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June 15, 2009
size='3'>Details Set for Remake of Financial
Regulations
President Barack Obama is expected Wednesday to
propose the most sweeping reorganization of financial-market supervision
since the 1930s, a revamp that would touch almost every corner of
banking from how mortgages are underwritten to the way exotic financial
instruments are traded, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. At the center of the plan is a move to remake
powers of the Federal Reserve to oversee the biggest financial players,
give the government the power to unwind and break up systemically
important companies -- much like the Federal Deposit Insurance Corp.
does with failed banks -- and create a new regulator for
consumer-oriented financial products, according to people involved in
the process. The plan stops short of the complete consolidation of power
that some lawmakers have advocated. For example, it will allow several
agencies to continue supervising banks. It also won't place specific
limits on the size or scope of financial institutions, but it will make
it much harder for large companies to be so overleveraged that they
threaten the broader economy.
href='http://online.wsj.com/article/SB124502035340513635.html#mod=testMod'>Read
more. (Subscription required.)
Commentary: A New Financial
Foundation
The Obama administration will put forward a plan to
modernize financial regulation and supervision with the goal of creating
a more stable regulatory regime that is flexible and effective in
guarding the system against its own excess, according to an op-ed in
today’s
size='3'>Washington Post by Treasury Secretary
Timothy Geithner and Lawrence Summers, director of the National Economic
Council. In developing its proposals, the administration has focused on
five key problems in our existing regulatory regime. First, existing
regulation focuses on the safety and soundness of individual
institutions but not the stability of the system as a whole. Second, the
structure of the financial system has shifted, with dramatic growth in
financial activity outside the traditional banking system, such as in
the market for asset-backed securities. In theory, securitization should
serve to reduce credit risk by spreading it more widely. However, by
breaking the direct link between borrowers and lenders, securitization
led to an erosion of lending standards resulting in a market failure
that fed the housing boom and deepened the housing bust. Third, our
current regulatory regime does not offer adequate protections to
consumers and investors. Fourth, the federal government does not have
the tools it needs to contain and manage financial crises. Finally, we
live in a globalized world, according to the op-ed, and the actions we
take here at home will have little effect if we fail to raise
international standards along with our own. We will lead the effort to
improve regulation and supervision around the world. By restoring the
public's trust in our financial system, the administration's reforms
will allow the financial system to play its most important function:
transforming the earnings and savings of workers into the loans that
help families buy homes and cars, help parents send kids to college, and
help entrepreneurs build their businesses. Read the
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/14/AR2009061402443_pf.html'>full
op-ed.
Autos
GM, Chrysler Execs
Confronted Again by Lawmakers on Dealer Closings
Lawmakers on Friday pressed Chrysler LLC and General
Motors Corp. executives to justify their decision to close over 2,100
auto dealerships nationwide in the effort to reinvent their ailing
businesses with massive federal financial assistance,
face='Times New Roman'>
size='3'>CongressDaily reported on Friday. GM
CEO Fritz Henderson and Chrysler President James Press defended the
dealership cuts before the House Energy and
Commerce Oversight and Investigations Subcommittee, saying that the
bloated network of dealerships had cost their companies billions of
dollars in lost revenue due to underperformance by individual dealers
and duplicative advertising campaigns. However, dealers argued that they
cost manufacturers no money, and in fact pump the lifeblood for
automakers whose anemic innovation all but crippled the once-robust U.S.
presence in the global car market.
href='http://energycommerce.house.gov/index.php?option=com_content&view=article&id=1665:oversight-and-investigations-subcommittee-announces-hearing-on-auto-dealership-closures&catid=133:subcommittee-on-oversight-and-investigations&Itemid=73'>Click
here to read the prepared testimony.
Auto Suppliers Attempt
Reinvention
The auto-industry meltdown is forcing a transformation
among automotive suppliers, which are slowly diversifying into
more-promising markets such as medical devices and green energy,
the
size='3'>Wall Street Journal reported today.
Many auto suppliers, however, won't be able to make the change. A wave
of bankruptcy filings is already swamping the sector, and some industry
experts predict that as many as 20 percent of the industry's 1,700 core
suppliers could go under this year. That figure doesn't include the far
larger number of smaller businesses further down the supply chain, many
of which are also under financial stress. Moving into new markets often
requires adapting the production process to serve a new type of
customer. Even larger companies are finding the transition difficult.
For example, Delphi recently tried to use its electronics expertise to
make high-efficiency, industrial light bulbs at one of its factories in
Indiana. The Troy, Mich.-based company abandoned that effort a few
months ago before making a single bulb.
href='http://online.wsj.com/article/SB124502111491313723.html#mod=testMod'>Read
more. (Subscription required.)
Against Automakers Stall Out
As Chrysler and General Motors dispose of
billions of dollars in assets and debts, potentially thousands of death
and injury claims will face near insurmountable obstacles to success,
the
size='3'>National Law Journal reported today.
When both auto companies emerge from bankruptcy, they are expected, as
in the terms of Chrysler's sale to Fiat, to do so 'free and clear' of
all pending and future claims and interests in all property sold
pre-bankruptcy. Last week in the U.S. Supreme Court, a group of consumer
organizations and plaintiffs lawyers stepped into what one bankruptcy
expert called the 'murkier waters' of the law's treatment of future tort
claims, or what another described as the 'intersection of bankruptcy law
and due process.' A number of bankruptcy experts, and even Chrysler in
its response to the consumer-plaintiff groups' stay request in the
Supreme Court last week, agree the language of §363 is not entirely
clear. Although the phrase 'interests in property' is not defined in the
code, Chrysler's counsel,
face='Times






