Weather's Economic Impact So Far: Substantial But Temporary

Photo Courtesy - Chris McGrath/Getty Images(NEW YORK) -- The significant snow falls in January are expected to have a substantial, though temporary, impact on the U.S. economy.  Experts say that from an economic standpoint, production and consumer spending are the most affected, but once the weather clears, pent-up demand will mean that people will return to doing what they do and make up for economic losses caused by the storm.

Paul Kocin, a meteorologist with NOAA, has researched the impact of the weather on the economy and says that a storm like Thursday's affected at least 20 million people and the stormy winter weather throughout the country has had an impact on millions more just in the month of January.   He says in the past economic losses during similar storms have been several billions of dollars.

Kocin points out, however, that snow cleanup is a relatively smaller cost than production losses, with a tab running into the millions rather than billions.  Cleanup costs will be a huge strain on city and state budgets, but these are one-time costs as compared to the long term budget woes states and cities are facing.

Even energy prices are not necessarily affected.  Dave Feinberg of Planalytics,  a firm that follows the impact of weather on business says, “there’s a lot more going on in energy markets than just the impact of weather.” 

Scott Bernhardt, CEO of Planalytics, says that airlines too are better prepared to deal with such weather, “this will cost airlines money, but they have become much better at canceling early and are able to bring their costs down significantly.”

So while this winter may seem painful and sometimes even deadly, the U.S. economy seems basically prepared to weather the storm.

Copyright 2011 ABC News Radio


Financial Crisis Was Avoidable, FCIC Report Says

Photo Courtesy - Getty Images(WASHINGTON) --The financial crisis was avoidable, and government regulators and financial corporations missed key warning signs which could have staved off the crisis. That's the conclusion from the first official government report on the cause of the financial crisis released by the Financial Crisis Inquiry Commission.  

“This financial crisis could have been avoided. Let us be clear.  This calamity was the result of human action, inaction and misjudgment, not of mother nature or computer models gone haywire,” chairman Phil Angelides said.  “The captains of finance and the public stewards of our financial system ignored warnings and importantly failed to question and understand and to manage the evolving risks in a financial system that is so essential to the well being of our country. Theirs was a big miss, not a stumble.”

The FCIC report comes six months after Congress implemented regulatory legislation to respond to the crisis before the commission was able to conclude their investigation. 

“I don’t think we chose to take our work and shape it for Dodd-Frank at all,” commissioner John Thompson said.  “Our task was to identify the causes of the financial crisis, not necessarily to fit our investigation into a piece of legislation that might have evolved, so it was more circumstance that legislation evolved during the same period of time that we were doing our investigation.”  

Commission members hope the report will act as a “guidepost” for future legislation.

The report assigns blame for the financial meltdown across the financial spectrum from government regulators to Wall Street executives who allowed risky behavior to occur.

The FCIC concluded the crisis stemmed from widespread failures in financial regulation; dramatic breakdowns in corporate governance and risk management; a government ill-prepared to handle the financial crisis; corporation’s adoptions of risky trading and borrowing practices; and a breach of accountability and ethics.

According to the report, government regulators and corporations missed key warning signs ranging from an influx in risky subprime lending and securitization and growth in financial firms’ trading activities to a steady rise in housing prices and the adoption of predatory lending practices.  The report points to the Federal Reserve’s inability to stem the toxic flow of mortgages as a prime example of a missed warning sign, arguing the Fed ignored its ability and responsibility to strengthen mortgage-lending standards.   

The 633-page report details the lead-up to the financial crisis, the boom and bust of the mortgage industry, the demise of major financial institutions, such as Bear Sterns, Lehman Brothers and AIG, and the aftermath of the crisis, which has left the economy struggling to recover from a severe recession.

The commission is obligated by Congress to refer any potential violations they discovered over the course of the investigation to the appropriate authorities, and Angelides said they did uphold this obligation and referred potential violations to the authorities.  He declined to comment on how many or what kinds of violations were uncovered.

Copyright 2011 ABC News Radio


Watchdog Disputes White House Claim Regarding Bailouts

Photo Courtesy - ABC News(WASHINGTON) -- When the Wall Street reform bill passed Congress last summer, President Obama said the new regulations would mean that taxpayers would never again be asked to bail out financial institutions.

“Because of this reform, the American people will never again be asked to foot the bill for Wall Street’s mistakes. There will be no more taxpayer-funded bailouts -- period,” the president said July 15.

