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Tuesday PM August 17th, 2010

BP claims processing transfers to government-appointed administrator…Shareholders prepare to vote on United and Continental Airlines merger…Rate at which U.S. homeowners are behind on mortgage payments remains elevated…


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BP plans to stop processing claims from people and businesses hurt by the Gulf oil spill as it prepares to transfer that role to a government-appointed administrator. The company says it will stop accepting new claims after Wednesday. The Gulf Coast Claims Facility, led by Kenneth Feinberg, will take over the process starting August 23rd. BP says it’s paid roughly $368 million to individuals and businesses, including about $102 million so far in August. Claims filed by government entities, as opposed to people and businesses, will still be handled by the British energy giant. Feinberg is scheduled to be in Louisiana on Wednesday to meet with residents and answer questions about how the claims process will work.

BP has sent nearly $175,000 to the state of Texas to cover the cost of the state cleanup of tar balls from oil washed up on a Galveston beach over the July 4th weekend. Texas General Land Office spokesman Jim Suydam said the state billed BP on July 25th for $174,295 in personnel and vehicle expenses associated with its cleanup response. Suydam says the agency received full payment Monday. The check also includes $77,500 for fire boom sent to the initial spill cleanup. Suydam says Texas typically bills a responsible party if scientifically identified, but expenses from an uncertain source are covered by funds fund from a tax on imported oil barrels. July tests showed tar balls on McFaddin Beach, between High Island and Sabine Pass, came from the massive BP Gulf oil spill.

A federal appeals court has postponed its September 1st hearing on an overturned six-month moratorium on deepwater drilling because the panel is seeking more information about the government’s new temporary drilling ban. A three-judge panel from the 5th U.S. Circuit Court of Appeals ordered a lower court to explore some of the differences, if any, between the Obama administration’s May 28th and July 12th moratoriums. The Interior Department issued the new moratorium after U.S. District Judge Martin Feldman overturned the initial moratorium. The government asked the 5th Circuit to review Feldman’s ruling, but the appeals court said it couldn’t rule on that appeal without more information about the new moratorium. Lawyers for several offshore service companies claim the second moratorium is identical to the first and was designed to circumvent Feldman’s order.

Commercial shrimpers had an encouraging outing as the first season since the Gulf oil spill opened. Shrimpers indicated their catch was plentiful and free of oil, despite a report by scientists that much of the crude remains below the surface of the Gulf. The new season opened amid anxiety over whether the catch will be tainted by crude and whether anyone will buy it even if it is clean. Louisiana ranks first in the nation in shrimp, blue crab, crawfish and oysters, and the state’s seafood industry overall generates an estimated $2.4 billion a year.

Shareholders at United and Continental Airlines will vote on September 17th on combining their two companies. A filing says the votes will happen at special meetings in Houston, where Continental is based, and at a United Airlines facility in Elk Grove Village, Illinois. Shareholders of United parent UAL Corporation will vote on whether to issue shares to Continental shareholders and amend the company’s certificate of incorporation. Shareholders of Continental Airlines will vote on the merger plan. The two companies still need antitrust approval. The airlines expect to close the deal by the end of this year, although combining their operations will take longer. The combined airline will be called United and will be based in Chicago.

Construction of new homes edged up slightly in July but applications for building permits tumbled to the lowest point in 14 months, a sign of continued stress in housing. The Commerce Department says construction of new homes and apartments rose 1.7 percent in July but applications for building permits, considered a good sign of future activity, fell 3.1 percent. A rebound in housing is considered critical for a sustained economic recovery. But builders continue to struggle with weak demand for new homes caused by high unemployment and a glut of foreclosed homes on the market.

