U.S. Economic/Financial News
SEC Subpoenas and Bankruptcy Rumors Hit GM
General Motors stocks and bonds suddenly sank Oct. 27 on fallout from the disastrous Delphi bankruptcy. Reports that the Securities and Exchange Commission (SEC) had issued a number of subpoenas to GM were confirmed by company spokesmen. Rumors of a GM bankruptcy by early 2006 spread around stock and bond marketsdenied by CEO Rick Wagoner in a statement to Reuters, and hotly denied by a GM spokeswoman in a Dearborn, Mich. press conference.
The SEC subpoenas appear to be of two types. One set is "routine," questioning GM's "Enron accounting" on the present value of its pension funds' assets. This is important in reality, but routine for companies' pension funds, since the Roaring '90s, and pension law presently does not challenge them on this. These subpoenas, sources said, may get into big losses in a Refco investment by one GM pension fund. But the subpoenas date from earlier this year, and also went to Ford and DaimlerChrysler.
But other, new subpoenas have to do with determining whether GM is obligated for $11-12 billion in pension obligations of Delphi. This is much more serious for GM, and may be "political," i.e., may involve action by the Pension Benefit Guaranty Corp. (PBGC), or other parts of the Bush Administration.
Later, on Oct. 27, Auto Insider reported that GM spokesmen had confirmed that the new subpoenas deal with any obligation GM may have to fund pension and other retirement benefits costs in connection with Delphi's proceedings under Chapter 11 of the U.S. Bankruptcy Code.
Eight Weeks After Katrina: Business Loans to Less Than 2% of Applicants
Shortly after Hurricane Katrina struck Aug. 29, the Small Business Administration put into implementation a disaster loan program to help Katrina's victims, and subsequently, those of Hurricane Rita as well. The SBA can extend a Business Physical Disaster Loan to a business to repair or replace its machinery and equipment, supplies, real estate, etc. It can also make loans to homeowners for repairs.
As a leading feature of the Bush-Cheney Administration's policy to abandon the U.S. Gulf states, precipitating their physical collapse, the SBA, rather than acting in an expedited manner, has extended a bare minimum in loans. According to an Oct. 21 conference call in which EIR participated, with Herbert Mitchell, head of the SBA's Office of Disaster Assistance, the SBA, through Oct. 21, had received applications for 142,177 disaster loans, and had approved only 2,295, a miniscule 1.6%. This must be assessed against the background that according to Louisiana Gov. Kathleen Blanco, of Louisiana's 198,000 businesses, a total of 81,000, or 41%, have been shut down or displaceda catastrophe.
Senator Olympia Snowe (R-Me), chair of the Senate Committee on Small Business and Entrepreneurship, released a blistering statement Oct. 25, charging, "The SBA's continued failure to process and approve disaster loans in a timely manner for the victims of Hurricane[s] Katrina and Rita is indefensible and inexcusable." She vowed that she will call an oversight hearing on this matter as soon as possible.
Federal Aid Urgently Needed for Louisiana Hospitals
Without Federal aid soon, thousands of public hospital employees will be laid off, and Louisiana's public hospital system threatened, according to a spokesman for the hospitals. "If Federal money cannot be found to somehow keep some, if not all" of the 3,000 hospital employees who had to evacuate "on the payroll, until we can ramp up and resume operations, we will have to begin furloughing employees as early as next month. Furlough means leave without pay, which is a predicate to layoffs," the spokesman said. "Some have been integrated into existing hospitals in the system, but obviously we can't restore jobs for everybody," according to the spokesman.
The spokesman added that a new problem looms: The two public hospitals in New Orleans, Charity and University, which were all but destroyedCharity will not be salvageableprovided one-third to one-half of all revenues for the statewide public hospital system, comprising nine hospitals. "As the two hospitals in New Orleans go, we are worried that without some sort of a Congressional appropriation, or some money from Congress forthcoming, the problems with New Orleans are going to have a domino effect throughout the system. This will impact precarious situations that exist at many of these hospitals, and only make it worse."
Hurricanes Cause Jump in Mass Layoffs
The number of mass layoff events hit 2,069 in September, the highest level since November 2001, and the fourth-highest total since record-keeping began in April 1995, according to a report issued by the Bureau of Labor Statistics Oct. 25. In the ten "industries" with the most mass-layoff initial claims, 59% of claims were filed in Louisiana and 23% in Mississippi; and in seven of the ten sectors, Louisiana and Mississippi accounted for more than 90% of the claims. For the U.S. as a whole, manufacturing accounted for 20% of all mass layoffs and 24% of initial claims. Here's the BLS breakdown:
|Elementary and secondary schools
|Temporary health services
|Gen. medical & surgical hospitals
|Shipbuilding and repairing
|Hotels and motels, non-casino
|Supermarkets & grocery stores
|Casinos, ex-casino hotels