Wednesday PM September 24th 2008

Galveston residents visit island to survey damage; governor announces rental assistance program for evacuees…Homes sales continue downward slide…Treasury Secretary and Congress continue discussing $700 million bailout proposal for financial industry…

Nearly two weeks after Hurricane Ike, some Texas residents are returning to their homes on Galveston Island to find almost all of their possessions lost. Ruben Rosas returned to his first-floor apartment on a bayou this morning. Some of the only things left in it were a cross that had been left on his father’s coffin and a small “King of Dads” statue his kids gave him when they were young. The 74-year-old says the good thing is that he’s “still around.” City officials have tried to prepare residents for the devastation Ike has left behind. Galveston has limited medical, power, water and sewer system capabilities. The city began letting people back in early this morning. Many people had been lining up on the highway leading to the island before dawn. The Category 2 hurricane battered Galveston with 110 mile-per-hour wind and a 12-foot storm surge more than a week ago, flooding homes and destroying businesses. The storm caused at least 61 deaths, including 26 in Texas. About 45,000 of Galveston’s 57,000 residents fled the island about 50 miles southeast of Houston. Residents of the island’s severely damaged West End can visit their homes but aren’t allowed to stay in them.

Rental assistance will be available for eligible Texans under a program announced today by Governor Rick Perry. The program, which involves federal funding, will help Texans find intermediate housing and offer temporary rental payments. The effort is called: Disaster Housing Assistance Program-Ike. Ike slammed the Texas coast on September 13th. Many shelters have closed, but some people still need help finding a place to live. Evacuees who can’t return to their homes by November 1st, and are eligible under FEMA guidelines, can seek rental assistance for apartments. To register, contact FEMA at: 800-621-3362, or go online.

Democratic Congressman Chet Edwards says the House will pass a year-end spending bill that will designate most of about $23 billion in disaster recovery aid for Hurricane Ike. The money is divided among agencies and programs. Edwards is the ranking Texan on the House Appropriations Committee. The sweeping spending bill also increases defense spending and assists automakers. It is intended to keep government running past the October 1st start of the 2009 budget year.

Former Presidents Bush and Clinton are joining forces again to help out the victims of Hurricane Ike. The former presidents first teamed up to raise $11 million for Tsunami victims, then worked to raise private money to help relieve the miseries of victims of Hurricanes Katrina and Rita. The two announced their new fund-raising drive to help hurricane victims in Texas and Louisiana at a surprise joint appearance at the Clinton Global Initiative in New York. They also said that former Secretary of State James Baker will chair the campaign and oversee a committee of about 40 business and civic leaders from the hard-hit areas. The new Bush-Clinton Hurricane Recovery Fund won’t make grants to individuals or families. Instead, it’ll coordinate with the hardest-hit cities and towns along the Texas and Louisiana Gulf Coast to finance infrastructure projects.

The Texas insurance commissioner says close to 50,000 insurance claims have been filed for Hurricane Ike’s damage and thousands more are pouring in each day. Commissioner Mike Geeslin told legislators the crush could potentially put a handful of insurance companies at financial risk, though he wouldn’t say which companies the Texas Department of Insurance is closely watching for problems. Lawmakers at a Capitol hearing also lamented an upcoming expected loss to the state budget of $400 million per year because of hurricane costs to the state-chartered Windstorm Insurance Fund. Much of that fund is supported by assessments to insurance companies that can then recoup some of their payments through state tax credits.

Fishermen along the upper Texas Gulf Coast are sweeping debris from gutted bayfront homes–after hurricane Ike. The cleanup comes on the eve of October’s peak harvesting season. But the $100 million fishing industry in Galveston Bay is stalled. Gulf harvesters and state officials predict Ike’s impact will be felt from distributors to the dinner table. Lisa Halili’s Prestige Oysters is among at least three in the Galveston bay front community of San Leon. Halili says recovering from Ike “is going to be the biggest challenge the seafood industry in Texas ever had to deal with.” Some fear it’ll take as long as two years for the industry to recover. Ike killed hundreds of acres of oyster reefs with waves of shocking saltwater, and suffocated others with grass Ike clawed from Bolivar Peninsula and washed into the Gulf.

