Sovereign Bancorp and Spain's Banco Santander confirmed on Monday that they are in talks about Santander acquiring the Pennsylvania-based banking firm.
In a terse one-sentence statement to the Spanish regulator, Santander (STD:banco santander sa adr
STD 13.24, +0.21, +1.6%) (ES:0113900J3: news, chart, profile) confirmed the media speculation that it would buy out Sovereign (SOV:Sovereign Bancorp Inc
News, chart, profile, more
Last: 3.67-0.14-3.67%
:
SOV 3.67, -0.14, -3.7%) but said no deal has been reached.
Sovereign said on Monday that, "it is not possible currently to know whether such conversations will lead to an agreement, or not, and there can be no assurances that an agreement will be reached or that a transaction will be consummated. Sovereign does not intend to comment further until an agreement is reached or discussions are terminated."
The Wall Street Journal had reported late on Sunday that Santander was in talks to buy Sovereign at roughly the same price as Friday's $3.81-a-share, or $2.53 billion.
"Our initial reaction is that we would be quite surprised if Sovereign management were to sell the company at the current stock price," said Ken Zerbe, an analyst at Morgan Stanley.
"Our view is that after disclosing and writing-off its poor-performing GSE and CDO investments, the company had put its most pressing problems behind it," he added.
If the deal is reached, it would be the third troubled bank Santander has agreed to buy in the last year.
It's reached an agreement to buy Alliance & Leicester (UK:AL: news, chart, profile) as well as the retail deposit business and the branch network of nationalized lender Bradford & Bingley, both of which are based in Britain.
Santander bought a 24.9% stake in Wyomissing, Pa.-based Sovereign three years ago. Terms of that acquisition require Santander to pay $38-a-share for the entire bank, but the Journal report said Santander's directors appeared likely to waive that condition.
Sovereign last week named Paul Perrault as chief executive, replacing Joseph Campanelli, who ran the bank following the ouster of long-time head Jay Sidhu.
Sovereign shares, which have fallen 78% in the last year, fell 0.5% on Monday.
Santander's U.S. shares have dropped a relatively limited 33% over the last year. In U.S. trading Monday, the shares rose 1.2%, to $13.18.
Monday, October 13, 2008
Friday, October 10, 2008
Wells Fargo Wins Battle over Wachovia Bank!
By D Mildenberg B Keoun
(Bloomberg) -- Wells Fargo & Co. will become the largest U.S. bank by branches with an $11.7 billion offer for ailing rival Wachovia Corp. that trumped a competing bid by Citigroup Inc.
Wells Fargo, based in San Francisco, and Wachovia said late yesterday they will stick to the terms of the all-stock deal they struck Oct. 3, four days after Citigroup's offer. The bid values the Charlotte, North Carolina-based lender at about $5.43 a share, 51 percent more than Wachovia's closing price of $3.60 in New York trading.
The deal marks Wells Fargo Chairman Richard Kovacevich's biggest takeover since he led Minneapolis-based Norwest Corp.'s purchase of Wells Fargo, founded in 1852, 10 years ago. Like JPMorgan Chase & Co., which last month acquired Washington Mutual Inc., he took advantage of the worst financial crisis since the Great Depression to extend his geographic franchise.
``They are going from being a mainly West Coast bank to rivaling Bank of America with a national retail franchise,'' said Tony Plath, a finance professor at the University of North Carolina at Charlotte. ``There will never be another Wells Fargo-Wachovia transaction. This was a defining moment for Kovacevich.''
Citigroup, based in New York, dropped the legal battle it waged to prevent the merger. The bank, led by Chief Executive Officer Vikram Pandit, still plans to sue Wells Fargo for $60 billion in damages, saying news of the competing bid caused its own share price to tumble.
Fed Cease-Fire
A torrent of back-and-forth court filings over the deal generated so much publicity that the Federal Reserve, concerned about its effect on U.S. financial markets, insisted on a cease- fire to allow the two suitors to settle their differences. The pause lasted until late yesterday, when Citigroup said it had ended talks with Wells Fargo.
