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Thursday PM April 2nd, 2009

G-20 summit agrees to give $1 trillion to IMF and World Bank…State budget architects depending on steady revenue estimate…ConocoPhillips expects damage from lower oil and natural gas prices and worldwide marketing margins…

President Barack Obama says the G-20 economic summit will be a turning point in a global economic recovery. Speaking at a London news conference at the close of the meeting of major and developing economies, Obama declared “we have learned the lessons of history.” He said the nations would not delay in taking unprecedented steps globally, rather than watching as economies around the world turned inward. He refuted those who said the United States and many of its European partners were at odds over how to confront the deepest global recession in decades. Obama said the meeting produced the means for taking “toxic assets” off the books of struggling banks, would lead to injecting money into economies to jump-start demand, and brought agreement on tough new regulations for financial institutions. But U.S. and British calls for more stimulus spending went unanswered.

Prime Minister Gordon Brown says leaders at the Group of Twenty have agreed to give $1 trillion to the International Monetary Fund and the World Bank to help struggling nations around the world. Brown also says the 20 countries at the G-20 summit will enact common policies to crack down on tax havens, regulate hedge funds, and rebuild trust in the financial system to “prevent a crisis such as this from happening again.” Brown says the G-20 will create a new Financial Stability Board to ensure cooperation across frontiers, to spot risks to the world economy and — together with the International Monetary Fund — provide “the early warning mechanism that this new global economy needs.” He says the G-20 nations will also give emerging powers a greater say in the world economy. Brown did not outline any new fiscal measures but says that the stimulus packages already announced by major nations have already been the biggest in history.

The Texas Senate has passed its version of the $182 billion state budget for 2010-2011. There’s concern that the slowing state economy will not generate enough money. Lieutenant Governor David Dewhurst says he has his fingers crossed that revenue estimates will hold.

image of speaker, click here for audio“And as of my last conversations with the comptroller, even though we’re seeing a softening today—and it could change tomorrow—but today, I still have my fingers crossed that our revenue estimates will hold.”

The proposal spends nearly $11 billion in federal stimulus money to help balance the budget.

NRG Energy’s takeover of Reliant Energy’s retail electric business has been helped along by the Federal Trade Commission. The FTC granted early termination of a waiting period for the $287.5 million acquisition of Reliant by New Jersey-based NRG, which is the second-largest power generator in Texas.

Delinquencies on consumer loans are continuing to rise, according to new data released by the American Bankers Association. The delinquency rate during the fourth quarter of 2008 across multiple consumer loans increased to 3.22 per cent. It’s the highest delinquency rate since the ABA began tracking the data in the 1970s. The delinquency rate was 2.90 per cent during the third quarter. Job losses during were the primary reason for the rise in loan delinquencies during the quarter, says James Chessen, the ABA’s chief economist. The ABA’s delinquency data tracks auto, personal, home equity, home improvement, recreational vehicle, mobile home and marine loans.

The government says the number of troubled loans backed by the federal mortgage insurance program is on the rise as economic troubles mount. However, Housing and Urban Development Secretary Shaun Donovan is telling Senate lawmakers that the Federal Housing Administration is “unlikely to face the catastrophic losses borne in the subprime sector.” He says in prepared remarks that that is partly because As of February, 7.2 per cent of loans backed by the FHA were either 90 days overdue or in foreclosure, up from 5.8 per cent last August. The FHA is the main source of home loans to borrowers with poor credit and low down payments after the subprime lending market’s collapse.

The Federal Reserve says commercial banks and investment firms borrowed less over the past week from its emergency lending program. The Fed says commercial banks averaged $59.7 billion in daily borrowing over the week that ended Wednesday. That was down from $62.8 billion in average daily borrowing logged over the week ended March 25th. Investment firms drew $19.5 billion over the past week from the Fed program. That was down from an average of $20.1 billion the previous week. The identities of financial institutions that borrow from the Fed program are not released. They now pay just 0.50 per cent in interest for the emergency loans.

Financial stocks are rising after the board that sets U.S. accounting standards said it would give banks more leeway in valuing assets that are a primary reason for the ongoing credit crisis. The Independent Financial Accounting Standards Board voted to adopt new guidelines under the so-called mark-to-market accounting rules, which require companies to value assets at prices reflecting current market conditions. The changes will allow the assets to be valued at what they would go for in an “orderly” sale, as opposed to a forced or distressed sale. The new guidelines will apply to the second quarter that began this month. The mark-to-market rules have forced banks to take steep write-downs on some assets, especially securities tied to high-risk subprime mortgages. Banks have been pummeled by losses tied to writing down the value of certain assets, especially bonds backed by troubled mortgages. Relief from the accounting standards could give banks the ability to minimize losses moving forward.

The government says orders to U.S. factories posted an increase in February after six straight monthly declines, providing another glimmer of hope that the economy’s deep plunge may be starting to moderate. The Commerce Department said that orders for manufactured products rose by 1.8 per cent in February, much better than the 1.1 per cent decline that economists had expected. The rebound may well prove temporary given all the forces that are continuing to batter the economy. But still, analysts said a string of better-than-expected reports in recent days could at least be signaling that the severe slide that has occurred may be starting to ease slightly.

