Early Edition September 05 2008 at 05:43 AM Chi-Chu Tschang and Harry Maurer
U.S. economy faces problems despite slowing inflation
The U.S. economy is on the verge of another slowdown despite the most severe inflation threats having passed, according to senior Federal Reserve officials. President of the San Francisco Fed Janet Yellen said on Sept. 4 that the economy faces "substantial headwinds" over the next few months after an "ephemeral" pick-up in the second quarter.
Yellen told reporters that a further cut in interest rates could come if the "adverse feedback loop" -- a cycle of rising unemployment, weak consumer spending, falling home prices, and tight credit conditions -- were to worsen substantially. There has been rumors from within the Fed that the slowing U.S. economy would ultimately curb inflation, although policy-makers continue to be divided on that assessment.
Source: Reuters
McCain accepts Republican presidential nomination
U.S. Senator John McCain accepted the Republican nomination for president on Sept. 4, offering himself an "imperfect servant" who will never surrender in his fight to change Washington and the country. In a speech to the Republican national convention, McCain said his record demonstrates an instinct for putting the people's interests over party loyalty. McCain's nomination caps an extraordinary two-week period in American politics and sets the stage for a historic November election.
Source: Washington Post
Pakistan to elect new president
Pakistani politician Asif Ali Zardari is expected to secure a comfortable victory in the country's presidential election on Sept. 6 when domestic lawmakers in an electoral college vote for the country's next leader. Zardari's path to the presidency follows the assassination of his wife Benazir Bhutto last December and the ouster of President Pervez Musharraf in August.
Source: Wall Street Journal
Russia loses foreign capital over Georgia conflict
Russia's central bank heavily intervened to support the rouble currency on Sept. 4 as analysts said $21 billion of foreign capital might have been pulled out of the country due to Moscow's ongoing conflict with Georgia. The rouble has fallen to its weakest level since the Russian central bank adopted its euro-dollar basket in February 2007. The central bank governor admitted there had been capital outflows since the war, but claimed the amount was much lower than analysts had predicted.
Source: Financial Times
BP buries the hatchet with Russian partners
On Sept. 4, the shareholders of Anglo-Russian oil venture TNK-BP announced a deal to settle their long-running dispute. In a memorandum of understanding signed in Moscow, BP and its Russian partner, Alfa Access Renova, have effectively agreed to bury the hatchet, ending months of acrimonious conflict.
Source: BusinessWeek
U.S. banks & businesses still can't raise capital
U.S. Banks and businesses are still having trouble raising money, according to data released on Sept. 4. That reinforces the prospect that the year-long U.S. credit crisis will persist for the foreseeable future.
Source: Reuters
Lehman Brothers considers splitting bank
Ailing Wall Street bank Lehman Brothers is contemplating a radical solution in its fight for survival: splitting itself into a "good" bank and a "bad" one. Lehman is considering placing about $30 billion of troublesome commercial mortgages and real estate that it owns into a new publicly traded company - the "bad" bank. The rest of the bank would be left to carry on with the help of a cash infusion from one or more investors.
Source: New York Times
European Central Banks cracks down on cheap lending
Bank stocks across Europe fell sharply and the risk of owning their debt leapt on Sept. 4 after the European Central Bank (ECB) declared a crackdown on abuses of its bank liquidity operations. ECB President Jean-Claude Trichet announced rule changes more radical than had been expected. These will affect financial firms that have developed too great a dependence on cheap funding from the bank.
Source: Financial Times
Pimco names El-Erian as sole CEO
Pacific Investment Management Company -- the world's biggest bond fund manager -- said Mohamed El-Erian will take over as sole chief executive officer after his counterpart Bill Thompson retires at the end of the year. El-Erian will continue to serve as co-chief investment officer with managing director Bill Gross, the California-based company said in a statement.
Source: Bloomberg
Dell looks to sell its factories
Dell is trying to sell its computer factories around the world -- a move to overhaul a business model that previously was central to the company's strategy, but which now is no longer competitive. According to people familiar with the matter, the U.S. firm has approached contract computer manufacturers with offers to sell the plants.
Source: Wall Street Journal
BoA wants to settle auction-rate securities probes
Bank of America (BoA) -- the second-largest bank in the U.S. -- wants to settle government regulatory probes into how it marketed auction-rate securities along similar terms to already-announced agreements with other major banks. In a statement, BoA said it had negotiated for almost a month with the U.S. Securities and Exchange Commission and regulators in New York and Massachusetts to provide liquidity relief to customers.
Source: Bloomberg
Tobacco giant Altria eyes $10 billion acquisition
Tobacco giant Altria is in talks to buy UST -- the maker of the popular Skoal and Copenhagen smokeless tobacco brands -- for more than $10 billion, according to people with knowledge of the negotiations. The terms could not be ascertained, but the acquisition would be Altria's first major purchase since the company split from Philip Morris International.
Source: New York Times
Conversation of the Day: Squeezing Out Extra MPG
Reader HW Writes: "WWII German SI aircraft engines and the MB 300 Gullwing Coup SI engine used direct fuel (gasoline) injection. So it's nothing new."
Tell Us: Tell Us: Can the Auto Industry Cruise in Comfort at 35 MPG?
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