Eight of 14 Gulf Coast refineries that shut down for Hurricane Ike are restarting. Four remain shut down–ExxonMobil’s Beaumont plant, Valero Energy and Total’s Port Arthur plants and Marathon’s Texas City refinery. Shell expects to start making fuels at its Deer Park refinery this week. The Motiva plant in Port Arthur could begin making gasoline by the end of the week. Shell-operated drilling and production facilities in the Gulf of Mexico are being restarted by some 1,210 personnel.

ConocoPhillips and Calgary-based Encana have begun construction on a $3.6 billion Illinois refinery expansion. It will more than double its capacity to refine heavy oil from Canada’s oil sands by 2011.

The House, responding to growing public demand for more domestic energy, has voted to end a quarter-century ban on offshore oil and gas drilling off the Atlantic and Pacific coasts. An extension of the ban for another year was left off a stopgap government spending bill the House approved on a 370-58 vote. Lifting the ban does not itself mean drilling in the offshore waters is imminent. But it could set the stage for the Interior Department to offer leases in some Atlantic federal waters as early as 2011. Democrats said continuation of the drilling ban would have prompted a veto by President Bush and possible government shutdown. The spending bill now goes to the Senate where it is likely to be approved in the next few days.

The $630 billion spending bill that includes a record budget for the Pentagon is heading toward the House floor. The bill needs to pass in order to keep the government running past October 1st. The plan settles a number of battles between the Democratic-led Congress and the White House. Among the solutions are additional funding for heating subsidies and more disaster relief aid for states like Iowa and Texas. It includes $488 billion for the Pentagon. U.S. automakers are set to receive up to $25 billion in low-interest loans in order to retool their operations toward more fuel efficient cars. The Senate is expected to send the bill to President Bush, who will sign it.

A trade group for real estate agents says sales of existing homes fell by 2.2 per cent in August, but the number of unsold homes on the market also dropped sharply from the previous month’s record high. The National Association of Realtors says sales fell to a seasonally adjusted annual rate of 4.91 million units, from an upwardly revised pace of 5.02 million in July. Sales had been expected to fall by 1.6 per cent, according to economists surveyed by Thomson/IFR. There were 4.2 million unsold homes on the market–a seven per cent drop from the record set in July. It was the steepest drop in inventory since December 2006. Analysts say until inventories drop substantially, the housing market will remain troubled. A gauge of prices of homes sold was down 9.5 per cent from a year ago to $203,000. It was the biggest monthly drop since records were first kept in 1999.

Property sales in the Houston area had its biggest year-to-year decline ever in August—the 12th consecutive monthly drop. Sales slid 20.1 per cent compared to last year at this time. But the average single-family home rose by 4.3 per cent in value in August to $223,933—the third highest level on record. The median price rose 0.6 per cent last month to $160,000.

Republican officials say Treasury Secretary Henry Paulson has accepted a major change in the Bush administration $700 million bailout proposal for the financial industry. The officials say the plan will include limits on the pay packages of executives whose companies benefit from it, particularly so-called “golden parachutes” for executives forced to leave. Criticism of the bailout from both parties has been heavy on Capitol Hill this week. Paulson is a meeting for a second day with House Republicans, some of whom have said they oppose any federal intervention into private financial markets. Virginia Congressman Tom Davis calls it “a terrible plan,” but adds he hasn’t heard anything better. While Democrats have also criticized the plan, party leaders have stressed their willingness to work with the White House to avoid an economic catastrophe. House speaker Nancy Pelosi also has been meeting with administration officials and says talks are “moving in a productive direction.” House GOP leader John Boehner says Americans are “furious” that they’re being asked to put up $700 billion. But he added that Congress “has a responsibility to act,” and that he hopes a bipartisan deal can be reached. A Republican says only four of his GOP colleagues raised their hands during the meeting when asked how many of them supported the plan. Tom Davis of Virginia says it’s a “terrible plan,” but that he hasn’t “heard anything better.” Republicans and Democrats both say President Bush has lost credibility on Capitol Hill, particularly in cases in which he argues there will be dire consequences if Congress doesn’t act. Senator Charles Schumer says he believes Congress must act quickly to rebuild the crumbling financial system but that lawmakers must have a strong supervisory role in how the bailout program is run. The New York Democrat says if there are provisions for a return of money in connection with the absorption of bad debt at various financial institutions, “it should go to taxpayers before bondholders, shareholders and executives.” Schumer is a member of the Senate Banking Committee. He also said on NBC’s “Today” show that “we have to have somebody overlooking the treasury secretary’s shoulder.” Senator Jim De Mint, a South Carolina Republican, differed with Schumer, saying Congress should resist the Bush administration’s pleas for the legislation. In De Mint’s words: “the government broke it. I don’t trust them to fix it.”

