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By CHARLES DUHIGG and VIKAS BAJAJ
Published: August 19, 2008
Financial conditions are continuing to worsen at Fannie Mae and Freddie Mac, leading some investors to prepare for a government bailout of the housing giants even as the Treasury Department and the companies say such government intervention will not be necessary. Stock prices of both companies continued to decline Wednesday after falling more than 24 percent on Monday and Tuesday and more than 85 percent since December. Fannie Mae shares were down 13 percent on Wednesday after closing Tuesday at $6.01; Freddie Mac shares, which closed Tuesday at $4.17, were down more than 13 percent Wednesday. On Tuesday, Freddie Mac was forced to pay its steepest borrowing premium in 10 years. “The markets are acting like a bailout is inevitable,” said Sean Egan, managing director of Egan-Jones Ratings, an independent credit ratings firm. Mr. Egan said he believed the federal government would need to help pump about $20 billion into each company, possibly through a government guarantee rather than through a direct injection of capital. “We believe Treasury is going to be forced to act within the next couple of weeks,” he added. “Probably some time after Labor Day, when investors are back from vacations so that the bailout has the biggest possible positive impact.” Treasury officials have repeatedly emphasized that they do not plan to use the authority, recently granted by Congress, to pump billions of dollars into the firms. Company insiders have begun arguing that the recent stock declines are the work of duplicitous critics conspiring to undermine the firms. Executives at both firms say they are confident they can raise additional money from investors and that the companies are adequately capitalized, with capital in excess of what they are required to hold by their regulator. Government officials note that both companies continue to buy mortgages and that they are borrowing at rates far below what other banks and companies pay. |
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By MICHAEL M. GRYNBAUM and PETER S. GOODMAN
Published: August 19, 2008
Prices for goods purchased by American businesses surged more than expected in July and have jumped by nearly 10 percent over the last year — the sharpest increase since 1981.
U.S. Census Bureau News Release
The data released on Tuesday by the Labor Department underscored how rising prices have seeped into much of the economy, led by higher costs for food and energy. Businesses have been absorbing some of the higher costs themselves while passing much of the increase to consumers, intensifying the strain on households just as joblessness expands and spending power shrinks. “There is virtually nothing that we have touched in the last six months that hasn’t increased,” said Gary O’Neal, a division manager at Central Plains Steel in Wichita, Kan., which distributes steel to manufacturers of construction and farming equipment. “The prices have increased so rapidly and so high compared to historically where they’ve been. It’s just been uncharted territory.” Many economists assert that inflation is already being choked off by a slowing global economy. Oil prices have sharply fallen in recent weeks, filtering through the economy in the form of lower prices for gasoline and heating oil. Economic weakness has spread beyond the United States to Europe and Japan, diminishing demand for basic commodities from iron ore to lumber while taking the edge off lofty price increases. “The cure for the inflation problem is a recession in the United States and Europe,” said Robert Barbera, chief economist at the research and trading firm ITG. “We have a recession, and while that’s lamentable, it makes the inflation numbers old news.” |
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By CHARLES V. BAGLI
Published: August 18, 2008
Facing potential lawsuits by the federal government, developers and landlords in New York City may need to spend tens of millions of dollars to renovate more than 100,000 apartments built since 1991 to comply with federal housing laws barring discrimination against tenants who use wheelchairs, real estate industry officials say.
Avalon Chrystie Place, on the Lower East Side, has 361 units.
For 20 years, residential developers have complied with a city law requiring them to ensure that all the apartments they build are accessible to disabled tenants. Considered path-breaking legislation when it was enacted in 1988, the city law essentially meets the federal requirements of the Fair Housing Act, developers and city officials say. But the United States attorney’s office in Manhattan has sent letters to about a dozen of the city’s most prominent landlords and their architects saying that some of their buildings were “not accessible to persons with disabilities,” which would constitute discrimination under the Fair Housing Act. The recipients included Related Companies, the Durst Organization, Rose Associates, Rockrose Development and Silverstein Properties. The letters said that doors were not wide enough, and that kitchens and bathrooms were not big enough to allow someone in a wheelchair to maneuver. Also, the letters said, tenants could not install “grab bars” to lift themselves in or out of a tub, because the walls had not been reinforced. The federal prosecutor’s office, which began sending the letters in January, has asked owners for meetings, building inspections and all the records of the design and layout of the apartments in specific buildings. Until recently, the real estate industry had hoped that the matter would quietly go away. |
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By RON LIEBER
Published: August 15, 2008
One after the other in recent weeks, airlines have altered their frequent-flier mile programs, adding fees, taking away bonuses and raising the number of miles you need for some free tickets.
