O'Neil recommends mandatory down payment

LEXINGTON, Ky. -- President Bush's first treasury secretary says Congress should scrap plans for a new economic stimulus package and instead require that no future home mortgage be awarded without a 20 percent down payment.

Paul O'Neill said Tuesday it doesn't surprise him that neither presidential candidate has endorsed his position, but he insisted it is the best way to quickly improve the nation's economic footing.

"Unfortunately we've gotten to a point where people that want to run for president don't think they can tell the truth and still get elected," O'Neill told reporters before speaking at a conference. "I'm hopeful whichever person gets elected, they'll be better than what they've said. An awful lot of presidential campaigns now are pandering to the lowest common denominator. They promise people everything."

O'Neill, who hasn't endorsed a candidate in the race and says he wouldn't be interested in serving in either administration, made a personal pitch last month to Democratic nominee Barack Obama concerning his idea to mandate down payments. He declined to characterize Obama's response.

O'Neill, a former CEO of aluminum giant Alcoa Inc., served as treasury secretary for the first two years of Bush's presidency, including leading the financial response to the Sept. 11, 2001, terrorist attacks.

While he praised aspects of the recent $700 billion financial bailout, which he says has allowed world markets to take a "deep breath," O'Neill said there should have been government action to combat faulty home loans far earlier. In 2006, he says, 30 percent of mortgages had no down payment and a larger number of those buyers defaulted on their first payment.

"That was a strong enough signal we should have shut down this ... flagrant abuse of the principles of home finance," O'Neill said. "It was bound to crater. It was absolutely bound to come down around our ears, which it has."

If every mortgage was backed by a 20 percent down payment, O'Neill said, the financial system would be protected long-term, even if some individual investments or businesses failed.

"If you can't afford a home mortgage, we shouldn't give you one," he said.

O'Neill said he is disappointed that the political response from both parties includes wide support for another economic stimulus package rather than curbing additional bad mortgages. He estimates that only 20 percent of the money pumped into the last stimulus package actually stimulated the economy, with the rest being used to pay off bills or going into savings accounts.

Should there be another one, he fears much of it will be bogged down by pet projects from lawmakers.

"In a way it's a dangerous time because every politician can imagine some additional money that they could put into a package that they believe will help them get re-elected," O'Neill said. "It's like a feeding frenzy when it looks like they're going to have more stimulus programs. It's almost as though there's no connection and understanding that at the end of the day, we the American people are going to have to pay for this."

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Gadgets designed at CMU work off gestures, brain signals

Gestris is a cool game, but don't expect to see it on store shelves next to Nintendo Wii systems anytime soon.

Players use body gestures -- but no controller or special clothing -- to move pieces on a big screen in the Tetris-style game that researchers at the Intel Corp.'s Pittsburgh Research Lab developed.

"It's a little showcase," Intel's Padmananabhan "Babu" Pillai said Tuesday as the lab at Carnegie Mellon University's Collaborative Innovation Center showed off its latest futuristic work at an open house.

"In the future, we would like to enable much richer interfaces in the home. Imagine that you could point to the TV and say, 'Volume up,' " he said.

Computers and robots that read humans' wants and needs more easily than ever before -- making the mouse, game controller and other gadgets relics of the past -- were a common theme among the dozens of projects demonstrated.

Intel opened its local center eight years ago, and 23 researchers now collaborate with faculty from universities including CMU and the University of Pittsburgh, medical experts from the University of Pittsburgh Medical Center -- plus 20 to 25 students at any given time.

"Mostly, Intel research is engaged in trying to understand where computing is going. And where it is going is a combined enterprise of hardware and software and, ultimately, human beings," said Andrew A. Chien, vice president and director of research at the Santa Clara, Calif.-based company.

Intel, the world's biggest maker of microprocessors -- the brain in every computer -- has 11 research centers near universities.

Machines, in other words, must interact with people in more natural ways, reading their gestures and even brain signals. "That's where we see the future as being," said Rahul Sukthankar, senior principal research scientist at the Pittsburgh lab.

"It's no longer just spreadsheets and word processers. It's really interacting with humans in their environment."

Beyond gesture or voice recognition, computers might respond to facial expressions or realize when a person is thinking about airplanes, for example, just by reading brain activity patterns consistent with that topic.

"Long range, you might be able to think about an object and do a Web search, for example" without touching a keyboard, researcher Dean Pomerleau said.

