Advertisement

TOP STORIES -- Oct. 26-31

Share via
From Times Staff

U.S. Economy Grows at 7.2% Rate in 3rd Quarter

In the most powerful quarterly expansion in nearly two decades, the U.S. economy grew at a 7.2.% annual rate from July through September, driven by consumer spending and a burst of corporate investment.

Growth of the gross domestic product, which measures the nation’s output of goods and services, was stronger than the 6% predicted by many economists.

President Bush and senior administration officials said that a recovery was well underway and claimed that the data vindicated the White House strategy of deep tax cuts. Democrats noted recent growth had yet to boost hiring and contended that in any event, it was not the product of administration action.

Advertisement

Business investment rose at an 11.1% pace in the third quarter, up from 7.3% in the second quarter. Purchases of equipment and software rose at a 15.4% rate. The new investment was accompanied by a further cutback in corporate inventories. For all the good news, the report gave few hints about when growth would begin translating into new jobs -- something many economists believe must happen for the recovery to endure.

*

Union Withdraws Pickets From Ralphs

The California supermarket strike took a surprising turn when the grocery workers union withdrew pickets from Ralphs stores in the region, giving supportive shoppers a break and focusing pressure on Albertsons Inc. and Safeway Inc.-owned Vons and Pavilions markets.

United Food and Commercial Workers union officials said they were acknowledging the frustration of shoppers who, in many locations, have no alternatives to the big three chains.

Advertisement

Terry O’Neil, a spokesman for Kroger Co.-owned Ralphs, said the chain had no intention of ending the lockout.

UFCW officials increasingly blame Safeway Chief Executive Steve Burd for the dispute. On Friday, the union ran full-page ads in major newspapers, including the Wall Street Journal, calling for his ouster.

The director of the Federal Mediation and Conciliation Service, an arm of the Labor Department, was trying to call parties back to the table.

Advertisement

Separately, the national labor movement threw its financial and strategic support behind the striking and locked-out Southern California supermarket workers. AFL-CIO President John Sweeney announced the creation of a multi-union fund to back the UFCW.

*

Prosecutors Request Documents From Tenet

In a signal that the government is investigating heart surgeries at additional hospitals run by Tenet Healthcare Corp., federal prosecutors in Los Angeles have requested documents related to coronary surgeries.

Tenet disclosed that it had received the request from the U.S. attorney’s office in Los Angeles.

The Santa Barbara-based hospital chain said it would voluntarily hand over documents involving the cardiac practices at Daniel Freeman Memorial Hospital, USC University Hospital and Centinela Hospital Medical Center in Inglewood.

There was a probe last year into allegations that at least two doctors performed unnecessary heart procedures at a Tenet-run hospital in the Northern California city of Redding. In August, Tenet agreed to pay $54 million to settle those allegations without admitting any wrong doing.

“It is patently inappropriate for anyone to speculate that this information request for documents is in any way similar to Redding Medical Center,” said spokesman Steve Campanini.

Advertisement

*

Fed Keeps Key Interest Rate at 45-Year Low

The Federal Reserve decided to keep a key short-term interest rate at a 45-year low of 1% in a bid to provide what it called “important ongoing support” to a strengthening economy.

The unanimous decision by the Federal Open Market Committee to leave rates unchanged was widely expected. Fed policymakers said that the current, low level of short-term rates “can be maintained for a considerable period.” The tool the Fed used was the federal funds rate, which banks charge one another for overnight loans.

The Fed said it had seen evidence that suggested the economy was getting stronger but also suggested healthy economic growth was not a sure bet, and pointed to the unlikely possibility that inflation -- running at about 1% -- could slip markedly.

The Conference Board reported a jump in its consumer confidence index to 81.1 in October from 77 in September.

Also, the Commerce Department reported that orders for durable goods rose 0.8% in September after a dip in August.

*

BofA to Buy FleetBoston for $43 Billion of Stock

Bank of America Corp. said it planned to buy FleetBoston Financial Corp. for more than $43 billion in a stock deal that would establish BofA as a major player in the Northeast and catapult it ahead of J.P. Morgan Chase & Co. to become the second-largest U.S. bank.

Advertisement

BofA Chairman Kenneth D. Lewis predicted the proposed stock swap would set off a wave of bank takeovers by rivals struggling to stay abreast.

BofA said the proposed purchase would depress its per-share earnings until the second half of 2005.

Under terms of the deal, which must be approved by regulators and shareholders, FleetBoston stockholders would receive 0.5553 share of BofA for each FleetBoston share.

