Business Highlights

By Wire reports | Tuesday, April 1, 2008 8:49 PM PDT ∞

Senate strikes bipartisan deal to help homeowners

WASHINGTON (AP) ---- Under growing pressure from voters to do something about the nation's home foreclosure crisis, top Senate leaders agreed Tuesday to at least start with a plan that can win the support of both Democrats and Republicans.

The pact between Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., ended weeks of partisan bickering over what to do about the crisis in the housing market and the toxic effect it's having on the economy.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., and the panel's top Republican, Richard Shelby of Alabama, were instructed to forge a compromise by this afternoon.

The legislation is likely to draw on elements of the Democratic plan such as letting states issue $10 billion in tax-exempt bonds to refinance subprime loans and permitting homebuilders and other money-losing businesses to reclaim previously paid taxes.

Democrats also want to provide $4 billion to states to buy up and refurbish foreclosed homes, a plan that the administration opposes as a bailout for lenders and speculators.

Senators in both parties gave the arrangement a 94-1 stamp of approval on a previously scheduled procedural vote. Sen. Jim Bunning, R-Ky., voted against the plan.

Bernanke: U.S. not in a recession

WASHINGTON (AP) ---- Federal Reserve Chairman Ben Bernanke met privately with House Republicans on Tuesday, and participants said he steered clear of saying the country is in a recession.

House Minority Leader John Boehner, R-Ohio, told reporters that the meeting was called because of "great concern about where our economy is headed."

A trio of crises ---- housing, credit and financial ---- are threatening to push the country into a deep recession. Home foreclosures have swelled to record highs, employers are slashing jobs and financial companies have racked up billions of dollars in losses from soured investments in mortgage-backed securities. The situation has sent a tremor through Wall Street and affected many Americans.

Bernanke is scheduled to go to Capitol Hill on Wednesday to give lawmakers a fresh assessment of economic conditions.

At Tuesday's meeting, Bernanke didn't say the economy is in a recession, Rep. Adam Putnam, R-Fla., told reporters after the session. Participants said Bernanke was closely monitoring the economy's pulse.

Manufacturing, construction weaken

NEW YORK (AP) ---- Further weakness in the manufacturing sector and construction industry underscored concerns that the U.S. economy has fallen into recession, though most analysts believe a downturn will be mild and relatively short-lived.

The Institute for Supply Management said Tuesday that manufacturing contracted in March for a second consecutive month as manufacturers grappled with weakening order books and rising prices for raw materials.

The institute's manufacturing index registered 48.6 in March, a bit stronger than the 48.3 reading for February, which had been the weakest month in five years.

Readings below 50 indicate contraction, while those above 50 show growth.

In Washington, the Commerce Department said that construction spending fell again in February as home building tumbled for a record 24th straight month.

U.S. auto sales plummet again

DETROIT (AP) ---- Automakers began 2008 expecting the worst year for U.S. auto sales in a decade. So far, they're getting what they anticipated.

Sales dropped by double digits in March, even for usual stalwarts like Toyota. And with fragile consumer confidence, falling home values, tightening credit and high energy prices, it may be some time before auto sales recover.

General Motors and Chrysler both reported a 19 percent drop in U.S. sales Tuesday. Ford's sales fell 14 percent and Toyota was down 10 percent compared with last March. Nissan fell 4 percent and Honda reported a 3 percent drop.

GM remained upbeat, saying demand is building up and the federal economic stimulus package could help boost sales in the second half of the year.

Oil slides as dollar gains ground

NEW YORK (AP) ---- Oil futures extended their slide Tuesday as the dollar gained ground, making commodities such as energy futures less attractive to investors seeking a hedge against inflation. But trading was choppy as a debate among investors over oil's direction played out in the marketplace.

Retail gas prices, meanwhile, slipped slightly from the record they set one day earlier.

Investors who previously bought commodities such as oil as a haven against inflation and a falling dollar sold Tuesday as the greenback strengthened against the euro and other currencies. The stronger dollar also made oil more expensive to overseas investors.

Many analysts say oil investors have taken most of their price cues in recent months from gyrations in the dollar.

Celent: 200,000 U.S. banking jobs at risk

NEW YORK (AP) ---- The U.S. financial industry has been shedding jobs at a record clip, and some analysts predict the pace will only accelerate over the next year-and-a-half as banks cut costs in the face of the housing market slump and the weak economy.

Analysts at the financial research firm Celent LLC said in a report Tuesday that it expects the U.S. commercial banking industry ---- essentially, all companies that lend or collect deposits ---- to lose 200,000 of its 2 million jobs over the next 12 to 18 months.

An annual loss of 200,000 jobs at the nation's commercial banks would be an unprecedented number.

In 2007, the entire financial services sector, which consists mostly of commercial banks, announced job cuts that totaled a record 153,000, according to the job placement consultancy Challenger, Gray & Christmas, Inc. More than half of those cuts were in the mortgage-lending business and occurred all over the country, particularly in New York and California.

Top European banks wallow in write-downs

GENEVA (AP) ---- Two of Europe's largest banks, UBS and Deutsche Bank, disclosed Tuesday that they are writing down billions more in bad investments, reflecting the unrelenting wave of woe from the U.S. subprime crisis.

Banks and analysts agreed that threats to the industry persist, predicting massive job losses over the next year and a half and larger global banking losses from the deterioration of the U.S. housing market.

UBS AG announced the surprise departure of its chairman and forecast losses and write-downs of approximately $19 billion in the first quarter. That puts its write-downs for the past nine months at $37.4 billion ---- the most reported by any bank so far.

Switzerland's largest bank also said it would post a first-quarter net loss of about $12.1 billion, seek about $15.1 billion in new capital and create a new unit for its troubled U.S. real estate assets. More jobs also will be cut.

Market watchdog targets EADS

PARIS (AP) ---- Airbus' parent company vowed to defend top executives against charges of insider trading and violating market disclosure rules as French regulators readied charges and broadened their investigation.

Regulators are trying to determine whether EADS executives and its main corporate shareholders ---- Lagardere Groupe and Daimler AG ---- sold shares when they found out that Airbus' massive jetliner, the A380, was running into construction delays.

Market watchdog Autorite des Marches Financiers said Tuesday it will inform the Paris prosecutors' office "immediately" of its findings.

AMF said letters outlining market abuse proceedings will be sent in coming days to those allegedly involved, a day after its board met to discuss findings of a lengthy probe.