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September 8, 2003
Jobs Cut Since 2001 Are Gone for Good, Study Says
The vast majority of the 2.7 million job losses since the 2001 recession
began were the result of permanent changes in the U.S. economy and are
not coming back, which means the labor market will not regain strength
until new positions are created in novel and dynamic economic sectors, a
Federal Reserve Bank of New York study has concluded, the Washington
Post reported. The conclusions of the study were underscored last
week by two Labor Department reports showing a surge in corporate
productivity, even as work hours are plunging, the online newspaper
reported. The Labor Department said productivity rose at a
stronger-than-expected annual rate of 6.8 percent in the April-to-June
quarter. 'I hope in September and October we will see some job growth,'
said Dean Baker, co-director of the Center for Economic and Policy
Research, who added, however, that such a bad job market 'is not what we
should be seeing at this point in a recovery.'
Most past recessions have been followed by a rapid recovery of jobs, as
companies that laid off workers during the downturn brought them back
when business picked up. But a growing body of evidence suggests that
this recession and recovery are different. Now, even as the economy has
slowly expanded over the past 20 months, businesses have stepped up
automation, sent jobs overseas and produced more while employing fewer
people. 'Instead of seeing a recession as something just to weather,
managers this time seem to have seen it as an opportunity or even a
mandate for permanently changing the way they operate,' Erica Groshen,
an assistant vice president at the New York Fed said, reported the
Post.
House, Senate to Consider Bill Changing Companies Contributions to
Employee Pension Plans
Bills changing the way that companies calculate the payments they must
make to their employee pension plans may move forward this week in both
the House and Senate, CongressDaily reported. The bills will
replace the current interest rate that companies assume to determine the
future solvency of their pension plans, the 30-year Treasury rate, with
a higher corporate bond index rate. The change will lower the amount
that companies must make, and it is heavily favored in business circles.
One unresolved question is how long the new rate will stay in place.
House Education and the Workforce Chairman John Boehner (R-Ohio) said he
favors a two-year duration, while Senate Health, Education, Labor and
Pensions Chairman Judd Gregg (R-N.H.) said he thinks keeping the new
rate in place for five years will add stability to companies' pension
planning. A temporary replacement for the 30-year rate is set to expire
by the end of the year, reported the newswire.
Long a Drag on the Economy, Capacity Glut Begins to Ebb
According to a Wall Street Journal article, one of the biggest
remaining obstacles to U.S. economic recovery - overcapacity -- is
fading and demand is picking up. That will help firms boost profits and
resist pressures to cut prices. Even though companies likely will be
slow to invest in new buildings and equipment, other than to replace
what's wearing out, recent signs of rising demand for capital goods
suggest companies have reduced overcapacity and new hiring may not be
far behind, according to the online newspaper.
Pepco, FERC Seek to Block Mirant Bid to Exit Contract
Pepco Holdings Inc. and the U.S. Federal Energy Regulatory Commission
sought to prevent Mirant Corp. from canceling an unprofitable
power-supply contract through
bankruptcy court, Bloomberg News reported. Pepco's Potomac Electric
Power Co. and the energy regulator filed a motion in the U.S. District
Court in Northern Texas to have the matter removed from Mirant's
bankruptcy proceedings in the state, Washington, D.C.-based Pepco said
in a statement.
The energy commission, which oversees wholesale power transactions,
has tried to block attempts by other electricity suppliers from
canceling contracts through bankruptcy. Atlanta-based Mirant declared
bankruptcy in July and last month sought approval from a bankruptcy
court in Fort Worth, Texas, to void the contract, which obligates it to
sell power to Pepco at below-market prices. Honoring the agreement would
result in more than $300 million in losses through 2005, Mirant has
said, reported the newswire. A bankruptcy judge on Aug. 28 granted
Mirant's request for a court order temporarily barring Pepco or the
regulatory agency from seeking to force Mirant to honor the contract.
Pepco has said it will ask that the order be vacated at a hearing on
Sept. 10, the newswire reported.