Pandit, who initially called the deal ``compelling'' and ``one of those high-return acquisitions in which we have contained the risk,'' said in yesterday's statement that the bank's willingness to walk away was a sign of ``discipline.''
``Following several days of negotiations, we continued to have dramatically different views regarding risks involved in the transaction,'' Pandit said in a memo to employees. ``As I said from the beginning, Citi does not need to do this transaction. We were willing to pursue it only if we could limit the risk and generate value for shareholders.''
Missed Opportunity?
Citigroup missed out on an opportunity to keep pace with rivals that have expanded through acquisitions of troubled institutions, said Charles Carlson, a money manager at Horizon Investment Services LLC in Hammond, Indiana. In addition to New York-based JPMorgan's takeover of WaMu and Bear Stearns Cos., Bank of America Corp. acquired Countrywide Financial Corp. and Merrill Lynch & Co.
``The more Citi could beef up its operations and be part of the big bank club, the better,'' Carlson said. ``I'm not sure this is going to be viewed as good for Citi.''
Wells Fargo gains control of a bank with $448 billion of deposits in 21 states. It would have 6,675 branches, compared with Bank of America's 6,139. More than half of Wachovia's branches are on the U.S. East Coast, while Wells Fargo's reach from California to Texas and Minnesota.
Kovacevich said yesterday in a statement that the combination would ``create significant value for Wachovia and Wells Fargo shareholders.'' He added that his management team has ``adequately evaluated the risks inherent'' in Wachovia's loan holdings.
Option ARMS
Wachovia's $498 billion loan portfolio includes about $122 billion of option adjustable-rate mortgages. The home mortgages are prone to default because they allow borrowers to defer part of interest payments, boosting the principal. After housing markets weakened, borrowers were left with loans larger than the value of their homes.
``Credit teams at Wells Fargo have had an opportunity to work with their counterparts at Wachovia,'' Kovacevich said.
Wachovia gained 25 percent in U.S. trading to $4.52 at 8:30 a.m. today. Wells Fargo fell 2.4 percent and Citigroup was down 5.6 percent at $12.22 after dropping 10 percent yesterday in New York.
The Wells Fargo deal was originally valued at $7 a share, or $15.1 billion. It declined this week as the bank's share price fell. Each Wachovia share will be exchanged for 0.1991 Wells Fargo share, based on the terms announced Oct. 3.
Emergency Funds
Wells Fargo said it expects expedited approval of the merger application by the Federal Reserve. The Fed said in a statement yesterday that it will immediately begin reviewing terms of the Wells Fargo offer.
Citigroup on Sept. 29 signed an agreement in principle to pay almost $2.2 billion for Wachovia's banking operations, leaving behind its securities brokerage and asset management businesses.
At the time, Wachovia was on the verge of collapsing into receivership, and Citigroup began plying it with emergency funding. Citigroup also agreed to pay $12 billion to the Federal Deposit Insurance Corp. in exchange for a guarantee that the agency would absorb any losses beyond $42 billion on a $312 billion pool of Wachovia loans.
Later last week, as Congress considered bailout legislation that included tax breaks for buyers of troubled banks, FDIC Chairman Sheila Bair encouraged Wachovia CEO Robert Steel to ``give serious consideration'' to a new offer from Kovacevich, according to court filings submitted by Wachovia in the legal battle with Citigroup.
Breaking the News
After the Wachovia board approved Wells Fargo's bid on Oct. 3, Steel called Pandit to inform him that Citigroup had been trumped and refused to engage in further discussions with his bank, according to a Citigroup court filing. Bair was on the call, according to an affidavit submitted by Steel.
The FDIC said in a statement this week that ``neither Chairman Bair nor any person at the FDIC in any way initiated or solicited the bid from Wells Fargo.''
Bair said yesterday she wanted to ``acknowledge'' Citigroup's willingness to let the acquisition by Wells Fargo proceed. ``While some outstanding issues remain, this announcement brings much needed certainty to the process,'' Bair said.
Wells Fargo may benefit from a notice by the IRS that makes Wachovia's loan losses more valuable as deductions. The new rule means Wachovia's losses can be used to offset an unlimited amount of Wells Fargo's taxable income over 20 years.
