Three big city mayors asked the federal government Friday to use a portion of the $700 billion financial bailout to assist struggling cities.
They sought help with the pension costs, infrastructure investment and cash-flow problems stemming from the global financial crisis.
The mayors - Michael Nutter of Philadelphia, Shirley Franklin of Atlanta and Phil Gordon of Phoenix - made their request in a letter to Treasury Secretary Henry Paulson.
Nutter said cities are facing an economic crisis not seen since the Depression and need help just like financial institutions.
"I want to make sure that cities and metro areas are at the table, that their voices are being heard, that our challenges and problems are well understood, so that we can get relief," Nutter said.
President-elect Barack Obama has also called for some sort of aid to state and local governments so they don’t have to raise taxes or lay off workers while the federal government is trying to revive the economy, but he hasn’t proposed or endorsed a specific aid plan.
On Thursday, groups representing the nation’s mayors and governors asked Congress to jump-start the economy by increasing food stamp payments, extending unemployment insurance and boosting funding for Medicaid.
Chris Hoene, director of policy and research at the National League of Cities, said Friday that revenue is down 4.3% from last year in American cities. He said cities are in what looks like the first wave of a three- to four-year financial decline. He said revenue from property, income and sales taxes are all down at the same time for the first time in a survey taken since 1985, and widespread cuts in services are likely.
"What we’re seeing happening right now in the economy is going to be playing itself out for the next several years," Hoene said.
The three mayors proposed providing loans to help cities pay pension costs creditscores. They also want $50 billion in loans for investment in infrastructure, and additional one-year loans to cities unable to borrow cash because of the tight credit markets.
Nutter said he met with Phillip Swagel, Treasury’s assistant secretary for economic policy. He said Swagel "completely understood that we have major problems, in big and small and medium-size cities all across America and they want to be helpful. It’s just a matter of figuring out what’s the best way to do it and what works best."
Asked about the request, a Treasury spokeswoman referred to Paulson’s statement Wednesday that assistance to local and state governments wasn’t the purpose of the bailout funding.
"The focus … is to stabilize financial institutions and strengthen the financial system, promote lending and so on," Paulson said then.
The Philadelphia pension system lost more than $650 million in the first nine months of the year. Last week, Nutter announced Philadelphia would be laying off city employees, cutting salaries, closing most of its swimming pools and shutting nearly a dozen library branches to cope with a $108 million shortfall this year caused by lower business and real estate tax revenue. The deficit could grow to a total of $1 billion over five years.
Phoenix’s budget deficit is at least $200 million and could reach $250 million by June if tax revenues keep sliding. The figure represents up to 22% of the city’s $1.2 billion general fund, which pays for most city services.
Franklin said this week that city employees in Atlanta will have their hours and pay cut by 10% each week. The cuts are being made to help the city weather an expected budget shortfall of $50 million to $60 million.
NEW YORK — Stocks fell Wednesday as a report showed manufacturing contracted more than forecast and analysts cut earnings estimates on industrial companies, overshadowing Warren Buffett’s $3 billion investment in General Electric Co.
Ingersoll-Rand Co. and Parker Hannifin Corp. slid more than 3.6 percent on Citigroup Inc. analysts’ prediction that credit losses will delay spending on equipment. GE dropped as much as 9.8 percent as Deutsche Bank AG said profit will be hurt by "deterioration" at its financial unit, then trimmed losses on plans to raise $15 billion from Buffett and others.
Benchmark indexes pared their declines as Bank of America and Citigroup climbed more than 8 percent on speculation Congress will approve the $700 billion financial-rescue plan.
The Standard & Poor’s 500 index retreated 5.3 points to 1,161.06, extending its biggest monthly drop in six years. The Dow Jones industrial average slipped 19.59 to 10,831.07. The Nasdaq composite index fell 22.48 to 2,069.4.
The benchmark index for U.S. equities jumped the most in six years yesterday as expectations grew that lawmakers will salvage the proposal to buy bad loans from banks. Even with Tuesday’s advance, the S&P 500 had its worst month since 2002 in September, declining 9.1 percent, and tumbled 8.9 percent for the third quarter.
