected to affect output too, particularly from platforms in the Western Gulf. Ike's projected path has it headed toward South Texas, with landfall expected later this week.
Traders are betting that Hurricane Ike will spare Gulf Coast oil installations. Traders were also betting that OPEC would likely keep crude production steady. At the pump, AAA says the average price for regular unleaded gasoline is $3.65 a gallon.
Saudi Arabia is suggesting OPEC will decide to keep crude production steady, despite concerns over rapidly falling prices. With the Saudis accounting for about a third of the output of the 13-nation Organization for Petroleum Exporting Countries, their views on production are often adopted. The comments by the Saudi oil minister also appeared to rebut calls for a cutback from Iran, OPEC's number two producer and a traditional OPEC price hawk. Other OPEC ministers have been less strident in calling for a cutback despite a nearly 30 per cent tumble in oil prices after they neared $150 a barrel in July. OPEC accounts for two-thirds of the world's known oil reserves and about 40 per cent of global production.
Senate Democrats are promising a series of votes on offshore oil drilling next week. That announcement frees up a vote on a defense bill Republicans had held up because of partisan disputes over the country's energy policy. Majority Leader Harry Reid says he's ready to take up two proposals. One is a compromise bill that'll allow limited oil and gas drilling 50 miles out in the Atlantic off Virginia, South Carolina, North Carolina and Georgia, and off Florida's Gulf Coast. Republican leaders are expected to push for broader offshore drilling and are likely to call for lifting drilling bans along the Pacific and Atlantic coasts as well as the eastern Gulf of Mexico. Several senators from both parties support the multi-state bill, though Florida Democrat Bill Nelson isn't among them. Nelson is hinting at a filibuster, saying he won't let Florida be "a sacrificial lamb."
High gas prices have more people getting out of their cars and on a train or a bus. According to industry figures, ridership on mass transit surged by more than five per cent during the second quarter. That means 2.8 billion trips were made on the nation's subways, buses, commuter railroads and light-rail systems. But that surge in riders is also straining agencies that can't afford to expand service and are struggling to maintain the services they already offer. Transit advocates say more federal support is needed. The House has passed a bill to make $1.7 billion available to transit agencies over the next two years.
The latest measure of the housing market is pointing lower. The National Association of Realtors says pending home sales fell 3.2 per cent in July from the previous month. And compared to a year earlier, the index of pending sales for existing homes was down 6.8 per cent. Pending home sales are those where the seller has accepted an offer, but the deal is not yet closed. Typically, there is a one-to-two-month lag before a sale is completed. Many analysts believe a true recovery in the housing market won't be seen until inventories of unsold homes are reduced well below current levels.
A study finds eight out of the top ten most expensive housing markets in the U.S. are in California. Eight Midwestern cities are among the ten most affordable markets, while the other two are in Texas — with Arlington ranking 7th, and Killeen coming in 9th. Details are in the Coldwell Banker home price comparison index. The study compared the average value of 2,200-square-foot houses with four bedrooms, two and a half baths, a family room and a two-car garage across 315 U.S. markets. The sharpest contrast was found between La Jolla, California, and Sioux City, Iowa — the most expensive and most affordable cities, respectively, in the study. In La Jolla, the average price of homes tracked by the study was about $1.8 million. The average price of a similarly-sized home in Sioux City was $133,459. After Sioux City, the most affordable domestic markets were Jackson, Michigan, with an average home price of $134,325, and Akron, Ohio, at $135,780. Canton, Ohio; Grayling, Michigan; Minot, North Dakota; Arlington; Muncie, Indiana; Killeen; and Eau Claire, Wisconsin, rounded out the bottom ten most affordable markets.
Continental Airlines announced it will discontinue flights to London Gatwick Airport from the New York area and Houston. Houston-based Continental will add a third daily flight from its New York hub at Newark Liberty International Airport to London's Heathrow Airport on October 25th. The launch of the Heathrow flight is subject to government and airport approval. Continental says the move is an effort to satisfy customer preference for Heathrow over Gatwick and to face growing competition at the airport. Continental says it will continue to operate two daily flights from Houston to Heathrow in addition to the three daily flights from Newark to Heathrow. Continental earlier announced new nonstop seasonal service between its Houston hub and Rio de Janeiro—three times weekly from December 17th through February 28th.