The rule change may save Wells Fargo $25 billion in the coming years, said Robert Willens, a former Lehman Brothers Holdings Inc. accounting analyst who teaches at Columbia Business School in New York.
(Bloomberg) -- Wells Fargo & Co. will become the largest U.S. bank by branches with an $11.7 billion offer for ailing rival Wachovia Corp. that trumped a competing bid by Citigroup Inc.
Wells Fargo, based in San Francisco, and Wachovia said late yesterday they will stick to the terms of the all-stock deal they struck Oct. 3, four days after Citigroup's offer. The bid values the Charlotte, North Carolina-based lender at about $5.43 a share, 51 percent more than Wachovia's closing price of $3.60 in New York trading.
The deal marks Wells Fargo Chairman Richard Kovacevich's biggest takeover since he led Minneapolis-based Norwest Corp.'s purchase of Wells Fargo, founded in 1852, 10 years ago. Like JPMorgan Chase & Co., which last month acquired Washington Mutual Inc., he took advantage of the worst financial crisis since the Great Depression to extend his geographic franchise.
``They are going from being a mainly West Coast bank to rivaling Bank of America with a national retail franchise,'' said Tony Plath, a finance professor at the University of North Carolina at Charlotte. ``There will never be another Wells Fargo-Wachovia transaction. This was a defining moment for Kovacevich.''
Citigroup, based in New York, dropped the legal battle it waged to prevent the merger. The bank, led by Chief Executive Officer Vikram Pandit, still plans to sue Wells Fargo for $60 billion in damages, saying news of the competing bid caused its own share price to tumble.
Fed Cease-Fire
A torrent of back-and-forth court filings over the deal generated so much publicity that the Federal Reserve, concerned about its effect on U.S. financial markets, insisted on a cease- fire to allow the two suitors to settle their differences. The pause lasted until late yesterday, when Citigroup said it had ended talks with Wells Fargo.
Pandit, who initially called the deal ``compelling'' and ``one of those high-return acquisitions in which we have contained the risk,'' said in yesterday's statement that the bank's willingness to walk away was a sign of ``discipline.''
``Following several days of negotiations, we continued to have dramatically different views regarding risks involved in the transaction,'' Pandit said in a memo to employees. ``As I said from the beginning, Citi does not need to do this transaction. We were willing to pursue it only if we could limit the risk and generate value for shareholders.''
Missed Opportunity?
Citigroup missed out on an opportunity to keep pace with rivals that have expanded through acquisitions of troubled institutions, said Charles Carlson, a money manager at Horizon Investment Services LLC in Hammond, Indiana. In addition to New York-based JPMorgan's takeover of WaMu and Bear Stearns Cos., Bank of America Corp. acquired Countrywide Financial Corp. and Merrill Lynch & Co.
``The more Citi could beef up its operations and be part of the big bank club, the better,'' Carlson said. ``I'm not sure this is going to be viewed as good for Citi.''
Wells Fargo gains control of a bank with $448 billion of deposits in 21 states. It would have 6,675 branches, compared with Bank of America's 6,139. More than half of Wachovia's branches are on the U.S. East Coast, while Wells Fargo's reach from California to Texas and Minnesota.
Kovacevich said yesterday in a statement that the combination would ``create significant value for Wachovia and Wells Fargo shareholders.'' He added that his management team has ``adequately evaluated the risks inherent'' in Wachovia's loan holdings.
Option ARMS
Wachovia's $498 billion loan portfolio includes about $122 billion of option adjustable-rate mortgages. The home mortgages are prone to default because they allow borrowers to defer part of interest payments, boosting the principal. After housing markets weakened, borrowers were left with loans larger than the value of their homes.
``Credit teams at Wells Fargo have had an opportunity to work with their counterparts at Wachovia,'' Kovacevich said.
Wachovia gained 25 percent in U.S. trading to $4.52 at 8:30 a.m. today. Wells Fargo fell 2.4 percent and Citigroup was down 5.6 percent at $12.22 after dropping 10 percent yesterday in New York.
