In tapping Columbia University Professor Robert Hubbard as chairman of the White House's Council of Economic Advisers, President Bush has chosen a well-respected economist who will be a strong advocate for the Administration's $1.6 trillion tax-cut plan. "He's an academic star," says American Enterprise Institute economist Kevin A. Hassett. "He's going to be a force in the Administration."
The 42-year-old, who served at Treasury from 1991 to 1993 under Bush's father, was not the President's first choice to head the CEA. Bush had wanted John Taylor for the job. But Administration insiders say the Stanford University economist shied away out of concern he'd be overshadowed by senior White House domestic adviser Lawrence Lindsey. For his part, Hubbard says that he expects no trouble in working with Lindsey. No absent-minded academic, Hubbard is a well-organized economist known for his work on taxes and savings--two areas that should serve him in good stead in his new post. There's more fallout from the Cendant stock meltdown of 1998: A federal grand jury charged former Cendant Chairman Walter Forbes, 58, and a former vice-chairman, E. Kirk Shelton, 46, with conspiring to inflate the company's earnings and stock price. Cendant--a name now synonymous with one of the largest accounting scandals of the '90s--was created by a merger of Forbes' CUC International, a marketer of discount membership clubs, and HFS, a hotel and real estate franchiser. Following the 1997 merger, shareholders saw the company's value plunge by $13 billion when the fraud was discovered in April, 1998. The Securities & Exchange Commission also filed a civil fraud lawsuit against Forbes and Shelton. Attorneys for both men say they are innocent. General Electric predicted in October that its $45 billion acquisition of Honeywell International could be completed by now. But the deal won't be swift, after all: The European Commission has launched an extended antitrust review that could last up to four months. Analysts say GE was too optimistic in expecting fast regulatory approval for a merger of this scope. There is little product overlap, but GE will by far stand as the aerospace industry's largest supplier. The EC is concerned that GE will trounce rivals by bundling products, services, and financing. The delay won't dent GE's earnings, analysts say, but it will slow the company's progress in integrating Honeywell, which has many businesses that are in need of repair. The Environmental Protection Agency got a boost on Feb. 27 when the U.S. Supreme Court ruled it did not overstep its authority by imposing tougher smog and soot requirements on states through a 1997 provision added to the 1970 Clean Air Act. Business groups argued that the EPA should have taken into account mounting industry compliance costs, which add up to billions of dollars a year annually. In a blow to industry, the high court unanimously ruled those costs did not have to be considered because the Clean Air Act is a health-based statute. Have drugmakers been breaking the law in their zeal to sell more drugs? Federal prosecutors suspect the answer is yes. In the latest case to come to light, the feds have subpoenaed data from Bristol-Myers Squibb to learn whether the $21 billion pharmaceutical giant improperly gave doctors free drugs to persuade them to buy its products. Prosecutors also want to know if the company helped doctors bill Medicare and Medicaid for more than the physicians paid for the drugs. Bristol-Myers says it's cooperating with the probe, but that it broke no laws. Never mind that most INvestors figure UAL's takeover of US Airways to be a long shot. The parent of United Airlines is acting as if it were a done deal. On Feb. 26, UAL announced that it is in talks to sell three US Airways commuter subsidiaries--PSA, Piedmont, and Allegheny Airlines--to regional carrier Atlantic Coast Airlines. The sale depends on UAL winning antitrust approval of its purchase of No. 6 carrier US airways. The Justice Dept. is expected to rule on the deal in April. UAL does not own any feeder airlines, relying instead on low-cost carriers that operate under contract. -- Walmart.com is laying off 24 employees, or about 10% of its workforce.
-- Berkshire Hathaway and Leucadia National will rescue Finova with a $6 billion loan.
-- Motorola said that it could suffer its first quarterly operating loss since 1985. When Nike announced its third-quarter earnings would miss Wall Street expectations by 28%, investors treaded on its shares, sending them down 19.5%, to $39.60 on Feb. 27. The problems: sluggish U.S. footwear sales and inventory snafus from a new software system. Despite inventory glitches, which the world's largest maker of athletic footwear said would affect sales for six to nine months, Nike expects to hit its fourth-quarter earnings targets.