Times Topics: Credit and Money Cards But lost in fliers’ frustration over the changes is this: It may make more sense to change the credit card you use, not the airline you fly.
Consumers are currently holding about 45 million credit cards issued by United States banks that reward their users with frequent-flier miles, according to The Nilson Report, a payments systems newsletter. That number has held steady for three years. This may be the year that number starts dropping. After a certain point, it will no longer make sense for many people to pay the annual fees that mileage cards usually charge and pay new fees to book tickets or upgrades. Will they also want to spend tens or hundreds of thousands of dollars on a card just so they can try to redeem miles for a single free plane ticket? I’ve come up with five questions to ask yourself if you’ve still got a mileage credit card at the top of your wallet, and a number of alternatives for different types of cards. But first, some snippets from the program changes, just in case you’ve missed them: US Airways has stopped giving bonus miles to members of its Dividend Miles program who have elite status, and the airline also added reward booking fees that range from $25 to $50. |
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By MATTHEW SALTMARSH
Published: August 19, 2008
Two disappointing economic reports pushed the major indexes lower on Wall Street on Tuesday, extending Monday’s decline.
Shares fell after the government reported that the Producer Price Index, which measures prices at the factory door, climbed 1.2 percent in July after a 1.8 percent gain in June, and that construction of homes and apartments fell to lowest level in more than 17 years in July. The Dow Jones industrial average was down more than 110 points, or 1.02 percent, in mid-morning trading. The Standard and Poor’s 500-Stock index was down 0.84 percent, and the tech-heavy Nasdaq declined 0.94 percent. Monday’s decline was spurred by jitters about the mortgage industry and pessimism about financial firms. Wall Street’s worries carried over into Asia and Europe, where shares also fell Tuesday. In Europe and Asia, financial firms led the declines. The trigger on Tuesday was Lehman Brothers, the investment bank, which is considering the sale of all or part of its prized money management division to private equity firms to raise billions of dollars of capital and ease the pressure caused by losses related to real estate Investors were also spooked by speculation Monday in New York that Fannie Mae and Freddie Mac, the two large mortgage finance companies, may need to be propped up by Washington. The Dow Jones industrial average finished at 11,479.39 on Monday, down 1.6 percent. The S.& P. 500-Stock index ended the session at 1,278.60, down 19.60 points. The Nasdaq composite index fell 35.54 points, or 1.5 percent, to 2,416.98, |
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By Brian Swint
Aug. 11 (Bloomberg) -- U.K. producer prices increased in July at the fastest pace since records began in 1986, adding to pressure on the Bank of England to wait before cutting interest rates as the economy edges toward a recession. Prices charged by factories rose 10.2 percent from a year earlier, compared with a 10 percent increase in June, the Office for National Statistics said in London today. Economists forecast 10.3 percent, according to the median of 32 estimates in a Bloomberg News survey. Prices increased 0.4 percent on the month. Bank of England Governor Mervyn King predicts record oil and food prices will drive inflation to double the 2 percent target later this year while the economy may contract. Policy makers, concerned that workers may ask for more pay to compensate for the higher cost of living, kept the main interest rate unchanged at 5 percent last week. ``Manufacturers are getting some traction to put up prices,'' said James Knightley, an economist at ING Financial Markets in London. ``This suggests that inflation will stay above target for longer. It'll take time for the Bank of England to respond to the recessionary environment with rate cuts.'' The pound was little changed against the dollar following the report, after falling against the U.S. currency for a seventh day. It traded at $1.9232 at 10:39 a.m. in London. It was also little changed against the euro at 78.22 pence per euro. |
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By Helene Fouquet and Sandrine Rastello
Aug. 11 (Bloomberg) -- French industrial production, which accounts for 15 percent of the euro-area's second-largest economy, unexpectedly declined in June as car sales fell. Output from factories and utilities decreased 0.4 percent from May, when it dropped 2.9 percent, Insee, the National Statistics Office in Paris, said today. Economists expected a gain of 0.6 percent, according to the median of 24 forecasts in a survey by Bloomberg News. In the year, output fell 1.6 percent. Manufacturers are struggling with a stronger euro and rising energy costs at a time when an economic slowdown in the U.S. is damping global expansion. European Central Bank President Jean- Claude Trichet said last week that growth will be ``particularly weak'' through the third quarter. ``It's yet more bad news and more is probably to come given the worsening outlook for growth,'' Cyril Regnat, a strategist with Natixis SA in Paris, said on Bloomberg Television. ``This very bad figure is mostly explained by oil prices and the loss of confidence.'' The cost of crude has gained 63 percent in the past year and the euro has advanced 11 percent against the dollar. Sentiment among French manufacturers fell to the lowest in five years in June, the Bank of France said last month. Growth is fading across Europe. Italy, the first of the three biggest economies in the euro region to report second-quarter gross domestic product, said its economy shrank, edging closer to the fourth recession in a decade. Machines, Cars Production of French consumer goods rose 0.5 percent in June and that of machinery and equipment slipped 1 percent, Insee said. Car manufacture fell 2.9 percent after a 7.6 percent drop in May. Construction expanded 0.7 percent. |
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By VIKAS BAJAJ
Published: August 4, 2008
The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.
Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults. The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time. The mortgage troubles have been exacerbated by an economy that is still struggling. Reports last week showed another drop in home prices, slower-than-expected economic growth and a huge loss at General Motors. On Friday, the Labor Department reported that the unemployment rate in July climbed to a four-year high. While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said. Defaults are likely to accelerate because many homeowners’ monthly payments are rising rapidly. The higher bills come as home prices continue to decline and banks tighten their lending standards, making it harder for people to refinance loans or sell their homes. Of particular concern are “alt-A” loans, many of which were made to people with good credit scores without proof of their income or assets. “Subprime was the tip of the iceberg,” said Thomas H. Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. “Prime will be far bigger in its impact.” |
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DAVID POGUE
Published: June 26, 2008
“Any sufficiently advanced memory card,” Arthur C. Clarke once didn’t write, “is indistinguishable from magic.”
The Eye-Fi photo card looks like an ordinary card, but it stamps your pictures with a location and wirelessly sends them to your computer.
But if he had written it, he could have been referring to the Eye-Fi Share card. It’s a 2-gigabyte memory card ($100), compatible with most digital cameras, with a twist: it has Wi-Fi networking built in. Each time you bring your camera home to your wireless network, it transmits your photos back to the computer, automatically and wirelessly. It can also upload them to Flickr, Picasa or another online photo-gallery site, automatically and wirelessly.
What’s the point? First, you’re saved the trouble of finding and attaching your U.S.B. transfer cable. Second, you skip the multi- step hassle of manually uploading the fresh pictures to a photo-sharing site. Finally, there’s an enormous showoff factor, both for you and for the manufacturer. How on earth did they fit Wi-Fi circuitry into a regular-size SD card, which could hide behind a postage stamp? In any case, this week, a new model arrives with an even more amazing trick up its sleeve. You know how your digital camera gives every photo an invisible time and date stamp? Well, the Eye-Fi Explore ($130) card invisibly stamps every photo with where you took it. That’s right: photo geotagging has finally come to a camera near you. Noting what photo was taken where used to require either tedious manual data entry or expensive add-on gear. Now it comes cheaply and automatically. |
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U.S. Economy: Service Industries Contracted as Orders Declined By Courtney Schlisserman Aug. 5 (Bloomberg) -- Service industries in the U.S. shrank in July for a second straight month as a decline in new orders overshadowed an improvement in employment. The Institute for Supply Management's index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 49.5, from 48.2 in June, the Tempe, Arizona- based group said today. The reading was higher than forecast, though still less than 50, the dividing line between growth and contraction. Stocks rallied for the first time in four days as commodity prices declined, adding to a growing sense that the Federal Reserve isn't poised to raise interest rates. Investors anticipate policy makers, meeting later today, will keep the benchmark interest rate unchanged at 2 percent. ``The report overall, especially with forward-looking orders, doesn't bode well,'' Anthony Nieves, chairman of the ISM's non-manufacturing survey, said on a conference call with reporters. ``We'll have to see how the impact of fuel affects the next release of numbers we see, but right now, it doesn't look good with the future.'' Economists forecast the services index, which includes real estate, financial services, utilities and retailers, would rise to 48.8, according to the median of projections in a Bloomberg News survey. Estimates ranged from 47 to 52.5. Stocks extended gains following the smaller-than-forecast contraction. The Standard & Poor's 500 Index rose 17.35 points, or 1.4 percent, to 1,266.38 at 10:33 a.m. in New York. The yield on the benchmark 10-year Treasury note was little changed at 3.97 percent. |
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