Citigroup agreed today to pay $1.66 billion to Enron creditors who lost money when the Houston-basedenergy trader collapsed in 2001. Citigroup was the last remaining defendant in what was known as the "mega claims'' lawsuit filed in 2003 against 11 banks andbrokerages. The Enron Creditors Recovery Corporation alleges that Enron kept creditors in the dark about its financial troubles by using shady accounting with the help of banks like Citigroup. The settlement brings Enron creditors' settlements to more than $5 billion. That amounts to a little more than a third of what creditors had tied up in Enron. Citi denies any wrongdoing. It had been trying to get the Enron suit tossed out. The creditors had filed claims against Citi that could have potentially totaled about $21 billion.
The government reports that sales of new homes fell in February for a fourth straight month as the steep slump in housing continues. The Commerce Department says new home sales dropped 1.8 percent last month to a seasonally adjusted annual rate of 590,000 units, the slowest sales pace since February 1995. The decline was slightly worse than expected. The median price of a home sold last month dropped to $244,100, down 2.7 percent from the level of a year ago. The prolonged slump in housing has dragged down overall economic activity. Many analysts believe the slump could combine with other problems, including a severe credit crunch, soaring energy prices and plunging consumer confidence, to push the country into a full-blown recession.
The government reports that factories experienced more weakness in February. Orders for manufactured goods fell for a second straight month, providing more evidence of the economic troubles gripping the country. The Commerce Department says demand for durable goods dropped 1.7 percent last month, disappointing analysts who had been expecting a small rebound after a 4.7 percent decline in orders in January. The declines showed up in a number of areas. Demand for manufacturing equipment plunged by 13.3 percent, the largest amount on record. The category that's seen as a good proxy for business investment fell by 2.6 percent, the biggest decline in four months.
Citing the crash of Bear Stearns, Treasury Secretary Henry Paulson says the government needs to bring investment houses under the kind of federal oversight that has long been given to commercial banks. Paulson told a U.S. Chamber of Commerce audience that the Bush administration will soon release just such a blueprint in an effort to promote a smoother functioning of financial markets. He also said the administration will look into ways of helping struggling homeowners at risk of losing their homes. But as far as some of the proposals put forth by Congressional Democrats, Paulson said "most are not yet ready for the starting gate.'' Paulson also rejected the need for a "system-wide solution'' to deal with homeowners who have no equity in their home, which is when the money owed on a house is more than the home is worth.
Two senators want to know more about the last-minute sale of investment bank Bear Stearns to JPMorgan, and how the Federal Reserve bank's backing for the deal could affect taxpayers. Montana Democrat Max Baucus and Iowa Republican Charles Grassley have written to executives of both firms, Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke. The lawmakers say they want answers on how taxpayers would fare under the deal, which the fed helped broker and guarantee in an extraordinary move aimed at preventing a meltdown of the U.S. financial system. Lawmakers are seeking specifics of the transaction by week's end. The letter comes as Paulson said that the Bear Stearns takeover highlighted the need for stronger and clearer regulation of big financial institutions.
JPMorgan Chase is offering bonuses to the top brokers at Bear Stearns to get them to stay with the company after it's acquired. The retention packages, which would go into effect when JPMorgan's buyout is completed, are aimed at keeping Bear Stearns' best-performing brokers from leaving for another investment bank. Retaining Bear's talent is key to the success of the integration of the risk-taking investment bank into the commercial bank. Bear Stearns employees have seen most of their stock holdings get wiped out after JPMorgan this month offered to buy the struggling investment bank for a small fraction of what it was valued at a few weeks ago.
A conference today at Rice University's James A. Baker III Institute for Public Policy focused on digital communications technologies. The Conference on Convergence and Connectivity 2008: Broadband, Wireless and Mobile looked at developing a vision for digitally-connected communities. Many emerging nations are now surpassing the United States in adoption of deployment of IT services for government, industry and individuals.
American Airlines canceled about 300 flights worldwide for inspections. An airline spokesman says crews need to check some wire bundles aboard the MD-80 aircraft. The inspections follow an audit by a joint team of inspectors from the Federal Aviation Administration and the airline itself. An American spokesman says the re-inspected planes returned to service throughout the day. He said the cancellations affect about eight percent of the airline's schedule. Two of American's eight Houston flights from Bush Intercontinental Airport were canceled, as well as two of seven arriving flights. About 50 departures each were canceled at the airline's hubs at Dallas-Fort Worth and Chicago O'Hare International Airports.