The Federal Reserve has lowered its benchmark interest rate once again, looking to keep the nation from tumbling into a recession. The decision to cut the federal funds rate by a quarter of a point was widely expected, although some in the financial markets were hoping for more. Fed officials are indicating that more rate reductions are possible if a severe downturn in housing and the crisis in mortgage lending get even worse. In addition to cutting the funds rate, the Fed announced a similar reduction in its discount rate, the interest it charges to make direct loans to banks.
An Alabama Supreme Court ruling that threw out almost all of a $3.6 billion verdict against ExxonMobil in a state lawsuit will stand. Alabama Governor Bob Riley has decided not to ask the state's justices to reconsider their decision in the state's royalties suit against the Irving-based oil giant. The court ruled 8-1 on November 1st that the award would be cut to $51.9 million. The court's decision was along party lines, with eight Republican justices siding with the oil company and the court's lone Democrat dissenting. The Republican governor's legal adviser says Riley decided, after consulting with lawyers, that seeking a rehearing by the Supreme Court "would be futile.'' The state government originally won the judgment in a lawsuit against ExxonMobil over royalties due from natural gas wells Exxon drilled in state-owned waters off the Alabama coast.
Washington Mutual, the nation's largest savings and loan, says it will close some offices, lay off workers, and set aside far more than expected for loan losses in its fourth quarter. WaMu says it will close five of six home loan centers in the Houston area, affecting 25 employees. The company also said it was slashing its dividend 73 percent. Additionally, WaMu announced a $2.5 billion offering of convertible preferred stock. The company said it now expects to set aside between $1.5 billion and $1.6 billion for loan losses in its fourth quarter. That estimate is about twice the level of expected fourth quarter net charge-offs. The company said higher loan loss provisions could continue through the end of 2008. WaMu said it will exit subprime lending, closing about 190 of 336 home loan centers and sales offices. That means the loss of about 2,600 home loans positions and eliminating 55 corporate and other support jobs.
The chief executive of Freddie Mac estimates the mortgage finance company will lose up to $7.5 billion in additional funds over the next few years as the housing crisis worsens and home-loan defaults rise. The government-sponsored company has already logged about $4.5 billion in projected losses during the first nine months of this year. The comments from Chairman and CEO Richard Syron came during a discussion with financial analysts in New York. Syron's remarks came a day after Freddie Mac and its larger government-sponsored rival Fannie Mae said they are changing their criteria for purchasing delinquent home loans they've guaranteed, in order to reduce the number they buy from investors.
Revenue in the nation's manufacturing sector is predicted to grow at triple the pace of the service sector next year, according to the Institute for Supply Management. Purchasing managers indicate they expect a 6.8 percent increase in manufacturing next year and a two percent rise in service revenue. Reported growth rates for 2007 are about 2.4 percent for manufacturing and 1.3 percent for service businesses. But manufacturers expect to spend less on capital expenditures in the coming year, worried over energy prices, commodity prices, the weak dollar, inflation and housing.
The U.S. and China signed two deals to safeguard the quality of food and drugs ranging from pet food to certain types of antibiotics imported into America from China. The agreements on food and feed product safety and on drugs and medical devices were signed at the end of a meeting of the China-U.S. Joint Commission on Commerce and Trade by U.S. Health Secretary Mike Leavitt. China's exports have come under intense scrutiny this year because a number of potentially deadly chemicals have been found in goods including toothpaste, toys and seafood. The international outrage grew in March after a tainted pet food ingredient made in China was blamed for the deaths of cats and dogs in North America. A Health Department statement said the agreements will establish bilateral mechanisms to provide more information on the goods imported into the United States. Exporters will have to register with Chinese authorities. The agreements also call for the Chinese to improve access to relevant production facilities by U.S. officials.