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By Jim Abrams
With no end in sight to economic bad news, President George W. Bush on Friday ensured that millions of laid-off workers will keep getting their unemployment checks as the year-end holidays approach.
Bush signed an extension of jobless benefits into law just before 8 a.m., as he was preparing to leave the White House for a morning flight to Lima, Peru, to attend the 21-nation Asia-Pacific Economic Cooperation forum.
Congressional leadership rushed the bill to the White House after it was approved Thursday to make the unusually quick bill signing possible before Bush left the country.
Earlier in the year, Bush expressed doubts about further benefit extensions, but he came to support the legislation as new figures showed new claims for jobless aid had reached a 16-year high.
In what could be its last vote of the year, the Senate approved a measure Thursday that would provide up to three months of extra benefits for those whose unemployment benefits have run out or are about to expire. The House passed the bill in October.
"With more Americans filing jobless claims than at any time since the 1992, the Senate's passage of the House's unemployment insurance extension legislation will help speed relief to more than 2 million workers who continue to search for new jobs in these difficult economic times," said House Speaker Nancy Pelosi, D-Calif.
Those times became a little more difficult Thursday as the Dow Jones industrials dropped more than 400 points for the second straight day, reaching the lowest level in more than five years. In part, investors were discouraged by the inability of the White House and Congress to agree on a plan to provide relief to the battered auto industry.
Democrats had sought to carve out $25 billion from the $700 billion financial rescue plan to keep the auto industry in business through next spring, but the White House and Senate Republicans objected.
Democratic leaders said they were ready to come back into session on Dec. 8, but only if the Big Three automakers first come up with a roadmap showing how federal aid will put them on the path to future economic viability.
At stake are millions of jobs in the auto and related industries that could go under if one or more of the major automakers goes bankrupt.
"We are prepared to come back into session the week of Dec. 8 to help the auto industry," said Senate Majority Leader Harry Reid, D-Nev. "But only if they present a responsible plan that gives us a realistic chance to get the needed votes."
Other federal actions to resuscitate an economy crippled by home foreclosures, a credit freeze and confusion in financial markets will probably have to wait until January.
President-elect Barack Obama has pledged to make economic recovery the immediate focus of his new administration and both the House and Senate will have increased Democratic majorities eager to support him.
The voice vote in the Senate Thursday came just hours after the Labor Department reported that claims for unemployment benefits jumped last week to 542,000. That marked the highest level since July 1992 and provided fresh evidence of a rapidly weakening job market that is expected to get even worse next year. The number of people searching for work has now topped 10 million and the civilian unemployment rate now stands at 6.5 percent, a 14-year high.
About 1.2 million people would exhaust their unemployment insurance by the end of the year without the extension, sponsors said. The measure is estimated to cost about $5.7 billion, although economists put the positive impact at $1.64 for every dollar spent on jobless benefits because the money helps sustain other jobs and restores consumer confidence.
"Extending this basic assistance to help unemployed workers pay their mortgages, feed their families, and heat their homes is a down payment on broader economic recovery legislation that our economy desperately needs," said House Ways and Means Committee Chairman Charles Rangel, D-N.Y.
The legislation as approved would provide seven additional weeks of payments to people who have exhausted their benefits or will exhaust them soon. Those in states where the unemployment rate is above 6 percent would be entitled to an additional 13 weeks above the 26 weeks of regular benefits. Benefit checks average about $300 a week nationwide.
The benefits provided would be in addition to 13 weeks of federally funded extended benefits Congress approved last June.
Congress has enacted federally funded extensions seven times in the past 50 years during economic slumps - in 1958, 1961, 1972, 1975, 1982, 1991 and 2002.
The White House had earlier opposed a broader $61 billion bill that would have helped states meet Medicaid costs and fund public works projects as well as extend jobless benefits.
But on Thursday White House press secretary Dana Perino urged Congress to move quickly on the benefits bill. "The recent financial and credit crisis has slowed the economy, and it's having an impact on job creation," she said.
Unemployment insurance is a joint program between states and the federal government that is almost completely funded by employer taxes, either state or federal.
In yet another bad sign for the economy's near future, the private, New York-based Conference Board said Thursday that its monthly forecast of economic activity declined 0.8 percent in October. Over the past seven months, the index has declined at a 4.7 percent annual rate, faster than at any other time since 2001.
Most of the decline was due to the drop in stock prices, a decline in building permits and sagging consumer expectations.
Friday, November 21, 2008
Stocks Drop Sharply and Credit Markets Seize Up
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By VIKAS BAJAJ and JACK HEALY
As a new bout of fear gripped the financial markets, stocks fell sharply again on Thursday, continuing a months-long plunge that has wiped out the gains of the last decade.