If the purchase closes as expected at midyear 2004, Charlotte, N.C.-based BofA would have 5,700 branches in 29 states and 16,500 automated teller machines, with plans to add more than 200 branches a year.

*

Strong Financial May Face Fraud Charges

Lawyers from New York Atty. Gen. Eliot Spitzer’s office have notified mutual fund giant Strong Financial Corp. and its founder, Richard Strong, that they each may face criminal fraud charges related to improper fund trading, a person close to the matter said.

The possible criminal action came as Strong said he would consider stepping down amid revelations that he engaged in so-called market timing of Strong mutual funds.

Advertisement

The company said Strong would reimburse the funds for any losses caused by his activities, and that the firm was undertaking several reforms to tighten its compliance policies. The company also said Strong didn’t believe that his trading was “disruptive to the funds.”

A criminal indictment of the firm would mark the first such action against a company in the mushrooming fund scandal. Spitzer said he had not decided what steps he would take.

Also last week, state and federal regulators filed securities-fraud charges against Putnam Investments and two of its portfolio managers over alleged late trading by the managers.

Putnam disclosed that it had received a subpoena for documents from the U.S. attorney’s office in Manhattan.

*

Utilities Expect Heavy Costs From Wildfires

The unrelenting wildfires are taking a still-unknown financial toll on the energy and telecommunication utilities that serve the ravaged areas, principally Southern California Edison Co., San Diego Gas & Electric Co., Verizon Communications Inc. and SBC Communications Inc.

The companies aren’t ready to put a price tag on their losses, which will fall on ratepayers. But the major utilities expect the total will be hefty. They figure that as of last week, thousands of electricity and telephone poles had burned and hundreds of miles of wire had melted. Thousands of employees have been working around the clock to restore service to customers.

Advertisement

Besides paying for repairs and overtime, Verizon and SBC are giving displaced customers free call forwarding and voice messaging, and Edison is not charging ratepayers whose homes were badly damaged or destroyed for power use since their last bill.

Edison said 261,000 customers lost power at some point during the fires. SDG&E; said 100,000 customers lost power.

*

WellPoint Agrees to Be Acquired by Anthem

In a deal that would create the nation’s largest for-profit health insurer, Indianapolis-based Anthem Inc. agreed to buy WellPoint Health Networks Inc. of Thousand Oaks for $14.3 billion in cash and stock.

The two companies are the leading providers of Blue Cross and Blue Shield managed-care plans. WellPoint, which owns Blue Cross of California, is the largest health insurer in the state, with 6.7 million members.

The deal would help generate efficiencies that could keep a lid on premiums. But Anthem and WellPoint operate in different states, and rates that insurers negotiate with doctors and hospitals depend largely on insurers’ market shares in each state.

Anthem would pay $23.80 in cash and one share of its stock for each WellPoint share.

The combined company would have annual revenue of $36 billion, be based in Indianapolis and keep the WellPoint name. The deal, expected to close in 2004, must be approved by stockholders, antitrust officials and insurance regulators.

Advertisement

*

Report Says China Isn’t Manipulating Currency

The Bush administration said China was not manipulating its currency to gain an unfair trade advantage, a finding that angered Republican and Democratic lawmakers whose states have been hit by job losses they blame on cheap foreign goods.

Although faulting China’s currency policies, a Treasury Department report found no violations of trade laws. China’s decade-old policy of pegging its currency, the yuan, closely to the dollar has come under fire because of sharply accelerating job losses in U.S. manufacturing.

The report also said Beijing’s intervention in the currency market was “not appropriate for a major economy like China and should be changed.”

Democratic Sen. Paul Sarbanes of Maryland questioned whether the administration was serious about ensuring that China plays by the rules “if it fails to make the elementary determination, for which I believe there’s compelling evidence,” that it has manipulated its currency.

*

Disney Delays Opening for Movie ‘The Alamo’

Walt Disney Co. has taken the unusual step of postponing the opening of “The Alamo,” saying the much-anticipated film needed more work. Trailers had begun promoting a Dec. 25 release, but Disney said the movie wouldn’t hit theaters until April.

It is not uncommon for studios to change opening dates, but it is rare for them to do so this close to the planned release of a high-profile movie. Disney executives and filmmakers said “The Alamo” wasn’t ready.

Advertisement

Delaying the opening will add to the cost of a movie whose budget has drawn close scrutiny within Disney. The Burbank-based entertainment company will have spent at least $80 million to make the epic and probably that much more to market the film here and abroad.

For a preview of this week’s business news, please see Monday’s Business section.

Advertisement