Not so fast, warns bailout watchdog Neil Barofsky.

Barofsky, the Special Inspector General for TARP (SIGTARP), said in a new report to Congress  that he interviewed Treasury Secretary Tim Geithner last month and Geithner acknowledged that “in the future we may have to do exceptional things again” if the government faces a financial crisis as severe as the 2008 one.

“To the extent that those 'exceptional things' include taxpayer-supported bailouts,” Barofsky said, “his acknowledgement serves as an important reminder that TARP’s price tag goes far beyond dollars and cents, and that the ultimate cost of TARP will remain unknown until the next financial crisis occurs.”

At a hearing Thursday before the House Oversight Committee, Barofsky cautioned future bailouts can occur if the government does not act to reduce the size of “too big to fail” banks.

“One of the legacy results of TARP is that the market still believes that the United States government is backstopping the largest too big to fail institutions and that causes a whole range of problems,” Barofsky said.  “This is a market distortion, and as a result, the executives of those banks get back into the position where it’s heads I win, tails the taxpayer bails me out.”

“They need to have the regulatory will and the political will to rein in the size of these banks,” he said. “If they don’t have the credibility that they will not be bailing out institutions going into the future, it almost won’t matter otherwise because again those incentives will still be warped, that discipline will still be gone, and those risks where the idea the taxpayer will bail out the executives, the shareholders, the counter parties will continue a perversion of the system.”

However Tim Massad, the acting assistant secretary for financial stability at the Treasury Department, argued that the Wall Street reform law, known as Dodd-Frank, had given the government the tools to make sure that future bailouts do not occur.

“I think Dodd-Frank gives us the tools to regulate any financial institution, regardless of its size, that poses systemic risks, and it gives us the tools to shut down such financial institutions,” Massad told the House panel. 

Copyright 2011 ABC News Radio


Taco Bell Defends Beef, Calls Suit 'Bogus'

Photo Courtesy - Joe Raedle/Getty Images(IRVINE, Calif.) -- Taco Bell President Greg Creed has responded to a California woman's "beef" about his company's taco meat filling, calling her class-action lawsuit "bogus and filled with completely inaccurate facts."

"There is no basis in fact or reality for this suit, and we will vigorously defend the quality of our products from frivolous and misleading claims such as this," Creed said in a statement on the company's website.

The lawsuit, filed Jan. 19 by the California law firm Beasley, Allen, Crow, Methvin, Portis & Miles on behalf of Amanda Obney, claims Taco Bell's beef filling is 65 percent binders, extenders, preservatives, additives and other agents, and wants Taco Bell to stop calling it "beef."

"Our seasoned beef recipe contains 88 percent quality USDA-inspected beef and 12 percent seasonings, spices, water and other ingredients that provide taste, texture and moisture," Creed said. "The lawyers got their facts wrong. We take this attack on our quality very seriously and plan to take legal action against them for making false statements about our products."

Creed said Taco Bell uses a proprietary recipe to give its seasoned beef flavor and texture -- "just like you would with any recipe you cook at home." The final product, he said, contains three-to-five percent water for moisture, three-to-five percent spices, and three-to-five percent oats, starch, sugar, yeast, citric acid, and other ingredients you'd find at home or in the supermarket.

"Our seasoned beef contains no 'extenders' to add volume, as some might use," Creed said.

The full list of ingredients is posted on the Taco Bell website.

Copyright 2011 ABC News Radio


Claims for Unemployment Benefits Rise by 51,000

Photo Courtesy - Spencer Platt/Getty Images(WASHINGTON) -- After dropping by over 35,000 the previous week, claims for unemployment benefits went up for the week ending Jan. 22, the Labor Department reported Thursday.

The number of people filing for jobless benefits spiked to 454,000, marking an increase of 51,000 claims from the previous week's total of 403,000.

The four-week average also rose to 428,750, an increase of 15,750 from the previous average of 413,000.

Copyright 2011 ABC News Radio


Foreclosure Activity Up in Most US Metro Areas

Photo Courtesy - ABC News(IRVINE, Calif.) -- Foreclosure activity went up last year in 149 of the country's 206 metropolitan areas with 200,000 or more residents, according to the latest report released Thursday by RealtyTrac.

