The credit crisis turns 1 this month, Business Week writes. What can you say? Certainly not “Many happy returns,” given that the latest government data shows the economy is contracting so quickly that a number of economists now believe “that a recession began late last year.” Even though President George W. Bush (and the Washington Post) pointed out that gross domestic product rose at a 1.9 percent annualized rate (after adjusting for inflation) during the second quarter, newly revised data showed “the economy contracted at a 0.2% rate in the final three months of 2007,” notes the Wall Street Journal. We’ll get another barometer today on the potential effects of the credit crunch’s terrible 2s when the Bush administration offers up its latest job-market forecast. Analysts suggest 75,000 jobs were lost in July, “signifying the seventh straight month of declines,” notes the New York Times.
The grim economic news put a dent in the price of oil, not that Exxon Mobil will worry too much. It recorded the “best quarterly profit ever for a corporation,” notes the NYT, with second-quarter returns jumping 14 percent, to $11.68 billion. The previous record for quarterly mega-profits was held by—you guessed it—Exxon Mobil. Not many other companies are smiling. British Airways boss Willie Walsh bemoaned “the worst trading environment the industry has ever faced” as he announced an 88 percent drop in profits (the carrier made $73.3 million pretax) from this time last year. Northwest would agree. It just announced a whopping $80 fuel surcharge for many domestic flights. Even if oil plummets and air travel rebounds, the current crisis guarantees a long-term problem for the industry. As the NYT reports, U.S. airlines are “putting off plans to update and expand their fleets” in the wake of their combined $6 billion losses in the second financial quarter of this year.
You can be forgiven if, up until now, you’ve not paid too much attention to all the allegations swirling around UBS. The Swiss banking giant has been cited by several regulators for deceiving investors about the arcane financial instruments called auction-rate securities. But now, courtesy of the WSJ, comes the much sexier allegation that one of the key executives who supposedly participated in this scheme is a former Bush administration official: David Aufhauser, onetime general counsel for the Treasury Department. Although Aufhauser hasn’t himself been charged, the Journal cites “people familiar with the matter” who say he was one of the UBS officials who personally dumped auction-rate securities even as the bank continued to sell them to customers as safe.
Don’t expect Wal-Mart to be stocking extra copies of Barack Obama’s books anytime soon. The Wall Street Journal reports the uber-retailer is warning its managers and supervisors that, “if Democrats win power in November, they’ll likely change federal law to make it easier for workers to unionize companies—including Wal-Mart.” The company is worried that reinvigorated labor unions would agitate for higher payroll and health costs for companies.
For weeks, the technology press had been looking forward to a good old fist fight at Yahoo’s annual shareholder meeting. Now that CEO Jerry Yang and activist shareholder Carl Icahn have averted all-out war, the media can’t hide its disappointment. “What was supposed to be the season’s biggest corporate showdown is now shaping up as a giant snooze-fest,” mopes CNN Money, while the Financial Times reports that Icahn won’t be attending the event, defusing “what little tension remained around the meeting by announcing his non-attendance on Thursday.” At least the WSJ is keeping its hope up, suggesting that Yang and Co. need to bolster Yahoo’s “bread-and-butter” display ad business in order to assuage still-fuming shareholders. With those investors “breathing down Yahoo’s neck, accelerating [display ad] growth could be the company’s best hope for changing its trajectory,” notes the WSJ.
Finally, the NYT has a clever spin on the proposed $4.5 billion Bristol-Myers Squibb takeover of the storied biotech firm ImClone. It was an infamously hasty stop-loss sale of ImClone stock, after all, that sent Martha Stewart to prison. Given the stock spike on news of the takeover, had Stewart and her broker held onto their shares back in late 2001, “they might have done just fine, and avoided jail time.”