The credit markets seized up as confidence in the nation’s financial system ebbed and people rushed to put money in Treasuries, the safest of investments. Some markets are now back to where they were before Congress approved the $700 billion financial rescue in October.
The Dow Jones industrial average fell nearly 445 points, or 5.6 percent. The broad market sank to its lowest level since 1997 — before the dot-com boom, the Nasdaq market bust and the ensuing bull market that drove stocks to record heights.
With Thursday’s rout, $8.3 trillion in stock market wealth has been erased in the last 13 months.
Investors are growing increasingly worried that big banks like Citigroup, JPMorgan Chase and Bank of America, which have all received billions of dollars from the government to bolster their finances, are still too weak. The price of Citigroup’s shares plunged 26.4 percent on Thursday and other financial shares fell to fresh lows.
Citigroup, which is under pressure from some investors to split itself or sell businesses, plans to hold a meeting on Friday to update executives on the company’s condition.
The Standard & Poor’s 500-stock index fell 6.7 percent, leaving that benchmark down about 52 percent from its peak in October 2007. The Dow Jones industrial average closed at 7,552.29, barely above its low in October 2002 during the depths of the last bear market. The Nasdaq fell 5 percent, to 1,316.12.
“This is a response to real fear,” said Marc D. Stern, chief investment officer at Bessemer Trust, an investment firm in New York. “We each have to look inside and say, is the fear warranted?”
The fear was reflected in a stampede for the safety of government securities. The Treasury’s benchmark 10-year bill rose 2- 22/32, to 106- 10/32 and the yield, which moves in the opposite direction from the price, was at 3.01 percent, down from 3.32 percent late Wednesday.
The sell-off in equities gathered force over the last several days and brought an abrupt end to what had been a modest improvement in financial markets. After the Federal Reserve began making short-term loans directly to businesses last month, a semblance of normalcy returned to credit markets, and the stock market, although volatile, held above its old lows.
But investor confidence, which has been shaky since the bankruptcy of Lehman Brothers, was dealt a severe blow when the Treasury Department announced last week that it would not buy troubled mortgage assets using the $700 billion that Congress approved in October. Economic reports showing rising unemployment, falling consumer prices and disastrous retail sales compounded the damage. The risk that one or all of the Detroit automakers might go bankrupt added to the gloom.
“The profit drag on corporate America is widening and deepening, and this is leading to more layoffs and cutbacks in capital spending, which is extending and deepening the recession,” said Stuart Schweitzer, global markets strategist for J.P. Morgan Private Bank. “We’ve gotten into a full-blown, self-feeding downturn.”
More bad economic news arrived on Thursday morning the Labor Department reported that new claims for unemployment benefits rose to a seasonally adjusted 542,000 last week, the highest level since July 1992. Unemployment is also climbing at a rapid clip in Europe, and the once-sizzling economies in Asia and Latin America are starting to sputter. Early on Friday, Singapore reported that its third-quarter gross domestic product fell at a 6.8 percent annualized pace.
In Asian trading early Friday, stocks were down nearly 3 percent in Japan, Australia and New Zealand. On Thursday, most European markets closed down more than 3 percent for the day.
The global nature of the slowdown is a reason that oil prices have fallen spectacularly in recent months. On Thursday, oil futures, which had touched $145 this summer, settled below $50 a barrel for the first time since 2005.
The sell-off in markets has been all the more severe because of forced selling by hedge funds, mutual funds, insurance companies and banks, all of which are being compelled to sell at the same time because of pressures from investors, lenders, regulators and rising insurance claims.
There have been spectacular declines in investments like commercial mortgage-backed securities, which are collections of loans backed by shopping malls, office buildings and apartments. Prices of those securities have fallen 20 percent just this month, mostly in response to a report about anticipated defaults on just two loans. The price of insuring against a default on commercial mortgages has more than doubled in less than a week.
“Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe Balestrino, fixed income strategist at Federated Investors, who added that he thought prices had fallen too far in many cases.
The troubles in the credit market are not limited to risky assets. The mortgage finance companies Fannie Mae and Freddie Mac, which the government took over in September, have had to pay a steep premium over rates at which the Treasury borrows because policy makers have not explicitly guaranteed their debt.
Investors said the weak condition of many large banks had exacerbated the pain in the financial system because those institutions served as critical intermediaries in the trading of securities, particularly in the credit markets, where securities do not trade on exchanges. Because they need every spare dollar to shore up their own health, those banks are not as willing to make markets in securities that may be even slightly risky.
