Morning Money Memo…
General Motors is facing more questions and potential legal problems over the recall of 1.6 million compact cars for faulty ignition switches. The Justice Department has launched an investigation that could lead to criminal charges.
“It’s incredible to me that General Motors could have ignored this defect for a decade,” says Joan Claybrook, former head of the National Highway Traffic Safety Administration. The recall was announced last month, but the first problems emerged a decade ago when GM engineers found that a heavy key chain could turn off the engine and disable airbags.
GM shares fell more than 5 percent yesterday – their sharpest one-day decline in over two years. In addition to the Justice Department moves, NHTSA has opened an investigation into whether the GM recall came far too late. Congressional hearings are also expected.
Tesla Motors has been told “fuhgeddaboutit” by New Jersey. The state Motor Vehicle Commission, controlled by Gov. Chris Christie, has refused to allow the electric car company to sell its vehicles directly to the public. Dealerships with at least 1,000 feet of floor space are required. Tesla has argued that dealerships add to the cost consumers must pay. New Jersey joins Texas and Colorado in insisting Tesla can only sell vehicles through licensed dealer franchises. “It is vital to introduce our own vehicles to the market,” Tesla said in a statement, “because electric cars are still a relatively new technology.”
The Food and Drug Administration has halted operations at a Delaware cheese plant after an outbreak of listeria linked to the company’s cheese killed one person and sickened seven others. This is only the second time the FDA has used its authority to shut down a plant after gaining that authority in a 2011 food safety law. The agency says its inspectors found unsanitary conditions at Roos Foods in Kenton, Del.
Shares of Freddie Mac and Fannie Mae plunged more than 25 percent yesterday after a plan to phase out the two government-backed mortgage giants picked up bipartisan support in Congress. Private insurers would be used instead to backstop home loans. The plan would create a new government insurance fund and investors would pay fees in exchange for insurance on mortgage securities they buy.
The government would become a last-resort loan guarantor. Following the 2008 financial crisis, the government rescued the two mortgage giants with a $187 billion bailout. But both Fannie and Freddie have been highly profitable since then, returning tens of millions of dollars in profits to taxpayers.
Richard Davies Business Correspondent ABC News Radio abcnews.com Twitter: daviesnow