The government is weighing a number of options to ease one of the worst financial crisis that has hit this country in decades, according to an Associated Press report with a person with knowledge of the talks. U.S. stocks surged late Thursday after a report that the administration was considering creating a government entity patterned after the Resolution Trust Corporation, created in the 1980s in the aftermath of the savings and loan crisis. But the official, speaking on condition of anonymity because of the sensitivity of the discussions, said the talks have not narrowed to a single option and that an RTC-type solution is not a certainty. President Bush canceled an out-of-town trip to stay in Washington and meet with his top economic advisers. Bush held a 40-minute meeting with Bernanke, Treasury Secretary Henry Paulson and Securities and Exchange Commission Chief Christopher Cox along with White House and Treasury Department aides.
President Bush says he shares the American people’s concern about the situation in U.S. financial markets and the economy. Bush says the markets are adjusting to “extraordinary measures” the government has taken to stabilize the economy. The president delivered a statement to the American people from just outside the Oval Office. He said that he and his advisers are working to promote stability in the markets. But Bush did not announce any new policy moves.
Hoping to deliver a counter-punch to the global credit crisis, the Federal Reserve pumped billions of dollars into financial markets in the U.S. and abroad. The Federal Reserve Bank of New York, in two operations, injected $55 billion into temporary reserves in the United States. The move is meant to help ease a strained financial system in danger of freezing up. Hours earlier, the Fed worked with other central banks, by stepping up action to ease the intensifying crisis that erupted just over a year ago. They banded together to flood global markets with dollars. All told, the Fed increased lines of cash to central banks by $180 billion to $247 billion. Working with the Fed in the coordinated action were the European Central Bank, the Swiss National Bank, the Bank of Japan, the Bank of England and the Bank of Canada.
Banks and Wall Street firms ramped up borrowing from the Federal Reserve’s emergency lending facility over the past week, a fresh sign of the credit stresses plaguing the country. A Fed report says commercial banks averaged $21.6 billion in daily borrowing over the past week. That compared with a daily average of $19.8 billion in the previous week. For the week ending September 17th, Wall Street firms drew such loans averaging $20.3 billion. That step-up comes after six straight weeks where they didn’t draw any loans. Their borrowing averaged as high as $38.1 billion a day over the course of a week in early April.
Senator Charles Schumer plans to offer a broad economic proposal for the government to offer a financial lifeline to those banks that are willing to renegotiate mortgages for those on the brink of losing their homes. The New York Democrat is an outspoken advocate for the financial industry, since so many of those workers are in his home state. Under Schumer’s model, the government would give capital infusions or loans to banks in return for an equity stake, similar to the deal struck with insurance giant AIG earlier this week. In return, the banks would lift objections to legislation allowing loan modification for homeowners in bankruptcy. Currently, a person in bankruptcy cannot renegotiate the terms of their mortgage, unlike other kinds of debt. Schumer’s plan is an alternative to another proposal in Congress to create a federal agency to buy up bank debt, shifting potential losses onto U.S. taxpayers. It would be similar to the resolution Trust Corporation, which lawmakers established during the 1980s savings and loan crisis.
Continental Airlines has insurance policies with AIG and fuel-hedging contracts with bankrupt Lehman Brothers. But the Houston-based carrier’s treasurer said Continental is not concerned about the ties with troubled financial companies. Continental Senior Vice President Gerry Laderman says the airline expects minimal effect from turmoil in the credit markets. Laderman says Continental financed nearly all of its aircraft purchases for this year–before the latest trouble hit. Laderman says Continental doesn’t have “any real exposure specifically” to struggling insurer American International Group, which is getting an $85 billion federal loan. Lehman Brothers filed for bankruptcy protection Monday. Lehman has been a counter-party on some of Continental’s fuel-hedging.
The Interior Department says at least 49 offshore oil or natural gas production platforms in the Gulf of Mexico were destroyed by Hurricane Ike, and some may not be rebuilt. It said in an assessment that the platforms accounted for 13,000 barrels of oil and 84 million cubic feet of natural gas a day. There are more than 3,800 production platforms in the Gulf producing 1.3 million barrels of oil a day and 7 billion cubic feet of gas a day. Most remain shut down. The department also said five gas transmission pipeline systems sustained damage, although the extent of damage is not yet known. The report said it’s too early to say whether there have been any oil spills.
