Late Edition December 08 2008 at 03:12 PM Harry Maurer
The Auto Bailout Takes Shape
The prospect of a bailout for Detroit's Big Three appears to be gaining strength. The White House today said that negotiations with congressional Democrats were going well, that agreement on "basic principles" had already been achieved and that there was "no reason" legislation couldn't be passed within days once all the details have been nailed down. Representative Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said that a deal might well be announced later today.
The short-term rescue taking shape would provide around $15 billion in loans, mostly to General Motors and Chrysler. Ford has said it needs only a line of credit for now. Thus the plan falls short of the $34 billion the automakers requested last week, but they would be able to return and ask for more aid after President Barack Obama takes office. The $15 billion would come from $25 billion already set aside to help the carmakers convert to more fuel-efficient cars. The United Auto Workers, in return for major concessions, is asking for an equity stake in GM and a seat on the board. Wall Street responded positively to the prospect of a bailout and to Obama's pledge of a massive stimulus plan focusing on infrastructure projects. The Dow was up more than 350 points around 3:15 p.m.
Source: BusinessWeek
Tribune Files for Chapter 11
Real estate magnate Sam Zell apparently bit off more than he could chew. Tribune Co., the media outfit he bought last year in a leveraged buyout, filed for bankruptcy protection, seeking relief from $12 billion in debt mostly taken on during the buyout. Zell said that rapidly declining revenues, a slowing economy, and the credit crunch have made it impossible for Tribune to service the debt. Tribune owns the Los Angeles Times, Chicago Sun-Times, the Chicago Cubs baseball team, and other properties.
Source: Los Angeles Times
Marc Dreier Charged
The founder of 250-person New York law firm Dreier LLP was charged by federal prosecutors with cheating hedge funds out of more than $100 million. Dreier was arrested in Toronto in early December after a bizarre incident in which he allegedly impersonated an official at the Ontario Teachers Pension Plan in an attempt to defraud potential investors. The U.S. complaint charges him with securities and wire fraud for raising money from funds by saying he represented a developer selling notes. The SEC also filed civil charges against him, and Wachovia sued him for defaulting on $12.6 million in loans.
Source: Bloomberg
Dow Laying Off 5,000
The latest big downsizing announcement: Dow Chemical will eliminate 5,000 full-time positions, about 11% of its global workforce. It will also cut 6,000 contractor jobs, shutter 20 plants, and idle 180 others, in order to cope with the economic downturn. The moves will chop Dow's total production by about 30%.
Source: MarketWatch.com
Taiwan Considering Bailout for Memory-Chip Makers
Taiwanese producers of DRAM may be in line for a government rescue, with Taiwan President Ma Ying-jeou's administration considering offering loan guarantees or rolling over existing loans. The island's chipmakers account for one-third of the world's production of DRAM; the companies are struggling as memory chip prices have plunged significantly below the cost of production.
Source: Financial Times
Biggest Infrastructure Program Since Ike, Obama Pledges
In his weekly radio and Internet address, President-elect Obama said he plans the biggest public-works program since the 1950s. Obama said his spending program, the largest since the creation of the interstate highway system under Eisenhower, would include projects to improve schools, highways, hospitals and broadband connectivity. "We need to act with the urgency this moment demands to save or create at least 2 1/2 million jobs so that the nearly 2 million Americans who've lost them know that they have a future," the President-elect said.
Source: Washington Post
Stocks Rise in Asia, Europe
Optimism about Obama's plans to stimulate the U.S. economy helped boost stocks in Asia and Europe on Monday. The MSCI Asia-Pacific Index closed up 4.3% and Europe's Dow Jones Stoxx was up 5.5% in early trading.
Source: Bloomberg
Merger Talks End for NYSE Euronext and Deutsche Borse
Germany's Deutsche Borse released a statement on Sunday night to put an end to speculation it was in merger talks with NYSE Euronext that would have created the world's largest stock exchange. Earlier, a German magazine had reported Deutsche Borse executives had met with officials from NYSE Euronext recently to discuss a deal. In its statement, Deutsche Borse said "if such talks were held with NYSE, they have ended without any result".
Source: Times of London
Layoffs Flood a Weakened Unemployment System
Worker advocates and some economists are worried that the unemployment insurance system has not kept pace with demographic shifts in the work force and leaves too large a percentage of workers ineligible for benefits. Just 37% of jobless U.S. workers are covered by unemployment insurance, down from 42% during the 1981-1982 recession and 50% during the 1974-75 downturn. "When only 4 in 10 have access to a safety net, that safety net is pretty weak," says Sharon Parrott, senior policy analyst for the Center for Budget Priorities, a research and advocacy group in Washington.
Source: BusinessWeek
More Restructuring at NBC Following Ousting of Executives
With networks anticipating big cuts in ad budgets next year, NBC this week will announce the merger of its two programming groups. The move comes after NBC, in last place among the four networks, on Friday fired three top programming executives following the GE-owned network's dismal start to the current season.
Source: Los Angeles Times
In Your Face: Bailout Blues
Reader Bob L writes: "Why don't all the overpaid executives and brokers who approved these bad loans return the money they made? They can't be tried for stupidity, but they should be tried for fraud."
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