President Bush is making a fresh appeal for Congress to move quickly on his proposal for a $700 million program to stabilize cascading financial markets. Bush made a terse public statement outside the oval office Friday morning, the day after an apparent agreement on the broad outline of a relief bill fell apart. The president said he expected that individual lawmakers would have disagreements about the details of the plan but said there is no choice but to act. Bush said, "there is no disagreement that something substantial must be done." He's trying to round up members of his own party and get them behind a proposed bailout of Wall Street. The White House says there's no reason a rescue package can't be put together by Monday. The administration is putting pressure on Congress with Treasury Secretary Henry Paulson and Vice President Dick Cheney talking to lawmakers. John McCain has also been on Capitol Hill today to meet with Republican leaders. The ongoing talks mean Congress will likely have to put off a scheduled adjournment next week and stay in Washington to address the issue.
Administration and Congressional leaders working on the financial market bailout are hoping things turn out better today than Thursday. A White House summit meeting involving Bush, the two presidential candidates, Congressional leaders and Treasury Secretary Paulsen "devolved into a contentious shouting match," according to McCain's campaign. The meeting revealed that the bailout plan had been suddenly sidetracked by fellow Republicans in the House who favor a different approach. It involves a package of tax breaks and a new government-sponsored insurance program for mortgage-backed securities. Instead of the government buying toxic mortgage securities, this plan would have banks, financial firms and other investors holding them pay premiums to the Treasury to finance the insurance coverage. Democrats say the idea is unworkable and that Paulson agrees. The idea behind the plan is that the insurance would give investors enough confidence to buy the illiquid securities and establish a market for them. The plan emerged after it became clear that House Republicans in large numbers weren't coming around to the Bush administration approach.
Weary Congressional negotiators worked into the night, joined by Paulson in an effort to revive or rework the proposal that President Bush said must be quickly approved by Congress to stave off potentially "a long and deep recession." The plan's centerpiece still is for the government to buy the toxic, mortgage-based assets of shaky financial institutions. Democratic House Financial Services Chairman Barney Frank says the fate of the proposal is in the hands of House Republicans, who he says need to drop their "revolt" against the measure. Frank, chairman of the House Financial Services Committee, also suggested that unexpected late resistance to the administration's plan by many House conservatives, may amount to Republicans carrying water for John McCain. Frank said he did not think that Democrats were going to have to "referee'' an internal republican ideological war over the 700 billion-dollar proposal that the administration has been trying to sell to lawmakers.
For the second time in six months, JPMorgan Chase is taking over a major financial institution crippled by bad bets in the mortgage market. JPMorgan Chase came to the rescue of Washington Mutual Thursday, buying the thrift's banking assets. The move came after WAMU was seized by the Federal Deposit Insurance Corporation in the largest failure ever of a U.S. bank. The deal will cost JPMorgan Chase $1.9 billion. The bank says in a statement it plans to write down WAMU's loan portfolio by approximately $31 billion. JPMorgan Chase, which acquired Bear Stearns last March, also says it will sell $8 billion in common stock to raise its capital position. The FDIC, which insures bank deposits, says it won't have to dip into the insurance fund as a result of the seizure.
JPMorgan Chase tops the list of the largest secured creditors in the Lehman Brothers bankruptcy case, with $23 billion in claims. Secured creditors would be paid back first in the event there is money to be distributed. Secured creditors are paid before unsecured creditors--shareholders rank lowest and often get nothing. Next on the list is Hudson Castle Group's Fenway, which is owed $3 billion; SwedBank of Sweden with $1.35 billion in claims; and State Street with $1 billion. Lehman Brothers Holdings filed the biggest bankruptcy in U.S. history on September 15th. It reported assets of $639 billion and debt of $613 billion.
Republicans in the Senate have blocked a plan by Democrats to pump $56 billion in government spending into the economy through public works projects, help for the jobless and money for states struggling with their Medicaid bills. The 52-42 tally fell well short of the 60 votes needed to defeat a GOP filibuster. The White House promised a veto anyway, saying the measure would not work and would cost too much. The failed measure would have followed up on a bipartisan plan enacted this winter to try to boost the economy through tax rebate checks. With the economy still sagging, Democrats have long pressed for a follow-up plan to extend unemployment benefits, boost food stamp payments and build infrastructure projects like roads, bridges, water and sewer projects and school repairs.
