Transit agencies around the United States may have to come up with billions of dollars to repay investors as long-term financing deals disintegrate, a result of the global credit crisis that could eventually affect millions of commuters.
The problems stem from the collapse of insurance giant American International Group, which had guaranteed financing deals between transit agencies and banks. Officials say about 30 transit agencies across the country have entered into these types of deals, including those in Atlanta, Chicago, Los Angeles, San Francisco and Washington. The fallout could mean less money for new trains and buses at a time when ridership in many areas has been steadily climbing because of high fuel prices.
The American Public Transportation Association said some agencies could be forced to increase fares, cut bus routes and delay long-term capital projects.
As auto merger talks proceed, jobs are axed
As talks over the potential sale of Chrysler LLC continued, the struggling automaker said Friday that it will slash 25 percent of its salaried work force and make further cuts to deal with a continued downward spiral in U.S. auto sales.
Negotiations for Chrysler's sale or merger, which involve majority owner Cerberus Capital Management LP, General Motors Corp. and the combined Nissan Motor Co.-Renault SA, were to continue into the weekend. They are snagged on items such as tax liabilities, tight credit and the slowing economy, according to a person briefed on the talks.
Chrysler, which has about 18,500 white-collar workers, will get rid of about 5,000 salaried workers and contract employees - those who work for other companies under contract with the automaker.
Credit markets show new signs of stress
The credit markets showed renewed signs of stress Friday as investors, worried about plunging stocks and the possibility of companies defaulting on their debt, fled once again to the safety of government debt. The three-month Treasury bill's yield fell further below 1 percent, while the 30-year Treasury bond's yield dropped briefly to multidecade lows before rebounding.
Large investors - particularly hedge funds - are responding to the turmoil by deleveraging, or trying to pay off their debts. Deleveraging involves selling stocks and other assets, and in turn, causing them to plunge in value.
'Drastic' fixes needed, U.N. leader Ban says
U.N. Secretary-General Ban Ki-moon called for "drastic" measures to shore up banks and extend lines of credit to the world's poorest states, pledging to support European and American efforts to rethink the global financial architecture. He said the era of self-regulation among the biggest banks and other money-lending institutions had ended.
"The danger is a succession of cascading financial crises," Ban warned. "This demands drastic measures. The IMF and the world's central banks may need to set up substantial standby lines of credit."
Ban spoke at a closed meeting with top U.N. agency heads, economic advisers and the heads of the World Bank and International Monetary Fund focusing primarily on the global financial crisis.