U.S. Economic/Financial News
New Biofools Lobby
Nov. 3 (EIRNS)A new lobbying front for the National Corn Growers Association and the ethanol industry, called Renewable Fuels Now (RFN), is setting up a counter-campaign to halt the erosion of support for ethanol as fuel. When Jean Ziegler, independent expert on the right to food for the U.N., called the use of food for fuel a "crime against humanity" on Oct. 26, Renewable Fuels Now struck back with press releases claiming: "Three Out of Four Americans Want Increased Renewable Fuel Use," and "New Poll: Americans Blame Higher Oil Prices for Increased Prices in the Grocery Aisle." The National Corn Growers Association even demanded Ziegler's resignation, according to the Nov. 3 Wall Street Journal. Now RFN is planning to saturate Washington, D.C. with an ad, targetting Congress as it gets set to debate raising the Renewable Fuels Standard for the coming years. The headline for the new ad is: "How Much Longer Can We Be Held Hostage to Foreign Oil?"
Winter Heating Oil Disaster Looms
Nov. 3 (EIRNS)A potentially disastrous scenario is developing in the Northeast this Winter, with heating oil supplies dangerously lowdown 25% over stocks last Fall, while prices have risen by 24%, to record levels. Retail prices in Massachusetts for heating oil are now above $2.90, twice what they were in 2000, according to Boston.com. In an attempt to bring down prices and free up supplies, Massachusetts Rep. Ed Markey (D) has called on the Bush Administration to release oil from two oil reservesthe Northeast Home Heating Oil Reserve, and the Strategic Petroleum Reserve (SPR)"to address the looming home heating oil crisis facing American consumers." Energy Secretary Samuel Bodman has instead chosen to call on the OPEC nations to increase production, ignoring the speculation-driven nature of the price hikes. DOE spokeswoman Megan Barnett countered demands to dip into the SPR, by calling on Congress and the Administration to "increase renewable and alternative fuels and vehicle efficiency standards through the President's Twenty in Ten Initiative." She sees the price gouging as a tool with which to club Americans into embracing biofuels madness.
Rangel Takes On the Hedge Funds
Nov. 2 (EIRNS)The House Ways and Means Committee, chaired by Rep. Charles B. Rangel (D-N.Y.), approved yesterday, House Resolution 3996, The Temporary Tax Relief Act of 2007, a $76 billion measure to stave off the growth of the alternative minimum tax (AMT) that applies to anyone making over $75,000 a year, and has not been adjusted for inflation since its passage in 1969. The AMT would devastate 23 million middle-class wage-earners next year, Rangel maintains. In addition, H.R. 3996 deals with investment funds managers. A press release from the Committee says, "Under the Committee-passed legislation, [fund managers] will no longer receive a lower capital gains rate of 15% for what is essentially a management fee or payment for services. Partners and managers would continue to receive a lower rate of taxation on returns derived from money they have personally invested" (emphasis added).
Rangel's press release also notes that the committee reviewed existing tax codes and "found no evidence to conclude that these partners or fund managers should receive preferential treatment for the same services provided by other corporate professionals doing the same jobs." In other words, their fees would be treated as taxable income, a move which produced cries of outrage from the hedge fund lobbies, such as the Private Equity Council, and its water-boy in the House, Rep. Eric Cantor (R-Va.). Cantor attacked Rangel for destroying future jobs with this tax, and the Private Equity Council, created by the Carlyle Group and other private financiers, said they will continue to block the measure from being passed in Congress. This is the beginning of a fight on the updating of the U.S. tax code. A month ago, Rangel unveiled a far broader measure which he called "the mother of all tax reforms," a blueprint to cut and simplify the taxes of the poor and middle class and eliminate the AMT, which was designed in the 1960s to prevent millionaires from using loopholes to avoid all tax liability. The Rangel plan would cut taxes for about 91 million families and provide a tax reduction to virtually every family with an annual income below half a million dollars.
'Citi-Corpse' Board in Emergency Meeting
Nov. 3 (EIRNS)The Board of Directors of Citigroup, the biggest U.S. bank, will hold an emergency meeting at its headquarters in New York tomorrow. One agenda item will be to accept the resignation of CEO Charles Prince. Other likely business reported by the Wall Street Journal and other sources includes:
* Writing off more billions of worthless securities, on top of the $3.3 billion in writeoffs Citi has just announced. Deutsche Bank analyst Mike Mayo has said that the big banks will have to write off another $10 billion immediately, most of it held by Citigroup and Merrill-Lynch.
* The Securities and Exchange Commission is said to be investigating Citigroup's reporting of its $80 billion of Structured Investment Vehicle's (SIVs). Meanwhile, Citigroup is expected to file another SEC quarterly report next week.
* Citigroup is in danger of falling below the minimum capital adequacy allowed for a federally chartered bank, if it has not already done so.
Fed Injects $41 Billion into U.S. Banking System
Nov. 1 (EIRNS)The Federal Reserve, through three separate interventions over the course of the day, pumped a combined $41 billion in Federal funds short-term liquidity into the U.S. banking system today. Of this amount, three-quarters of the Federal funds were issued against the security of housing- and mortgage-related paper, part of the Fed's five-month siege to liquefy the impaired mortgage market. This tactic has achieved no success in its ostensible objective; however, it is setting the ground for Weimar-style hyperinflation. While the Fed injected $41 billion of funds, the bids by banks for funds from the Federal Reserve totalled $262.45 billion; the issue was oversubscribed more than six times. To this must be added the $163 billion that the Federal Home Loan Bank system was compelled to lend, during August and September, to deeply troubled banks. To avoid borrowing from the Federal Reserve, which is done publicly, the banks are pillaging the lending authority of the little-known FHLB (Federal Home Loan Bank). Had the banks borrowed one- to three-month money in the amount of $163 billion from the Federal Reserve's discount window, as they did from the FHLB, there would have been a public hue and cry.
Cerberus/Chrysler Cuts 12,000 Jobs; 30% in One Year
Nov. 1 (EIRNS)Cerberus-owned Chrysler Corporation, waiting only days after its unions were compelled to accept a new contract with substantial wage and benefit cuts, announced the elimination of 8,500-10,000 more production jobs, and a total cut of up to 12,000 both blue- and white-collar employees. The company started five plants in Toledo, Ohio; Detroit and Sterling Heights, Michigan; Belvidere, Illinois; and Brampton, Ontario on the road to closure, cutting out a shift at each one. Chrysler closed six plants, eliminating 5,000 production jobs, in 2002-03. Now it has eliminated 11,000 more production employees since February of this year, and announced this additional 8,500-10,000 cut. By early in 2008, the company will have cut 20,000, or approximately 30%, of its entire production workforce in little more than a year. That is the disastrous rate of shrinkage of the auto industry in the United States, the reservoir of the nation's primary capacity for machine-tooling and innovative industrial design. The U.S. auto industry, including car and light truck production and auto parts/supply companies, has already (through September) lost 25% of its employment, 335,000 jobs, since the year 2000, and prior to the job cuts coming now.
Chrysler is slashing its productive capacity with sales continuing to fall; but the mortgage meltdown and financial collapse are hitting all sales. The entire auto industry's sales in the United States are down 2.7% for the first ten months of this year, the third straight year of falling sales, and heading for a yearly sales total below 16 million for the first time since 1995.