U.S. Economic/Financial News
Bush-Appointed Amtrak Board Secretly Voted To Privatize its Northeast Corridor
The Northeast Corridor (NEC) runs between Boston and Washington and is the most capital-intensive electrified rail corridor in the U.S. The Sept. 22 secret vote would, if approved by Congress, de facto lead to the implementation of the Bush Administration's "bankrupt Amtrak" plan, since it is the NEC which generates the revenues for the national rail system. Such a move also plays into the neo-con networks in Congress who have tried for years to privatize Amtrak. But, so far, this year, Congress has not fully adopted the Bush death warrant for Amtrak.
U.S. Senator Frank Lautenberg (D-NJ) said of the Amtrak vote, "The Bush administration wants to hold a fire sale on Amtrak and sell its best asset, the Northeast Corridor. Selling the [NEC] is the first step in President Bush's plan to destroy Amtrak and intercity rail service in America." The Times reports the Senate may take up its version of the appropriations bill which includes Amtrak funding, next week.
Freddie Mac Economist: Billions More Needed in Refinancing Aid to Gulf States
Freddie Mac chief economist Frank Nothaft tried to sketch a 2006 "soft landing" for the U.S. housing bubble in a National Press Club presentation Oct. 12: a median price increase of "only" 7.7%, of which 2-3% would be in the form of price inflation in all building materials; a 5% drop in housing starts and a 3% drop in home sales (despite replacement of destroyed homes in the Gulf states); "the end of the home refinancing boom"; a "robust economy," etc. Nothaft seemed to be talking more about "Rosy" than "Katrina and Rita," whose impact was supposed to be his topic.
But in discussion afterwards, Nothaft said that 350,000 mortgages in Louisiana, Mississippi, and Alabama were "affected" and "at least 100,000" completely wiped out; some $4 billion in mortgage-relief intervention is needed by Fannie Mae and Freddie Mac combined. The scale of the relief they can give will be determined in part by the Senate, specifically the Banking Committee, as part of hurricane disaster reconstruction. Freddie Mac has already reported losses of $300 million for the third quarter, from action on its mortgage guarantees for mortgages wiped out in the Gulf states, and from investments in securities based on those mortgages. It and Fannie Mae are trying to get bank lenders to return all September mortgage payments on affected homes, as well as reimbursing them for October's. Nothaft said that Freddie Mac and Fannie Mae will guarantee new mortgages for unemployed people in the Gulf states.
Gulf Seafood Industry Fears Next Catastrophe: Lifting of Tariffs on Imports
Early this year, after domestic shrimpers argued that foreign competitors were dumping large quantities of seafood into U.S. markets, depressing prices, the International Trade Commission, a U.S. government agency, approved tariffs, by a vote of 6 to 0, on imported frozen shrimp from Thailand, India, China, Vietnam, Brazil, and Ecuador.
However, on Sept. 14, the Commission held a hearing to consider lifting the tariffs on shrimp from Thailand and India, due to damages of the tsunami last December. The decision is expected in November. Gulf fishermen say that lifting the tariff would be crushing to an already devastated Gulf fishing industry. Nearly half of all U.S. shrimp production comes from shrimpers fishing out of, or delivering to, Louisiana, Mississippi, and Alabama ports.
Hurricanes Again Reveal Deregulation-Caused Disinvestment in Infrastructure
As Texas recovers from hurricane Rita, after two weeks, 58,000 customers were still without power. Physical damage to the system was massive. Pat Wood III, a pro-deregulation ideologue, who until recently chaired the Federal Energy Regulatory Commission (FERC), complains that the utility company, Entergy, did not invest in enough transmission capacity before the storm. In fact, since FERC started to deregulate the transmission sector of the electrical industry, the Edison Electric Institute reports, industry transmission investment has dropped from $5 billion in 1975 to $2 billion in 2000. The industry compact with regulators had required they meet reliability standards with adequate capacity, and allowed them to recoup the cost through adjusted rates. Now, it's every utility for itself. To complicate things further, the state of Texas has its own, independent electric transmission grid. That prevented Entergy from being able to bring power to Texas from its subsidiaries in contiguous states, or any near-by company.