In this issue:

Soaring Tuitions Drive Students To Work and into Debt

Airlines Find It Harder and Harder To Get Off the Ground

Record Number of Homeowners in Bankruptcy as Mortgage Debt Goes Through the Roof

Fed, Prescribing More Poison, Slashes Overnight Interest Rate

D.C. Now Hit by Collapse of Venture Capital Funds

WALL STREET POLICE BLOTTER


From Volume 1, Issue Number 36 of Electronic Intelligence Weekly, Published November 11, 2002

U.S. ECONOMIC/FINANCIAL NEWS

Soaring Tuitions Drive Students To Work and into Debt

College students are finding it increasingly difficult to afford the skyrocketing cost of being "dumbed down" in school. As Lyndon LaRouche has observed, there is nowadays an inverse ratio between the cost of tuition and the quality of education received. According to the Wall Street Journal Nov. 5, average yearly tuition at a four-year public college rose a whopping 117% between 1981 and 2001; at expensive private schools, tuition rose even more, by 123%, forcing many students to work long hours outside of school, and/or take on huge debts. Nationwide, 74% of full-time undergraduates worked in 1999-2000, averaging 25.5 hours per week, with 19.7% working full-time. Upon completing college, the average student will owe $16,900 in Federal loans, up 69% from 1992-93—plus private loans and credit-card debt.

Airlines Find It Harder and Harder To Get Off the Ground

The airline industry employed 53,000 fewer people (10% of workforce) in the third quarter of this year than they did a year ago, and, since the end of September, have announced another 20,000 job cuts. The major carriers have lost nearly $8 billion this year. "All the airlines are on very thin ice right now," warned an Aviation Daily editor, with some "likely to cease operations" unless more cuts are made.

*UAL, parent of United Airlines, to stave off bankruptcy, received a postponement from the German bank, Kreditanstalt fur Wiederaufbau, of $500 million in debt payments due by the end of the year. The world's second-largest carrier still must come up with another $450 million in debt payments over the next two months. United's pilots union has tentatively agreed to an 18% pay cut; flight attendants, mechanics, and other employees have tentatively offered $5.8 billion in pay cuts over five and one-half years.

*U.S. Airways, already in bankruptcy, must make deeper payroll cuts as it faces a severe cash crunch, after having cut flights by about 13% since August. Other airlines, smelling blood, are moving in on its route network.

*American Airlines, the largest air-carrier in the world, after losing $3 billion in the first nine months of this year, is pressuring workers for more pay cuts.

Record Number of Homeowners in Bankruptcy as Mortgage Debt Goes Through the Roof

Chapter 13 bankruptcy filings—which allow homeowners to avoid foreclosure, but require them to catch up on past-due mortgage payments—jumped 8% in the second quarter from a year earlier, to over 110,000. The number of homeowners in bankruptcy surged over the past year to an estimated 750,000, compared with about 450,000 five years ago. The rise in homeowner-bankruptcy filings comes amid a 50% surge in mortgage debt over the past four years (to $5.7 trillion), as homeowners have used home-equity loans to cover credit-card debt and other short-term obligations (not to mention investing in the stock market and, recently, losing their shirts).

Fed, Prescribing More Poison, Slashes Overnight Interest Rate

The Federal Open Market Committee, by a unanimous vote, lowered the Federal funds rate (the interest rate on overnight loans between banks) by a larger-than-expected 0.5%, to 1.25%, the lowest since July 1961—in the 12th straight rate cut since the beginning of 2001. The Fed blamed "greater uncertainty" about an Iraq war for "inhibiting spending" (by already-debt-laden Americans).

The Fed's Board of Governors also cut the discount rate on loans to banks from the Fed system, by a half-percentage point to 0.75%.

D.C. Now Hit by Collapse of Venture Capital Funds

The collapse of venture capital funds nationally has now hit the Washington, D.C. area hard, the Washington Post said Nov. 4. Investments in start-ups in the third quarter were down 84% from the peak in early 2000. Nationally, the third quarter saw a 26% fall from the previous quarter, at $4.5 billion in 647 start-ups, an eight-year low.

WALL STREET POLICE BLOTTER

Webster Now Subject of SEC Investigation; Pitt Resigns as Chairman

Former FBI and CIA Director William Webster is now the subject of a Securities and Exchange Commission investigation, growing out of his role as head of the audit committee of a company which is being investigated for fraud by the SEC. Awkwardly, Webster was recently selected by SEC chairman Harvey Pitt to head a new accounting oversight board, which was created in the wake of recent accounting scandals.

It turns out that Webster headed the audit committee of U.S. Technologies, a company which is now insolvent and is being investigated for accounting fraud. U.S. Technologies started out as a company contracting prison inmates to work for private electronics and manufacturing companies.

Meantime, SEC chair Pitt resigned Nov. 6. under fire, in part, for failing to tell other members of the SEC about Webster's conflict of interest.

Long-time EIR readers may recall that then-FBI Director Webster was the recipient of the notorious "Dear Bill" letter from Henry Kissinger in August 1982, demanding that the FBI "do something" about Lyndon LaRouche; after being prodded by Kissinger's cronies on the President's Foreign Intelligence Advisory Board, Webster ordered the opening of a national security investigation of LaRouche. Webster's giving in to political influence-peddling by private citizen Kissinger, constituted a far bigger scandal than anything of which Webster is currently accused.

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