Ingersoll-Rand, the maker of Thermo King and Hussmann refrigeration equipment, dropped $1.71, or 5.5 percent, to $29.46. Parker Hannifin, the world’s largest maker of hydraulic equipment, lost $1.91, or 3.6 percent, to $51.09. Citigroup cut the companies to "hold" from "buy," citing a business slowdown.
"More important than the bailout plan will be next year’s economy," said Marc Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom & Doom Report "I would rather sell on strength."
GE lost $1, or 3.9 percent, to $24.50, leading industrial companies in the S&P 500 to a decline of 2.6 percent, the biggest retreat among 10 groups. Deutsche Bank analysts cut their 2008 earnings estimate 9 percent to $2 a share and their 2009 profit projection to $1.95 a share. The worsening conditions at GE Capital is "driven by tighter credit markets, asset shrinkage and debt pay-down," analyst Nigel Coe wrote in a research note.
"We also eased back our industrial assumptions," Coe said.
Credit default swaps, contracts to protect against a default by GE Capital, which has a AAA rating, jumped to a record.
"We see no reason for the defaults widening," GE said in a statement. The company said its commercial-paper funding "has gone smoothly," and "we have over-funded every day."
Life insurers fell on concern declines in stocks and bonds will cause increased investment losses. MetLife Inc. dropped 14 percent to $48.15. Hartford Financial Services Group Inc. slipped 7 percent to $38.11. Principal Financial Group Inc. retreated 13 percent to $37.64 no fax payday advance cash till payday. Phoenix Cos. slumped 18 percent to $7.59.
Berkshire Hathaway Inc. climbed 4.9 percent to $137,000 after GE said Buffett’s company will buy a $3 billion stake in preferred shares that pay an annual dividend of 10 percent and can be purchased back by the company at a 10 percent premium after three years.
"If you’re an entity with cash available, and not cash you have to borrow, there are some real opportunities in this market," said Mark Freeman, a money manager at Westwood Management Corp. in Dallas, which oversees $8 billion. "However, the number of participants that have that ability is fairly limited. There’s no shortage of sellers and very few buyers."
SLM Corp., the biggest U.S. student lender, fell the most in the S&P 500, losing $3.99 to $8.35. The cost to protect against the company’s default reached a record Tuesday as short-term corporate borrowing rates soared amid the worst financial crisis since the Great Depression.
IBM Corp. fell $6.83, or 5.8 percent, to $110.13, the steepest decline in the Dow average. Sanford C. Bernstein analysts said the increased risk of customers failing to pay their bills could hurt profit at the world’s second-largest software maker.
Ford Motor Co. dropped 65 cents, or 13 percent, to $4.55. The second-largest U.S. automaker said second-half profit at its European unit will decline on sagging demand for new vehicles and rising raw-material costs.
Peabody Energy Corp. tumbled 8.8 percent to $41.05. Cabot Oil & Gas slid $2.31 to $33.83 as the S&P 500 energy index tumbled 1.7 percent. Crude for November delivery fell $2.11, or 2.1 percent, to $98.53 a barrel. Prices are down 33 percent from the record $147.27 a barrel reached on July 11.
Citigroup climbed $2.49, or 12 percent, to $23 and Bank of America added $3.13, or 8.9 percent, to $38.13.
The paralysis in credit markets is changing how U.S. companies do business as banks pull back on loans or make them prohibitively expensive. Some companies are closing plants and stores, postponing takeovers and grabbing any available credit in a fight for survival.
Carmike Cinemas Inc., the third-largest U.S. theater chain by screens, suspended its dividend, while Duke Energy Corp., owner of utilities in five U.S. states, tapped $1 billion from a credit agreement and RC2 Corp., the maker of infant and preschool products, canceled an acquisition.
