World leaders will gather November 15th in Washington for a summit to discuss the global economic crisis. A senior administration official said that the forum will be the first in a series of international meetings to discuss what economists predict could be a long and deep downturn. President Bush, French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso issued a statement last weekend that said the first such summit would focus on progress being made to address the current crisis and reforms needed to avoid a repetition of the problems. The later summits will be designed to implement specific steps on the principles of reform. The location of the summit has not been announced.
Treasury Secretary Henry Paulson says the current financial challenges facing the country will persist for a number of months, but he says the economy will rebound. Paulson says the Bush administration, working with the Federal Reserve, is committed to taking the necessary steps to strength the financial system. He says close cooperation with other countries is critical. Paulson says he's talked with Chinese leaders, and it's clear that China accepts its responsibility" as a major world economy that will work with the United States and other partners to ensure global economic stability. Paulson says he's looking forward to the next round of high-level talks with China in Beijing in December. The Treasury Secretary says it's important for China to continue allowing its currency to rise in value against the dollar. Paulson calls it an "unnatural act" to have an economy the size of China's integrated into the global economy with a currency that does not reflect economic fundamentals. Paulson spoke to the national committee on U.S.-China relations in New York on Tuesday.
British Prime Minister Gordon Brown says the economic downturn will probably lead to a recession in the U.K. Brown has told lawmakers at the House of Commons that current economic woes are "likely to cause recession." Britain's Office for National Statistics is expected to report later this week that the economy shrank for the first time since 1992 during the July to September quarter. Two consecutive quarters of negative growth are the usual definition of a recession. Main opposition Conservative party leader David Cameron says Brown must shoulder some blame for Britain's downturn.
Lawmakers are beginning to consider how to overhaul the regulatory structure overseeing the U.S. financial system, based upon lessons learned from the current financial crisis. House Financial Services Committee Chairman Barney Frank says a special committee may be created to draft the regulatory overhaul. The panel kicked off what promises to be a long, complex debate on how to avoid a repeat of the current financial mess. Frank signaled he's willing to look into whether certain accounting rules should be loosened as republicans and industry groups would like. They complain that the rules, requiring companies to account for their assets at the price they could get if they had to sell them, can needlessly erode an institution's balance sheet when the market value of an asset is far less than its actually worth. Frank said Congress wouldn't directly rewrite the accounting rules, but may give regulators flexibility to ease capital-raising requirements when assets are marked down.
Toyota will resume production at its full-size truck plant in San Antonio on November 10th. But the Japanese automaker says it'll run only one of the plant's two production lines. Plant spokesman Mike de la Garza says the Tundra plant's 2,000 workers will split their time between making the 2009 model and working on non-production improvements projects. The automaker suspended production at the plant in August, cutting short its 2008 model production amid high gas prices and slowing construction. The full-time workers have stayed on the payroll, undergoing training and doing improvement projects. De la Garza says Toyota expects to resume production on both lines in the spring, depending on sales and market conditions.
Halliburton has signed an accord with Kazakstan's state oil company on increasing cooperation. Halliburton's Dave Lesar, who lives in the Middle East now, met with the Kazakh prime minister to discuss planned projects.
The Energy Information Administration says crude stocks jumped by 3.2 million barrels last week, slightly more than the 2.9 million barrel increase expected by analysts survey by energy research firm Platts. The EIA also says gasoline inventories increased by 2.7 million barrels last week; analysts had expected a gain of 3 million barrels. Inventories of distillates, which include heating oil and diesel, rose by 2.2 million barrels, well above expectations of a 600,000 barrel increase.
The Interior Department is announcing plans to make available 190 million acres of federal land in a dozen western states for development of geothermal energy. Interior Secretary Dirk Kempthorne says as many as 270 communities could benefit from direct use of geothermal energy under the federal leasing program. The Interior Department announced approval of its environmental review for the program and plans to issue a final rule on the leasing program within two months. Kempthorne called geothermal energy — the use of steam and hot water from beneath the earth — a major source of renewable energy. Electricity from geothermal sources under the plan could produce more than 5,000 megawatts of electricity, enough to power 5.5 million homes.
Continental Airlines is delaying the sale of 20 of its retiring Boeing aircraft. Buyers are having trouble obtaining financing. The aircraft are now for delivery between the fourth quarter of this year and the end of 2009. Other deliveries to Continental have been delayed because of a strike involving Boeing machinists.