Wholesale prices rose last month for the first time since March on higher costs for food and passenger cars and trucks. Still, the increases were modest and show that the weak economy isn’t spurring widespread price rises. The Labor Department says the producer price index, which measures price changes before they reach the consumer, rose by 0.2 percent in July, after three months of declines. The rise matched wall street economists’ forecasts, according to a survey by Thomson Reuters. Excluding volatile food and energy costs, so-called “core” producer prices rose by 0.3 percent in July, the ninth straight increase. Core prices have risen by 1.5 percent in the past year.

Industrial production rose in July as manufacturing remained a key engine of the flagging economic recovery. The Federal Reserve reports that output at the nation’s factories, mines and utilities increased 1.0 percent last month. But it says June’s results were revised to a loss of 0.1 percent, reflecting the economy’s sluggishness. Factory output grew by a robust 1.1 percent in July, helped by auto plants that kept operating when they normally shutter for summer renovations. Factories are the largest single component of industrial production. The strong manufacturing growth should ease fears that the economy could begin to shrink again. The nation emerged a year ago from its deepest recession since the Great Depression.

The rate at which U.S. homeowners fell behind on their mortgage payments remained stubbornly elevated in the second quarter. Credit reporting agency Transunion says its data shows that in the three months that ended on June 30th, the number of mortgage holders 60 days or more behind on payments was 6.67 percent. That’s up from 5.81 percent from last year, and well above the historical norm of 1.5 to two percent. It was a marginal improvement from the first-quarter’s rate of 6.77 percent, and below the 6.89 percent record reached in 2009’s fourth quarter. Transunion expects the mortgage delinquency rate to drift down, nearing 6.4 percent by the end of 2010.

An appeals court has refused to dismiss a lawsuit brought by the parents of a Pittsburgh-area soldier electrocuted in an army barracks shower in Iraq. Houston-based military contractor KBR appealed last year after a federal judge refused its request to dismiss the lawsuit. KBR had argued the judge had no jurisdiction over military matters. KBR claims it wasn’t responsible for Staff Sgt. Ryan Maseth’s death in January 2008, when it was tasked with maintaining the barracks. Army investigators have determined a water pump shorted out and electrified water flowing into the soldier’s shower. Tuesday’s 3rd U.S. Circuit Court of Appeals ruling means the case will be sent back to U.S. District Judge Nora Berry Fischer for more pretrial proceedings. The lawsuit seeks unspecified damages.

Utilities across the country are building dozens of old-style coal plants that will cement the industry’s standing as the largest industrial source of climate-changing gases for years to come. An Associated Press examination of U.S. Department of Energy records and information from utilities shows more than 30 traditional coal plants have been built since 2008 or are under construction. With no limits on carbon dioxide emissions, the new construction is equivalent to putting 22 million additional automobiles on the road. Analysts say the new plants ensure coal’s continued dominance in the power industry. Combined, they will produce enough electricity to power up to 15.6 million homes. Utilities are clinging to coal because it is cheaper than natural gas and more reliable than wind or solar power.

Texas Health and Human Services Commissioner Tom Suehs has asked for more than 1,500 new eligibility workers to deal with anticipated higher demand for food stamps. The Dallas Morning News reports that the state currently has more than 8,300 eligibility workers, processing in excess of 2.6 million cases. Suehs says that by 2013 the program could have nearly 3.1 million cases. The 2009 legislature passed a bill ordering the commission to identify how many workers it would need to eliminate processing delays and errors. Suehs last week submitted the staffing analysis to Governor Rick Perry and other legislative leaders as Texas faces a projected budget shortfall going into the 2011 legislative session.

General Motors is recalling nearly 250,000 crossover vehicles worldwide to inspect second-row seat belts that could be damaged and not latch. GM says the recall affects 2009-2010 models of the Chevrolet Traverse, Buick Enclave, GMC Acadia and Saturn Outlook. Most of the recalled vehicles are in the United States but some are also in Canada, Mexico and elsewhere. GM says the seat belt buckle could be damaged when the seat back is returned to an upright position. That could make the buckle appear to latch when it isn’t. The automaker says it does not know of any cases where the second-row seat belts failed to perform properly in a crash.