The Wells Fargo deal was originally valued at $7 a share, or $15.1 billion. It declined this week as the bank's share price fell. Each Wachovia share will be exchanged for 0.1991 Wells Fargo share, based on the terms announced Oct. 3.
Emergency Funds
Wells Fargo said it expects expedited approval of the merger application by the Federal Reserve. The Fed said in a statement yesterday that it will immediately begin reviewing terms of the Wells Fargo offer.
Citigroup on Sept. 29 signed an agreement in principle to pay almost $2.2 billion for Wachovia's banking operations, leaving behind its securities brokerage and asset management businesses.
At the time, Wachovia was on the verge of collapsing into receivership, and Citigroup began plying it with emergency funding. Citigroup also agreed to pay $12 billion to the Federal Deposit Insurance Corp. in exchange for a guarantee that the agency would absorb any losses beyond $42 billion on a $312 billion pool of Wachovia loans.
Later last week, as Congress considered bailout legislation that included tax breaks for buyers of troubled banks, FDIC Chairman Sheila Bair encouraged Wachovia CEO Robert Steel to ``give serious consideration'' to a new offer from Kovacevich, according to court filings submitted by Wachovia in the legal battle with Citigroup.
Breaking the News
After the Wachovia board approved Wells Fargo's bid on Oct. 3, Steel called Pandit to inform him that Citigroup had been trumped and refused to engage in further discussions with his bank, according to a Citigroup court filing. Bair was on the call, according to an affidavit submitted by Steel.
The FDIC said in a statement this week that ``neither Chairman Bair nor any person at the FDIC in any way initiated or solicited the bid from Wells Fargo.''
Bair said yesterday she wanted to ``acknowledge'' Citigroup's willingness to let the acquisition by Wells Fargo proceed. ``While some outstanding issues remain, this announcement brings much needed certainty to the process,'' Bair said.
Wells Fargo may benefit from a notice by the IRS that makes Wachovia's loan losses more valuable as deductions. The new rule means Wachovia's losses can be used to offset an unlimited amount of Wells Fargo's taxable income over 20 years.
The rule change may save Wells Fargo $25 billion in the coming years, said Robert Willens, a former Lehman Brothers Holdings Inc. accounting analyst who teaches at Columbia Business School in New York.
Monday, October 6, 2008
Citigroup is Sueing Wells Fargo & Wachovia !
(Bloomberg) -- Citigroup Inc. sued Wells Fargo & Co. and its takeover target Wachovia Corp. for $60 billion, claiming their agreement violates its rights to buy a portion of the Charlotte, North Carolina-based lender under a previous deal.
Citigroup is seeking more than $20 billion in compensatory damages and $40 billion in punitive damages from the banks, their officers and directors, according to a complaint filed today in New York State Supreme Court in Manhattan.
``The Citi/Wachovia transaction would have been signed and announced on Friday, October 3rd if it had not been subverted by the unlawful conduct of Wachovia, Wells Fargo, and their officers and directors and outside advisers,'' Citigroup said in a statement.
Citigroup seeks to complete its purchase as part of a rebuilding effort following $61 billion in losses tied to the mortgage-market collapse. The bank wants to buy parts of Wachovia for about $2.16 billion. San Francisco-based Wells Fargo's $15 billion bid is for the whole company. Wachovia said the Wells Fargo offer is a better deal for investors, employees and taxpayers because, unlike Citigroup, it doesn't rely on U.S. government assistance.
Wachovia spokeswoman Christy Phillips-Brown and Wells Fargo spokeswoman Melissa Murray declined to comment, saying the banks hadn't seen the complaint.
State Law
The suit, which focuses on state law, alleges breach of contract and tortuous interference, where a third party interferes with an agreement between two others. Citigroup also seeks an order barring Wachovia and Wells Fargo from continuing their merger talks and an order forcing Wachovia to negotiate with it ``in good faith.''
A separate lawsuit is pending between Citigroup and Wachovia across the street in Manhattan federal court. In that case, Wachovia said that the $700 billion federal bailout law for the banking industry signed into law last week includes language that permitted Wells Fargo to top Citigroup's offer, a contention disputed by Citigroup's lawyers. That case was assigned today to U.S. District Judge Lewis Kaplan.