The University of Houston's C.T. Bauer College of Business convenes a panel this evening at Melcher Hall to discuss the economic downturn. Academic, banking, small business and personal finance experts will take part in the public event, which also includes panelists from television and print media.
The Junior League is holding another economic discussion this evening, featuring financial experts from the investment community. The discussion, hosted by the Texas Exes Business Network and sponsored by the Bank of Texas, will be moderated by an official from the Houston branch of the Federal Reserve Bank of Dallas.
The Bennigan's and Steak & Ale chains, whose parent company filed for Chapter 7 bankruptcy protection, are getting a new owner. Atalaya Capital Management announced it's buying the brands, their trademarks and equity for an undisclosed price. The acquired assets include Bennigan's Franchising, which was formed by surviving franchisees after the company filed for bankruptcy. Atalaya says a bankruptcy judge in the Eastern District of Texas has approved the deal, which is expected to close by October 31st. The parent company of both the Bennigan's and Steak & Ale brands, S&A Restaurant, filed for bankruptcy protection in July under pressure to repay its debts. S&A was owned by Plano-based Metromedia Restaurant Group. Also, another Metromedia subsidiary--Metromedia Steakhouses--filed for Chapter 11 bankruptcy protection in a Delaware Court. Metromedia Steakhouses owns the Ponderosa and Bonanza Steakhouse chains.
Kmart is reminding consumers you can still buy things on layaway. Hyped in national advertisements for the first time in years, layaway lets shoppers pay for everything from tools to televisions bit by bit before taking the items home. The practice dates back to the Great Depression, but has all but disappeared in recent decades. A Kmart spokesman says it's an option that suddenly "has a great deal of relevance." For now, layaway sales account for only a declining fraction of overall sales, and retail experts don't think that's going to change. A spokeswoman for the National Retail Federation says consumers would rather make payments on things they already have, instead of paying for them while they sit in the store. Wal-Mart gave up on layaway sales in 2006.
Lending rates among banks in the U.S. and Europe have continued to drop as central banks' cash loans to banks appear to be unblocking credit markets. The rate on three-month loans in dollars, known as the London Interbank Offered Rate, has fallen sharply, by 0.29 percentage points to 3.54 per cent. The offered rate for three-month euro-denominated loans has fallen 0.03 percentage points to 4.936 per cent, the lowest rate since June 5th. Interbank rates are important because they affect the cost of loans to businesses and individuals. They skyrocketed in recent months as banks worried that other lenders might collapse. After massive intervention from governments and central banks, that worry is slowly fading.
The Federal Reserve is raising the interest rate it pays commercial banks on excess reserves, helping the central bank battle the credit crisis. The move will encourage banks to keep excess reserves at the Fed because they will be earning higher interest on that money. That will give the Fed more control over interest rates and more leverage to battle the credit debacle. Under the new formula, which takes effect on Thursday, the Fed will pay banks 1.15 per cent on excess reserves. The Fed pays banks three-quarters of a percentage point under the old formula.
AT&T says its earnings rose 5.5 per cent in the third quarter. But it missed analyst expectations in part because of strong sales of iPhones, which AT&T subsidizes. The country's largest telecommunications company said it earned $3.23 billion in the July-September period. That's up from $3.06 billion in the same period a year ago. Dallas-based AT&T says revenue rose four per cent to $31.3 billion, matching analysts' estimates.
ConocoPhillips says third-quarter profit rose 41 per cent due largely to record oil prices this summer. The results easily topped Wall Street forecasts for the third-largest U.S. oil company. The Houston-based company said net income for the July-September period rose to $5.18 billion from $3.67 billion during the same period a year earlier. Revenue rose nearly 52 per cent to $70 billion from $46.1 billion a year ago.
Kimberly-Clark says its third-quarter profit declined nine per cent as it paid more for raw materials and ramped up its marketing efforts. The Irving-based maker of Huggies diapers says net income declined to $413.1 million from $453.1 million last year. Revenue rose eight per cent to $5 billion from $4.62 billion, as sales of personal care products benefited from higher volumes and prices as well as currency exchange rates. Thomson Reuters said analysts, who typically exclude one-time costs, expected $4.99 billion in revenue. Kimberly-Clark says commodity costs rose by $250 million in the quarter while marketing spending rose by $25 million. It also lowered its full-year profit outlook.