TOP STORIES -- Feb. 9-14
Greenspan Cool Toward
Bush’s Tax-Cut Plans
Federal Reserve Chairman Alan Greenspan put a damper on President Bush’s drive for new tax cuts, saying he supported Bush’s proposals but only under conditions the White House seems certain to reject.
That less-than-enthusiastic endorsement of the administration’s latest proposal was taken as fresh evidence that the White House plan is in political trouble.
Greenspan insisted in congressional testimony that he favored Bush’s call for eliminating the personal tax on stock dividends but only if the measure were “revenue neutral” instead of resulting in a $385-billion loss.
The White House is pushing three tax-cut plans that its own estimates show would carry a 10-year price tag of $1.46 trillion.
The Fed chairman told the Senate Banking Committee: “Contrary to what some have said,” an increase in the deficit “does affect long-term interest rates. It does have a negative impact on the economy.”
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Edison Decries Reliant
Settlement as Inadequate
Saying customers are being shortchanged, Southern California Edison called for federal regulators to reconsider a $13.8-million settlement with Reliant Resources Inc. for withholding power and trying to manipulate electricity prices on two days in June 2000.
Edison said its analysis found that Reliant earned at least $15.5 million from its traders’ activities and that the harm caused to California utilities and customers was even greater because the withholding of power caused prices to increase for electricity bought in the future.
The Rosemead-based unit of Edison International claims that it paid about $20 million extra in long-term electricity costs because of Reliant’s actions.
An Edison spokesman said the company was poised to present new evidence showing that the market manipulation stretched beyond Reliant and beyond the two days covered in the settlement.
A Reliant spokesman said the company had no comment on Edison’s complaint.
For Scios CEO, J&J; Deal
Strikes Personal Chord
Scios Inc. accepted a $2.4-billion cash purchase offer from pharmaceutical giant Johnson & Johnson. J&J; will pay $45 a share for Scios, whose arthritis drug SCIO-469, now in its second round of human tests, could be a billion-dollar-a-year product if approved, analysts say.
Sunnyvale, Calif.-based Scios is one of the country’s oldest biotech firms but is unprofitable. It has on the market one treatment for congestive heart failure.
Scios Chief Executive Richard Brewer hopes to persuade J&J; to develop the arthritis drug into a cancer treatment. Brewer, 51, has myeloma, a cancer that might be helped by Scios’ arthritis pill; his cancer is in remission.
J&J;’s pharmaceutical group president, Joseph Scodari, cautioned that the cancer studies are interesting but preliminary and that and any myeloma opportunity remains a long way off.
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CSFB Says Data Related
to IPO Case Were Lost
Credit Suisse First Boston notified a federal judge that it mistakenly taped over about 75 electronic files that the investment banking firm was required to keep as part of a class-action suit over Wall Street’s handling of initial public stock offerings.
In a letter sent to Judge Shira A. Scheindlin in New York, CSFB’s law firm wrote that the brokerage had an “inadvertent loss of data” from recycling “operational backup tapes.” The letter, a copy of which was obtained by The Times, acknowledged that taping over the data violated the judge’s December 2002 document preservation order.
A CSFB employee in the computer department thought “every substantive document” on the tape was stored elsewhere, the firm said. CSFB “apologizes to the court,” the letter said.
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Proposed Merger Is Off
for CNN and ABC News
AOL Time Warner Inc. pulled the plug on a proposed merger of its CNN news network and Walt Disney Co.’s ABC News, formally ending months of talks about how to make such a complicated combination work.
A merger could have resulted in savings for both sides and a powerful combined news organization. But it also presented major hurdles, including figuring out how to divide control.
“After careful review,” AOL Time Warner said, “it was determined that although there are great merits and possibilities to a merger of ABC and CNN news, for us, the potential problems associated with the completion of such a transaction and the integration of these two distinct and great cultures was more than we want to pursue at this time.”
Disney spokeswoman Zenia Mucha said, “This would have been a venture that would have benefited both sides, but circumstances have prevented it from moving forward.”