The average retail price for a gallon of gasoline jumped a nickel this week across Texas and drew closer to the $2 mark. AAA Texas reports the statewide average is $1.97 a gallon. Nationally, gasoline averages $2.04 a gallon–an increase of four cents from last week. The association survey found Dallas had the most expensive gasoline in Texas, at $2 per gallon. Corpus Christi had the least expensive retail gasoline, at $1.92 a gallon. AAA Texas says the price at the pump has risen because of the recession, as oil refiners cut capacity to keep the markets from being glutted with gasoline. The association also says this time of year is when refiners must change their gasoline from winter blend to cleaner-burning spring and summer products to reduce air pollution. Those additives push up the cost.

Texas Farm Bureau plans to raise home rates a statewide average of 5.9 per cent starting April 15th, according to the Houston Chronicle, pending a review by state insurance regulators. The rate change is highest in Galveston County, with an average 12.2 per cent increase. Harris County rates will climb an average of 0.5 per cent.

ConocoPhillips says lower oil and natural gas prices and significantly lower worldwide marketing margins are expected to hurt first-quarter results. The projection is part of the Houston-based oil company’s overview of market conditions for the January-March period. The nation’s third-largest oil company also says production likely rose by about 30,000 barrels of oil equivalent from the fourth quarter. Those results include ConocoPhillips’ Syncrude Canada operations but not its Russian Lukoil business. But lower commodity prices were a problem. The market price for natural gas was down $2.04 compared with the first quarter and $3.12 from the year-ago period. ConocoPhillips noted iCanada operationsts actual crude oil and natural gas prices may vary greatly from the price indicators because of quality, pricing lags and other factors. The company said its exploration expenses amounted to about $275 million before-tax in the quarter.

A budget amendment to expand oil and gas production in the Outer Continental Shelf has been introduced by Senator Kay Bailey Hutchison of Texas and other co-sponsoring Senators. Hutchison notes that the current budget proposal promotes renewable energy development, improved electricity transmission and creation of green jobs, but overlooks oil and gas production as a way of decreasing the need for foreign energy.

Mergers and acquisitions won’t return to 2007 activity levels for about five years, according to a Brunswick Group study, as reported by the Houston Business Journal. Respondents cite lack of credit and the slowing economy, coupled with lack of confidence by chief executives. Brunswick says the potential impact of the stimulus package on credit and confidence could drive domestic deals, especially in health care and financial sectors.

Intel and General Electric are jointly investing $250 million over the next five years to develop products aimed at providing personalized home health care technology for seniors. The companies envision technology that will cut health care costs and help aging baby boomers and people with chronic illnesses remain in their homes by allowing doctors to monitor patients remotely. Announcing the agreement, Intel Chief Executive Paul Otellini and GE CEO Jeffrey Immelt said their cooperation will help them jump quickly into a market they estimate will grow to $7.7 billion by 2012, from $3 billion this year. The investment is one of “four or five big bets” that Intel, the computer chip maker, is making outside of PCs.

A.H. Belo says it will cut some workers’ salaries and suspend pension contributions for the year as it looks to lower costs further amid ongoing revenue declines plaguing the publishing industry. The Dallas-based newspaper publisher said its board also approved a previously announced plan to suspend matching contributions to its savings program as well as a severance amendment that affects some of its executives, including Chief Executive Robert Decherd. A.H. Belo’s publications include the Dallas Morning News.

Continental Airlines reports a load factor that’s 2.9 points below the same month a year ago The international load factor is down 4.2 per cent from March 2008. The Houston-based air carrier has been named “Best Airline: North America” in the Skytrax 2009 World Airline Awards for the second year in a row.

Unions at American Airlines are using an interactive Web site game to skewer the chief executive of Fort Worth-based American Airlines. The Transport Workers Union represents mechanics, bag handlers and other ground workers at American. It says it’s launching a new campaign to protest stock-based compensation for several hundred management employees later this month. In early 2007, CEO Gerard Arpey received a $6.6 million stock bonus as reward for a sharp rise in the company’s share price in 2006. But last year, his stock bonus fell to $1.7 million as AMR’s share price tumbled. The AMR board originally set a target of $2.2 million for Arpey’s 2009 stock-based incentive payment. Similar payments in recent years have totaled nearly $300 million. They’re expected to be a small fraction of that amount this time though because the stock price of American Airlines parent AMR has dropped from $40 in early 2007 to less than $3 last month. Fort Worth-based AMR which lost $2.07 billion last year.

The McCombs School of Business at the University of Texas in Austin has announced its Hall of Fame Class of 2009, to be inducted in a ceremony at the campus on November 6th. James Huffines is chairman of PlainsCapital Bank, and is on the UT System Board of Regents. Joel Staff is chairman of Reliant Energy. And Elizabeth Yant is a partner at PricewaterhouseCoopers in Houston.