Gregory Joseph, an attorney for Citigroup, told New York State Supreme Court Justice James McGuire of the state appeals court yesterday that his client had sought to file a lawsuit against Wachovia on Oct. 3.
``On Friday we were ready to file and we were told by federal regulators that we should not,'' Joseph said. By Oct. 4, Citigroup decided to file suit and went searching for an available state court judge who handles business cases. They eventually located Justice Charles Ramos at his home in Cornwall, Connecticut.
Extended Right
Ramos on Oct. 4 extended Citigroup's sole right to negotiate with Wachovia after lawyers for Citigroup sought an emergency extension of an ``exclusivity agreement.''
Yesterday, McGuire reversed that ruling. Ramos has scheduled an Oct. 10 hearing in the case.
According to Citigroup's state court complaint, Wells Fargo's proposed transaction triggers severance payments that may enable Wachovia Chief Executive Officer Robert Steel and other senior executives to receive a combined $225 million.
The consummation of Citigroup's offer wouldn't prompt similar agreements because the New York-based bank was buying Wachovia's banking operations and not the entire company, according to Citigroup.
Citigroup dropped $1.57 to $16.78 at 1:25 p.m. in New York Stock Exchange composite trading. Wachovia fell 47 cents to $5.74 and Wells Fargo fell $1.68 to $32.88.
The case is Citigroup Inc. v. Wachovia Corp., 08-602872, New York State Supreme Court for New York County (Manhattan).
Friday, October 3, 2008
Depression Or Recession ??
Crisis Hits Main Street as Employers Cut More Jobs (Update3)
By S. Chandra and R.Miller
(Bloomberg) -- U.S. payrolls plunged in September, signaling the economy may be heading for its worst recession in at least a quarter century as the 13-month-old credit crisis on Wall Street finally hits home on Main Street.
Employers cut the most jobs in five years in September as cash-squeezed companies pulled back in an effort to bolster pinched profits. In its last employment report before Americans choose their next president, the Labor Department said the unemployment rate was 6.1 percent, a climb of 1.4 percentage points from a year before.
``If credit markets remain dysfunctional, the current recession could turn out to be as severe as any in the postwar period,'' said former Federal Reserve governor Lyle Gramley, now senior economic adviser at the Stanford Group Co. in Washington.
The spreading crisis is also having reverberations on the campaign trail, as polls show anxious voters increasingly see Democrat Barack Obama as the candidate best placed to see the U.S. through its economic travails. The unemployment rate has only risen twice in the year leading up to elections since World War II, and in each case the incumbent party lost.
`This country can't afford Senator McCain's plan to give America four more years of the same policies that have devastated our middle class and our economy for the last eight,'' Obama, 47, said in a statement.
McCain's Reaction
Arizona Senator John McCain, 72, took the opportunity to paint his opponent as a tax-and-spend liberal, whose prescriptions would exacerbate the crisis.
``Unlike Senator Obama, I do not believe we will create one single American job by increasing taxes, going on a massive spending binge, and closing off markets,'' McCain said in a statement. ``Our nation cannot afford Senator Obama's higher taxes.''
Job losses accelerated as the credit crisis deepened last month, forcing the failure or government takeovers of Lehman Brothers Holdings Inc., Fannie Mae, Freddie Mac and American International Group Inc.
The figures came hours before the House of Representatives passed a $700 billion rescue plan for the U.S. financial industry pushed by Treasury Secretary Henry Paulson. The Senate approved the legislation two days ago after the House rejected an initial version of the bill Sept. 29.
Market Reaction
Stocks rose and Treasury securities fell. The Standard & Poor's 500 index climbed 1.8 percent to 1,134.6 at 1:39 p.m. in New York. The yield on the benchmark 10-year note rose to 3.71 percent from 3.63 percent late yesterday.
Today's report showed that hours worked -- considered a good proxy for the state of the overall economy -- matched the lowest level since records began in 1964. That indicates the likely current recession may be at least as severe as the 1981-82 slump, during which gross domestic product shrank by 2.7 percent.
