href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='http://www.abiworld.org/AM/Images/headlines/headline.gif' />
June 14, 2007
Committee Chair Warns Fed on Supbrime Mortgages
House Financial Services
Committee Chair Barney Frank (D-Mass.) at a hearing yesterday threatened
to strip the Federal Reserve of its authority to write rules against
abuses in the market for high-risk mortgages if the central bank did not
act quickly to do so, the Associated Press reported yesterday.
Frank’s remarks intensified the pressure from congressional
Democrats on the Fed in recent months as mortgage delinquencies and
foreclosures have surged. If the Fed does not exercise its authority
soon as the sole federal agency entitled to write regulations
prohibiting unfair and deceptive mortgage practices, “then
we’ll find someone else who will,” Frank said at the
committee hearing. Randall Kroszner, a member of the Fed’s board
of governors, testified that the Fed is looking closely at the issue,
recognizing that “any rule should be drawn sharply” to avoid
choking off access to credit that lets less affluent people become
homeowners.
href='http://www.nytimes.com/2007/06/13/business/14subprime.html?ref=business&pagewanted=print'>Read
more.
In related news, the
Federal Reserve will consider rules at a hearing today that would ban
all lenders from practices that critics say are at the root of the
subprime mortgage crisis, Marketwatch.com reported yesterday. Such a
far-reaching move would be unusual and could signal the Fed's
acknowledgement that some of the nation's most vulnerable consumers have
been slipping through the regulatory cracks. Americans will lose up to
$164 billion in home-based wealth due to foreclosures in the subprime
mortgage market, according to a study from the Center for Responsible
Lending, a nonprofit research and policy organization.
Last week, Fed Chairman Ben Bernanke said effective
disclosures are the first line of defense against improper lending, but
that additional measures may be required to combat bad lending
practices, such as fraud or abuse.
href='http://www.marketwatch.com/news/story/fed-consider-steps-against-abusive/story.aspx?guid=%7bFAF6B489-6136-407B-B692-79A6D52A6E30%7d&print=true&dist=printTop'>Read
more.
href='http://www.federalreserve.gov/boarddocs/press/bcreg/2007/20070612/default.htm'>Click
here to read the Fed’s press release on the
hearing.
id='2'>Senator Looks to Voluntary Efforts on Credit Card
Practices
Sen. Thomas Carper
(D-Del.) endorsed a proposal yesterday to have banks and consumer groups
work together to curb questionable credit card practices rather than
push for legislative action this year,
size='3'>CongressDaily reported yesterday.
Carper praised the idea of House Financial Services Financial
Institutions Subcommittee Chairwoman Carolyn Maloney (D-N.Y.) to hold a
summit so banks and consumer groups could develop a 'gold standard' for
cards that did not contain certain fees and rate policies that have come
under criticism. Carper added that he is hopeful a summit could
establish voluntary standards, as some banks have already acted on their
own to end practices that came under Democratic criticism during
high-profile hearings. Maloney said she plans another hearing in
September. JPMorgan Chase & Co. recently dropped the practice of
double-cycle billing, in which a bank assesses interest on the entire
amount charged during one month unless the bill was paid in full; and
Citigroup Inc. ended universal default, a practice in which customers
are charged a higher interest rate if they miss a payment on another
card or if their credit score had dropped. Carper said he wanted to
create an environment where issuers will feel they are rewarded for
doing the right thing, though some in the industry have expressed
concern that any concerted effort could open them up to antitrust
violations.
Autos
id='3'>Delphi-UAW Agreement Near
Delphi Corp. and former
parent General Motors Corp. are close to reaching a deal with the United
Auto Workers (UAW) that would provide a cash payout to
w:st='on'>
size='3'>Delphi workers in exchange
for lower hourly wages, the
size='3'>Detroit News reported today. GM would
fund the program. The proposal would offer
4,000 UAW workers a one-time lump sum cash payment in return for
accepting lower wages that could range from $14-$18 an hour -- similar
to what newer temporary workers earn. Workers could also take the lump
sum and accept early retirement or flow back to GM. The amount of the
lump sum payment is not clear. Talks between GM, the UAW,
size='3'>Delphi
partners were held Wednesday, and the parties hope to complete an
agreement within a week or so.
href='http://www.detnews.com/apps/pbcs.dll/article?AID=/20070614/AUTO01/706140409/1148&imw=Y'>Read
more.
w:st='on'>
id='4'>Detroit
face='Times New Roman' size='3'> Automakers Seeking Union
Concessions
General Motors Corp.,
Ford Motor Co. and DaimlerChrysler AG's Chrysler Group are seeking
unprecedented concessions from the United Auto Workers (UAW) union in a
bid to narrow what they say is a $30-an-hour labor-cost disadvantage
against Asian rivals like Toyota Motor Corp. and Honda Motor Co.,
the Wall Street
Journal reported today. The unusually tough
stance by the three
w:st='on'>
size='3'>Detroit
marks their latest attempt to stanch heavy losses in their North
American auto operations. It also sets up a potential showdown with the
UAW as the two sides prepare for contract talks that start this summer.
