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The Honolulu Advertiser

Updated at 12:49 p.m., Wednesday, August 22, 2007

Business briefs: Credit crisis weighs on jobs, bank profits

Associated Press

CHARLOTTE, N.C. (AP) — More than 25,000 workers nationwide have lost jobs in the financial services industry since the beginning of the month — with more than half coming since last Friday. With few exceptions, the cuts are the direct result of woes in the nation's housing market.

More layoffs are announced daily. On Wednesday, Lehman Brothers Holdings Inc. closed its "subprime" mortgage business, laying off 1,200 workers at 23 offices; Scottsdale, Ariz.-based 1st National Bank Holding Co. closed its wholesale mortgage unit and cut 541 jobs, and Accredited Home Lenders Holding Co. added 1,600 positions to the heap. The night before, banking giant HSBC said it would close a main financing office and cut 600 jobs.

Since the start of the year, more than 40,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc.

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NEW YORK (AP) — Four major banks said Wednesday they each borrowed $500 million from the Federal Reserve's discount window, lending weight to the central bank's efforts to restore liquidity to tight markets.

In going public with the moves, Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp. and Wachovia Corp. each stressed they have "substantial liquidity" and the ability to borrow money elsewhere. The borrowings, at least in part, seemed meant to reassure investors' jitters about the credit crunch rattling Wall Street.

In a joint statement, the latter three banks said they decided to borrow the money to demonstrate "the potential value of the Fed's primary credit facility" and encourage its use by other banks.

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LAS VEGAS (AP) — A holding company for the Persian Gulf state of Dubai has laid down a big marker on the Las Vegas Strip — a $5 billion investment that gives it a chunk of MGM Mirage and 50 percent of a massive entertainment complex the casino operator is building.

Dubai World will pay $2.7 billion for half of the 76-acre CityCenter complex under construction in the heart of the Strip, and buy up to $2.4 billion in MGM Mirage Inc. stock, the company said Wednesday.

The investment gives Dubai its first step into Las Vegas and for MGM Mirage, removes a significant debt load from the development of the $7.4 billion CityCenter.

MGM Mirage also gets access Dubai World's rolodex of wealthy clients that could purchase the new luxury condos at the site, and at premium prices, said MGM Mirage chief executive Terry Lanni.

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PITTSBURGH (AP) — Toll Brothers Inc., the nation's largest builder of luxury homes, said Wednesday its third-quarter profit plunged nearly 85 percent as the housing downturn and credit worries triggered cancellations and hefty writedowns.

The company's chairman and chief executive said the quarterly cancellation rate, which rose to nearly 24 percent, was greater than at any point in the 21 years the company has been traded publicly.

Toll Brothers said earnings for the three months ended in July sank to $26.5 million, or 16 cents per share, from $174.6 million, or $1.07 per share, during the same period last year.

The company was forced to write down property at a cost of $88.5 million, or 54 cents per share, compared with $14.6 million, or 9 cents per share, during the year-ago quarter.

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WASHINGTON (AP) — Surging mortgage defaults whacked U.S. banks and thrifts in the second quarter. Profits fell 3.4 percent to $36.7 billion, and reserves to cover loan losses soared 75 percent from a year ago, regulators said Wednesday.

Results for the nation's financial institutions from the Federal Deposit Insurance Corp. showed that higher expenses for noncurrent loans, along with lower interest from investments, hurt profits in the April-June period.

The impact of the nation's worsening housing downturn on federally insured banks and savings institutions was evident in all aspects of the FDIC data for the second quarter.

The increases in noncurrent loans — 90 days or more past due — and set-aside reserves to cover losses were the biggest in 16 years for banks and thrifts. Total past-due loans jumped by 10.6 percent, to $6.4 billion, and nearly half the increase came from home mortgage loans.

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BEIJING (AP) — China, on the defensive over the safety of its products, lashed out Wednesday at the U.S. by claiming its soybean exports contained pesticides, poisonous weeds and dirt and blaming American manufacturer Mattel Inc. in part for lead tainting that prompted the recall of millions of toys.

China is facing a global backlash following discoveries of high levels of chemicals and toxins in a range of Chinese exports from toothpaste and seafood to pet food ingredients and toys. Beijing has tried to defend its safety record and reassure consumers by highlighting similar problems in other countries.

Soybeans, which are mainly crushed for oil and used as animal feed, are the biggest single U.S. farm export to China, according to the American Soybean Association. China has bought billions of dollars worth since the current market year began in September.

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SAN DIEGO (AP) — Accredited Home Lenders Holding Co. will slash its work force by more than half and stop accepting new mortgage applications in the U.S. as it struggles to survive in the troubled home lending industry, the company said Wednesday.

San Diego-based Accredited, which issued $15.77 billion in home loans last year, said it will cut about 1,600 of its 2,600 positions and close 65 branches.

In Arizona, Scottsdale-based 1st National Bank Holding Co. said it would close its wholesale mortgage unit and mortgage centers in Virginia, North Carolina and Nevada.

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FRANKFURT, Germany (AP) — The European Central Bank, which has repeatedly pumped extra funds into European money markets for two weeks, said Wednesday it plans to auction supplementary three-month funds valued at $53.97 billion to provide more liquidity to cash-hungry markets.

The move prompted a new debate whether the bank would move forward in raising its benchmark interest rate, a decision that will be announced Sept. 6.

The 40 billion-euro tender is scheduled for Thursday and will not hamper the 13-nation bank's regular call for bids of three-month funds on Tuesday.

The supplementary tender bid is lower than the 50 billion euros ($67.46 billion) set for its regular three-month move.

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NEW YORK (AP) — Crude oil futures slipped further below $70 a barrel Wednesday after the government surprised traders with news that U.S. crude inventories rose last week.

The sell-off was small, though, as traders monitored Hurricane Dean, which struck the Mexican mainland for a second time Wednesday after striking oil platforms in the Gulf and forcing thousands to flee.

Also, gasoline futures, which had fallen by about 18 cents this week, bounced back 2.5 cents after the Energy Department's weekly inventory report showed that the nation's gas stockpiles declined by more than analysts anticipated.

Gasoline demand doesn't appear to be falling off, as some investors expected it might due to recent stock market volatility.