The Washington Post on A1 says the Federal Reserve and other bank regulators will unleash “one of the most aggressive efforts in decades” against abusive credit-card industry practices. This expected wave of oversight must be real after all.
The proposed regulations, which could be finalized by year’s end, would label as “unfair or deceptive” practices that consumers have long complained about. That includes charging interest on debt that has been repaid and assessing late fees when consumers are not given a reasonable amount of time to make a payment. When different interest rates apply to different balances on one card, companies would be prohibited from applying a payment first to the balance with the lowest rate.
The Post says past efforts have focused on disclosure and notes that Congress has been itching to pass its own laws against unfair practices. The banking industry denounced the rules, but it’s a wounded dog right now.
Dow-n and out
The Chicago Tribune scoops that the Bush administration forced out the chief of the Environmental Protection Agency’s Midwest office after she went on a jihad against Dow Chemical for dumping the pollutant dioxin over most of the last hundred years. The Trib says the move was triggered by an investigation it was preparing on the matter.
The paper reports that the administrator had tried to speed up efforts to force the company to clean up its mess, which Dow Chemical has repeatedly stalled fixing.
Here’s our Quote of the Day, from the defenestrated EPA administrator:
“There’s no question this is about Dow. I stand behind what I did and what my staff did. I’m proud of what we did.”
SUV era over?
Americans are buying small cars at a record pace as spiking gas prices and the weak economy finally push them out of their Chevy Suburbans and Ford Expeditions and into Ford Focuses and Toyota Yarises
The New York Times leads its front page with a report that fuel-efficient compacts and subcompacts accounted for about 20 percent of all sales last month for the first time. That’s up from just one in eight car sales ten years ago. Four-cylinders outsold six-cylinders for the first time last month, as well. The Los Angeles Times calls the small-car gains “colossal.”
The NYT calls it a “blow to Detroit automakers,” since they have fewer small models than the Asian automakers and have been more dependent on sales of light trucks like SUVs. SUV sales are off a quarter from last year.
The Times says this appears to be a landmark shift, the real deal after false starts in the past caused by temporarily spiking energy costs. This one is also helped along by the suffering economy.
Previous spikes in sales of smaller cars were often a result of consumers trading down during tough economic conditions or gas-price increases. When the economy improved or fuel prices dropped again—as they did after the oil-price shocks in the 1970s ease— buyers invariably went back to bigger vehicles.
But with oil prices expected to remain high for years, auto industry executives are seeing a turning point. “The era of the truck-based large S.U.V.’s is over,” said Michael Jackson, chief executive of AutoNation, the nation’s largest auto retailer.
The automakers are betting gas prices aren’t ever going back to a buck a gallon. They’re shifting “just about everything” into small cars, a J.D. Power analyst says. The Wall Street Journal reports on its Marketplace front that car-makers are going to start selling electric cars that recharge via wall socket, but utility companies are raising concerns that a wave of plug-ins will overwhelm their systems during the day. Regardless, the oil-price spike is boosting the prospects of rechargeable cars.
The Journal is makin’ sense here:
The fastest way to reduce demand is to keep prices high, forcing motorists to drive less. Higher gas prices would spur development of new technologies, such as hybrid cars, that don’t make economic sense if gas is cheap. It will take years before widespread availability of hybrids would make a big dent in gas demand.
But here come the politicians. The WSJ reports on A4 that Democrats in Congress are about to propose a series of measures to ease gas prices, including a pause in the program that stockpiles emergency oil reserves, stricter requirements for speculative trading, and a windfall-profits tax of up to 25 percent on oil companies.
Exxon keeps making record profits
Speaking of windfall profits, Exxon Mobil missed analyst estimates by $600 million and still raked in a record $10.9 billion in first-quarter earnings, up 17 percent but less than Wall Street expected.
