January 82010

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January 8, 2010

A recent survey by AARP found that 70 percent of the elderly
have been solicited to take out new 'exotic' mortgages, the
class='Apple-converted-space'>  New York Times
class='Apple-converted-space'>  reported today. In one case,

a family alleged that a woman in her late 70s and suffering from the
onset of dementia was targeted and signed into the loans. The popular
types of loans that are often presented to the elderly have been
option/ARM and “Pick-a-Payment” mortgage loans. Critics
blame these loans for helping to cause the housing market crash.
Lawmakers agree: As of Jan. 1, it is illegal to write this type of loan
in California. 

href='http://www.nytimes.com/2010/01/08/us/08sfmetro.html?ref=business&pagewanted=print'>Read

more.

The commission appointed
by Congress to examine the causes of the financial crisis is to hear
testimony on Wednesday from the heads of four of the nation's largest
banks, as the panel begins a year-long investigation that its chairman
described as an effort to figure out what happened during the financial
crisis, the 
Washington Post 
reported today. Philip Angelides, chairman of the Financial Crisis
Inquiry Commission, said that he planned to hold a series of public
hearings, conduct hundreds of interviews and request or subpoena
information from companies and government agencies. The commission has
until Dec. 15 to produce a report. Although legislation to reform
financial regulation already is moving through Congress, Angelides said
that the commission's work remains relevant because more bills are
likely to follow and a better understanding of what happened could
inform the way laws are enforced. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2010/01/07/AR2010010704090_pf.html'>Read

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name='5'>Commentary: Financial Reforms Should Aim for Stability of
the Financial System

While financial reform
probably can’t prevent either bad loans or bubbles, it can do a
great deal to ensure that bubbles don’t collapse the financial
system when they burst, according to a commentary in today's
class='Apple-converted-space'>  New York Times.
Enhanced consumer protection, while it might have blocked many subprime
loans, would not have prevented the sharply rising rate of delinquency
on conventional, plain-vanilla mortgages, according to the commentary.
It also would not have prevented the monstrous boom and bust in
commercial real estate. The risks created by the housing bubble were
strongly concentrated in the financial sector. As a result, the collapse

of the housing bubble threatened to bring down the nation’s banks.

By increasing risky investments in the real estate with borrowed money,
according to the commentary, banks could increase their short-term
profits and executive bonuses. The result was a financial industry that
was hugely profitable as long as housing prices were going up —
finance accounted for more than a third of total U.S. profits as the
bubble was inflating — but was brought to the edge of collapse
once the bubble burst. It took government aid on an immense scale, and
the promise of even more aid if needed, to pull the industry back from
the brink.

href='http://www.nytimes.com/2010/01/08/opinion/08krugman.html?ref=opinion&pagewanted=print'>Read

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name='6'>Creditors Balk at Lehman's Proposed Guidelines

U.S. Bank NA and Societe
Generale are among at least a dozen creditors objecting to Lehman
Brothers Holdings Inc.'s proposal to streamline the roughly 65,000
claims against the bankrupt financial giant by expanding omnibus
objection rules and forgoing court approval on certain settlements,

class='Apple-converted-space'>  Bankruptcy
Law360  reported
yesterday. On Dec. 23, Lehman submitted a motion requesting that it and
other parties of interest be allowed to file omnibus objections for up
to 500 claims at a time, and allow omnibus objections for reasons not
set forth in the federal Bankruptcy Code. Specifically, Lehman moved for

the right to use the omnibus objection vehicle for any claim that
contradicts its books and records, that seeks recovery of amounts for
which it is not liable, that carries insufficient documentation to
assert validity, or that is incorrectly classified. Lehman cited the
breadth of the case — with claims expected to total $830 billion
— as reasoning for its proposal, which it said would ease the
court's burden. 
href='http://bankruptcy.law360.com/print_article/142137'>Read
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name='7'>Reliance Raises Offer for LyondellBasell

