News

Friday PM January 11th, 2008

Bank of America buying Countrywide Financial in $4 billion deal…Lone Star Funds chairman says South Korean prosecutors have banned him from leaving…Houston gasoline prices average another six cents per gallon… America’s biggest consumer bank is buying the nation’s largest mortgage lender, saving California-based Countrywide Financial from possible bankruptcy in the middle of the mortgage crisis. […]

Bank of America buying Countrywide Financial in $4 billion deal…Lone Star Funds chairman says South Korean prosecutors have banned him from leaving…Houston gasoline prices average another six cents per gallon…

America’s biggest consumer bank is buying the nation’s largest mortgage lender, saving California-based Countrywide Financial from possible bankruptcy in the middle of the mortgage crisis. Bank of America is paying $4 billion in stock. The deal will turn the bank into America’s largest loan servicer. Countrywide has nine offices in the Houston area. There’s no immediate word on job cuts, but analysts said they expect some among Countrywide’s 15,000 employees. Lewis said he would like Countrywide Chairman and CEO Angelo Mozilo to stay with the combined companies until the deal is done. By buying Countrywide, Bank of America Chief Ken Lewis becomes a market savior of sorts, rescuing the mortgage company from failing in the global credit crunch. The acquisition also will save the financial services industry and regulators from the messy task of figuring out who would collect payments on the millions of U.S. home loans serviced by the lender. One analyst expects the deal eventually will make money for Bank of America. But he says “there’s still plenty of risk involved” right now. The agreement has been approved by both companies’ boards and is subject to regulatory and Countrywide’s shareholders approval.


The chairman of U.S. buyout group Lone Star Funds says South Korean prosecutors have banned him from leaving the country. John Grayken said he was informed of the ban by his lawyers. He spoke to reporters after testifying in a stock price manipulation trial involving the Dallas-based private equity group. He did not give a reason for the restriction or say how long it would be in force, though he called it “unnecessary.” He says he intends to fully comply with the investigation. Grayken has not been charged. But Lone Star is snarled in a series of legal and tax disputes in South Korea that have thwarted its attempts to sell off its controlling stake in Korea Exchange Bank, the country’s sixth-largest lender. Lone Star has consistently denied wrongdoing.


An overnight fire destroyed a glove factory in the northeast Texas town of Atlanta. No injuries were reported in the fire at the Guard-Line plant in the center of Atlanta, about 25 miles south of Texarkana. But firefighters spent most of the pre-dawn hours fighting the flames and subsequent hot spots. About 75 people were employed at the plant.


Retail gasoline prices continue to rise across Texas. The weekly AAA Texas Gas Price Survey finds regular self-serve averaging $2.98 per gallon. That’s a nickel higher than last week approaching the all-time high of $3.09 was set in May. The national average is $3.10, also up a nickel from last week and 13 cents from the record high. Houston’s average is up almost six cents to $2.95 per gallon. Auto club spokeswoman Rose Rougeau says Texas is one of the few states with a statewide average price for regular self-serve still under $3 per gallon. She says record crude-oil prices continue to force retail gas prices higher. El Paso has the lowest average price of the 11 Texas cities in the survey with $2.86 per gallon. That’s up four cents from last week. Texarkana is the only Texas city topping $3 with an average price of $3.05 per gallon, three cents higher than last week.


Consumer confidence has taken a tumble amid worries about jobs, energy prices and the housing crunch. One yardstick, the RBC Cash Index, puts consumer confidence at just over 56. That’s the lowest it’s been since the index began in 2002. The 56 figure is measured against a benchmark of 100, and is ten points worse than it was a month ago. An economist says “people are anxious because everything sounds pretty awful these days.” Unemployment is at a two-year high. And there’s been a meltdown in the housing market on top of credit problems and high gasoline prices. The White House is considering a rescue plan, including a possible tax cut. And Fed Chairman Ben Bernanke promises further interest-rate cuts.


The U.S. trade deficit has surged to the highest level in 14 months, amid record imports of foreign oil. The Commerce Department says the gap between imports and exports jumped by 9.3 percent in November to $63.1 billion. That’s much larger than the $60 billion that had been expected. The increase was driven by a 16.3 percent surge in America’s foreign oil bill. It climbed to an all-time high of almost $35 billion as the price of imported crude reached new records. And with oil prices last week touching $100 per barrel, analysts are forecasting higher oil bills in future months. November’s deficit with China declined slightly while the weak dollar boosted exports to another record high.


Berkshire Hathaway now controls 17.6 percent of Burlington Northern Santa Fe. That’s after Warren Buffett’s Omaha-based holding company bought 751,400 shares of the Fort Worth-based railroad. Berkshire revealed the purchases of BNSF stock in two filings with the Securities and Exchange Commission. The second filing disclosed purchases of 721,800 shares of BNSF stock made between Tuesday and Thursday. Earlier, Berkshire disclosed the purchase of 29,600 shares on Monday. Berkshire now owns 61.6 million shares of BNSF. Berkshire owns furniture, insurance, jewelry and candy companies, restaurants, natural gas and corporate jet firms and has major investments in such companies as Coca-Cola, Wells Fargo and Fort Worth-based Acme Brick and Justin Brands.


The number of rigs actively exploring for oil and natural gas in the United States fell by 30 this week to 1,744. Houston-based Baker Hughes reports that of the rigs running nationwide, 1,409 were exploring for natural gas and 327 for oil. Eight were listed as miscellaneous. A year ago, the rig count stood at 1,717. Texas lost ten rigs. Baker Hughes has tracked rig counts since 1944. The tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted several record lows in 1999, bottoming out at 488.

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