In recent years, the union has agreed to work-rule changes and benefit
cuts for its retirees designed to save the auto makers billions of
dollars a year. However, UAW President Ron Gettelfinger, who declined to
comment on the coming negotiations, has argued his workers shouldn't
bear the entire cost of
w:st='on'>
size='3'>Detroit
restructuring.
href='http://online.wsj.com/article/SB118178643572134789.html?mod=home_whats_news_us'>Read
more. (Registration required.)
id='5'>Trustee Balks at New Century's Accountants
U.S. Trustee
Kelly Beaudin
Stapleton objected to New Century's bid to
hire Grant Thorton LLP as a tax accountant and ICP Consulting LLC as a
liquidation advisor, saying that engagement letters with the firms
contain provisions that courts have previously not allowed,
Bankruptcy Law360
reported yesterday. In a motion filed Wednesday in the
U.S. Bankruptcy Court for the District of Delaware, Stapleton also asked
Grant Thorton to give back some money it earned from New Century prior
to the sub-prime lender's bankruptcy filing. The motion said that Grant
Thorton hasn't provided any details for the approximately $940,000 it
received from New Century in the 90 days leading up to the chapter 11
filing. And the trustee argues that a payment of about $6,500 is a
voidable preferential transfer that affects whether the firm is eligible
to be employed in the case. The trustee has asked Grant Thorton to pay
the money back to the estate and waive any pre-petition claim related to
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=26713'>Read
more. (Registration required.)
id='6'>Judge Rules against Opening Records in
w:st='on'>
size='3'>Spokane
Bankruptcy
Bankruptcy Judge
Patricia Williams
denied the
face='Times New Roman' size='3'>Spokane
size='3'>(
face='Times New Roman'
size='3'>Wash.
Spokesman-Review's request to open sealed
documents in the Spokane Catholic Diocese bankruptcy case, the
Associated Press reported yesterday. The mediated settlement approved in
April calls for the diocese to pay $48 million to about 150 victims of
past clergy abuse at the discretion of an independent reviewer. The
newspaper sought details of individual payments and the names of priests
accused of abuse, some of whom may still be active in the
ministry. Judge
Williams cited confidentiality agreements signed by lawyers and a
federal mediator for rejecting the request, even though the newspaper
asked for documents with victims' names blocked out.
href='http://www.theolympian.com/northwest/story/134181.html'>Read
more.
id='7'>Granite Broadcasting Reaches Agreement with Former
Shareholders
A judge on Monday dismissed an
appeal of formerly bankrupt media company Granite
face='Times New Roman'>Broadcasting Corp.'s chapter 11
reorganization plan, after the shareholders who filed it agreed to drop
their objections,
size='3'>Bankruptcy Law360 reported yesterday.
The shareholders, led by Harbinger Capital Partners Master Fund I Ltd.,
had filed a rival reorganization plan in which they offered to pay a
large portion of Granite's debts in exchange for control of the company.
The court approved Granite's plan on June 4.
face='Times New Roman' size='3'>The shareholders went on to appeal the
plan only days after the company exited chapter 11. The approved
agreement put Granite in the control of hedge fund Silver Point Capital,
which paid the company's debts in exchange for nearly all of its equity.
In approving the deal, the court noted that the rival shareholders were
“not willing to pay a price that would cover the debt in
full.”
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=26817'>Read
more. (Registration required.)
SEC
Ends Price Limits on Short Selling
The Securities and
Exchange Commission (SEC) voted yesterday to end price restrictions on
short selling, meaning that investors seeking to sell a share that they
do not own will no longer be barred from doing so because the price of
the stock is falling, the
size='3'>New York Times reported today. The
5-to-0 vote, ending a rule that had been in place since 1938, when short
sellers were blamed by some critics for having caused the 1929 market
crash and the Depression that followed, came as the commission also
voted to make it harder to engage in naked shorting, the practice of
selling shares that have not been purchased or borrowed. SEC chairman
Christopher Cox called naked short selling “a fraud that the
commission is bound to prevent and to punish.” The SEC adopted a
rule, known as Regulation SHO, in 2004 that was intended to reduce naked
short selling by requiring the publication each day of a list of
securities with heavy fails. Brokers are required to cure the fails
within 13 days. But fails existing before the stock went on the list
were grandfathered. Yesterday’s vote will remove the grandfather
provision, and the commission said it was also considering removing an
exemption from the rule for options market makers who need to sell short
href='http://www.nytimes.com/2007/06/14/business/14sec.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
id='9'>Boy-Band Mogul's Memorabilia Auctioned
Platinum and gold records,
autographed posters and even a key to the city all were sold at an
auction as creditors liquidated the assets of boy-band impresario Lou
Pearlman, the Associated Press reported yesterday. Hundreds of bidders
packed a downtown building Tuesday for the chapter 11 bankruptcy sale.
Pearlman allegedly defrauded about 1,000 investors of more than $315
million by selling a bogus savings account plan, then using their money
to cover his losses in other businesses. Banks are seeking more than
$120 million, according to court documents. He also is being
investigated by the FBI, IRS and state authorities. Pearlman's assets
included memorabilia from the Backstreet Boys and 'N Sync, the two boy
bands he created in the '90s that made him famous, and several of his
lesser-known acts.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/06/13/AR2007061300477_pf.html'>Read
more.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/06/13/AR2007061300477_pf.html'>
href='http://business.guardian.co.uk/story/0,,2098101,00.html'>