New
Roman'
size='3'>Thomas Cullen of Jones Day, said the
bankruptcy court correctly concluded that it extends
beyond
face='Times






New
Roman'
size='3'>in rem interests, such as liens, to
encompass
face='Times New Roman' size='3'>in personam
size='3'>claims, including tort claims.
href='http://www.law.com/jsp/article.jsp?id=1202431448029&src=EMC-Email&et=editorial&bu=Law.com&pt=LAWCOM%20Newswire&cn=NW_20090615&kw=Plaintiff%20Suits%20Against%20Automakers%20Stall%20Out'>Read
more.
Judge Approves Sale of
Tropicana Casino
A bankruptcy judge has approved the sale of Tropicana
Atlantic City Casino and Resort to investor Carl Icahn and a group
prepetition lenders in which the lenders agreed to swap $200 million in
debt owed to them by the casino's bankrupt parent company in exchange
for ownership of the property,
face='Times






New
Roman'
size='3'>Bankruptcy Law360 reported on Friday.
Bankruptcy Judge
face='Times





New
Roman'
size='3'>Judith H. Wizmur on Friday approved
the sale by Tropicana's owner, Adamar of New Jersey Inc., and its wholly
owned subsidiary, Manchester Mall Inc., to the lenders, according to
Tropicana's conservator, retired New Jersey Supreme Court Justice Gary
Stein.The approval, which still requires an official nod by the New
Jersey Casino Control Commission, follows a May 29 asset sale in which
the Icahn-led group of lenders was the lead — and only —
bidder for the casino.
href='http://bankruptcy.law360.com/articles/106267'>Read
more. (Subscription required.)
Theme park operator Six Flags declared bankruptcy
after failing to reach a deal with lenders on $2.4 billion in debt,
the
size='3'>Washington Post reported yesterday.
The bankruptcy for the 48-year-old firm follows a wild ride in recent
years. Washington Redskins owner Daniel Snyder took control of the
company after a bitter proxy fight in 2005. The company doubled its
income from corporate sponsorship and from season ticket sales, and it
added themed attractions based on the Looney Tunes characters, the
Justice League of America, skateboarding legend Tony Hawk, the Wiggles
and Thomas the Tank Engine. However, its summer 2007 attendance was
slammed by bad weather in Georgia and Texas, and by an accident on a
ride at its park in Kentucky. The same year, it sold seven of its theme
parks to a Jacksonville, Fla., company for $312 million in an effort to
improve its balance sheet.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/13/AR2009061300802_pf.html'>Read
more.
Eighth Circuit Reverses
Ruling on Sale of Farmland Plant
The U.S. Court of Appeals for the Eighth Circuit has
ruled that a bankruptcy court had the jurisdiction to dismiss a
complaint seeking billions of dollars filed by an unsuccessful bidder
for a fertilizer plant once owned by bankrupt farmer-owned cooperative
Farmland Industries Inc.,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. The appeals court on Wednesday reversed a
finding by the Bankruptcy Appellate Panel for the Eighth Circuit that
the U.S. Bankruptcy Court for the Western District of Missouri, which
had dismissed the complaint by GAF Holdings LLC for failure to state a
claim, lacked jurisdiction over the suit. The Eighth Circuit remanded
the case to the BAP to determine whether the bankruptcy court properly
dismissed the complaint.
href='http://bankruptcy.law360.com/articles/106240'>Read
more. (Subscription required.)
Insurance Giant AIG Takes
Former Chief to Court
The latest act in the drama of the American
International Group opens today when the ailing insurance giant takes
former CEO Maurice R. Greenberg to court, accusing him of plundering a
trust that it says was set up to pay top performers, the
face='Times New Roman'>New York
Times reported today. AIG contends that
Greenberg unlawfully took $4.3 billion in stock in 2005, the year he was
forced out as chief executive. Greenberg and his lawyers say that those
AIG shares — owned by Starr International, a privately held
company, of which he is chairman — were not held in a trust at
all. As Starr’s chairman, they say that Greenberg had the
authority to sell the shares and invest the proceeds in new offshore