Shares of Citigroup, for instance, have fallen more than 50 percent this week, to $4.71. Earlier in the week, the bank said it would nearly double previously announced layoffs to 52,000, or 14 percent of its total staff. Other big institutions like Goldman Sachs and Morgan Stanley have been reducing their reliance on borrowed money because they have decided to become bank holding companies subject to regulation by the Federal Reserve.
“They are the middleman, and they have just gotten killed,” Andrew Feltus, a bond fund manager at Pioneer Investments, said about big banks and securities firms.
Still, in a sign that some investors have not lost all faith, two dozen stocks in the S.& P. 500-stock index rose, albeit barely, and among them were two of the American’s troubled automakers.
General Motors and Ford had a rare positive day on Thursday after Congressional leaders left open the door for federal aid to them and for Chrysler, which is privately held. Still, Democratic leaders criticized the executives of the companies and said they needed to make a more persuasive case that they would be responsible stewards of government money. G.M. and Ford were up slightly, though still close to their lowest levels in decades.
By VIKAS BAJAJ and JACK HEALY
As a new bout of fear gripped the financial markets, stocks fell sharply again on Thursday, continuing a months-long plunge that has wiped out the gains of the last decade.
The credit markets seized up as confidence in the nation’s financial system ebbed and people rushed to put money in Treasuries, the safest of investments. Some markets are now back to where they were before Congress approved the $700 billion financial rescue in October.
The Dow Jones industrial average fell nearly 445 points, or 5.6 percent. The broad market sank to its lowest level since 1997 — before the dot-com boom, the Nasdaq market bust and the ensuing bull market that drove stocks to record heights.
With Thursday’s rout, $8.3 trillion in stock market wealth has been erased in the last 13 months.
Investors are growing increasingly worried that big banks like Citigroup, JPMorgan Chase and Bank of America, which have all received billions of dollars from the government to bolster their finances, are still too weak. The price of Citigroup’s shares plunged 26.4 percent on Thursday and other financial shares fell to fresh lows.
Citigroup, which is under pressure from some investors to split itself or sell businesses, plans to hold a meeting on Friday to update executives on the company’s condition.
The Standard & Poor’s 500-stock index fell 6.7 percent, leaving that benchmark down about 52 percent from its peak in October 2007. The Dow Jones industrial average closed at 7,552.29, barely above its low in October 2002 during the depths of the last bear market. The Nasdaq fell 5 percent, to 1,316.12.
“This is a response to real fear,” said Marc D. Stern, chief investment officer at Bessemer Trust, an investment firm in New York. “We each have to look inside and say, is the fear warranted?”
The fear was reflected in a stampede for the safety of government securities. The Treasury’s benchmark 10-year bill rose 2- 22/32, to 106- 10/32 and the yield, which moves in the opposite direction from the price, was at 3.01 percent, down from 3.32 percent late Wednesday.
The sell-off in equities gathered force over the last several days and brought an abrupt end to what had been a modest improvement in financial markets. After the Federal Reserve began making short-term loans directly to businesses last month, a semblance of normalcy returned to credit markets, and the stock market, although volatile, held above its old lows.
But investor confidence, which has been shaky since the bankruptcy of Lehman Brothers, was dealt a severe blow when the Treasury Department announced last week that it would not buy troubled mortgage assets using the $700 billion that Congress approved in October. Economic reports showing rising unemployment, falling consumer prices and disastrous retail sales compounded the damage. The risk that one or all of the Detroit automakers might go bankrupt added to the gloom.
“The profit drag on corporate America is widening and deepening, and this is leading to more layoffs and cutbacks in capital spending, which is extending and deepening the recession,” said Stuart Schweitzer, global markets strategist for J.P. Morgan Private Bank. “We’ve gotten into a full-blown, self-feeding downturn.”
More bad economic news arrived on Thursday morning the Labor Department reported that new claims for unemployment benefits rose to a seasonally adjusted 542,000 last week, the highest level since July 1992. Unemployment is also climbing at a rapid clip in Europe, and the once-sizzling economies in Asia and Latin America are starting to sputter. Early on Friday, Singapore reported that its third-quarter gross domestic product fell at a 6.8 percent annualized pace.
In Asian trading early Friday, stocks were down nearly 3 percent in Japan, Australia and New Zealand. On Thursday, most European markets closed down more than 3 percent for the day.
The global nature of the slowdown is a reason that oil prices have fallen spectacularly in recent months. On Thursday, oil futures, which had touched $145 this summer, settled below $50 a barrel for the first time since 2005.
The sell-off in markets has been all the more severe because of forced selling by hedge funds, mutual funds, insurance companies and banks, all of which are being compelled to sell at the same time because of pressures from investors, lenders, regulators and rising insurance claims.