President Bush says that despite Congressional debate over his proposed bailout plan, “a robust plan” will be passed. The president spoke before a meeting to discuss free trade with leaders of other western hemisphere nations. It was one of his final events in his three-day trip to attend the U.N. General Assembly. He said the leaders can see clearly that the legislative process in the U.S. is “give and take.”

Republican vice presidential nominee Sarah Palin says the United States could be headed for another Great Depression if Congress doesn’t act on the financial crisis. Palin’s comments came in an interview with “CBS Evening News” anchor Katie Couric. Asked whether there’s a risk of another Great Depression if Congress doesn’t approve the $700 billion bailout package, Palin said: “unfortunately, that is the road that America may find itself on.” Palin said the answer to the financial crisis doesn’t necessarily have to be the bailout plan that the Bush administration has proposed, but should be some form of bipartisan action to reform Wall Street.

Was there criminal wrong doing at the four financial institutions whose collapse helped trigger the bailout plan by the Bush administration? Two law enforcement officials say the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, Lehman Brothers and insurer American International Group. A senior law enforcement official says the inquiries, still in preliminary stages, will focus on the financial institutions and the individuals that ran them. Officials say the new inquiries brings the number of corporate lenders under investigation over the last year to 26.

AIG says it has completed the deal under which it’s getting an $85 billion injection of taxpayer money. In return, the government gets an 80 per cent stake in one of the world’s largest insurers. New York-based AIG said last night it has signed a definitive agreement with the Federal Reserve Bank of New York. The deal, hammered out earlier this month, provides a two-year, $85 billion emergency federal loan to AIG at an interest rate of about 11.5 per cent. AIG says it will repay the money in full with proceeds from the sales of some of its assets.

A former director of the International Monetary Fund says financial markets need international regulation to avoid another crisis. Michel Camdessus says the international community should have spoken out against the unregulated banking practices that spread globally from the United States. He describes many of those practices as ethical failures. Camdessus was head of the IMF for 13 years, including the period of the Asian financial crisis in the late 1990s. He said that plans to reform global economic markets were abandoned after the Asian crisis was resolved, and he fears another opportunity will be lost now. He said a central authority such as the IMF should safeguard against further abuses in unregulated markets.

The Federal Reserve, in coordinated action with foreign central banks, plowed $30 billion into money markets overseas, part of an ongoing effort to fight a global credit crisis. The new swap arrangements will provide up to $10 billion each to the central banks of Australia and Sweden and $5 billion apiece to the central banks of Denmark and Norway. Last week, the Fed and other foreign central banks pumped as much as $180 billion into money markets overseas. The European Central Bank, the Bank of Japan the Bank of England, the Swiss National Bank and the Bank of Canada participated in that maneuver. The global credit crisis poses a danger not only to the U.S. economy but also the world economy.

image of new Lincoln penniesThe penny will be produced with four different flip side designs starting next year. The U.S. Mint unveiled the designs at the Lincoln Memorial in Washington D.C. this week, Lincoln’s profile will remain on the heads side of the coins but the Lincoln Memorial will be replaced on the tails side by new images, with a different one being introduced every three months. The first design will depict a log cabin, representing the Kentucky home where Lincoln was born in 1809. The first new penny goes into circulation on February 12th—Lincoln’s birthday.