India's Reliance Industries Ltd. recently sweetened its offer to take a
controlling stake in LyondellBasell Industries when the chemical maker
exits bankruptcy, but Lyondell appeared unlikely to accept the new terms

and instead plans to stick with a previous deal to hand the company to
senior lenders, the 
Wall Street Journal
class='Apple-converted-space'>  reported today. Reliance's
latest offer pushes its valuation of Lyondell to about $13.5 billion, up

from $12 billion in an initial offer disclosed in November. Under terms
of the proposal made just before Christmas, Reliance would buy some
$2.25 billion in new stock and support a separate $2.8 billion stock
sale to take Lyondell out of bankruptcy. Reliance is seeking to control
Lyondell even if it holds a minority stake in the company. 

href='http://online.wsj.com/article/SB10001424052748704130904574644793534743658.html?mod=WSJ_hps_sections_business'>Read

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Six Flags Looks to Exit Bankruptcy by
March

U.S. theme park operator Six Flags Inc. said yesterday that it could
emerge from bankruptcy as soon as March under an $830 million financing
deal it is arranging with lenders, Reuters reported yesterday. The
company said that it would seek court approval of its proposed
reorganization plan in U.S. Bankruptcy Court in March. Six Flags filed
for bankruptcy last June as fewer people attended its amusement parks,
leaving it struggling with heavy debt. Six Flags' reorganization plan is

supported by a steering committee of its secured creditors and led by
investment firm Avenue Capital Management, which would take control of
the company under the plan. However, the company's official unsecured
creditors’ committee opposes the plan saying it undervalues the
theme park operator. The case is In re  Premier International
Holdings Inc., U.S. Bankruptcy Court, District of Delaware, No.
09-12019. 
href='http://www.reuters.com/article/idUSN0719625920100107'>Read
more.

FirstFed Financial Files for
Bankruptcy

FirstFed Financial Corp. filed for chapter 11 protection less than a
month after its banking unit was shut down by federal regulators,
Reuters reported yesterday. The company listed assets of $4.8 million
and liabilities of $159.7 million in court papers filed on Wednesday.
OneWest Bank, formerly failed mortgage lender IndyMac, bought 39
branches of FirstFed's bank in December. In addition to assuming $4.5
billion in total deposits, OneWest, of Pasadena, Calif., agreed to buy
essentially all of First Federal's assets of $6.1 billion. The case is
In re FirstFed Financial Corp., U.S. Bankruptcy Court, Central
District Of California, No 10-10150. 
href='http://www.reuters.com/article/idUSSGE60608Z20100107'>Read
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name='1'>Analysis: Bonuses at Bank of America Pare Back to 2007
Levels

Bank of America Corp.
investment bankers are likely to get bonuses that are close to 2007
levels as the giant bank tries to stem more defections following its
takeover of Merrill Lynch & Co., the
class='Apple-converted-space'>  Wall Street
Journal  reported
today. The expected payouts reflect Merrill's recovery since the
securities firm's net loss of $27.6 billion in 2008, forcing a rescue by

the U.S. government. Through the first three quarters of last year,
Merrill churned out a profit of $2.2 billion, or about one-third of Bank

of America's overall earnings of $6.5 billion. However, the move could
reignite controversy over Merrill's stratospheric pay culture, which
remained largely intact even as the financial crisis pushed the company
close to collapse. Merrill employees collected $3.6 billion in bonuses
for 2008, triggering regulatory and congressional probes that
contributed to the unexpected retirement of Chief Executive Kenneth
Lewis. Lewis's successor, Brian Moynihan, who took over Jan. 1, is
trying to repair the bank's tarnished image and shore up its
investment-banking unit after several high-profile departures in early
2009 cast doubt on the viability of the Merrill acquisition. 

href='http://online.wsj.com/article/SB10001424052748704854904574644822224423560.html?mod=WSJ_hps_LEFTWhatsNews'>Read

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