There have been spectacular declines in investments like commercial mortgage-backed securities, which are collections of loans backed by shopping malls, office buildings and apartments. Prices of those securities have fallen 20 percent just this month, mostly in response to a report about anticipated defaults on just two loans. The price of insuring against a default on commercial mortgages has more than doubled in less than a week.
“Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe Balestrino, fixed income strategist at Federated Investors, who added that he thought prices had fallen too far in many cases.
The troubles in the credit market are not limited to risky assets. The mortgage finance companies Fannie Mae and Freddie Mac, which the government took over in September, have had to pay a steep premium over rates at which the Treasury borrows because policy makers have not explicitly guaranteed their debt.
Investors said the weak condition of many large banks had exacerbated the pain in the financial system because those institutions served as critical intermediaries in the trading of securities, particularly in the credit markets, where securities do not trade on exchanges. Because they need every spare dollar to shore up their own health, those banks are not as willing to make markets in securities that may be even slightly risky.
Shares of Citigroup, for instance, have fallen more than 50 percent this week, to $4.71. Earlier in the week, the bank said it would nearly double previously announced layoffs to 52,000, or 14 percent of its total staff. Other big institutions like Goldman Sachs and Morgan Stanley have been reducing their reliance on borrowed money because they have decided to become bank holding companies subject to regulation by the Federal Reserve.
“They are the middleman, and they have just gotten killed,” Andrew Feltus, a bond fund manager at Pioneer Investments, said about big banks and securities firms.
Still, in a sign that some investors have not lost all faith, two dozen stocks in the S.& P. 500-stock index rose, albeit barely, and among them were two of the American’s troubled automakers.
General Motors and Ford had a rare positive day on Thursday after Congressional leaders left open the door for federal aid to them and for Chrysler, which is privately held. Still, Democratic leaders criticized the executives of the companies and said they needed to make a more persuasive case that they would be responsible stewards of government money. G.M. and Ford were up slightly, though still close to their lowest levels in decades.
Report says CIA witheld info from White House
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By PAMELA HESS
The senior Republican on the House Intelligence Committee Thursday called for a criminal investigation into whether the CIA lied to Congress and withheld information from the Justice Department during its inquiry into the 2001 shoot-down of an American missionary plane by the Peruvian air force with help from a CIA spotter plane.
The CIA's Office of General Counsel advised agency managers to avoid producing written reports about the incident "to avoid both criminal charges against Agency officers and civil liability," according to unclassified excerpts of an August CIA inspector general report released Thursday by Michigan Rep. Pete Hoekstra..
The report said the CIA withheld from the National Security Council, Justice Department and Congress the results of multiple investigations that documented continuous and significant violations of aircraft intercept procedures created to prevent the shoot-down of innocent aircraft over the Amazon jungle. The classified report was completed in August and sent to Congress in October.
Many aircraft were shot down by Peruvian fighter aircraft within two to three minutes of being spotted regularly "without being properly identified, without being given the required warnings to land, and without being given time to respond to such warnings as were given to land," the report said.
Hoekstra suggested other innocent aircraft may have been shot down.
In the case of the missionary shoot-down in April 2001, the report said CIA officers misrepresented the incident as a one-time mistake in an otherwise well-run program.
"In fact, this was not the case," according to the report. "Between 1995 and 2001, the Agency incorrectly reported that the program complied with the laws and policies governing it."
"Violations of required procedures occurred in every shoot-down the CIA took part in" for the six years of the CIA's Airbridge Denial Program with Peru, said Hoekstra, who read unclassified portions of the report to journalists. The number of shoot-downs was not made public.
The classified version of the report identified personnel by name who, Hoekstra said, misled Congress and obstructed the Justice Department investigation into whether criminal charges should have been filed in the case. Justice ultimately decided against filing charges.
"As DOJ was making that determination, information was being withheld" by the CIA from the National Security Council, Congress and Justice, Hoekstra said.
"This is as ugly as it gets: an agency operating outside of the law, covering it up and getting away with it as long as they did," said Hoekstra.
CIA Director Michael Hayden has made no decisions regarding the IG's recommendations, but has asked former Chairman of the Joint Chiefs of Staff Gen. Richard Myers, a former fighter pilot an expert in air interdiction operations, to advise him, according to an official who spoke on condition of anonymity to discuss internal CIA matters.
He called the latest report further evidence that parts of the intelligence community and the CIA believe they are not accountable to Congress or even their own managers.
CIA spokesman Mark Mansfield pledged the CIA's full cooperation with Congress, saying:
"This situation obviously calls for careful deliberations that will result in sound fair decisions."