Continental pilots are beginning furloughs as cuts are made to compensate for higher fuel costs and weak economic conditions. Continental is eliminating 149 pilot positions—part of some 3,000 positions overall. About 300 management and clerical positions were cut. More than 90 per cent of the positions marked for elimination were through voluntary programs or attrition. The Air Line Pilots Association says its efforts were successful in saving the jobs of 326 pilots who otherwise would have been furloughed.
Chief executives stepping down from Fannie Mae and Freddie Mac are waiting for their final paychecks, which will total $24 million. But two Democratic lawmakers say they shouldn't get that much. The government took control of the two mortgage financing agencies earlier this week. And the two Senators say financial mismanagement is the cause. In a letter to the Federal Housing Finance Agency, they say that the millions of dollars in bonuses for executives is "out of line" because "errors in management" are now costing taxpayer dollars. The Democratic Senators, Charles Schumer of New York and Jack Reed of Rhode Island, both sit on the Senate's banking committee. Some members of Congress began seeking pay curbs after the two companies' CEOs received $32 million in compensation last year.
Mayor Bill White is presenting "Running Government as a Business" this evening at the Jones Graduate School of Management at Rice University. White came to City Hall from the business world. He plans to discuss what the government can learn from business in defining objectives, creative problem-solving, effective execution, meaningful measurement and honest feedback.
The latest estimates show the U.S. federal deficit running to a near-record level for the budget year ending September 30th. Capitol Hill figures now clock the deficit at $407 billion. And the Congressional Budget Office predicts the red ink will spill over into next year. That's when the deficit could reach a record $438 billion, and likely higher as the government takes over mortgage giants Fannie Mae and Freddie Mac. The numbers represent about three per cent of the size of the economy. They're still much smaller than the deficits of the 1980s and early 1990s. But the new figures are so eye-popping in dollar terms that they may keep the next president from adding to it with extra spending programs or tax cuts.
The Federal Reserve has auctioned another $25 billion in loans to squeezed banks to help them overcome credit problems. The auction is part of an ongoing program started in December that seeks to ease financial turmoil and credit stresses. In the latest auction, commercial banks paid an interest rate of 2.67 per cent for the 84-day loans. There were 38 bidders. The Fed received bids for $31.64 billion worth of the loans. The auction was conducted on Monday with the results made public on Tuesday.
The government is urging owners of five million recalled Ford vehicles to bring them to dealerships to repair a cruise control switch system that has been tied to engine fires. The National Highway Traffic Safety Administration issued a second consumer advisory to owners of certain unrepaired Ford, Lincoln and Mercury sport utility vehicles, pickup trucks, vans and passenger cars who have not responded to previous recalls. NHTSA said about 12 million vehicles have been part of the recall and nearly five million still have not been fixed. A similar warning was issued in February but officials said the rate of the vehicles being repaired has declined. The recalls have affected Ford's popular F-series pickup trucks and led to hundreds of complaints and dozens of lawsuits over engine fires. Ford spokesman Wes Sherwood said the Dearborn, Michigan, company supported the effort to communicate with owners. He said owners have received several recall notices but "the return rate has been lower than expected or hoped (for)." Dealers have installed a fused wiring harness into the speed control electrical system as part of the recall, and the government said replacement parts are available. Owners can take their vehicle to a dealer to have the cruise control deactivated until the parts arrive. NHTSA issued a lengthy list of older vehicles covered by the consumer advisory, including 1993-2004 Ford F150 trucks, 1994-2002 F250 through F550 super duty trucks with gasoline engines, and 1998-2001 Ford Explorer and Mercury Mountaineer suvs, which were among the best-selling vehicles in the nation during those years. A complete list is available at their Web site.