Evidence grows of tougher times ahead
Wake up and good morning. Well, the stock market may be drooping but bankruptcy filings are alive and growing. According to the U.S. Bankruptcy Court in the Middle District of Florida, bankruptcy filings in August rose to 1,778 from 1,267 in August of 2007 and 744 in August of '06. And since the start of the year through August, bankruptcy filings hit 13,556, up from 8,222 in the same period of 2007, and 4,643 in 2006. Serious increases.
Which is our way of raising the question. How goes the struggling economy? Here are some snapshots starting with Bank of America. It just halved its quarterly 64-cent dividend, plans to raise $10-billion in new capital and announced a 68 percent drop in profits. "We know many investors in our stock are quite disappointed with a dividend reduction," said BofA CEO Kenneth D. Lewis. "These are the most difficult times for financial institutions that I have experienced in my 39 years in banking." Funny, we thought it was a move to save money to help purchase Merrill Lynch, not to mention the announcement that Countrywide, the nation's largest and arguably more notorious mortgage lender during the housing boom (which BofA just bought), is settling a "predatory lending" lawsuit brought by state attorneys general (including Florida's) by giving $8.4-billion in loan relief to borrowers in Florida and beyond. As part of the agreement, Countrywide will launch a program to refinance subprime borrowers and consumers with pay-option ARMs into fixed-rate loans they are capable of repaying. Borrowers must have made their first loan payment before Dec. 31, 2007, and must meet other eligibility requirements.
On a related note, the New York Times is floating an interesting front page story about the Federal Reserve's upping the ante on getting credit moving again. A proposal being discussed with the Treasury Department would empower the Fed to buy vast amounts of unsecured short-term debt that companies rely on to finance their day-to-day activities, the story says. If this were to happen, the central bank would come closer than ever to lending directly to businesses.
Here's a closer look at the downward trending of so many Tampa Bay area company stocks in light of Monday's big drop in the Dow. What happens when the shares of a lot of regional-based corporations enter the single-digit arena? Caution ahead.
More broadly, a growing number of economists believe the country is on the brink of — or already in — its first recession since 2001 and that it will be longer lasting. Here are the highlights from a survey by the National Association of Business Economists. The good news: the group still expects that "lower oil prices, a bottoming out in home prices, and a better functioning of financial markets should enable the economy to resume trend-like growth by the second half of 2009." Keep those fingers crossed.
And how is the growing turmoil in Europe (now they're bailing out their own banks, too) likely to affect Florida? Try tourism for starters. Yes, the dollar is still weak but Europeans will think twice about visiting here if their home turf is less stable. Global economic concerns may just become a bigger issue for all of us in the coming days.
-- Robert Trigaux, Times Business Columnist