Rate cut day: The market is way up in early trading, in part because of better-than-expected third-quarter numbers from Lehman and also because everyone expects the Fed to lower short-term interest rates in a few hours. The question is not so much whether there will be a cut, but how much (a quarter or a half point)? Also, will there be any clues of more cuts to come? An unscientific reader poll by the WSJ's online edition has 39 percent saying that the Fed shouldn't cut rates at all (many think a rate cut would reward foolish speculation and Wall Street greed). A decision is expected at 11:15 West Coast time.
Mixed picture on prices: Producer prices took an unexpected dip in August, providing further evidence that inflation isn't a big problem - and giving the Fed another excuse to lower rates. "There is little residual inflation pressure in the U.S. economy,'' Joseph LaVorgna, chief U.S. economist at Deutsche Bank. told Bloomberg. But wait a second - if inflation isn't a concern, why have prices for everything made with wheat - pastries, pasta, bread - shot up around the world? Droughts and floods are part of the explanation, but so too is the move by farmers to plant less wheat and more corn. From the LAT:
Sara Lee raised the prices of its own bread and bagels by 5% last week, and the cost of what it bakes for the private labels of retailers by 6% to 7%. And it's not just Sara Lee and its customers who are feeling the pinch. Shoppers in Rome are threatening pasta boycotts to protest rising prices. In Lanzhou in western China workers are complaining about paying more at the industrial city's 3,000 noodle shops. And in the United States, parents are shelling out more for all the Wonder Bread and Hostess Twinkies that are stuffed into school lunchboxes. The run-up is cutting into the profits of bakers such as Charles Feder. He buys about a ton of flour each week for his Rossmoor Pastries in Signal Hill, which counts Universal Studios, Walt Disney Co. and dozens of restaurants, hotels and country clubs among its clients.
SEC pressed on global warming: Two environmental groups and the financial officers of 10 states, including California, want companies to be required to disclose the risks that climate change may pose to the bottom line. For some reason, Allstate was singled out for not mentioning greenhouse gasses or global warming in its annual report (no doubt one of many companies). From the Washington Post:
Even firms willing to disclose financial impacts of climate rules face hurdles because the outcome of legislative efforts remains so uncertain. "It's very tricky to quantify," said Kyle Danish, an attorney with Van Ness Feldman who advises utilities and energy firms. "If I'm a company looking at greenhouse gas regulation . . . the impact on my company is wildly different depending on design factors." He added: "For some of our electric power clients, depending on how allowances are distributed, they lose or gain hundreds of millions of dollars. Some are winners under some schemes and vast losers under other schemes."
Speaking of global warming: A federal judge dismissed California's global warming lawsuit against six automakers, saying the issues raised should be addressed by lawmakers and not the court. Filed by then-California Attorney General Bill Lockyer, the suit sought to hold Chrysler, Ford, General Motors, Honda, Nissan and Toyota liable for the environmental harm their cars and trucks produce. But that doesn't mean states can't pass laws regulating auto emissions. Automakers are suing California challenging a 2002 law that would limit vehicle greenhouse gas emissions. (The Recorder)
Chemerinsky fallout: Now that he's coming back as the new dean of UC Irvine's law school, attention has focused on the school's chancellor, Michael Drake, who had withdrawn the job offer. This week, the UCI Academic Senate holds an emergency meeting to consider Drake's actions. The matter will also come up at a meeting of the UC Board of Regents. An LAT editorial criticized Drake’s "flagrant and ongoing refusal to take responsibility" for the mess. The big question, of course, is whether somebody made Drake do the deed. From the LAT:
The cabinet of UCI's Academic Senate met in closed session Monday to consider a response to the furor. The panel has sway over the university's curriculum and has played a critical role at pivotal moments in university controversies. In 1983, UCI was the prime candidate to house Richard Nixon's presidential library, but the sponsoring foundation dropped the university as a prospect after the Academic Senate voted to place restrictions on it. The panel's current vice chairwoman, Jutta Heckhausen, said: "I think that Chancellor Drake did an excellent job as chancellor for UCI until the Chemerinsky hire. . . . All the more perplexing it is to see him be so secretive and vague about the reasons for rescinding the offer."
WGA talks look bleak: Writers go back to the bargaining table on Wednesday, but there's little optimism about reaching a deal by the contract's Oct. 31 expiration. The betting is that the guild will hold off on a strike and keep its members working well into next year under terms of the expired deal. The idea is to join up with the Screen Actors, when that contract expires on June 30. Negotiations are certain to be contentious because both sides want lots of stuff. (Variety)
L.A. chamber backs governor: The biz group favors Schwarzenegger's health care package because it would spread the costs to different constituencies, including hospitals, government and individuals. In so doing, the chamber broke away from the California Chamber of Commerce's position that any mandated health contribution requirement would be an excessive burden on business. (LAT)
Two Rodeo is sold: The Bev Hills shopping arcade/center is going for a cool $275 million, which goes to show that even in a credit crunch, marquee properties will get takers. And with Tiffany, Lalique, Versace and other upscalers, this property is certainly cherce. The buyer is Sloane Capital, which is owned as horse racing tycoons John Magnier and J.P. McManus and property investor Aidan Brooks. (LAT)
Union Bank settles: It's agreed to pay $31 million in penalties for failing to maintain an effective anti-money laundering program. The bank settled the government case without admitting or denying the allegations, but Forbes is reporting that the bank had been implicated in a drug money laundering scheme involving Mexican exchange houses.
Union Bank of California’s drug money troubles largely stem from a Mexican exchange house called Ribadeo Casa de Cambio, which has been shut down by Mexican regulators. Its president, Francisco Anton Perez, had been found shot dead in the back of a car with his hands tied behind his back. Forbes first reported in August that Union Bank of California was working with the feds to resolve money laundering concerns involving Ribadeo Casa de Cambio. At the time, three Colombians, Ricardo Mauricio Bernal, his brother Juan Manuel Bernal and Camilo Ortiz Echeverri, were expected to plead guilty to federal charges that they laundered $3 million.
Disney bookings are up: Mouse House CFO Thomas Staggs doesn't see any signs of a drop-off in theme park attendance, though international visits to the parks have still not recovered from 9/11 (difficulties gaining travel visas to the United States are also causing problems). Staggs did say that Disney won't open any new parks in the United States anytime soon. (AP)
Lacter on radio: This morning's business chat with KPCC's Steve Julian includes an update on efforts at health care reform, the latest Census data on non-English speaking households, and downtown development activity. Here's a link that has all the biztalk sessions.