Entergy Texas says it’s on track to restore power to about half of its Conroe-area customers by Thursday night. A company spokeswoman tells The Courier that the Lewis Creek plant is generating at full capacity. Crews are now working to stabilize the transmission system. Renee Powers is the Conroe service manager for Beaumont-based Entergy Texas. She said: “we’ve got the distribution system ready to go, but we wanted to have an additional transmission line as a backup. We can’t afford a crash.” As of early Wednesday afternoon, Entergy Texas had restored power to 54 percent of its customers in The Woodlands area, north of Houston. Some 3,000 residential customers in Conroe had electricity Wednesday, mostly near the Conroe Regional Medical Center. Conroe is about 40 miles north of downtown Houston and has been largely without electricity since Hurricane Ike struck early Saturday.
Hurricane Ike may give some homeowners lagging on their mortgage payments a temporary rescue from foreclosure. Housing Secretary Steven Preston visited Houston today and urged private lenders to cut some slack to financially strapped homeowners in areas ravaged by Ike along the Texas coast. Preston says he doesn’t want people worrying about foreclosure while being saddled with other costs from Ike. The Housing Department has already issued a 90-day moratorium on foreclosures of federally insured home mortgages. Officials did not have an immediate number on how many homes could qualify.
Battered by Hurricane Ike, Galveston is finally enjoying a ray of hope: a reopened grocery store. A Kroger store on Seawall Boulevard opened Wednesday afternoon to dozens of residents who had lined up on foot and in cars for the event. Normally open 24 hours a day, the store has limited hours for now: 8 a.m. to just before the city’s 6 p.m. curfew. The store is accepting all forms of payment. The scene was almost festive. Workers grilled fajitas outside for employees who had worked since 6 a.m. Wednesday to clean shelves and cases. They’d removed enough spoiled food to fill 16 dump trucks. No meat or dairy products are available for now, but most other items are. “It’s almost like coming home,” Anita Katz-Schuler, the first customer in a line of cars, told the Galveston County Daily News
NASA’s Johnson Space Center in Houston is ready to reopen after shutting down for Hurricane Ike. The space agency said that JSC will be fully up and running Monday. It shut down last week before Ike slammed into the Texas coast and incurred minimal damage from the storm that flattened Galveston and left much of Houston without electricity. International Space Station Flight Control is scheduled to resume from mission control in Houston on Friday. The duties had been passed temporarily to backup facilities near Austin and in Huntsville, Alabama.
From Texas rice farms to midwest cornfields, some farmers in the path of Hurricane Ike’s remnants saw profits sink as strong winds battered crops. Along with prospects of lower yields, those farmers will have to take more time to harvest as they slowly move equipment through fields to try and scoop up crops knocked down by the storm. That means farmers have to spend more money on fuel to keep combines in the fields longer. Heavy rains in central and northern Illinois came too late to help the state’s corn crop but could give a late boost for soybeans after an extended summer dry spell. But in western Kentucky, Ike lashed corn fields with high winds. In Texas, where Ike made landfall as a Category 2 hurricane, strong winds and rains heavily damaged the rice crop, equipment and storage facilities east of Houston. And the storm was blamed for killing about 4,000 cattle in two southeast Texas counties and some of the missing livestock may never be found. About a quarter of Arkansas’ rice crop was affected by wind and rain from remnants of Hurricanes Ike and Gustav. Based on preliminary reports, Arkansas farmers could lose ten percent of their overall yield because of the storms.
Farm Aid founder Willie Nelson says the organization will give $30,000 in grants to groups that help family farmers in areas of Texas and Louisiana hit hardest by Hurricanes Ike and Gustav. Nelson, a native Texan, said the grants include $7,500 each to the Lutheran Social Services of the South, the Southern Mutual Help Association, the Louisiana Interchurch Conference and the Federation of Southern Cooperatives. Farm Aid, based in Somerville, says more funds will be distributed as the extent of the hurricane damage becomes clearer. Farm Aid, the nation’s longest-running benefit concert, has raised more than $30 million since its first show in 1985.