insurance businesses and in a new charitable arm.
href='http://www.nytimes.com/2009/06/15/business/15aig.html?_r=1&ref=business&pagewanted=print'>Read
more.
Bally Reaches Deal with
Lenders to Exit Chapter 11
Health-club operator Bally Total Fitness Holding Corp
has reached a deal with its lenders on a restructuring plan to help it
exit from bankruptcy, Reuters reported today. Bally's senior lenders,
including JPMorgan Chase & Co., have agreed to cut the health-club
operator's debt by at least $660 million, court papers show. Under the
agreement, Bally's lenders will get 94 percent of the restructured
company's equity, court papers show.The case is
face='Times New Roman' size='3'>In re Bally Total Fitness of Greater New
York Inc., et al, U.S. Bankruptcy Court,
Southern District of New York, No. 08-14818.
href='http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSBNG5809320090615'>Read
more.
Former Shareholder's
Lawsuit Adds New Wrinkle to Heller Bankruptcy
In a move that may do nothing more than add a layer of
complication and delay, a former Heller shareholder has forced nine
corporations that made up Heller Ehrman LLP into bankruptcy, including
Heller Ehrman Hong Kong, Heller Ehrman Europe and corporations in
various states like California which technically employed Heller's
partners,
size='3'>The Recorder reported today. These
corporations were also the target of the class action brought by
Heller's former employees that was winding through civil court before
being dismissed Wednesday. The request to dismiss was submitted before
the corporations were forced into bankruptcy, according to Steve Blum of
Blum Collins, which is representing the employees. The employee suit
will be folded into one that's already under the jurisdiction of the
bankruptcy court, he said.
href='http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1202431452564'>Read
more.
Vedanta to Raise Bid in
Asarco Bankruptcy
The advantage in the battle to take copper giant
Asarco LLC out of bankruptcy is expected to shift this week as Vedanta
Resources PLC increases its bid, countering an offer filed by Mexican
mining conglomerate Grupo Mexico SAB, the
face='Times






New
Roman'
size='3'>Wall Street Journal reported today.
An amended debtor's filing that may be submitted as soon as today will
show a unit of Vedanta, a London-based mining conglomerate with the bulk
of its assets in India, will increase to $770 million from $600 million
the note portion of its offer -- valued at between $2 billion and $3
billion including all liabilities. The Vedanta unit, Sterlite
Industries, will also improve its terms of payment to a crucial class of
creditors: asbestos claimants, who had been seeking a settlement of
personal-injury claims from damages arising from Asarco's mining,
smelting and refining operations across the American West since
1899.
href='http://online.wsj.com/article/SB124499998232213265.html'>Read
more. (Subscription required.)
In related news, Bankruptcy Judge
face='Times New Roman'>Richard
S. Schmidt has allowed bankrupt copper mining
company Asarco LLC to settle disputes regarding future remediation costs
brought by state and federal environmental regulators,
size='3'>Bankruptcy Law360 reported on Friday.
Judge Schmidt on Thursday approved the settlement between Asarco, the
Idaho Department of Lands, the Idaho Department of Environmental Quality
and the U.S. government over the Triumph Mine Tailing Piles Site.
According to a motion by Asarco requesting approval for the settlement,
Asarco has agreed to allow a general unsecured claim totaling $1.7
million to be paid to the Department of Environmental Quality in
exchange for conveying the tract at issue by a quit-claim deed to the
state agency. As a condition of the settlement, the state agency and the
U.S. Environmental Protection Agency have agreed not to sue or assert
further claims against Asarco over the cleanup, on confirmation of a
plan of reorganization for the mining company, the motion said.
href='http://bankruptcy.law360.com/articles/106109'>Read more.
(Subscription required.)
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