More grim economic news from around the globe sent stocks sliding past another milestone, with the Dow falling below 7000 to around 6850 at 2:50 p.m. The index last closed below 7000 on May 1, 1997.

Last week, U.S. stocks dropped to the lowest level in 11½ years, and the selling pressure simply resumed today, with the financial sector leading the way amidst investor insecurity about the Treasury Dept.’s still ill-defined rescue plans for banks and mortgage holders. .

Source: MarketWatch.com

Billions More for AIG

Insurance giant American International Group is about to get another dose of federal bailout money. AIG released a dismal earnings report, saying it lost nearly $62 billion in the fourth quarter, the largest loss in U.S. corporate history. That is forcing a retooling of the company and its $150 billion federal bailout. The government is offering AIG access to as much as $30 billion in new cash to keep it alive, in return for preferred stock. The company’s stock jumped on the news, rising about 12% around 3 p.m., though it was still worth almost nothing: less than 50 cents a share.

Source: CNNMoney.com

A New Nominee for Health Secretary

As expected, President Obama named Kathleen Sebelius as his pick for Health & Human Services Secretary. His first choice, former Senator Tom Daschle, had to withdraw because of a tax scandal. Obama also named a former Clinton Administration official, Nancy-Ann DeParle, to head up his White House Office of Health Reform. Both officials will play key roles in the President’s push to remake the U.S. health-care system. On Thursday, Obama will kick off that effort with a White House summit conference.

Source: Wall Street Journal

Freddie Mac’s Chief Quits

David Moffett, who was appointed to run the mortgage giant just last September as the financial crisis gathered steam, is stepping down no later than Mar. 13. He told the board he wants to return to the financial-services sector. Freddie Mack will work with the Federal Housing Finance Agency to find a successor. Moffett previously was CFO of U.S. Bancorp.

Source: CNNMoney.com

Mixed Signs for the U.S. Economy

Consumer spending rose by 0.6% in January over the month before, after a 1% decline in December, and personal income increased by a seasonally adjusted 0.4%. But consumers boosted their savings rate to 5.0%, the highest since a 5.5% reading in May, 1995. The savings rate tends to go up when consumers are worried about their jobs and try to put more money aside. Meanwhile, the Institute for Supply Management’s manufacturing index dropped for the 13th straight month, hitting 35.8. Any reading below 50 shows the sector is contracting.

Source: Wall Street Journal

Survey: U.S. Economists Divided Over Stimulus

What’s the best way to end the recession? Business economists expect the government to spend more money as a salve against the recession, but they’re mixed on how it should be done. On March 2, a survey by the National Association for Business Economics will reflect those differences of opinions among forecasters. “If anything, our respondents appear to be less convinced of the near-term effectiveness of fiscal policy in turning the economy around,” said NABE President Chris Varvares, president of Macroeconomic Advisers LLC. A third of the forecasters said current fiscal policy is too stimulative and another third believe it isn’t enough.

Source: Associated Press

Facebook’s Thiel Explains Failed Twitter Takeover

Facebook remains on the lookout for acquisitions after its failed attempt to buy microblogging site Twitter, one of the company’s directors and largest investors says. “We’re still focusing on growing as much as possible,” says Peter Thiel in an interview with BusinessWeek. In Facebook’s first public confirmation of the talks, Thiel said the parties disagreed over price and structure when they seriously considered a deal last fall. “It became pretty clear it wasn’t going to happen,” Thiel says from the mid-Manhattan office of his hedge fund Clarium Capital. “The deal would have to be done with Facebook stock. And then you have to figure out how much the stock is worth.”

Source: BusinessWeek

Obama’s Healthcare Reform Is Tough Sell During Recession

President Obama’s goal of remaking the health care system was always going to be difficult to reach. But as he prepares to begin a campaign for universal coverage this week, the ailing economy has complicated his task. Mr. Obama is proposing a major expansion of the federal commitment to health care even though the government can barely afford the health insurance programs it has. The financial condition of Medicare is deteriorating because of the recession, according to new information from federal officials, and the Medicare trust fund could be depleted several years sooner than expected. As he gears up for a week focused on health care, Obama hopes to turn the economic crisis to his advantage by citing the burden of health costs and the growing ranks of the uninsured, now at 46 million people, to justify a shake-up.

