The markets: Banks organize a bailout fund
With a nudge from the U.S. Treasury, Citigroup, JPMorgan, and Bank of America will set up a $75 billion fund to purchase mortgage securities and other distressed debt, said Carrick Mollenkamp in The Wall Street Journal. “The fund is designed to stave off what Citigroup and others see as a threat to financial markets worldwide”—the prospect of banks unloading billions of dollars of securities at fire-sale prices. That would force institutions around the world to take huge losses. Instead, the fund would lend the institutions the money they needed to hold on to the securities until prices recovered. The creation of the fund suggests that efforts by the Federal Reserve to relieve the credit crunch have only partially succeeded, said Eric Dash in The New York Times. Central bank action has failed to revive the market for the short-term IOUs, called commercial paper, which banks use to fund their purchases of mortgage securities. “Investors have all but stopped buying” those IOUs, raising concerns that banks will be forced to sell their securities all at once to pay off their outstanding commercial paper. The new fund is designed to prevent that from happening, since the resulting credit squeeze could “thrust the economy into recession.”
Gaming: Electronic Arts branches out
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Video game maker Electronic Arts said last week it would substantially expand its product line by purchasing two software studios for $860 million, said the Associated Press. EA, which makes the wildly popular games Madden NFL and The Sims, has only a small presence in “the lucrative market for role-playing, action, and adventure games.” The purchase of BioWare and Pandemic Studios adds two of the biggest players in that market to EA’s portfolio.
Media: Fox Business Network debuts
The Fox Business Network made its debut this week, taking direct aim at business channel CNBC, said Howard Kurtz in The Washington Post. Rupert Murdoch’s new cable venture “is determined to be different,” striving to “put a Foxified sheen on even eye-glazing financial matters.” Fox News Chairman Roger Ailes has positioned the network as a hipper, breezier alternative to CNBC. Having recently snapped up The Wall Street Journal, Murdoch is quickly emerging as a major player in financial journalism. Fox executives say they want to “attract viewers who haven’t been drawn to business coverage.”
Medical devices: Medtronic finds a flaw
Medical device maker Medtronic this week suspended sales of a crucial component of its heart defibrillators, saying the equipment may have led to five patient deaths, said Val Brickates Kennedy in Marketwatch.com. The components in question are wires that transmit electrical impulses to Medtronic’s popular implantable defibrillators, which are used to correct irregular heartbeats. Medtronic said a fracture in the wires “may have been a possible or likely contributing factor” in the deaths of five patients. Medtronic said the risk of malfunction was not high enough to justify advising doctors to remove the wires in patients that already have them.
Banking: Heads roll at Citigroup
With its latest profits off 57 percent, Citigroup last week reshuffled its executive suite, consolidating its investment banking and alternative investment divisions under a single leader, said Landon Thomas Jr. and Eric Dash in The New York Times. Vikram Pandit, 50, will head the combined division. “The changes are the latest example of the continuing fluidity, if not confusion, in Citigroup’s executive suite.” Citigroup CEO Charles Prince III is under intense shareholder pressure to improve Citi’s performance, and “questions linger about his ability to run the giant bank.”
Spotlight
Carl Icahn
He’s back! said Dawn Kawamoto in CNETNews.com. More than 20 years after he first transformed the corporate landscape, billionaire financier Carl Icahn is waging not one but two big takeover battles. Icahn, who owns 13.2 percent of software developer BEA Systems, “is calling on BEA to put the proverbial ‘for sale’ sign in its window,” and he may threaten to pursue a proxy fight to get a seat on the board of directors. His call has already been answered by Oracle Corp., which made an unsolicited $6.7 billion bid. Icahn says he’s pleased by the development, but wants Oracle to go higher. Meanwhile, said Andrew Pollack in The New York Times, Icahn is pursuing his own, $23 billion offer for Biogen Idec, one of the oldest and largest U.S. biotech companies. But he has hinted that his all-cash offer is a ploy to flush out another bidder. He could be on to something. Many pharmaceutical companies see big profits in the protein-based drugs that are Biogen’s specialty. “Frankly,” Icahn said, “I think that if they put the company up for sale, they would get a better offer than I made.”
The Bottom Line
Tightening oil supplies and concerns that a threatened Turkish military assault on Kurdish rebels in Iraq might disrupt pipeline shipments helped push the price of oil to a record-setting $88 a barrel this week—just in time for the home heating season. Associated Press
The average concert ticket bought through Ticketmaster carries fees and charges that add 38 percent to the ticket’s face value. CNNmoney.com
Coca-Cola is teaming up with a Chinese medicinal research academy to develop drinks based on traditional Chinese herbs and formulas. The Chinese academy’s president, Hongxin Cao, said the partnership would combine Coke’s global reach with Chinese medicine’s “more holistic view on health.” Marketwatch.com
To promote its new, more healthful menu, McDonald’s has erected a 10-by-30-foot billboard in Chicago that’s planted with 16 different kinds of live, growing lettuce. The lettuces spell out the phrase “fresh salads.” USA Today
A new federal health study found that 7 percent of full-time workers in the U.S. battled depression in the past year. Personal-care workers and food-service employees had the highest depression rates, at 11 percent and 10.3 percent, respectively. The unemployed, though, fared worse. They had a depression rate of 12.7 percent. Associated Press
The news at a glance...International