Several projects center on health care. One tracks the growth of stem cells, while another compares images of a patient's suspicious-looking mole to thousands of other pictures in a large database to help detect skin cancer. "Doctors told us a lot of times, they are not quite sure about what they are seeing," researcher Mei Chen said.

Another, necklace-like device could help dieters. Most people eat more than they realize, said CMU computer scientist Jie Yang, who worked on the project.

But a tiny computer could recognize food items on a plate, compile calorie and fat data for every meal and factor in the wearer's activity for the day. Standard, fast-food fare from major restaurant chains is being used to test the system, he said.

Intel also is dabbling in home computer networks that transfer data faster, using the combined wireless capabilities of the devices in a whole neighborhood. Users could borrow capacity from neighbors when they need it to send large files.

"One of the things I cannot do very effectively today is show my baby to my mother in Greece," researcher Dina Papagiannaki said, adding she and partner Michael Kaminsky have talked with Verizon Communications Corp. and other Internet service providers and were surprised to find, "They liked this idea."

Intel's Jason Campbell described projects that could use millions of tiny sphere-like computers to build objects that change their shape upon command.

Rather than drawing an object on a screen, "it appears out of a vat on your desk," he said. And everyday objects such as a cell phone could change form to provide the user with a keyboard, or fit around his ear.

Lily Mummert keeps honeybees at her home in North Strabane in Washington County, and in her role with Intel, she's developing a video system that measures the activity of bee colonies without impeding their movement as current technologies that use infrared sensors might.

Given worldwide declines in bee populations, "With this, maybe we could catch a colony collapsing early enough to do something about it," she said.

U.S. Steel tempers optimism after record quarterly profit

U.S. Steel Corp. rode strong prices and demand to post the biggest quarterly profit in its 107-year history -- $919 million -- but executives warned Tuesday the world economic downturn will hurt the steelmaker in the fourth quarter.

"We expect a decline in fourth-quarter results, mainly due to softening demand and prices for flat-rolled products in North America and Europe, and we expect to continue to operate at reduced production levels," U.S. Steel CEO John P. Surma told analysts.

U.S. Steel's third-quarter net income, which calculates to $7.79 a share, increased sharply from the same three-month period in 2007, when it earned $269 million, or $2.27 a share.

The third-quarter profit outpaced second-quarter earnings of $668 million, or $5.65 a share.

Sales jumped to $7.31 billion, compared with $4.35 billion a year ago, and were higher than second-quarter sales of $6.74 billion.

The stock market reacted to U.S. Steel's earnings by boosting the share price by 14.2 percent to $35.20 a share, up $4.38.

U.S. Steel's performance was "tremendous," said steel analyst Charles Bradford of Bradford/Soleil Research of New York. But he issued a warning to expect lower earnings in the fourth quarter.

The price of spot steel -- product sold outside a long-term contract -- is down more than $100 a ton from the third quarter, Bradford said. He cut his fourth-quarter earnings estimate to $4.80 a share.

"The trend is not good," Bradford said. "They're going to get hit hard in Europe in the fourth quarter," and the company won't reach the operating profit of $835 million it generated from its flat-rolled steel operations in the third quarter, he said.

U.S. Steel has been anticipating a slower fourth quarter because of the normal seasonal downturns but "nothing as abrupt as has transpired," Surma said. The economic crisis has resulted in a lowering of inventory levels, and that may continue until the steel stockpiles fall another one million tons, he said.

The company shipped 6.43 million tons of steel products in the third quarter, up from 5.55 million tons a year ago.

It sold flat-rolled steel at an average price of $900 a ton for the quarter, compared to $648 a ton a year ago, and prices for tubular products for the oil and gas industry almost doubled --- to an average of $2,390 a ton compared to $1,292 a ton in the third quarter of 2007.

U.S. Steel's record earnings were announced one week after Allegheny Technologies Inc., a Pittsburgh-based specialty metals company, lowered its earnings guidance for the fourth quarter and the full year. U.S. Steel did not offer specific guidance for the fourth quarter.

Surma would not disclose operating rates for the company's mills at the end of the quarter but said they were well below the average operating rates for the entire quarter, when it operated at 86.5 percent of capacity. He said current operating rates are well below that level.

Shipments of flat-rolled steel are down because of the slowdown in the automotive industry and softening orders from steel service centers, Surma said. But orders of tubular products have been good.

Lower fuel prices have not translated into a drop in drilling activity, although Surma did not rule that out.