Hoekstra also called Thursday for the declassification of the CIA report on the incident, which killed a Michigan woman and her infant daughter. The pilot, the woman's husband and her son survived.
He said the intelligence committee will likely hold hearings on the matter in the new year.
The incident occurred in April 2001 in Peru's remote Amazon region near the Colombian and Brazilian borders as part of the CIA's airbridge counternarcotics program. A CIA-contracted surveillance plane was supposed to identify drug-smuggling aircraft, and Peruvian and Colombian fighters were supposed to intercept them and order them to land. If they didn't follow those orders, the fighters had authority to shoot them down.
According to a U.S. report released by the State Department in 2001, the CIA aircraft initially identified the plane, but then grew concerned that it was an innocent flight, too late — given language problems and established procedures — to prevent the Peruvian fighter from firing.
The shoot-down was "even more senseless and avoidable than I originally imagined," Hoeskstra said.
"It is a blot, a dark stain," he said. "This is a sad day for the CIA."
By PAMELA HESS
The senior Republican on the House Intelligence Committee Thursday called for a criminal investigation into whether the CIA lied to Congress and withheld information from the Justice Department during its inquiry into the 2001 shoot-down of an American missionary plane by the Peruvian air force with help from a CIA spotter plane.
The CIA's Office of General Counsel advised agency managers to avoid producing written reports about the incident "to avoid both criminal charges against Agency officers and civil liability," according to unclassified excerpts of an August CIA inspector general report released Thursday by Michigan Rep. Pete Hoekstra..
The report said the CIA withheld from the National Security Council, Justice Department and Congress the results of multiple investigations that documented continuous and significant violations of aircraft intercept procedures created to prevent the shoot-down of innocent aircraft over the Amazon jungle. The classified report was completed in August and sent to Congress in October.
Many aircraft were shot down by Peruvian fighter aircraft within two to three minutes of being spotted regularly "without being properly identified, without being given the required warnings to land, and without being given time to respond to such warnings as were given to land," the report said.
Hoekstra suggested other innocent aircraft may have been shot down.
In the case of the missionary shoot-down in April 2001, the report said CIA officers misrepresented the incident as a one-time mistake in an otherwise well-run program.
"In fact, this was not the case," according to the report. "Between 1995 and 2001, the Agency incorrectly reported that the program complied with the laws and policies governing it."
"Violations of required procedures occurred in every shoot-down the CIA took part in" for the six years of the CIA's Airbridge Denial Program with Peru, said Hoekstra, who read unclassified portions of the report to journalists. The number of shoot-downs was not made public.
The classified version of the report identified personnel by name who, Hoekstra said, misled Congress and obstructed the Justice Department investigation into whether criminal charges should have been filed in the case. Justice ultimately decided against filing charges.
"As DOJ was making that determination, information was being withheld" by the CIA from the National Security Council, Congress and Justice, Hoekstra said.
"This is as ugly as it gets: an agency operating outside of the law, covering it up and getting away with it as long as they did," said Hoekstra.
CIA Director Michael Hayden has made no decisions regarding the IG's recommendations, but has asked former Chairman of the Joint Chiefs of Staff Gen. Richard Myers, a former fighter pilot an expert in air interdiction operations, to advise him, according to an official who spoke on condition of anonymity to discuss internal CIA matters.
He called the latest report further evidence that parts of the intelligence community and the CIA believe they are not accountable to Congress or even their own managers.
CIA spokesman Mark Mansfield pledged the CIA's full cooperation with Congress, saying:
"This situation obviously calls for careful deliberations that will result in sound fair decisions."
Hoekstra also called Thursday for the declassification of the CIA report on the incident, which killed a Michigan woman and her infant daughter. The pilot, the woman's husband and her son survived.
He said the intelligence committee will likely hold hearings on the matter in the new year.
The incident occurred in April 2001 in Peru's remote Amazon region near the Colombian and Brazilian borders as part of the CIA's airbridge counternarcotics program. A CIA-contracted surveillance plane was supposed to identify drug-smuggling aircraft, and Peruvian and Colombian fighters were supposed to intercept them and order them to land. If they didn't follow those orders, the fighters had authority to shoot them down.
According to a U.S. report released by the State Department in 2001, the CIA aircraft initially identified the plane, but then grew concerned that it was an innocent flight, too late — given language problems and established procedures — to prevent the Peruvian fighter from firing.
The shoot-down was "even more senseless and avoidable than I originally imagined," Hoeskstra said.
"It is a blot, a dark stain," he said. "This is a sad day for the CIA."
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