National City Corp. gained the most in the S&P 500, rising $1.14, or 65 percent, to $2.89 on speculation Ohio’s biggest bank may be acquired. Huntington Bancshares Inc. rose $1.81, or 23 percent, to $9.80. Sovereign Bancorp Inc., the second-largest U.S. savings and loan, increased 22 percent to $4.82. First Horizon National Corp., Tennessee’s biggest bank, rose 20 percent to $11.24.
It was a "bailout bounce" for the history books that capped a chaotic week for global stocks.
Toronto’s main equity index rollicked yesterday in its biggest relief rally since the "Black Monday" crash of 1987 after the United States took radical steps to restore confidence in jittery credit markets while regulators snuffed out short-selling in volatile financial stocks.
The S&P/TSX composite index shot up by 7.03 per cent – a whopping 848.42 points – to close at 12,912.99. The benchmark index actually recorded a gain of more than 140 points on the week, despite days of stomach-churning gyrations.
On Wall Street – ground zero for the global financial crisis – the blue-chip Dow Jones industrial average surged by 368.75 points to 11,388.44. Morgan Stanley and Goldman Sachs Group Inc. helped lead the charge in financial stocks after U.S. Treasury secretary Henry Paulson and Federal Reserve chair Ben Bernanke announced a sweeping plan to halt the credit-market seizure. U.K. and U.S. regulators, meanwhile, cracked down on short sellers, investors who bet on share-price declines in financial firms.
In fact, markets around the world cheered the bailout plan by U.S. officials, which aims to ease banks’ credit woes by taking toxic assets off their balance sheets. London’s FTSE 100 Index posted a record advance and Russia’s RTS Index jumped 22 per cent after a two-day trading halt. Russian stocks were also buttressed by President Dmitry Medvedev’s pledge to prop up its banks.
Some analysts, however, suggested the jubilance would be short-lived. Seattle hedge-fund manager Bill Fleckenstein predicted the U.S. government’s moves are bound to fall flat given the weighty problems plaguing the world’s biggest economy.
"They’re not going to fix the fundamental problem that the homeowner has a house he can’t afford. The economy is weak and getting weaker," he said. Fleckenstein has long warned about many of the problems, such as unrealistic real estate prices and excessive consumer and government debt, now plaguing the United States. He argues there was a "complete abdication of responsibility on the part of regulators."
With U.S. taxpayers now on the hook for the failures of various financial institutions, "the prudent are being asked to bail out the reckless" and the government budget deficit will soar paydayloans free credit report without a credit card. While measures taken over the past week could ease the credit crunch, the after effects will spread. "The next problem is going to be the real economy," he said.
Jack Ablin, chief investment officer with Harris Private Bank, said the government’s plan to establish a new entity to buy troubled assets from banks is welcome news but will be "costly." He also cautioned "this does not represent a catalyst to a new bull market …"
Yesterday, however, Bay Street took its cues from Wall Street. The TSX financial sector gained more than 5.72 per cent as investors bid up shares of banks and insurance companies.
Shares of Royal Bank of Canada shot up $3.44 (Canadian) to $51.43, while stock in insurance giant Manulife Financial Corp. jumped $1.53 to $36.87.
The U.S. Securities and Exchange Commission has named both RBC and Manulife on a list of 799 financial stocks that investors are now barred from short selling on American markets. Other Canadian companies on the list include the Bank of Nova Scotia, Fairfax Financial Holdings Ltd., Sun Life Financial Inc. and Kingsway Financial Services Inc.
After the close of financial markets, the Ontario Securities Commission issued a temporary order prohibiting short selling of securities of certain financial firms that are listed on the TSX and also inter-listed in the United States.
The affected companies include Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Fairfax Financial Holdings Ltd., Kingsway Financial Services Inc., Manulife, Quest Capital Corp., Royal Bank, Sun Life Financial Inc., Thomas Weisel Partners Group Inc., Toronto-Dominion Bank, and Merrill Lynch & Co. Canada Ltd.
The Bank of Canada, meanwhile, took more steps to lubricate credit markets by lending commercial banks and brokers $2 billion for 28 days.
