AP
Business
Highlights
Monday
February 23, 6:49 pm ET
Major stock market indexes fall to 1997
levels
All the major indexes slid more than 3 percent. The Dow is just
over 100 points from 7,000.
Investors pounded most financial stocks even as government
agencies led by the Treasury Department said they would launch a revamped bank
rescue program this week. The plan includes the option of increasing government
ownership in financial institutions without having to pour more taxpayer money
into them.
Although the government has said it doesn't want to nationalize
banks, many investors are clearly still concerned that this could be a
possibility as banks continue to suffer severe losses because of the recession.
They're also worried that banks' losses will keep escalating as the recession
sends more borrowers into default.
Feds explore taking bigger stakes in shaky banks
WASHINGTON (AP) -- The government on Monday moved toward
dramatically expanding its ownership stakes in the nation's banks -- with
Citigroup, the struggling titan of the industry, apparently at the top of the
list.
Wall Street responded as it has with the rollout of almost every
other plan to fix the financial crisis, taking a big drop and sending the Dow
Jones industrials to its lowest level in a dozen years.
The Treasury Department, the Federal Reserve and other banking
regulators said they could convert the government's stock in the banks from
preferred shares to common shares.
The strategy, which could be applied retroactively to banks that
received money in the first incarnation of the bailout, carries risks. But it
avoids, at least for now, having to tap more taxpayer money or resort to
full-fledged nationalization.
Citigroup -- perhaps the biggest name in American banking -- has
approached the regulators about ways the government could help strengthen the
bank, including the stock conversion plan, according to people familiar with
the discussions.
Judge orders Thain to testify on
Merrill bonuses
CHARLOTTE, N.C. (AP) -- A New York judge is ordering former
Merrill Lynch CEO John Thain to testify about bonuses
paid to Merrill employees before the company was sold to Bank of America.
New York's Attorney General Andrew Cuomo filed a motion in the
state's Supreme Court Monday asking that Thain be
compelled to provide details on the bonuses, which he had declined to give
during a deposition Thursday. Thain's spokesman Jesse
Derris said later Monday that the motion was granted and Thain
will answer the questions Tuesday.
Thain
said Thursday he had been told by BofA not to divulge
details about them.
Thain
was dismissed from the combined company last month after news broke that
Merrill paid $3.6 billion in bonuses before it completed its sale.
Obama pledges to slash deficit -- after increase
WASHINGTON (AP) -- Urging strict future restraint even as current
spending soars, President Barack Obama pledged on Monday to dramatically slash
the skyrocketing annual budget deficit as he started to dole out the record
$787 billion economic stimulus package he signed last week.
The president promised to cut the yearly deficit in half by the
end of his four-year term.
He said he would reinstitute a pay-as-you-go rule that calls for
spending reductions to match increases and would shun what he said were the
past few years' "casual dishonesty of hiding irresponsible spending with
clever accounting tricks." He called the long-term solvency of Social
Security the most pressing fiscal challenge and said reforming health care,
including burgeoning entitlement programs, was a huge priority.
Obama goes before Congress and the nation Tuesday night to make
the case for his agenda and his budget plans, which the White House is to
release in more detail on Thursday.
Official: Obama likely to name Locke to Commerce
WASHINGTON (AP) -- President Barack Obama's likely third pick for
Commerce secretary is former Washington Gov. Gary Locke, a senior
administration official said Monday.
Locke, a Democrat, was the nation's first Chinese-American
governor when he served two terms in the
Obama's expected choice of Locke arose less than two weeks after
his most recent pick, Republican Sen. Judd Gregg of New Hampshire, backed out.
Just over a week after Obama named him and he accepted, Gregg cited "irresolvable
conflicts" with the policies of the Democratic president.
Obama originally gave the post, which requires Senate
confirmation, to New Mexico Gov. Bill Richardson. He withdrew in January,
before Obama took office, after the disclosure that a grand jury is
investigating allegations of wrongdoing in the awarding of contracts in his
state.
UAW reaches health care trust fund deal with Ford
DETROIT (AP) -- The United Auto Workers and Ford Motor Co. said
Monday they agreed to let the automaker change how it pays for a health care
trust fund for retired workers, a deal that could serve as the model for
cash-starved General Motors Corp. and Chrysler LLC.
Ford said the agreement allows it to make payments to the
union-managed trust with up to 50 percent of company stock instead of cash.
Having the UAW take equity frees up cash for operations.
Ford, like its Detroit and foreign competitors, is seeing a huge
drop in sales as consumers shy away from purchasing new cars during a
recession. However, the company has not asked for low-interest government
loans. General Motors and Chrysler have asked for a total of $39 billion, and
have received $17.4 billion so far.
For Ford, which isn't receiving government aid but is trying to
cut costs, the agreement announced Monday is another in a series of concessions
from auto workers.
Rattner
to advise Treasury on auto industry
WASHINGTON (AP) -- The White House selected a Wall Street
financier on Monday to advise Treasury Secretary Timothy Geithner
on the restructuring of General Motors Corp. and Chrysler LLC.
Steven Rattner, co-founder of
Quadrangle Group LLC, will serve as counselor to Geithner,
who is leading an auto industry task force charged with shaping the future of
GM and Chrysler.
Rattner
had been a leading candidate to become the so-called "car czar." But
President Barack Obama decided instead to create a task force led by Geithner and White House economic aide Larry Summers to
review $17.4 billion in federal loans to GM and Chrysler and their requests for
billions more in aid.
Quadrangle Group said Monday that Rattner
was leaving his role as managing principal of the firm to take the Treasury
position.
MIAMI (AP) -- A federal judge decided Monday it will take months
to determine if and when the Internal Revenue Service will learn the identities
of 52,000 wealthy Americans who have secret accounts at Swiss bank UBS AG.
The IRS had sought an accelerated timetable, but Justice
Department tax attorney Stuart Gibson and UBS lawyers told Gold at a brief
telephone hearing Monday they had agreed on a lengthier process. Gold also set
a series of deadlines for court filings.
COO Peter Chernin to depart News Corp.
in June
LOS ANGELES (AP) -- Peter Chernin,
president and chief operating officer of News Corp., will leave the company in
June.
The media conglomerate said in a statement Monday that its 20th
Century Fox movie studio and Fox TV businesses will report directly to Chief
Executive Rupert Murdoch upon Chernin's departure.
Next week marks Chernin's 20th
anniversary with the company. Murdoch called Chernin's
contributions "immeasurable."
Chernin
will launch a Fox-based production company later this year, among other
ventures. In addition, he will continue his efforts as Chairman of Malaria No
More.
By The Associated Press
The Dow Jones industrials dropped 250.89, or 3.41 percent, to
7,114.78. It last closed this low on Oct. 28, 1997 when it finished at
6,971.32.
The Standard & Poor's 500 index
fell 26.72, or 3.47 percent, to 743.33. It was the lowest close since April 11,
1997, when it ended at 737.65.
The technology-laden Nasdaq
composite index dropped 53.51, or 3.71 percent, to 1,387.72.
Light, sweet crude for April delivery for April delivery fell 4
percent, or $1.59, to settle at $38.44 a barrel on the
Brent crude fell 91 to $40.99 on the ICE Futures exchange in
In other Nymex trading, gasoline
futures fell 3 cents to settle at $1.0433 and heating oil fell 2 cents to
settle at $1.1754 a gallon. Natural gas for March delivery rose
less than a penny to settle at $4.097 per 1,000 cubic feet.