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Friday, October 30, 2009
FOXBusiness.com's Week in Review: Oct. 26-30, 2009
By Erik Berte and Julia Limitone
FOXBusiness
Monday
The Dow began its wild ride of a week with a loss of 104 points Monday, falling to 9868. This came on a bad day for banking stocks and a dollar that surged off its 14-month low.
Commercial Real Estate Trouble Dept.: Large commercial real estate lender Capmark Financial Group filed for bankruptcy in Delaware. This comes as many analysts have been issuing warnings that commercial real estate could be the next bubble to burst, on the heels of the residential housing market. The company recently reported a $1.6 billion loss and said that a Chapter 11 filing was possible, so this wasn’t too big a surprise.
Nationwide Average
$2.70 a gallon
Tuesday
Billionaire activist investor Carl Icahn urged CIT Group (CIT) bondholders to reject the struggling lender’s plan for exchanging notes and, instead, asked them to go along with his restructuring plan Tuesday. Icahn, who has been heavily critical of CIT’s plans, said he’d offer debt holders an option of selling their debt to him for 60% of the par value if they go against CIT’s proposal.
Meanwhile, the former CEO of AIG (AIG), Hank Greenberg, could be attempting to take some of the top talent at the insurer, according to a report in the New York Times. He has reportedly been hiring them for a venture he just started called C.V. Starr & Company. AIG is one of the seven firms that received the most government assistance, making its pay practices subject to the Obama Administration’s Pay Czar Kenneth Feinberg’s approval. Many analysts say government restrictions on executive pay could lead to brain drain, or the loss of the most talented individuals, at these firms.
Wednesday
Former NBC CEO Bob Wright told FOX Business that a sale of NBC Universal to Comcast (CMCSA) would take a while to be done, but is a likely event. NBC Universal was once valued at about $30 billion, but Wright said the offer of $6 billion in cash as well as a package of certain assets, would likely be enough for Comcast to make the purchase. He said General Electric (GE), which is the majority owner of NBC Universal, would likely make about $20 billion total on a deal.
Pay Czar Dept.: The Obama Administration’s Pay Czar Ken Feinberg was in front of the House Committee on Oversight and Government Reform Wednesday. He said he is against extending the pay restrictions put over the seven firms receiving the most government help to other firms. The government “should not enter the business of micro-managing compensation practices beyond these seven companies by expanding my jurisdiction or broadening my discretionary authority,” he told Congress. Feinberg recently issued restrictions on the compensation of each firm’s highest-paid executives.
Thursday
Edmunds.com put out a study Thursday that showed the government’s “Cash for Clunkers” program, designed to boost the auto industry and encourage people to buy more fuel-efficient cars, ended up costing taxpayers a whopping $24,000 per car sold. Edmunds said only 125,000 cars were bought because of the program and that the remaining 690,000 vehicles that were sold during the program’s length, would have been bought no matter what.
The “Clunkers” program cost almost $3 billion in total for the 125,000 additional cars sold, resulting in the figure of $24,000 per car.
Meanwhile, the gross domestic product numbers for the third quarter came in, showing that the economy expanded for the first time in more than a year, fueling speculation that the recession has passed.
This news helped push the Dow up 200 points, ending at 9963 Thursday afternoon.
Friday
CIT said it will accept help from Carl Icahn. The lender will take a $1 billion line of credit from Icahn, who has been highly critical of the company. This came a day after the lender’s restructuring offer expired.
And just a day after gaining 200 points, the Dow fell again, losing 250 points. The average closed at 9713 Friday afternoon, as a selloff was fueled by a stronger dollar and tumbling bank stocks. This was the second-largest drop since the markets began a six-month recovery.