Payrolls fell by 159,000 in September, the Labor Department said in Washington. Aside from a 9,000 gain in government payrolls, all major categories showed declines except education and healthcare.
``The really bad news here is that job losses are now widespread,'' said Nariman Behravesh, chief economist at Global Insight Inc., a Lexington, Massachusetts, forecasting firm. ``The problems in housing and manufacturing are now spreading everywhere. We are in a recession, there is no debate about that.''
Health Services
Even the vibrant health-services industry is showing signs of succumbing to the economy's troubles. Health care employment rose 17,000, about half the average monthly gain for the prior 12 months.
Walgreen Co., the largest U.S. drugstore chain, reported Sept. 29 that its profits rose less than analysts estimated after it posted its smallest sales increase in a decade.
A private report today showed that services-industry growth remained stagnant in September. The Institute of Supply Management's non-manufacturing index slipped to 50.2 from 50.6 the month before. Fifty is the dividing line between growth and expansion.
Total payrolls were forecast to drop 105,000 after declining by a previously estimated 84,000 in August, according to the median of 76 economists surveyed by Bloomberg News. The jobless rate was projected to remain at 6.1 percent.
Rate Forecasts
Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York, said the unemployment rate may eventually rise to more than 7 percent as the credit crunch takes its toll on the economy. If that happens, that would make the overall rise in unemployment the biggest since the early 1980's.
Edelmira Clark, 53, of Chicago, said she was concerned about losing her job as a hotel housekeeper. Her company has already cut her work hours to two days a week.
``I'm trying to find a part-time job in the morning to balance, because I can't do only two days of work,'' said Clark, who immigrated to Chicago from Belize in 1997. ``But a lot of people, my friends, have lost their jobs for good.''
Workers' average hourly wages rose 3 cents, or 0.2 percent, to $18.17 from the prior month. Hourly earnings were 3.4 percent higher than September 2007. Economists surveyed by Bloomberg had forecast a 0.3 percent increase from August and a 3.6 percent gain for the 12-month period.
After today, the total decline in payrolls so far this year has reached 760,000. The economy created 1.1 million jobs in 2007.
Americans will go to the polls on Nov. 4 and the October jobs report is due Nov. 7.
`Angry' Voters
``Voters are extremely angry, and they want someone to blame,'' said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis.
Obama has opened up a lead over Republican rival John McCain in the aftermath of their first debate and amid growing concerns about the economy, according to a Pew Research Center survey taken Sept. 27 to Sept. 29. A mid-September poll from Washington- based Pew had shown the candidates were in a statistical tie.
Earlier in September, a Bloomberg/Los Angeles Times poll showed more respondents said Obama would do a better job handling the financial crisis than McCain, and almost half of the voters believed he had better ideas to strengthen the economy than his rival.
Factory Firings
Factory payrolls fell 51,000 after decreasing 56,000 in August. Economists had forecast a drop of 57,000.
Today's report also reflected the housing slump. Payrolls at builders declined 35,000 after falling 13,000. Financial firms decreased payrolls by 17,000, the most since November last year.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 82,000 workers after eliminating 16,000 in the previous month. Retail payrolls slid by 40,100 after a 25,400 drop.
In the past month, Hewlett-Packard Co., the world's largest personal-computer maker, announced it will cut 24,600 jobs, and auto-parts maker Federal-Mogul Corp. said it would eliminate 4,000 positions globally.
Marriott International Inc., the world's largest hotel chain, yesterday reported third-quarter profit fell 28 percent as U.S. companies and consumers cut back on travel.
Without action from Congress, ``the resulting credit squeeze could threaten businesses,'' Chief Financial said on a conference call. There are ``tens of thousands of jobs at stake in our company alone, and we are typical.''
Mounting job cuts will further limit consumer spending, which accounts for more than two-thirds of the economy. A Bloomberg survey in September predicted spending will be unchanged this quarter, the weakest performance since 1991.