Source: New York Times

Decline in China’s Manufacturing Sector Slows

China’s manufacturing sector shrank in February for the seventh straight month, but the speed of contraction appears to be slowing. The CLSA China Purchasing Managers Index, produced by U.K.-based research firm Markit Group Ltd., came in at 45.1 in February, compared with 42.2 in January. The index fell to a record low of 40.9 in November. A PMI reading below 50.0 indicates contraction. It was the third straight month that the PMI figure was higher than the previous month’s, raising economists’ hopes that the worst for China’s economy is past. China grew at its slowest pace in seven years in the fourth quarter of 2008.

Source: Wall Street Journal

U.S. Chipmaker Spansion Files for Chapter 11

Spansion sought bankruptcy protection on March 1, becoming the latest chip maker to succumb to a global recession and falling memory-chip prices. Spansion, a U.S. maker of flash memory chips, had recently said it was exploring a sale of the company, but now plans to use the bankruptcy process to restructure debt obligations and refocus on its more profitable divisions. The company and four U.S. affiliates filed for bankruptcy protection in U.S. bankruptcy court in Delaware, listing assets of $3.84 billion, and debts of almost $2.4 billion. Spansion had met with holders of its $625 million senior secured floating rate notes due in 2013, to discuss a reorganization plan that would enable it to emerge more quickly from court protection.

Source: Reuters

EU Leaders: No Aid for Eastern, Central Europe

The European Union won’t be throwing a lifeline to the bloc’s hardest hit nations. On March 1, EU leaders, meeting for an emergency session in Brussels to discuss the global economic crisis, rejected Hungary’s proposal for a $228 billion aid package for Eastern and Central Europe. In a statement afterward, the leaders offered reassurances that they would stick by the single market, promote growth and reject protectionism. In Asia, the euro fell to a fresh one-week low against the dollar.

Source: UPI, Reuters

Asian Summit Ends, No New Economic Steps

Southeast Asian leaders ended a two-day meeting in Thailand on Sunday after failing to come up with any specific steps to boost their export-driven economies. In a statement, the leaders of the 10-member Association of Southeast Asian Nations agreed on the “necessity of proactive and decisive policy actions to restore market confidence and ensure continued financial stability.” They pledged to improve coordination over economic stimulus programs and condemned trade protectionism, but offered few concrete proposals.

Source: Washington Post

Buffet’s Annual Letter: Looking to Buy During Recession

Billionaire Warren Buffett is predicting a dismal 2009 “and, for that matter, probably well beyond.” In his much-anticipated annual letter to shareholders on Feb. 28, the chairman of Berkshire Hathaway said he would keep shopping for new investments for Berkshire during the recession. “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down,” wrote Buffet, who is one of the world’s most-admired investors. Omaha, Neb.-based Berkshire barely broke even in the fourth quarter, with profit dropping 96%, the fifth straight quarterly fall. At the end of the year, Buffet’s investment company had about $25.5 billion in cash, down from $33.4 billion on Sept. 30. Last year, insurance and utility results helped offset mistakes such as his multibillion-dollar mistake of buying shares of oil company ConocoPhillips when oil and gas prices were near their peak. Buffett said he has also lost most of a $244 million investment in shares of two Irish banks.

Source: Reuters, Bloomberg

Conversation of the Day: Academic Endowments

Reader jte writes: “This old ‘why can’t universities be run like a business?’ yarn is an old one, but I’m still a little surprised it’s being trotted out again now.”

Read the Story and Tell Us What You Think

Hot Topic on the Business Exchange: Facebook

Facebook is a social network founded in 2004 by Mark Zuckerberg. After allowing users outside of school networks to join, the site has been gaining ground and members. Robert Hof and others are sharing their insights.

Join the Exchange