Elsewhere, Prime Minister Stephen Harper stressed that no government bailouts of this country’s banks are being considered because they’re still in "very good shape."
That drew the ire of New Democrat Leader Jack Layton, who said the government must play a stronger role in the economy.
With files from Joanna Smith and the Star’s wire services
Gap Inc. is gaining international ground with new franchise agreements to open stores in Mexico, Egypt and Jordan.
The new agreement brings to 21 the number of countries with approved Gap franchisees. The first franchisee was signed in January 2006, and over 100 franchised Gaps and Banana Republic stores are now open in 13 countries.
In Mexico, Gap (NYSE: GPS) will open stores within stores at a Mexican department store chain through a partnership with Distribuidora Liverpool. Gap products will become available in spring 2009.
Gap Inc. will also expand its Middle East presence with franchised Gap and Banana Republic stores in Egypt and Jordan. Fawaz Alhokair Group will open the first Gap stores in Egypt and Jordan by the end of the year, with Banana Republic stores following in 2009 credit scores cash advance. Fawaz Alhokair also has franchised Gap and Banana Republic stores in Saudi Arabia.
Gap and Banana Republic franchise stores are now open in Bahrain, Greece, Indonesia, Korea, Kuwait, Oman, Qatar, Malaysia, Saudi Arabia, Singapore, Philippines, Turkey and United Arab Emirates. The company has also announced franchise agreements to open stores in Bulgaria, Croatia, Cyprus, Romania and Russia over the next five years.
Stocks rallied Thursday after a report about potential buyers of Lehman Brothers - including Bank of America - gave investors some reassurance at the end of a choppy session.
After the close, the Washington Post reported that the Treasury Dept. and the Federal Reserve are putting together a sale of Lehman through a group of private firms, with a deal expected to be announced this weekend. The government and the Fed also teamed up to orchestrate the rescue of Bear Stearns in March.
Also after the close, Washington Mutual sought to reassure investors that its capital position and credit outlook were stable, amid escalating worries. Following the announcement, ratings agency Fitch downgraded the company’s debt rating. (Full story)
The Dow Jones industrial average (INDU) gained 165 points, or 1.5%. The Standard & Poor’s 500 (SPX) index gained 1.4% and the Nasdaq composite (COMP) added 1.3%.
Whether it’s Bank of America or a different firm or firms that end up purchasing Lehman may not be that important, said Michael Sheldon, chief market strategist at RDM Financial Group.
"I don’t think it matters who purchases them as long as their instability or the rumor of their possible demise is diminished," Sheldon said.
Sheldon noted that the session’s trading volume has been improving of late and that it will be important to see if that continues, as higher volumes can be seen as a sign of greater conviction on the part of investors.
Stocks were mostly lower through the morning as Lehman and other bank stocks tumbled on worries about their solvency. Meanwhile, a steeper-than-expected jump in the U.S. trade deficit and a weak jobless claims report added to recession fears.
While bank shares remained under pressure in the afternoon, the selloff in oil prices gave a lift to companies that benefit directly from lower fuel prices, including transportation stocks. Consumer stocks benefited too, on lower inflation expectations. Meanwhile, the S&P 500 flirted with its 2008 lows and then managed to bounce back.
But the market spiked heading into the close after the Wall Street Journal Web site reported that Lehman Brothers is actively shopping itself to potential acquirers, including Bank of America.
The report boosted a number of bank stocks, but failed to lift Lehman Brothers, which slumped almost 42% on the session.
Partly the day’s advance was a function of short-covering in some of the really beleaguered sectors of the market, said Tom Schrader, managing director at Stifel Nicolaus. Short-covering refers to the process by which traders, who have sold a stock short to take advantage of a falling market, buy the stock back.
Investors were also reacting to oil prices, which settled at a 5 1/2 month low.
For the past few weeks, falling oil prices have been seen as mostly a negative, in that they reflect a slowdown in the global economy. But Thursday, investors also seemed to focus on how lower fuel prices will help transportation and consumer stocks and also impact inflation expectations.