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2 National City shareholders file lawsuits over sale

Days after getting merger news about National City Corp., shareholders sued the bank in Pittsburgh and Delaware courts over its $5.6 billion deal with PNC Financial Services Group.

A lawsuit filed in federal court in Pittsburgh by shareholder Martin Sheerer on Monday accuses the Cleveland bank of fraud by misrepresenting its condition in the months prior to the deal with PNC last Friday. National City statements and omissions "induced" Sheerer and "thousands of unsuspecting shareholders" to buy or hold their stock, then were hurt by the stock's continued decline.

The lawsuit seeks damages it wants the court to determine at trial. It also seeks designation as a class action of shareholders who, such as Sheerer, bought the stock since May 1.

Sheerer claims National City misstated the adequacy of its loan-loss reserves, and failed to disclose the bank's exclusion from a government program to bolster capital and its key regulator's order that National City find a buyer instead.

A National City spokesman could not be reached for comment.

PNC will pay National City holders $2.23 a share in a deal expected to close by yearend. PNC is being assisted by selling $7.7 billion in preferred shares to the U.S. Treasury as part of the agency's bank recapitalization plan.

Another shareholder sued National City in federal court in Wilmington, Del., alleging it breached its fiduciary duty by failing to obtain a better deal. PNC's offer is "unfair and grossly inadequate," said the lawsuit. It also accuses CEO Peter Raskind of "self-dealing," and objects to golden parachutes totaling over $41 million for the banks top three executives.

PNC spokesman Brian Goerke declined to comment.

Meantime, U.S. Rep Steven LaTourette, a Republican in suburban Cleveland, asked the Treasury Department and a House committee to investigate the deal. He said John Dugan, comptroller of the currency, steered the $7.7 billion to PNC, noting that Dugan earlier served at a Washington law firm which represented PNC in 2005.

Comptroller spokesman Robert Garrson said Dugan also once represented National City. "I don''t know why anybody would suggest he'd favor one over the other," Garrson said.

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Plant to process natural gas

Five years and $700 million after Range Resources Corp. determined the Appalachian Basin, specifically Southwest Pennsylvania, could be the country's next natural gas production hot spot, "cool" processing of the fuel from local wells has begun.

Fort Worth, Texas-based Range has partnered with MarkWest Energy Partners LP of Denver to open a refrigerated processing plant in Chartiers, Washington County. Range is providing natural gas from some 30 drill sites located in the Marcellus Shale formation.

The plant can handle up to 30 million cubic feet per day of what's called "wet" natural gas. Wet gas includes a number of other gases that must be separated prior to shipping to homes through nearby interstate natural gas pipelines.

Both companies are trying to capitalize on what some natural gas industry experts believe could be the country's largest onshore natural gas field, Appalachia's Marcellus Shale formation.

Geologists have known about the Marcellus for years, but there never was an economical way to extract it commercially. Recent advances in drilling, specifically horizontal drilling, and well completion techniques being used in other shale areas, such as the highly successful Barnett Shale formation in Texas, allow explorers to crack the shale and extract what's believed to be huge potential.

"This plant enables us to really ramp up production," said Jeff Ventura, a Penn Hills native and Range's president and chief operating officer, Monday during a tour of the company's Marcellus Shale operation at the Southpointe office park in Cecil, Washington County.

MarkWest is spending $200 million to building this and two other plants off Route 519, three miles north of Houston to handle Range's production.

The plants will be dedicated to Range's natural gas production. Ventura said the company expects to be producing by the end of next year up to 100 million cubic feet of natural gas daily. One million cubic feet of natural gas is enough fuel to handle the needs of an average Pittsburgh-area home for more than 10 years.

"This plant makes the Marcellus Shale play real," said MarkWest CEO Frank Semple.

Range and MarkWest are among a number of local, regional and national companies probing the Marcellus formation. Marcellus Shale is a layer of shales typically 5,000 to 6,000 feet below the surface, running from the southern portion of New York, through much of Pennsylvania, into eastern Ohio and through most of West Virginia.

Estimates vary, but some surveys place recoverable natural gas from the entire Marcellus region in the 200 trillion cubic feet to 500 trillion cubic feet range, enough gas to handle all of America's natural gas needs for more than 10 years.

Range alone has control of 850,000 acres of land primarily in Pennsylvania.

In addition to processing Range Resources' natural gas, MarkWest looks forward to selling natural gas liquid products once the other facilities are completed. The company also is signing deals with other companies to offers its services elsewhere in Appalachia.

