President Bush says it will take some time, but the American people can be confident the "last resort" measures taken to stabilize the economy are bold enough to work. Bush, speaking this morning at the U.S. Chamber of Commerce building, said since it took a while for the credit markets to freeze it will also take them a while to thaw. He says the series of recent moves were meant to stop the problems from getting worse, and were not intended as a quick fix for the battered economy. Bush said he's still a believer in a free-market, and that in normal times he would have opposed the recent government interventions. But he told the business leaders that had the government not acted, "the hole in our financial system would have grown larger" requiring more "drastic and costly" measures later. He said there will be strong oversight and said taxpayers could benefit from the actions over the long term.
One of the nation's most respected investors says he's been moving his personal investments from safe treasuries into U.S. stocks. That's the word from billionaire Warren Buffett, writing an opinion piece in today's New York Times. Buffett wrote that "if prices keep looking attractive, my non-Berkshire net worth will soon be 100 per cent in United States equities.'' The piece, titled "Buy American. I am," reiterated one of the legendary investor's favorite maxims: be fearful when others are greedy; be greedy when others are fearful. Since stocks began to tumble in September, Buffett and his Berkshire Hathaway holding company have made large bets on U.S. companies, exacting rich dividend payments in the process.
Reliant Energy is asking the Texas Public Utility Commission to allow it to create two new electric providers, according to the Houston Chronicle. The company says the two new entities would give it flexibility in unwinding a credit agreement with Merrill Lynch. Lost sales due to Hurricane Ike-related power outages and inadequate hedges against falling power prices would have put Reliant in default of its arrangement with Merrill. Reliant now has investments from other firms that are more expensive than the Merrill deal.
Mervyns, which filed for bankruptcy protection in July, plans to liquidate its remaining 149 stores and wind down business. The company's Web site says Mervyns operates in Texas and six other states. The Hayward, California-based chain today announced the liquidation plans. An analysis of available options, including a sale of the company, led the board to determine that liquidation was the best way to maximize value for Mervyns creditors. Mervyns plans to pursue the liquidation under the Chapter 11 bankruptcy code, which typically allows companies to retain more control over the selling off of assets.
Tyler-based Tyler Pipe plans to lay off 185 workers. The company plans to shut down its impact molding line by December 17th, according to the Tyler Morning Telegraph. The firm produces iron waterwork fittings used in irrigation systems installed as part of new home construction. Its plant that produces soil pipe, soil fittings and specialty drains for the commercial plumbing market will remain open.
The Texas unemployment rate rose slightly in September—reaching 5.1 per cent. The Texas Workforce Commission reports that compares to a metro jobless rate of an even five per cent in August. But Texas lost 4,000 nonfarm jobs in September—the first monthly drop in more than a year. Initial unemployment claims almost doubled last month, compared to August. Houston's rate also increased slightly to 5.1 per cent. Commission Chairman Tom Pauken said the effects of Hurricane Ike played a role in the rapid increase in unemployment claims. Pauken says the full statistical impact of the September 13th hurricane wouldn't show up until next month. Midland had the lowest non-seasonally adjusted unemployment rate at 3.2 per cent. The McAllen area had the highest at 7.9 per cent.
Builders have slashed construction of new homes to the slowest pace since early 1991 when the country was in a deep recession. The 6.3 per cent drop last month was much bigger than the 1.6 per cent decrease that had been expected. The decline was steepest in the northeast where construction dropped nearly 21 per cent. The construction of single-family units fell to the lowest level on record. Construction slipped by nearly 17 per cent in the west, with single-family building hitting a record low. The Midwest saw a gain of 5.6 per cent, reflecting strength in apartment construction. Single-family building, though, was at a record low. In the south, construction climbed, but by only half a per cent. And the Commerce Department also finds applications for building permits fell by 8.3 per cent on an annual basis, to the weakest level in more than 25 years. The building industry is on pace to construct the fewest new homes and apartments this year since the end of World War II. The housing industry is suffering its worst decline in decades after a five-year boom, triggering severe economic troubles throughout the larger economy.