"The commodity crunch over the last few months has been across the board, and now it’s all coming back," Schrader said. "Oil is down over 30% from the highs, natural gas is down over 50% and grain prices are coming down. Inflation expectations have got to come down too."
"That’s the good news," he said. "The bad news is that it also means the global economy is weaker."
Lehman Brothers: Lehman (LEH, Fortune 500) shares plunged 42% Thursday, after having recovered some of those losses at midday.
On Wednesday, the bank reported a nearly $4 billion fiscal third-quarter loss, its biggest quarterly loss since it went public in 1994. Lehman also said it will spin off part of its commercial real estate business, cut its dividend and sell a 55% stake in its investment unit, which includes profitable money manager Neuberger Berman.
Investors initially took a lackluster response to the stock Wednesday, sending it 7% lower after boosting it right after the announcement faxless payday loan overnight payday loans. On Thursday, both Wall Street pros and investors sent the message that the restructuring moves seemed like too little, too late.
Goldman Sachs downgraded the stock to "neutral" from "buy," while Citigroup cut it to "hold" from "buy."
Lehman has struggled this year amid mounting losses related to bad mortgage bets and its inability to raise sufficient capital to continue operating its businesses properly. (Full story)
Investors have been particularly wary of the company in the wake of the government bailout of Fannie Mae and Freddie Mac announced last weekend and the near-failure and ultimate government rescue of Bear Stearns in March.
Banking: A number of other financial firms have sparked worries about their exposure to bad mortgage loans and their ability to raise money. AIG (AIG, Fortune 500) shares - as well as those of Washington Mutual (WM, Fortune 500) and Wachovia (WB, Fortune 500) - have been battered in recent days on such concerns.
AIG initially tumbled to a more than 13-year low on reports that the CEO may consider selling the consumer finance and reinsurance units to raise money. But the stock recovered with the broader financial sector near the close of trade. (Full story).
The hammering that AIG, WaMu and others are suffering is not to be taken lightly, said Joseph Saluzzi, co-head of equity trading at Themis Trading.
"It’s a ‘where there’s smoke, there’s fire’ situation with what’s happening to those stocks," he said.
But the sector bounced back by the close, with WaMu adding 21%, JP Morgan Chase (JPM, Fortune 500) adding 6% and Wells Fargo (WFC, Fortune 500) adding 7% among other gainers. The Philadelphia Bank Sector index gained 2.8%.
Among other movers, airline, railroad and trucker stocks advanced as investors focused on the positive benefits of lower fuel prices. The Dow Jones Transportation (DJTA) average gained 3.4%. Also helping was railroad CSX (CSX, Fortune 500), which boosted its 2008 forecast.
Automakers GM (GM, Fortune 500) and Ford (F, Fortune 500) also gained.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by eight to seven on volume of 1.45 billion shares. On the Nasdaq, decliners topped advancers by a narrow margin on volume of 2.34 billion shares.
Economy: In addition to the banking system woes, investors received two discouraging economic reports Thursday, on the trade deficit and the labor market.
The U.S. trade gap surged to $62.2 billion in July, its widest level in 16 months. Oil prices, which reached record levels in July before sliding the past two months, were the main reason for the increase. The report beat economists’ forecasts for a dip to $58 billion versus a revised $58.8 billion in June.
The number of Americans filing new claims for unemployment fell 6,000 to 445,000 last week, beating forecasts for a bigger drop to 440,000, the government reported.
Fuel prices: Oil prices fell as slumping demand reflected concern about the economic outlook. (Full story).
U.S. light crude oil for October delivery settled down $1.71 at $100.87 a barrel on the New York Mercantile Exchange, the lowest close since March 24.
Oil prices have lost more than $45 a barrel since peaking at $147.27 on July 11.
Gas prices rose overnight, climbing for the second day in a row as Hurricane Ike strengthened, according to a national survey of credit-card activity.
Other markets: In global trade, European and Asian markets ended lower.