Retail gasoline prices across Texas jumped 16 cents in the past week as recovery efforts continue from Hurricane Ike. AAA Texas reported the statewide average price for gasoline reached $3.70 per gallon. The national average price for retail gasoline was $3.83–also up 16 cents in the past week. The industry group reports the least expensive gasoline was in Corpus Christi, at $3.62 per gallon. Texarkana had the highest average price, at $3.78 per gallon. Ike slammed the Gulf Coast, making landfall at Galveston, last Saturday. AAA Texas spokeswoman Sarah Schimmer says the big question now is how long it will take the refineries and oil rigs to get power restored and come back online.
The Conference Board’s Index of Leading Economic Indicators dropped half a per cent in August. That’s worse than expected. The index had dropped seven-tenths of a per cent in July. Economist Ken Goldstein with the Business Research Group says there may be no signs of improvement seen “until well into the second half of 2009.” The index is designed to forecast where the economy is heading in the next three to six months based on ten economic components. Supplier deliveries, manufacturing hours worked and consumer manufacturers’ new orders for capital goods were all down.
The Labor Department says new applications for jobless benefits rose last week, citing the impact of Hurricane Gustav. Initial jobless claims rose to a seasonally adjusted 455,000, up 10,000 from the prior week. A Labor Department analyst said last week’s number is the first to include claims stemming from job losses caused by Hurricane Gustav, which slammed into the Louisiana coast over the Labor Day weekend. Louisiana was unable to report actual claims until last week, the analyst said. The department wouldn’t give a precise estimate of the impact of the hurricane, but said claims would have fallen without it. The four-week average of new claims, which smoothes out fluctuations, rose by 5,000 to 445,000. Venezuela and Russia are deepening military and energy ties, with plans to step up oil, weapons and technology cooperation. As two visiting Russian bombers left Venezuela, officials of both countries said the visit is just the start of a new chapter in a flourishing strategic alliance. President Hugo Chavez will visit Moscow next week and is planning oil projects with Russian companies as well as joint military exercises in the Caribbean later this year. Sergei Chemezov, of Russian state holding company Rostekhnologii, told Russia’s Interfax news agency that Venezuela is also in talks to buy Russian air defense systems and armored tanks.
The House has approved measures to curb speculation in oil and other commodity markets, ignoring a White House veto threat. Lawmakers said federal regulators now don’t currently have the necessary tools or manpower to track trading abuses. The bill passed 283-133. It is aimed at certain hedge fund and large institutional traders and would give the Commodity Futures Trading Commission more staff and authority to limit the stake traders hold in certain markets. It also would require new reporting and other limits on traders including foreign trading boards that operate electronically in the United States. The White House said President Bush likely would veto the bill if it gets to his desk. It said there is “no verifiable evidence” market speculators caused oil prices to soar. The bill now goes to the Senate.
Michigan Attorney General Mike Cox says his office has reached a settlement with the investment arm of Comerica over the sale of $1.46 billion in auction-rate securities. Comerica has agreed to offer full buybacks to any customer who bought the risky investments. Comerica also must pay a $10,000 fine to the state and an additional $100,000 to an investment advocacy group. Cox announced the conclusion of his probe in Detroit, saying there was no indication Comerica committed a crime. Comerica Chairman and Chief Executive Ralph W. Babb says the deal will provide relief to clients in the face of “unprecedented market conditions.” The Dallas-based company joins a long list of major financial institutions to reach similar settlements with regulators.
The Fort Worth-based parent of American Airlines says a key revenue measurement is rising and its fuel bill is falling. American says it expects third-quarter revenue per mile flown by paying customers to rise between 9.5 per cent and 10.5 per cent from a year ago. Parent AMR Corporation says in a regulatory filing that, including the American Eagle commuter carrier, the company-wide increase in so-called unit revenue will range between 9.4 per cent and 10.4 per cent. The company said cargo and other revenue would “increase substantially” over the same period in 2007. AMR also says it expects to pay about $2.7 billion for fuel in the third quarter. That’s $200 million less than it had forecast in July. However, that would still be nearly $1 billion more than it spent on fuel a year earlier.