The Financial Times on page one says the company is “struggling to increase oil production and to squeeze profit out of its refining business.” Oil production fell 10 percent in the first quarter from a year ago. The Journal on B1 is content to tell us that’s because of a “variety of factors” that it doesn’t spell out. The Times does, though, saying on C1 that production plummeted because Venezuela’s snatched of Exxon’s resources there, the aging of U.S. oil fields, and “lower quantities in West Africa.” Bloomberg says the cost of refining gas rose more than the price of gas, squeezing Exxon’s refining profits by $5 million a day.
The NYT and WSJ note that the results are likely to increase the political pressure on the oil business. Its revenue soared 34 percent to $117 billion in the quarter.
See no evil, hear no evil
The NYT notes on page one that Wall Street is whistling past the economic graveyard these days, with stocks up 11 percent in the last several weeks, along with a bucket-full of things that were virtually untouchable not long ago, like bank loans, junk bonds, and credit-default swaps.
It is a remarkable reversal in attitudes from just a few months ago, when the broader economy seemed relatively healthy but Wall Street was traumatized by billions of dollars in mortgage-related losses. Now, bankers and investors appear ready to look past the crisis to more profitable times, while consumers find themselves in a more precarious position as the job market weakens and banks make it harder to borrow money.
The Times notes that we’ve seen this before: the Dow hit 14,000 last fall even as the credit bubble had clearly popped with messy consequences. It quotes analysts saying there is still much pain ahead, specifically from the cratering housing market and tighter lending.
Stocks jumped yesterday by 190 points on the Dow, closing above 13,000, and Nasdaq was up 2.8 percent, and the Journal on C1 notes that investors moved out of commodities like oil and gold and into stocks.
Comrade longshoremen
Longshoremen struck at twenty-nine ports along the West Coast yesterday in what they said was a May Day protest of the Iraq War on the fifth anniversary of Bush’s “Mission Accomplished” debacle.
That would be admirably civic-minded of them, but the LAT reports that their bosses say the one-day walkout was more geared toward boosting the union’s leverage on its contract, which expires in two months.
The LAT has a weird fourth paragraph in which it says (a little too high in the story) that the action “added significant support for May Day, which has become the preeminent working-class and protest event of the year.” Get me some tickets!
The Journal misses the story, but the NYT sets the scene, describing rallies that “seemed like street fairs” with Ralph Nader banners, book stands, and even horse-petting cops.
Remember Katrina? New Orleans does
We like to see the Journal checking in with New Orleans, a story much of the press in the last year or so has dropped like inhibitions on Bourbon Street. The paper says on A4 that tourism has had a “triumphant revival” but that’s “absent any other thriving business.”
The city has fewer than half its pre-apocalypse population and we’re coming up on Katrina’s three-year anniversary.
Overall restoration remains uneven and torturously slow. The population is about 239,000, according to the Census Bureau, or closer to 299,000, according to the city, compared with the pre-Katrina count of 485,000. Thousands still await federal grants to rebuild their homes; tens of thousands more can’t afford to salvage theirs. Huge swaths of neighborhoods remain vacant, their blown-out windows boarded up since the storm passed. Most communities still lack necessities such as supermarkets and pharmacies, habitable schools and functioning fire stations.
The small and medium-size merchants who once formed the spine of city commerce can’t find enough customers. More than ever, they are relying on tourism, and this year they flocked to the jazz festival; far more applied for vending booths than could be accommodated.
Gates gets tough with Yahoo
The WSJ on B1 says Microsoft is likely to turn its $44 billion bid for Yahoo into a hostile one. The paper says that would be a drawn-out process and risks the possibility that Yahoo employees would leave in droves.
Grab-bag of bad economic news
In economic news, manufacturing continued to contract in April, with a slowdown in orders and production.
Consumer spending registered an anemic 0.1 percent gain after inflation in March, the fourth straight month of weak results.
Inflation-adjusted income went nowhere in March and unemployment claims jumped 35,000 to 380,000 last week. Continuing unemployment claims hit the highest level in four years. But the Journal notes that past recessions have seen much sharper job woes, but notes job growth was already weaker in the lead-up than it has been in past economic cycles.
Sun Microsystems will lay off up to 2,500 workers after it reported a poor first quarter of sales and blamed it on the economy.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.