The foreclosure-tracking firm found that cities in California, Florida, Nevada and Arizona -- with the exception of Boise City-Nampa, Idaho -- accounted for 19 of the top 20 metro foreclosure rates in 2010.  Las Vegas-Paradise, Nevada topped the list as the area with the highest rate, with 1 in 9 housing units receiving a foreclosure filing last year -- close to five times the national average.

Cape Coral-Fort Myers, Florida followed in second with one in 12 housing units receiving a filing, and Modesto, California rounded out the top three with 1 in 14 housing getting a notice.

While foreclosure activity decreased from 2009 in the top 10 metro areas with the highest foreclosure rates in 2010, filings increased in some of the nation's largest metro areas not on the top 20 list.

Houston-Sugar Land-Baytown, Texas saw an increase of 26 percent from 2009, marking the biggest spike among the nation's 20 largest metro areas.  Seattle-Tacoma-Bellvue, Washington followed with a nearly 23 percent increase and Atlanta-Sandy Springs-Marietta, Georgia came in third with close to a 21 percent increase.

Among the nation's 20 largest metro areas, Washington, D.C. posted the biggest drop in filings with a decrease of 22 percent.

Copyright 2011 ABC News Radio


Verizon to Offer iPhone Unlimited Data Plan for Limited Time

Photo Courtesy - Verizon Wireless(NEW YORK) -- Verizon announced it will offer its $30 a month unlimited data plan for the iPhone, for a limited time only.

The cell phone carrier says it will eventually move to a usage-based billing model.

AT&T, the former exclusive carrier of the iPhone, discontinued its unlimited data plan last summer.

On Jan. 11, Verizon announced it will begin selling Apple's iPhone 4 on Feb. 10, breaking the exclusive hold AT&T has had on the device since its June 2007 launch.

Copyright 2011 ABC News Radio


Notaries Plead the Fifth Amid Accusations of Fraud in Foreclosures

Photo Courtesy -- ABC News(ANNAPOLIS, Md.) – Problems with notaries are just the most recent in a string of legal issues with foreclosure documents.

The recent accusations against notaries have caused 18 present and past notaries to plead the fifth in foreclosure cases, reports The Daily Record.

The most common problem being uncovered with the notarized documents are the certifications that say the notary witnessed a signature, even when they didn’t.

The fraudulent notaries have been an issue for home buyers as foreclosures have been dismissed due to the false documents. Such notaries, however, have yet to face prosecution.

Copyright 2011 ABC News Radio


Goldman CEO Warns of Over-Regulation on Banks

Photo Courtesy - Mario Tama/Getty Images(DAVOS, Switzerland) – The CEO of Goldman Sachs, a company that received $12.9 billion in federal bailout money, said Wednesday that further regulation on banks by the government will only move risky financial activities elsewhere.

According to a report in the Financial Times, Gary Cohn, Goldman’s top executive, made those remarks at the World Economic Forum, which is a meeting of top economic, business, and political leaders from around the world.

Cohn said that if regulation continued to constrict activities of the major banks, that hedge funds and unregulated businesses would be more apt to undertaking risky business maneuvers. He argued that new rules should not just be given to banks, but that they should be applied across all markets.

Cohn drew strong criticism for his remarks from some observers who claimed that his comments were very self-absorbed, and that he only said that because banks stand to lose business that can easily move elsewhere.

But those who sided with Cohn said that he made a strong point, because if unregulated activities shift to other markets, the risk for another collapse similar to the recent one on Wall Street could happen again.

The report also says that many large hedge funds have lobbied Congress to be left off of a list of areas to be regulated, claiming that they are not strong enough to harm the U.S. financial ecosystem.

Copyright 2011 ABC News Radio


Kodak Profit Drops 95% In Final Quarter of 2010

Image Courtesy -- Brandon Goodman/Getty Images for the PGA TOUR(ROCHESTER, N.Y) – Upstate New York-based Eastman-Kodak said Wednesday that its fourth-quarter revenue numbers were down 25 percent from where expectations were for many different reasons. The company’s revenue totaled $1.93 billion in the period from October to December, falling short of the $2.11 billion analysts had predicted.

While slacking sales of film and older model camera equipment have sliced into Kodak’s profits, the company also says lower prices from new companies on digital products, falling licensing fees, and an increase in commodity prices hurt their bottom line.

Kodak faces strong competition from both Sony and Canon in the digital camera market.

Copyright 2011 ABC News Radio

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