In the bond market, Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.64% from 3.63% late Thursday. Prices and yields move in opposite directions.
The dollar fell versus the euro and the yen.
COMEX gold for December delivery fell $17 to $745.50 an ounce.
Ford Motor Co. announced plans to transform its vehicle lineup on Thursday and reported the largest quarterly loss in its 105-year history.
Ford’s (F, Fortune 500) stock ended the session about 15% lower at $5.13 a share.
"Because of deteriorating economic conditions, demand has declined dramatically, especially in North America," said Ford CEO Alan Mulally, who also blamed rising gas prices for the decline.
Mulally said the company is working toward reducing its salaried workforce by 15%. The company aims to save $5 billion annually, and has managed to reduce costs by $1 billion so far.
He also said the company is now shifting its focus "to bring to the North American market smaller, more fuel-efficient vehicles that people increasingly want."
The company said it will make big changes to the vehicles it sells domestically - bringing six small cars made in Europe to the North American market.
Ford said that three large truck and sport utility vehicle plants in Wayne, Mich., Louisville, Ky., and Cuautitlan, Mexico would be switched over for the manufacture of small cars. Re-tooling will begin in December, the company said.
In addition to converting the three plants in North America, Ford said it will ramp up production of small utility vehicles at its Kansas City, Mo., assembly plant, including the Ford Escape, Escape Hybrid, Mercury Mariner and Mariner Hybrid.
Fortune: Can this car save Ford?
Mulally said that, in the second quarter, Ford rolled out two new vehicles - the Ford Flex, a "crossover" car-based SUV, and the Lincoln MKS luxury sedan. Mulally said these are the first vehicles with "eco boost" technology, providing better fuel economy.
Mark Warnsman, analyst for Calyon Securities, said that Ford has a "good plan" but "they’ve got to say in business long enough to make it work."
"They’re not going to have these smaller vehicles in the U.S. until 2010 or 2011 and they’re going to have to hustle to keep up with demand," said Warnsman, noting that Honda Motor (HMC) is Ford’s top competitor in producing small, fuel-efficient cars.
As production winds down, Ford has been slashing production of SUVs and large trucks to meet the reduced demand, and delayed the launch of its new F-150. But some truck and SUV lines will continue, at least for now.
Ford said it will continue to produce the Ford Ranger through 2011 at its Twin Cities, Minn bad credit payday advance payday loans. plant, which was scheduled to close in 2009. The company also said it would shift production of the Ford Expedition and Lincoln Navigator to its Louisville plant from Wayne, Mich.
Tough quarter: Ford said it lost $8.7 billion, or $3.88 per share, in the second quarter, including pre-tax special charges primarily due to the write-down of assets. A year earlier, the automaker announced a profit of $750 million, or 31 cents per share.
Without charges, Ford reported a loss of $1.4 billion, or 62 cents per share, in the latest quarter.
Revenue, excluding special items, fell to $38.6 billion from $44.2 billion a year earlier.
Ford said the special items included $8 billion in write-offs stemming from the loss in value to Ford North American and its Ford Credit lease portfolio. For this, Ford blamed "deteriorating economic conditions."
Ford managed to beat analyst expectations on revenue, but missed on earnings. Analysts expected Ford to report a 14% drop in revenue to $34.6 billion, and a loss of 27 cents per share, without charges, according to consensus compiled by Thomson/First Call.
Hard-hit: Ford, like its American rival GM (GM, Fortune 500), has been hard-hit by economic weakness. In particular, rising gas prices have severely hampered consumer interest in big trucks and SUVs. In 2007, Ford lost its place as the No. 2 automaker in the U.S. to the Japanese automaker Toyota (TM).
Ford has been offering buyouts to the hourly employees among its 54,000-strong workforce. But only 4,200 workers accepted, far short of the company’s goal. On Monday, Ford said that a new round of buyout and early retirement offers had been made to workers at 17 facilities.
On Wednesday, the rival U.S. automaker Chrysler also announced that it was cutting 1,000 salaried jobs.