The government says the economy's spring rebound turned out to be slightly less energetic than previously thought. Even so, the improvement is expected to be short lived as the country gets pounded by the worst financial crisis in decades. The Commerce Department reports that gross domestic product increased at a 2.8 per cent annual rate in the April-June period. That wasn't as strong as the 3.3 per cent growth estimated a month ago. But it did mark a pick up after two terrible quarters. Economists were predicting the second-quarter GDP reading would stay at 3.3 per cent.
The average retail price of gasoline in Houston fell 15 cents this week to $3.54, according to AAA Texas. Galveston averages dropped seven cents to $3.56 per gallon. Statewide averages are down more than ten cents to $3.59. National averages are down 13 cents to $3.70 per gallon.
France's Total refinery in Port Arthur is restarting, after regaining power. The plant is the last of 14 refineries shut down for Hurricane Ike to regain electricity. Marathon's Texas City plant is undergoing repairs, but all other area refineries have begun ramping up production.
The fuel shortage that has drivers across the southeast scrambling to fill their tanks is pinching independent gasoline stations. Such stations rely on gas sales to lure customers who also buy snacks, soda and other incidentals. Experts say it could be weeks before the region again has a steady supply of gas. Trade associations that represent gasoline retailers in Florida, Tennessee and Virginia say their supplies are below normal--but the situation had improved. A handful of the 14 upper Gulf Coast refineries that halted operations as Hurricane Ike approached--remain shut down. But at least two prepared to resume making gasoline and other products. Pump prices also continued falling across the country amid the nation's economic doldrums and dwindling demand. Retail gasoline prices in Texas dropped 11 cents this week, to $3.59 per gallon.
The number of rigs actively exploring for oil and natural gas in the United States dropped by 23 this week to 1,995. Of the rigs running nationwide, 1,559 were exploring for natural gas and 423 for oil, Houston-based Baker Hughes reported. Thirteen were listed as miscellaneous. A year ago, the rig count stood at 1,760. Texas gained three. Baker Hughes has tracked rig counts since 1944. The tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted several record lows in 1999, bottoming out at 488.
Cameron International, a Houston-based provider of valve equipment to the petroleum industry, will add 110 jobs as part of a $49 million expansion of its Ville Platte manufacturing plant. The plant currently has 500 jobs that pay an average of $49,000 annually. The expansion includes a new 125,000-square-foot building. Plant manager Josh Stanford says it's the second largest manufacturing capital investment for Cameron. Cameron officials selected Ville Platte for the expansion after considering several other existing company sites in other states. Officials say the state and the company are working out the final details of an economic incentive package that will be tied to capital investment and job creation requirements.
Chrysler says it will fire about 250 salaried workers by the end of the month as the automaker tries to meet its goal of cutting 1,000 white-collar jobs. Chrysler had said it hoped most of the cuts would come from early retirements, attrition and voluntary separation programs. But the company says that it only achieved about three-quarters of the planned reduction. The cuts come as Chrysler continues to struggle amid the nationwide slump in auto sales.
The latest movement for mortgage rates aren't going to help would-be homebuyers or those looking to refinance. Freddie Mac says the average for 30-year fixed-rate mortgages rose to 6.09 per cent, up from 5.78 per cent last week. For 15-year fixed-rate mortgages, the national average was 5.77 per cent, up from 5.35 per cent last week. And for one-year Treasury-indexed adjustable rate mortgages, the average was 5.16 per cent, up from 5.03 per cent last week.
KB Home says its third-quarter loss quadrupled from a year-ago period helped by hefty gains on the homebuilder's now-discontinued French operations, and missed Wall Street expectations. The Los Angeles-based company's loss widened to $144.7 million from a loss of $35.6 million a year ago. But excluding gains from its divested French operations, year-ago losses totaled a whopping $478.6 million. Latest-quarter results included pretax charges of $82.2 million to write down inventory values. Revenue for the period ended August 31st fell by more than half to $681.6 million from $1.54 billion, as continued deterioration in new home demand and pricing, excessive inventories and less mortgage availability hurt sales across most markets. Analysts polled by Thomson Reuters had predicted revenue of $734.7 million.