American Airlines says it has suspended flights to and from Bolivia due to the country’s political crisis. The airline’s Bolivian sales manager announced that American’s daily flights to and from the South American country are on hold as a “precaution for the security of our customers, personnel and airplanes.” Edson Jauregui said regular service will resume on October 2nd, though the airline will run a single flight from Miami to La Paz on September 29th. American Airlines runs the only daily nonstop flights between the U.S. and Bolivia. The company briefly suspended service when anti-government riots broke out across eastern Bolivia earlier this month.

Rwanda has named the former U.S. ambassador to Sierra Leone and Burundi as Honorary Consul General at Rwanda’s new consulate in Houston. Ambassador Cynthia Shepard Perry of Manvel will head Houston’s 89th consulate—the 12th country from Africa to be represented in Houston. Coffee and tea are Rwanda’s chief exports.

Consumer activists say the Texas Residential Construction Commission should be abolished. They say the panel is ineffective and shields homebuilders from liability for shoddy work. In leveling the criticism, the activists were merely echoing a recent state report. The commission created in 2003 was skewered last month in a review by the state review. The Sunset Review Commission found the agency doesn’t have the trust of the consumers to protect them from unqualified builders. The creation of the commission was backed by homebuilders. They praised it for establishing standards and warranties for home construction and creating a process to settle disputes between builders and buyers out of court. But consumer groups have argued the agency did more to protect builders than consumers and limited homeowners’ legal recourse in disputes.

A new study of why consumers choose one new car over another says a growing number of buyers are turning down vehicles due to inadequate gas mileage. Wednesday’s study by J.D. Power and Associates also says more potential buyers are considering Asian brands, while the number considering domestic vehicles is shrinking. The study surveyed nearly 30,000 new-vehicle buyers from May to July. It says 40 per cent of buyers rejected a new car because of price. The number two reason is a car’s interior, while number three is fuel economy. Twenty per cent of buyers cited gas mileage as a reason for rejecting a car. That’s up three percentage points from last year. J.D. Power spokesman John Tews says that’s one of the biggest jumps in the study’s history.

Texas energy regulators, trying to cope with the biggest oil boom in decades, dipped into an environmental cleanup account. They’re hoping to whittle down a backlog of well permit requests and expand drilling. The Texas Railroad Commission voted unanimously to tap up to $750,000 from the Oil Field Cleanup Fund. The account normally is used to plug abandoned wells and remediate contaminated drilling sites. The money in the account comes largely from industry permit fees. Industry advocates have been pushing the Railroad Commission to seek emergency funds to reduce bureaucratic and costly delays in the permitting process. Oil industry advocates say they have grown increasingly frustrated with the long waits for government approval to explore for oil at a time of soaring energy prices.

Blame it on the high cost of fuel: most of the truckers expected at a rally to protest high gas prices couldn’t afford to drive to Capitol Hill. More than 200 truckers were expected Tuesday, but fewer than 20 showed in the nation’s capital for a rally against soaring pump prices. Organizers say expensive travel costs were the reason for the low turnout, even if truckers are fuming about paying nearly double what they used to in recent years to fill up. Members of Truckers and Citizens United who drove their tractor-trailers into Washington noisily honked their horns. The truckers are asking Congress to approve measures to bring down fuel prices. They also back new moves to promote offshore drilling.

Starbucks plans to introduce several new warm breakfast sandwiches next week. The company the sandwiches, called Piadini, will feature artisan bread and will be filled with sausage, egg and cheese or portobello mushroom, spinach and ricotta cheese. Starbucks also is adding ovens to 800 more stores. The ovens are currently in about 3,000 locations. Michelle Gass, the company’s senior vice president of marketing, said that over time, ovens will be in 90 per cent of the stores. The company recently changed the kind of cheese it was using in its warm breakfast sandwiches to neutralize the cooking smell, which it found interfered with the coffee aroma at its restaurants.

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