MCI MCI Hearing This Week to Decide Company's Shape
MCI begins a reorganization hearing this week that will decide if the
telephone operator can emerge from the largest bankruptcy in history as
a viable company, Reuters reported. It will determine how much money, if
any, creditors will recover for their investment in the No. 2 U.S.
long-distance telephone and data services company. The plan, backed by
about 96 percent of the company's creditors, would erase about $36
billion in debt. If approved by the bankruptcy court, MCI would emerge
with about $3.5 billion or $4.5 billion in debt, and $1 billion in cash.
MCI expects the hearing to last about two weeks. Some legal experts,
however, said the hearing potentially could continue on for months given
the size and complexities of the case and competing classes of
creditors, Reuters reported. One of the company's bankruptcy lawyers
said MCI could emerge from bankruptcy protection within one to three
months after its plan is confirmed if certain conditions were met,
reported the newswire.
MCI Creditors Fail on Subpoenas For Competitors
A bankruptcy-court judge on Friday thwarted MCI creditors who wanted the
power to subpoena rivals that have accused MCI, formerly known as
WorldCom Inc., of defrauding them out of fees for connecting calls, the
Wall Street Journal reported.
Creditors had requested the authority to look for evidence that AT&T
Corp., Verizon Communications Inc., SBC Communications Inc. and a
Washington, D.C.-based public-relations firm, Issue Dynamics Inc.,
colluded in a high-profile 'smear campaign' designed to scare off MCI's
customers and derail its emergence from chapter 11 bankruptcy-court
protection. Judge Arthur Gonzalez of the U.S. Bankruptcy Court for the
Southern District of New York said the creditors were 'seeking discovery
in a public-relations effort to defend MCI.' He said their request
wasn't consistent with bankruptcy rules. He also said that the creditors
won't have any grounds for future lawsuits if it turns out the rivals'
charges are true. The U.S. attorney in New York is investigating the
accusations, reported the Journal.
Nassau Launches Index Tracking Equipment Repossessions
Nassau Asset Management, a New York-based asset management company has
launched NasTrac Quarterly Index (NQI), which reports on equipment types
generating the greatest volume of liquidations, the company announced in
a press release on Friday. Ed Castagna, senior executive vice president,
says NQI gives equipment leasing and finance companies a snapshot of
current equipment values, helping them forecast future asset values and
adequately price lease and loan transactions to mitigate risk.
'Nassau's NQI also can be used to help gauge the economic health of
individual industry sectors,' Castagna adds. 'Viewed over time, NQI's
quarterly data on repossessions can be compared with data from the
previous year to help identify which industry sectors may be
experiencing financial downturns, upturns or cyclical changes,'
according to the press release.
Ex-Enron CFO Fastow Gets April 2004 Trial Date
Former Enron Corp. Chief Financial Officer Andrew Fastow will stand
trial next April on nearly 100 criminal charges, separately from two
co-defendants, a federal judge ruled in an order made public on Friday,
Reuters reported. U.S. District Judge Kenneth Hoyt's order scheduled
Fastow's trial on nearly 100 fraud, money laundering, conspiracy and
insider trading counts to begin on April 20. Co-defendants Dan Boyle and
Ben Glisan, who face far fewer charges, are to go to trial later in
2004. All three, who were named in May in a 109-count indictment, have
pleaded not guilty and are free on bond, reported the newswire.
DVI Wins Bankruptcy Court Approval to Tap Into $20 Million
Loan
DVI Inc., a bankrupt medical-equipment leasing and finance company, won
court permission to tap into a $20 million loan to finance operations
while restructuring under bankruptcy protection, Bloomberg News
reported. Ableco Finance LLC and other lenders will provide the loan,
the company said. U.S. Bankruptcy Judge Mary Walrath in Wilmington,
Del., authorized the company to use as much as $11 million of the loan.
She scheduled a hearing on Sept. 25 to consider approving the company's
use of the full amount.
Jamison, Penn.-based DVI filed for protection last month, citing
problems with merging business units and accounting questions. DVI said
it found misrepresentations had been made to some lenders, undermining
the company's efforts to borrow money or sell the business. The company
has said it plans to sell its assets. DVI listed $1.86 billion in assets
and $1.61 billion in debts in its chapter 11 petition.
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