It isn't the full one percent interest rate cut that some observers had called for. But the Federal Reserve has cut interest rates by three-quarters of a point. The move takes the benchmark federal funds rate to 2.25 percent, to try to stem the credit crisis that has continued to weaken the housing market and helped bring down Wall Street's Bear Stearns. The central bank says the outlook for economic activity has weakened further and that financial markets remain under considerable stress. It also says inflation has been elevated, but adds that pricing pressures should moderate.
President Bush says this is a challenging time for the U.S. economy and his administration is prepared to take further action if necessary--beyond the $168 billion program of tax rebates for families and businesses. The president made the remarks in Jacksonville, Florida, where he was talking about trade. Bush has warned that the government should not overcorrect in trying to fix the economy. But he said that "if there needs to be further action we'll take it--in a way that does not damage the long-term health of our economy.'' He said one problem is an oversupply of housing and it will take time to work through that.
U.S. Senator Kay Bailey Hutchison of Texas delivered an upbeat State of the Senate address to members of the Greater Houston Partnership. Senator Hutchison says the economic stimulus package could help.
"And those should be in the mail in May. And we hope that that is doing to help our economy--that it was meant to be a stimulus package. But we're also monitoring to see if there is something more that we should be doing—either a second stimulus, or something that would shore up the backing of mortgages. We're really asking advice about what would be the most that we could do to help. Now, I think that having a loss carry-back for our homebuilders so they don't have to sell homes at bargain-basement prices and bring down the value of the neighborhood those are things that I would support, yes. I hope that mortgage companies that are holding these mortgages are going to work with the people voluntarily so that if they will continue to make payments, they'd be able to keep their homes and not have foreclosures."
Senator Hutchison says Houston has been relatively resistant to the nation's current economic problems, by having a diverse economic base that creates lots of jobs.
In another sign of troubles in the beleaguered housing industry, construction of new homes fell by a larger-than-expected amount last month. The Commerce Department reports that construction of new homes and apartments fell by six-tenths of one percent in February to an annual rate of 1.065 million units. That was a bigger decline than the two-tenths of one percent drop that Wall Street had been expecting, although January was revised up to show a stronger gain than originally reported. And in a worrisome development for the future, applications for building permits plunged by 7.8 percent in February to an annual rate of 978,000 units, the slowest pace in 16 years.
Delta Air Lines says it will offer voluntary severance payouts to roughly 30,000 employees--more than half its workforce--and cut domestic capacity by an extra five percent this year as part of an overhaul of its business plan to deal with soaring fuel prices. Executives at Atlanta-based Delta, the nation's third-largest carrier, said in a memo to employees Tuesday that the airline's goal is to cut 2,000 frontline, administrative and management jobs through the voluntary program, attrition and other initiatives. A spokeswoman says that if more than that many agree to take the voluntary severance, they will be allowed to. The severance program primarily affects mainline Delta employees. Delta had 55,044 total full-time equivalent employees as of the end of last year.
Delta Air Line's pilots union has told company executives it can't agree on seniority issues with its counterpart at Northwest Airlines. That raises serious doubts about the prospect of a combination of the two companies as Delta prepares to overhaul its operations. The disclosure was made in a letter from the head of the pilots union at Delta to rank-and-file Delta pilots. Lee Moak said the union will not "chase a transaction for transaction's sake.'' The letter does not mention Northwest, but describes the union that delta's pilots had been negotiating with as the only one they were focused on talking with. Multiple officials close to the talks have said in recent months that the other company was Northwest Airlines. The letter talks about the discussions with the other carrier in the past tense, suggesting at least for now there won't be further talks. The two carriers don't need a pilot seniority integration deal in advance to move forward with a combination, but Delta executives have said they would not move forward with any combination unless the seniority of their employees was protected. A Delta-Northwest combination deal could move forward without a pilot seniority agreement, but that would be up to the boards of the two companies.
Venezuela has praised a British judge's ruling against ExxonMobil. Judge Paul Walker threw out an order to freeze $12 billion in assets belonging to Venezuela's state oil company. Walker says he'd disclose the reasons for his judgment on Thursday. During the court case, walker signaled he agreed that Petroleos de Venezuela has no connection to England--a key argument in its defense. Irving-based ExxonMobil had decided to go to international arbitration with the Venezuelan oil company last year. That was after Venezuelan President Hugo Chavez nationalized a heavy oil project in the lucrative Orinoco River basin. ExxonMobil spokesman Alan Jeffers said the oil company has no plans at this time to appeal the judge's decision. He says orders in The Netherlands and New York to seize Venezuelan assets in exchange for nationalized oil fields remain in place.
Toy distributor Mega Brands has recalled about 2.4 million Chinese-made toys. Tiny magnets could fall out and be swallowed or inhaled by children and possibly kill them. If more than one magnet is swallowed, they can attach to each other and cause intestinal perforation, infection or blockage, which can be fatal. Mega Brands is recalling 1.1 million Magtastik and Magnetix Jr. preschool toys and about 1.3 million Magnaman magnetic action figures. Stores where the toys were sold include Wal-Mart, Target, Toys "R'' Us and kMart between January 2005 and December 2007. For details, on the recall, or on how to return the toys and receive a free replacement, consumers can call 800-779-7122.
Dell CEO Michael Dell says he expects business to grow fast in Asia. He told reporters in Seoul, South Korea, that his Round Rock-based computer company saw 41 percent growth in the Asian Pacific region and Japan. The company's founding chairman also says the outlook for laptop computers is bright. Dell says the fourth quarter the company's laptop business in the Asia Pacific grew over 70 percent. He also says industry research firm IDC estimates the laptop business is growing about 21 percent year-on-year in the region. Dell also says the world's number two personal computer maker has become the number one provider of servers in the United States and China. Servers are computers that store large amounts of data for distribution to individual users. The company says fourth-quarter profit dropped 6.4 percent in the quarter ended February 1st. Dell's counting on growth in emerging markets to counter weakness in the united states, where customers are reining in spending on technology.
Alliance Data Systems says affiliates of Blackstone Group are in breach of their acquisition agreement. The Dallas-based credit-card services provider on Monday said the affiliates must cure the breach and complete the $6.5 billion deal reached in May. Blackstone originally offered $81.75 per share for Alliance Data Systems, but in January said it couldn't close the deal because of objections from the U.S. comptroller of the currency, which regulates a bank owned by ads. Ads subsequently filed a lawsuit, but withdrew it after Blackstone said it would work toward closing the acquisition. Ads said it continues to work to complete the deal. Ads shares closed Monday's session down $2.53, or 5.4 percent, at $44.10.