The ISM on Oct. 1 said manufacturing shrank in September at the fastest pace since the last recession in 2001. The odds the central bank will lower its benchmark rate by a half percentage point, to 1.5 percent, were almost 100 percent today, up from 32 percent a week ago.
By S. Chandra and R.Miller
(Bloomberg) -- U.S. payrolls plunged in September, signaling the economy may be heading for its worst recession in at least a quarter century as the 13-month-old credit crisis on Wall Street finally hits home on Main Street.
Employers cut the most jobs in five years in September as cash-squeezed companies pulled back in an effort to bolster pinched profits. In its last employment report before Americans choose their next president, the Labor Department said the unemployment rate was 6.1 percent, a climb of 1.4 percentage points from a year before.
``If credit markets remain dysfunctional, the current recession could turn out to be as severe as any in the postwar period,'' said former Federal Reserve governor Lyle Gramley, now senior economic adviser at the Stanford Group Co. in Washington.
The spreading crisis is also having reverberations on the campaign trail, as polls show anxious voters increasingly see Democrat Barack Obama as the candidate best placed to see the U.S. through its economic travails. The unemployment rate has only risen twice in the year leading up to elections since World War II, and in each case the incumbent party lost.
`This country can't afford Senator McCain's plan to give America four more years of the same policies that have devastated our middle class and our economy for the last eight,'' Obama, 47, said in a statement.
McCain's Reaction
Arizona Senator John McCain, 72, took the opportunity to paint his opponent as a tax-and-spend liberal, whose prescriptions would exacerbate the crisis.
``Unlike Senator Obama, I do not believe we will create one single American job by increasing taxes, going on a massive spending binge, and closing off markets,'' McCain said in a statement. ``Our nation cannot afford Senator Obama's higher taxes.''
Job losses accelerated as the credit crisis deepened last month, forcing the failure or government takeovers of Lehman Brothers Holdings Inc., Fannie Mae, Freddie Mac and American International Group Inc.
The figures came hours before the House of Representatives passed a $700 billion rescue plan for the U.S. financial industry pushed by Treasury Secretary Henry Paulson. The Senate approved the legislation two days ago after the House rejected an initial version of the bill Sept. 29.
Market Reaction
Stocks rose and Treasury securities fell. The Standard & Poor's 500 index climbed 1.8 percent to 1,134.6 at 1:39 p.m. in New York. The yield on the benchmark 10-year note rose to 3.71 percent from 3.63 percent late yesterday.
Today's report showed that hours worked -- considered a good proxy for the state of the overall economy -- matched the lowest level since records began in 1964. That indicates the likely current recession may be at least as severe as the 1981-82 slump, during which gross domestic product shrank by 2.7 percent.
Payrolls fell by 159,000 in September, the Labor Department said in Washington. Aside from a 9,000 gain in government payrolls, all major categories showed declines except education and healthcare.
``The really bad news here is that job losses are now widespread,'' said Nariman Behravesh, chief economist at Global Insight Inc., a Lexington, Massachusetts, forecasting firm. ``The problems in housing and manufacturing are now spreading everywhere. We are in a recession, there is no debate about that.''
Health Services
Even the vibrant health-services industry is showing signs of succumbing to the economy's troubles. Health care employment rose 17,000, about half the average monthly gain for the prior 12 months.
Walgreen Co., the largest U.S. drugstore chain, reported Sept. 29 that its profits rose less than analysts estimated after it posted its smallest sales increase in a decade.
A private report today showed that services-industry growth remained stagnant in September. The Institute of Supply Management's non-manufacturing index slipped to 50.2 from 50.6 the month before. Fifty is the dividing line between growth and expansion.
Total payrolls were forecast to drop 105,000 after declining by a previously estimated 84,000 in August, according to the median of 76 economists surveyed by Bloomberg News. The jobless rate was projected to remain at 6.1 percent.
Rate Forecasts
Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York, said the unemployment rate may eventually rise to more than 7 percent as the credit crunch takes its toll on the economy. If that happens, that would make the overall rise in unemployment the biggest since the early 1980's.
Edelmira Clark, 53, of Chicago, said she was concerned about losing her job as a hotel housekeeper. Her company has already cut her work hours to two days a week.
