BUSINESS BRIEFS
Big bond insurer shares plunge on credit fears
Associated Press
NEW YORK — The credit crisis spread to the nation's largest bond insurer yesterday, sending shares of MBIA Inc. plunging and calling into question the safety of tens of billions of dollars of company and local government debt held by investors.
The Fitch Ratings service warned that it might cut its rating on MBIA in the next six weeks if the company cannot find $1 billion in new capital. That followed a disclosure by MBIA that of the $30 billion in mortgage debt guarantees it issued, some $8 billion were for the the riskiest types.
One analyst said he was shocked by the magnitude of that exposure.
A call seeking comment from MBIA officials at the company's headquarters in Armonk, N.Y., was not returned immediately yesterday.
For the past decade, Wall Street firms have profited by bundling and selling pools of mortgages, auto loans, credit card bills and more to investors. The riskiness of these securities was thought to be offset by the promise from insurers like MBIA that they would step in to make principal and interest payments if issuers defaulted.
ECONOMY GREW 4.9% IN SUMMER
WASHINGTON — The economy sprinted ahead at its fastest pace in four years during the summer, although it is expected to limp through the final three months of this year as housing and credit woes weigh on individuals and businesses.
The Commerce Department reported yesterday that the gross domestic product grew at a 4.9 percent pace in the July-to-September period, unchanged from an estimate a month ago. The performance was impressive given that the housing market plunged deeper into despair. Builders slashed spending on housing projects in the third quarter at an annualized rate of 20.5 percent, the most in 16 years.
Economic growth in October through December is expected to have slowed to a pace of just 1.5 percent or less. Some analysts fear that economic activity may even contract slightly.
Gross domestic product measures the value of all goods and services produced in the United States.
SHAKE-UP BEGINS AT TRIBUNE CO.
CHICAGO — Real estate magnate Sam Zell took control of newly private Tribune Co. yesterday and began shaking up the newspaper and TV company the moment the $8.2 billion buyout he led closed, reshuffling the board, naming two top executives and promising more action ahead.
Taking on the CEO and chairman roles, Zell made clear he won't hesitate to make sweeping changes at the media conglomerate even though he has no previous experience in the industry.
He signaled he has no immediate asset sales in mind at the company that owns 23 television stations and nine daily newspapers, including the Los Angeles Times and the Chicago Tribune, although the Chicago Cubs baseball team and Wrigley Field are to be auctioned off by July.
However, he made clear that other changes are coming.
WEAK SALES HIT RITE AID SHARES
HARRISBURG, Pa. — Rite Aid Corp. shares fell to a 52-week low yesterday on sharply wider third-quarter losses, with fewer customers making holiday purchases or buying the cold and flu remedies that typically boost sales this time of year.
The nation's third-largest drugstore chain lowered its 2008 profit outlook for the second time this year, prompting a sell-off that drove shares briefly as low as $2.71.
By early afternoon, shares had recovered somewhat but were still trading down $1.08, more than 26 percent, at $3.02.
Rite Aid's chairman, president and chief executive, Mary Sammons, said she was disappointed with the results, but that she was pleased with progress toward integrating more than 1,850 Brooks and Eckerd stores acquired in June.
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