Mazda is recalling 215,000 Mazda3 and Mazda5 vehicles to fix problems with the power-steering system that could lead to a crash. The Japanese automaker told the government the recall involved model year 2007-2009 Mazda3 and Mazda5 vehicles built from April 2007 through November 2008. Mazda says the vehicles could have a sudden loss of power-steering assist, making it more difficult for the driver to steer the vehicle. The automaker says that could increase the risk of a crash. The government had opened an investigation into steering problems in the vehicles in June. At the time, the National Highway Traffic Safety Administration had 33 complaints alleging steering problems, including three crashes.

Domestic automakers are gaining ground in a customer satisfaction survey. For the first time ever, Ford’s Lincoln-Mercury and General Motors’ Buick have taken top spots in the American customer satisfaction index. However, Chrysler continues to underperform, with two of its three divisions at the bottom. Overall, the survey finds a 2.4 percent drop in automobile satisfaction, with most domestic and foreign automakers showing declines. Fourteen of the 19 largest auto nameplates showed some deterioration over the past year. But U.S. brands had the smallest drop, while Japanese and Korean brands fell the most. University of Michigan professor Claes Fornell, the founder of the satisfaction index, says the near future looks good for Ford and General Motors. He says satisfied customers tend to do more repeat business and don’t require greater price incentives to return.

Collin County Judge Keith Self says county workers should get less government matching funds for their pensions in a time when average citizens do not have similar benefits. Self has proposed cutting the county’s match for every employee dollar contributed from $2.50 to $1.50. The Dallas Morning News reports the Texas County and District Retirement System allows counties to match employee contributions up to 250 percent, and it guarantees their accounts will grow by seven percent every year. Self says the average citizens “don’t get anywhere close to a two-and-a-half-to-one match. They don’t get guaranteed interest.” Collin County is just north of Dallas County.

A Texas state representative known for railing against runaway government spending has acknowledged pocketing more than $17,000 intaxpayer money for travel expenses that his campaign had already funded. Republican State Representative Joe Driver acknowledged the double-billing when presented with the findings of an Associated Press investigation. In an interview, Driver told the AP that he routinely pays hotels and airlines with donated political funds and then submits the same expenses to the state. He has also been collecting thousands of dollars in mileage reimbursements for travel in vehicles for which his campaign has shelled out more than $100,000. In a written statement, Driver says he’s consulted what he describes as “ethics specialists” in the House and determined he had made errors in his campaign reports. But he denies ever misusing state tax dollars. Driver vows to pay back any dollars that he was not entitled to receive. Democrats, meanwhile, are asking for a criminal investigation into Driver’s travel reimbursements.

Senator Bill Nelson wants to create five business enterprise zones around the country, including one possibly at the Kennedy Space Center, where investors who put their money in commercial space ventures would get major tax breaks. The Florida Democrat will produce legislation today that would give tax breaks worth 20 percent of their outlays to investors in private space-related businesses. Nelson says the commercial space jobs and investment act would help attract engineers and scientists to these enterprise zones and create jobs in a space industry facing uncertainty.

The Federal Reserve is banning mortgage brokers and lenders from reaping bigger fees by steering consumers into more expensive home loans. The central bank says the new rules, which go into effect next April, will bar lenders from steering borrowers into loans that are not in their interest solely because they can receive inflated fees. Such fees have been a contentious issue in the mortgage industry. Consumer advocates have charged that mortgage brokers fed the housing crisis by steering people into risky home loans that wound up going bust.

The American Cancer Society says cancer is the world’s top “economic killer” as well as its likely leading cause of death. The group says cancer costs more in productivity and lost life than aids, malaria, the flu and other diseases that spread person-to-person. In a report that will be presented this week in China at a global conference, the Cancer Society says chronic diseases including cancer, heart disease and diabetes account for more than 60 percent of deaths worldwide, but get less than three percent of public and private funding for global health.

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