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Forecasters Say State’s
Recovery Is Slowing
Local economic forecasters have significantly downgraded California’s growth prospects for this year, as war jitters, tech woes and budget blues are slowing the state’s recovery.
The Los Angeles County Economic Development Corp. in September predicted the state would generate 260,000 new jobs in 2003, but cut its estimate 64%, to 94,000, in an updated forecast.
The LAEDC cut its employment estimates for every region in the state, most significantly in the Bay Area, after California’s economy lost steam last quarter, said Jack Kyser, chief economist with the private nonprofit group.
Kyser said apprehension over conflict with Iraq along with a weak economy has created indecision among consumers and businesses. LAEDC analysts predict consumers would retreat further if bombs started falling on Baghdad. Still, the LAEDC expects Southern California to lead the state as it has done throughout this sluggish period.
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Listen.com Slashes Song
Price to Lure Subscribers
To boost subscriptions, Listen.com of San Francisco said it would temporarily slash the price of burning songs from its online service Rhapsody to an industry low of 49 cents a track.
Listen’s six-week experiment is a sign of things to come. Online music ventures have amassed the licenses and technology to offer a comprehensive service but are searching for a way to lure the masses. That’s why Listen is selling music below cost.
Chief Executive Sean Ryan believes that consumers are willing to pay for music online if offered the right mix of price, features and programming. But no one knows yet what the right price or package may be. To test pricing, Listen is teaming with Terra Lycos to make the discounted music available to new subscribers. Listen’s subscription fee is $9.95 a month.
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Pepsi Proffers $3 Million
After ‘Dissing’ Rapper
PepsiCo Inc. signed a $3-million agreement with hip-hop activists who denounced it for dumping a commercial by rapper Ludacris over concerns about obscene lyrics.
That’s twice in two weeks that PepsiCo weathered boycott threats from rap music mogul Russell Simmons and his Hip-Hop Summit Action Network, which demanded that Pepsi apologize, reinstate the ad and donate $5 million to the Ludacris Foundation, a nonprofit group run by the rapper’s mother.
Instead, PepsiCo did not apologize, pledge to rerun the ad or pay any funds to the foundation. Executives did agree to form a committee with the hip-hop network and the foundation to determine which urban charities would receive $1 million annually for the next three years.
Simmons had earlier called for a Pepsi boycott after the company aired a Super Bowl spot by rocker Ozzy Osbourne, whose music also contains obscenities.
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As War in Iraq Looms,
Crude Oil Prices Climb
Crude oil prices climbed to a 29-month high last week on war fears compounded by tight petroleum supplies. Analysts said there was no relief in sight.
Prices at the pump have jumped, and market watchers predict $2-a-gallon regular-grade gasoline within weeks in California, where motorists already are forking over at least that much for premium gasoline.
The AAA said regular gasoline in Los Angeles rose 2.5 cents Thursday to $1.789 a gallon. “We’re all holding our breath” to see where prices stop, said a spokesman for the Automobile Club of Southern California. A month ago, L.A. motorists were paying $1.608; a year ago, $1.276.
On Thursday, West Texas intermediate crude for March delivery hit $36.36 a barrel on the New York Mercantile Exchange, up 59 cents. The price was last this high Sept. 20, 2000.
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For This Big Gun, Both
Demand and Criticism
Smith & Wesson Corp., creator of the .44 Magnum of “Dirty Harry” fame, unveiled its new .50-caliber Magnum revolver as the world’s most powerful commercially produced revolver.
The Model 500, with double the power of most assault rifles in America and a barrel as long as 10 inches, will cost as much as $989. Already, gun buyers across the country can’t wait to get their hands on it.
Even before wide distribution, scheduled for next month, gun control groups condemned the Model 500, predicting it would soon find its way to the streets. But executives for the country’s second-largest firearms manufacturer said they hoped the gun would help regain lost market share by generating excitement among an important, albeit niche, market of big-game hunters, collectors and recreational target shooters.