"Long-term, we're looking at processing 150,000 gallons per day of propane, and 50,000 to 60,000 gallons per day of other liquids, which we will move by truck, pipeline and eventually by rail," said Randy Nickerson, MarkWest's chief commercial officer.

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Combined bank may use less office space

PNC Financial Services Group's $5.6 billion acquisition of National City Corp. could result in the combined bank occupying less office space than it now does in the Pittsburgh market, real estate experts said Monday.

But the pendulum could swing the opposite way if PNC consolidates in Pittsburgh any of National City's operations from its base in Cleveland.

And it may take time to find new uses for bank branches that PNC closes, experts believe.

National City leases 162,000 square feet at the 20-story National City Center on Stanwix Street, Downtown, and an additional 275,000 square feet at Allegheny Center on the North Side.

But it recently put more than 50,000 square feet at the Downtown site and 100,000-square-feet at Allegheny Center on the market for sublease, said Jeremy Kronman, commercial broker with CB Richard Ellis/Pittsburgh.

"National City already has done some downsizing, so I'm not sure anything really will change with the merger," said Kronman, who is in charge of leasing at National City Center.

Reed Smith LP, one of the city's largest law firms, is said to be interested in subleasing all of the available National City Center space.

According to a report by Grubb & Ellis Co., Pittsburgh's office vacancy rate declined to 15.5 percent as of Sept. 30 from 16 percent at the end of June.

The Pittsburgh office market could benefit further if PNC consolidates office functions here, Kronman said. "I think moving operations of another bank to Pittsburgh could be very positive, although maybe not so for Cleveland," he said.

Many of National City's retail branches are in prime locations, said Ned Doran, of GVA Oxford, the commercial leasing arm of Oxford Development Co. He worked with National City in recent years to find sites, including offices in Shadyside and Squirrel Hill.

National City operates 158 retail branches in Allegheny, Armstrong, Beaver, Butler, Fayette, Washington and Westmoreland counties, and PNC has 96 offices.

Alternative uses could include professional offices, medical facilities and fast food or small retail stores, Doran said.

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Region bucks trend on jobs

Despite economic woes nationally, the Pittsburgh region showed signs of growth in September, with 7,000 more jobs compared with a year ago and a drop in the unemployment rate, the state said today.

"That means Pittsburgh is continuing to buck the national trend, since most major regions lost jobs in September. Many regions have lost literally tens of thousands of jobs in the past year, both in the Rust Belt and Sun Belt," said Harold D. Miller, president of Future Strategies LLC, a Downtown-based consulting firm.

The number of nonfarm jobs in the seven-county Pittsburgh region rose to 1,159,400 last month, according to the state Department of Labor and Industry. On a month-to-month basis, the region's jobs count in September increased by 10,400 from August.

"The real significant number is the 7,000-job increase from September 2007 to September 2008," Miller said, because the single-month increase is due to back-to-school employment.

The jobs data, however, was collected before the nation's economic crisis intensified, so figures may look different in October and November, Miller said.

The region's unemployment rate in September was 5.4 percent, a two-tenths of a percentage point decline from 5.6 percent in August. All seven counties in the region -- Allegheny, Armstrong, Beaver, Butler, Fayette, Washington and Westmoreland -- experienced a drop in the unemployment rate in September, the state said. In September, Pennsylvania's jobless rate was 5.7 percent and the nation's was 6.1 percent.

A separate survey found that employment among those living in the region rose by 6,000 to 1.157 million in September from August, and by 10,000 compared to year ago. The increase in residential employment could be an indication people from other regions are coming to the Pittsburgh area in search of work, Miller said.

The jump in September's job count can be traced to a rise in jobs at colleges and universities, which rose to 38,200 from 32,500 in August, and local government jobs, which include school districts, increased by 11,000 to 55,000 in September from August. Transportation and warehousing, which includes school bus drivers, jumped by 3,300 to 44,600 in September from August.

Without the seasonal bump of employment in schools and universities, the region's jobs count "would be relatively flat, or a small decrease," said Frank Gamrat, senior research associate at the Allegheny Institute for Public Policy, a think tank in Castle Shannon.

The monthly jobs increase shows how important education is to the region's economy, Gamrat said. From September 2000 to 2008, the region's goods-producing sector lost about 33,000 jobs, while the health care and education sectors gained a similar amount, he said.

"If it wasn't for education and health care, this area would be in trouble, We've turned ourselves into a medical center. It kind of helps to buffer the negative effects of the recession," Gamrat added.

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