Ford’s stock has fallen 10% so far this year. But it still managed to outperform the S&P, which has dropped 12%.
Calyon has received compensation from Ford for non-investment banking services in the past 12 months.
Chancellor of the Exchequer Alistair Darling said fallout from a global credit crunch is proving worse than previously expected, a sign that U.K. policy makers are bracing for slower growth.
“The effect of what has happened is going to be far more profound than people predicted even at the turn of this year,'' Darling said in an interview with Bloomberg Television, which will air excerpts today. “It is quite clear that if you look during the course of this year, conditions have become more difficult across the world.''
The finance minister, whose tenure has coincided with the sharpest decline in house prices and the steepest rise in living costs in a decade, reiterated his belief the British economy will escape recession and pledged to keep up the fight against inflation.
The deteriorating economic outlook, together with a run on deposits at Northern Rock Plc in September and a series of U- turns on tax policy, have eroded Prime Minister Gordon Brown's popularity. Darling won't release new economic forecasts until his pre-budget statement in the fourth quarter.
Britain's economic growth will probably slow to 1.6 percent this year and 1.3 percent in 2009, the weakest since 1992, according to a survey of 40 economists by the Treasury released on July 16. In March, Darling expected growth of up to 2.25 percent this year, compared with 3.1 percent in 2007.
Slower Growth
The Bank of England has already presented a more somber outlook. Governor Mervyn King said then that there may be “an odd quarter or two of negative growth.'' His deputy, John Gieve, said policy makers must grapple with inflation “well over'' 4 percent, double the government's target.
The central bank expects growth to slow to 1 percent in the first quarter of 2009. Consumer prices climbed 3.8 percent in June from a year earlier, the most since records began in 1997.
House prices fell the most in 15 years in June as higher borrowing costs reduced mortgage lending, triggering the worst property slump since Britain's last recession in 1991, according to HBOS Plc, the U.K.'s biggest mortgage lender payday loans online payday loan.
“Times are tough,'' Darling said in the interview, which was recorded July 14. “They are tough for everyone.''
The Conservative opposition had a 22 percentage point lead over Labour in a YouGov Plc survey published on July 13. Forty- six percent of people predicted a recession in the next year, compared with 31 percent in June, YouGov said in its survey of 1,800 people. Brown has until June 201o to call the next election.
Tax Cuts
In May, Darling announced a 2.7 billion-pound ($5.4 billion) emergency tax cut for 22 million people and last week postponed for six months an increase in fuel duty to cushion the effect of record oil costs.
In the interview, Darling said the worst of the credit crisis is far from over, noting action to prop up the mortgage lenders Freddie Mac and Fannie Mae in the U.S. In Britain, Alliance & Leicester Plc agreed to be acquired by Banco Santander SA of Spain for 1.26 billion pounds, less than half of its market value at the end of last year.
Worldwide, banks and securities firms have raised $324 billion in the past year after record writedowns and credit losses of almost $410 billion from the collapse of the subprime mortgage market, according to data compiled by Bloomberg.
“I don't think anyone would be wise to start speculating on how long the present difficulties will last,'' Darling said. “We are dealing with them here and other countries are dealing them as well. If you look at the problems the banks have had, they have moved into a different phase and governments have to take account of that.''
U.K. mortgage rates surged to the highest in eight years and consumer confidence dropped as the worst housing slump in three decades deepened.
“This is doom and gloom,'' said Alan Clarke, an economist at BNP Paribas SA in London. “The housing market is in freefall and unemployment is rising.''
The rate on a home loan fixed for two years rose to 6.63 percent in June, the highest since February 2000, the Bank of England said today in London. The 0.37 percentage point increase from a month earlier is the biggest since October 2003. Nationwide Building Society's index of consumer sentiment dropped to the lowest level since the survey began in May 2004.
The U.K. is skirting a recession as house prices fall, oil costs rise to a record and lenders refuse to pass on the Bank of England's three interest-rate cuts since December. Policy makers, who make a rate decision tomorrow, said last month that they considered increasing borrowing costs after inflation accelerated to 3.3 percent, the fastest pace in at least a decade.
