FOLLOW THE WEEK ON FACEBOOK
FOLLOW THE WEEK ON FACEBOOK
GM Bets On Garbage, Citi Faces More Subprime Flotsam
January 14, 2008
NEWS AT A GLANCE
GM buys into ethanol
General Motors bought an undisclosed stake in ethanol startup Coskata, as it seeks reliable fuel for its fleet of flex-fuel cars and trucks. Coskata says it has developed an economical way to produce ethanol from agricultural waste and household trash. (BusinessWeek.com) GM, which announced the deal at the start of the annual Detroit auto show, is betting on ethanol as an oil alternative after running into problems with its plug-in electric concept car, the Chevy Volt. (Los Angeles Times, free registration) Other electric cars at the show are close to production, including the $80,000 Karma from year-old Fisker Automotive. (The Wall Street Journal)
Citi might write down $24 billion
Citigroup could write down $24 billion in mortgage- and credit-related losses, lay off 20,000 employees, and cut its dividend, according to a CNBC report. Citigroup is also seeking to sell a $15 billion stake to largely foreign investors. (MarketWatch) Citigroup will unveil its plans Tuesday, when it reports fourth-quarter earnings. (CNBC.com) This quarter’s earnings reports from Citi and other financial giants are expected to be especially murky and unreliable, as complex home-mortgage-based securities leave bankers and analysts unsure of the value of bank holdings. “There is going to be a lot of confusion and debate,” said Frederick Cannon at brokerage Keefe, Bruyette & Woods. (BusinessWeek.com)
Fed raises rate-cut expectations
Federal Reserve Chairman Ben Bernanke and other Fed officials have signaled a more aggressive stance against recession risks, touting the need for “insurance” against a downturn. (Bloomberg) The statements, which boosted expectations of a 50-point rate cut at the Fed’s Jan. 28-29 meeting, are part of a move toward greater openness after months of criticism about mixed messages. The Fed has “more or less gotten to the right place,” said economist Stephen Stanley at RBS Greenwich Capital, but “it’s hard to parse out a center of gravity.” (The Wall Street Journal) The rate-cut expectations sent the U.S. dollar to a new low against the Swiss franc and a seven-week low against the euro early today. (Reuters)
AP amps up celebrity offerings
As it works to expand its entertainment offerings, the Associated Press is interested in “virtually everything involving Britney,” according to a leaked memo from Los Angeles bureau chief Frank Baker. The AP says its expansion of celebrity coverage is driven by demand from the more than 1,500 daily papers that subscribe to the venerable wire service. Although some media analysts say the move marks a sad day for journalism, AP sports and entertainment managing editor Lou Ferrera defended Baker. “If you’re an editor in L.A. and Britney Spears is in your backyard,” he said, “you want to know everything about that story.” (The New York Times, free registration)
Try 4 Risk-Free Issues of The Week magazine.
of The Week magazine.