There could be criminal charges in a federal probe of banks and lenders for their role in the nation's mortgage crisis. There's a strong hint in that direction from the top federal prosecutor in Los Angeles, U.S. Attorney Thomas O'Brien telling the Associated Press, "I think we are going to see some fairly dramatic results in the near future." He says people have made "many millions of dollars" preying on the unsuspecting and he says "that's wrong." A Los Angeles federal grand jury is investigating at least three mortgage lenders: Countrywide Financial, New Century Financial and Indymac Bancorp. Prosecutors are looking into the possibility of mortgage fraud and other white-collar crimes. O'Brien oversees the Justice Department's Central District of California, which became the heart of the nation's real-estate boom and bust.
Freddie Mac says rates on 30-year mortgages have jumped to the highest level in eight weeks. The average is put at 6.46 per cent this week, up from 5.94 per cent last week. It marks the third increase out of the past four weeks and pushes rates to the highest level since August 21st. That means a homebuyer is having to spend about $55 more a month to buy the U.S. median-priced home of $203,100 with a 20-per cent down payment. And given falling home prices in large swaths of the country, higher interest rates might just be one more reason for buyers to hold off. Rates on 15-year fixed-rate mortgages, popular for refinancing, rose to 6.14 per cent. That's up from 5.63 per cent last week. The average for one-year adjustable-rate mortgages edged up slightly to 5.16 per cent, compared to 5.15 per cent last week.
Mexico's central bank is leaving its benchmark interest rate unchanged at 8.25 per cent in a continued bid fight both inflation and slowing growth. The bank says the world financial crisis is having a "particularly intense" impact on emerging economies. It says that talk of global recession is already slowing growth in Mexico, although it expects inflation may rise in the fourth quarter as energy subsidies are phased out. Mexico's treasury secretary lowered his 2008 growth forecast to 2.5 per cent last month. Annual inflation reached 5.5 per cent in September. The U.S. and several European nations cut interest rates to ease credit and calm markets last week, but Mexico's bank notes that markets are still volatile.
Signal International has been awarded a $10 million contract to repair two offshore oil rigs damaged last month by Hurricane Ike. The rigs are owned by Hercules Offshore of Houston, which operates 24 jack-up rigs and three submersible rigs in the Gulf of Mexico. Signal says it will add 200 workers at least temporarily to help complete the repairs, which are expected to take about a month. The company now has about 2,500 employees at its two shipyards in Pascagoula, Mississippi. The first rig arrived at signal's east yard in Pascagoula this week.
Hyundai is recalling about 150,000 Hyundai Elantra sedans because of potential electrical problems that could prevent air bags from deploying. Hyundai said the recall involves Elantras from the 2001 model year. If a liquid is spilled near the cup holder, it could drip into the air bag control module electrical connector, contaminate the module, preventing air bags from deploying in a crash. The Korean automaker also is recalling about 75,000 Elantras from the 2001 and 2002 model years because of issues with an air bag wiring harness that could prevent the side air bags from deploying. Hyundai spokesman Miles Johnson says owners who see an air bag warning light should take their car to a dealership for inspection.
A businessman who built his Formosa Plastics group into Taiwan's biggest and most profitable manufacturing conglomerate has died in America. Wang Yung-Ching died yesterday. He was 91. He established Formosa Plastics in 1954 with a loan from a U.S. aid program. Formosa Plastics also set up chemical companies in the U.S. and owns several oil wells and properties rich in natural gas in Texas. Wang invested in power plants and plastics factories in China. The company says Wang died during a business trip to the U.S. Television stations reported that Wang died of cardiac arrest in a New Jersey hospital. Wang was a farmer's son with only an elementary school education. He set up a rice store with his two brothers in his early 20s. Wang diversified into electronics, cosmetics, hospitals and car manufacturing.
Baker Hughes in Houston says the number of rigs actively exploring for oil and natural gas in the U.S. fell by 14 this week to reach 1,976. A year ago the rig count stood at 1,764. Texas is down 10 rigs. Baker Hughes has tracked rig counts since 1944.
Schlumberger says third-quarter profits jumped during a period when oil still cost more than $100 per barrel nearly every day, but the world's biggest oilfield services company said there may be tougher times ahead. Schlumberger said that net income totaled $1.53 billion, compared with $1.35 billion during the same period last year. Revenues jumped more than 20 per cent to $7.26 billion from $5.93 billion. Profits were in line with the per-share estimates of analysts polled by Thomson Reuters, and revenue slightly exceeded expectations at just over $7 billion. Schlumberger is the first of the major oil sector companies to report earnings.