“The Bank of England's credibility is in question with the worst peak in inflation in its history, but there are a lot of reasons not to hike now,'' BNP's Clarke said.
Rate Decision
All but one of 49 economists in a Bloomberg News survey predict the Bank of England will keep the key rate unchanged at 5 percent tomorrow. Nationwide said there is a 20 percent chance that the bank will raise interest rates.
Evidence of the economy's deterioration sent the pound lower against the euro today. The currency fell to 79.59 pence from 79.57 pence yesterday.
House prices fell the most since 1992 in June, Nationwide said July 1. Unemployment may rise 58 percent to 1.3 million by the middle of 2010, the Centre for Economic and Social Inclusion, a government-supported research group, predicted this week.
Homebuilders Redrow Plc and Bovis Homes Group Plc today said they will cut their workforce by 40 percent as sales drop. Persimmon Plc said yesterday it eliminated 1,100 jobs after the housing slump lowered first-half sales by 34 percent payday loans online fast cash advance.
“The state of the housing market is of grave cause for concern,'' Harriet Harman, deputy leader of the ruling Labour Party, said in Parliament today. She said the government and the Bank of England will fight inflation even as economic conditions threaten to “get tougher.''
Policy Disagreement
Policy makers John Gieve, Timothy Besley, Paul Tucker and Kate Barker, who testified before a U.K. parliament committee on June 26 with Bank of England Governor Mervyn King, all said they considered advocating higher interest rates last month. The nine- member panel voted 8-1 to keep the main rate unchanged. David Blanchflower supported a reduction.
Inflation climbed to 3.3 percent in May, the fastest pace since at least 1997, and King said last month that the rate may exceed 4 percent later this year. In May, he predicted that the economy may see the “odd quarter or two'' of contraction as consumers pare spending.
Inflation has also accelerated because the weakness of the pound is driving up import prices. The pound fell 13 percent in the past year against a basket of the U.K.'s main trading partners. The goods trade gap stayed at 7.5 billion pounds ($15 billion) in May, the statistics office said today.
More than half the respondents in the Nationwide survey expect the economic outlook to worsen over the next six months, and around 70 percent predict their incomes will stay the same in that period, the report showed.
Consumers “are recognizing that the economy is weakening, and that's going to affect them,'' said Fionnuala Earley, chief economist at Nationwide, in an interview on Bloomberg Television. “The next move in rates will be down, but it will be much later this year or next year.''
The Bush administration has put a two-year stop to solar energy projects on federal lands in Arizona and other Western states while it studies their environmental impact.
The U.S. Bureau of Land Management and U.S. Department of Energy will study the impact of solar energy production and other facilities that could be developed on public lands in Arizona, New Mexico, Utah, Nevada, California, Colorado and Nevada.
There are 125 applications by solar energy companies to build facilities on public lands in those states.
The review will take two years worrying a solar energy sector looking to expand in the western U.S. including Arizona.
A number of U.S., German and Japanese solar energy companies want to locate or expand in Arizona and other Western states amid concerns about high energy costs and emissions absolutely free credit report faxless payday loans.
Critics have questioned the Bush administration policies and links oil and gas companies saying the administration is too cozy with those energy sectors.
Kuwait’s oil minister has welcomed Saudi Arabia’s call for a meeting of oil producers and consumers to discuss ways of dealing with soaring energy prices.
Mohammed al-Eleim says consumers and producers have to talk because they are "in the same boat." He did not elaborate.
But he reiterated to reporters Tuesday that record high prices of oil were not caused by market fundamentals.
The government of Saudi Arabia, the world’s largest oil producer, announced Monday it was calling for the meeting in the near future http://paydayintime.com payday loan low fee. The gathering will also include oil companies.
Light, sweet crude for July delivery traded at $134.62 a barrel by noon Tuesday in Europe in electronic trading on the New York Mercantile Exchange.
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