``I'm trying to find a part-time job in the morning to balance, because I can't do only two days of work,'' said Clark, who immigrated to Chicago from Belize in 1997. ``But a lot of people, my friends, have lost their jobs for good.''
Workers' average hourly wages rose 3 cents, or 0.2 percent, to $18.17 from the prior month. Hourly earnings were 3.4 percent higher than September 2007. Economists surveyed by Bloomberg had forecast a 0.3 percent increase from August and a 3.6 percent gain for the 12-month period.
After today, the total decline in payrolls so far this year has reached 760,000. The economy created 1.1 million jobs in 2007.
Americans will go to the polls on Nov. 4 and the October jobs report is due Nov. 7.
`Angry' Voters
``Voters are extremely angry, and they want someone to blame,'' said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis.
Obama has opened up a lead over Republican rival John McCain in the aftermath of their first debate and amid growing concerns about the economy, according to a Pew Research Center survey taken Sept. 27 to Sept. 29. A mid-September poll from Washington- based Pew had shown the candidates were in a statistical tie.
Earlier in September, a Bloomberg/Los Angeles Times poll showed more respondents said Obama would do a better job handling the financial crisis than McCain, and almost half of the voters believed he had better ideas to strengthen the economy than his rival.
Factory Firings
Factory payrolls fell 51,000 after decreasing 56,000 in August. Economists had forecast a drop of 57,000.
Today's report also reflected the housing slump. Payrolls at builders declined 35,000 after falling 13,000. Financial firms decreased payrolls by 17,000, the most since November last year.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 82,000 workers after eliminating 16,000 in the previous month. Retail payrolls slid by 40,100 after a 25,400 drop.
In the past month, Hewlett-Packard Co., the world's largest personal-computer maker, announced it will cut 24,600 jobs, and auto-parts maker Federal-Mogul Corp. said it would eliminate 4,000 positions globally.
Marriott International Inc., the world's largest hotel chain, yesterday reported third-quarter profit fell 28 percent as U.S. companies and consumers cut back on travel.
Without action from Congress, ``the resulting credit squeeze could threaten businesses,'' Chief Financial said on a conference call. There are ``tens of thousands of jobs at stake in our company alone, and we are typical.''
Mounting job cuts will further limit consumer spending, which accounts for more than two-thirds of the economy. A Bloomberg survey in September predicted spending will be unchanged this quarter, the weakest performance since 1991.
The ISM on Oct. 1 said manufacturing shrank in September at the fastest pace since the last recession in 2001. The odds the central bank will lower its benchmark rate by a half percentage point, to 1.5 percent, were almost 100 percent today, up from 32 percent a week ago.
Thursday, October 2, 2008
Mr. Marriott, Says Tough Year Ahead 2009 !!!!!!
NEW YORK (Reuters) - Hotel operator Marriott International Inc (MAR.N: Quote, Profile, Research, Stock Buzz) on Thursday said third-quarter profit fell as its time-share business slowed and the company warned that 2009 would be tough.
Marriott, which typically manages hotels instead of owning them, reported income from continuing operations of $94 million compared with $122 million in the year-ago quarter.
The company reported diluted earnings per share from continuing operations of 26 cents compared with 31 cents in the third quarter of 2007.
Third-quarter Revenue rose 1 percent to $3 billion.
Looking ahead, Marriott said it expects the 2009 business environment to remain "unusually challenging."
The company expects its worldwide revenue-per-available room (RevPAR), a key industry measure, to decline 1 percent to 3 percent in the fourth quarter of 2008.
Marriott, which typically manages hotels instead of owning them, reported income from continuing operations of $94 million compared with $122 million in the year-ago quarter.
The company reported diluted earnings per share from continuing operations of 26 cents compared with 31 cents in the third quarter of 2007.
Third-quarter Revenue rose 1 percent to $3 billion.
Looking ahead, Marriott said it expects the 2009 business environment to remain "unusually challenging."
The company expects its worldwide revenue-per-available room (RevPAR), a key industry measure, to decline 1 percent to 3 percent in the fourth quarter of 2008.
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