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April 28, 2008
Committees to Markup Bills Focusing on Bankruptcy Relief for Active
Duty Military, Housing Stimulus Package
The House Judiciary
Committee on Wednesday will mark up H.R. 4044, a bill that would exempt
military reservists called to active duty and certain others from
application of the means test in chapter 7,
size='3'>CongressDaily reported today. Also on
Wednesday, the House Financial Services Committee will finish its markup
of legislation that would allow the Federal Housing Administration to
refinance up to $300 billion in new guarantees for subprime loans at
risk of default. The panel began debate on the bill last week, and the
measure will be part of the housing-stimulus package that will be
considered on the House floor the week of May 5.
Loan
Industry Fighting Rules on Mortgages
The mortgage industry,
facing the prospect of tougher regulations for its central role in the
housing crisis, has begun an intensive campaign to fight back,
the New York
Times reported today. As the Federal Reserve
completes work on rules to root out abuses by lenders, its plan has run
into criticism from bankers, mortgage brokers and other parts of the
housing industry. One common industry criticism is that at a time of
tight credit, tighter rules could make many mortgages more expensive by
creating more paperwork and potentially exposing lenders to more
lawsuits. Four months ago, the Fed proposed the new standards on exotic
mortgages and high-cost loans for people with weak credit. The
Fed’s proposals came after it was criticized sharply as a captive
of the mortgage lending industry that had failed over many years to
supervise it adequately. Proposals are pending in Congress on mortgage
standards, but it is not clear whether they will be adopted this year.
The Fed has its own authority under housing and lending laws to adopt
mortgage standards.
href='http://www.nytimes.com/2008/04/28/business/28mortgage.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='3'>Commentary: GSE Reform Should Center on Capital
Base
As Congress tackles the
issue of reforming government-sponsored enterprises (GSEs), proposals
should provide solid assurances that GSEs maintain a sufficient capital
base, according to an editorial in today’s
face='Times New Roman' size='3'>Washington Post
size='3'>. Under current law, Fannie and Freddie are required to hold a
reserve fund equal to 2.5 percent of their assets that is only half the
ratio required of commercial banks. That layer of protection reflects
the implicit guarantee of a federal bailout that the GSEs enjoy. (The
GSEs have held somewhat more in reserve in recent months due to a
temporary agreement with their regulator.) Given the immense size of the
GSEs -- Fannie Mae and Freddie Mac currently hold or guarantee $5
trillion worth of mortgages, about 80 percent of the market -- it would
be better if they could rely more on their own resources. At the moment,
the firms' losses are significant: $3.6 billion in the fourth quarter of
2007 for Fannie and $2.5 billion for Freddie. Losses could grow as
Fannie and Freddie take on more risk to help prop up the housing
market.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/04/27/AR2008042701567_pf.html'>Read
more.
name='4'>Legislation Targets Financial Scammers that Victimize the
Elderly
As fraud against seniors
rose nearly 40 percent last year, according to the North American
Securities Administrators Assn., Congress recently introduced
legislation that aims to curtail bogus credentials used to snare elderly
clients, the Los Angeles
Times reported yesterday. The Senior Investor
Protection bill would provide funding for states to monitor the
credentials of people claiming to be senior or retirement specialists
and provide funds to investigate and prosecute advisors who use
fraudulent or misleading professional designations to get clients. The
bill looks to bar advisors from using credentials that have not been
verified by an accredited institution, such as a college or university,
or by a nationally recognized accrediting institution.
href='http://www.latimes.com/business/la-fi-perfin27apr27,0,1169477,print.column'>Read
more.
Airlines
name='5'>Eos Airlines Files for Bankruptcy
Eos Airlines, which offers
business class flights between New York and London, said that it has
filed for chapter 11 protection, Reuters reported yesterday. Eos, the
latest carrier to fail in the face of record fuel prices and a softening
economy, said that it would stop operations today and cut most of its
work force. Eos filed for bankruptcy protection yesterday in the U.S.
Bankruptcy Court in the Southern District of New York.
name='6'>Judge Approves
w:st='on'>
size='3'>Sale
Contract Services Division
Bankruptcy Judge
Randall Newsome
approved the sale of Aloha Airlines’ contract
services division to Los Angeles-based Pacific Air Cargo,
Bankruptcy Law360
reported on Friday. The $2 million deal is set to close
May 5, provided there are no objections from Aloha's creditors. The
1,000-employee contract services division handles baggage, ticket agents
and customer service for United Airlines and carriers that operate out
of
size='3'>Hawaii's
airports. Pacific Air Cargo operates five cargo flights a week
between
size='3'>Honolulu
w:st='on'>Los
Angeles
facility at
face='Times New Roman' size='3'>Honolulu
size='3'>International
w:st='on'>
size='3'>Airport
year. An auction for Aloha's cargo division, its most profitable unit,
has been extended into next week.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54331'>Read
more. (Registration required.)
name='7'>Continental Abandons Merger Talks with
United
Continental Airlines said
yesterday that it had abandoned merger talks with United Airlines and
was planning to remain an independent carrier, a blow to lengthy efforts
by United to find a merger partner, the
size='3'>New York Times reported today.
Continental’s move was a stunning development for United’s
parent, UAL, which had been negotiating in expectation of reaching a
deal by late this week. Continental decided to drop the discussions
after UAL announced worse-than-expected earnings, which sent shares
falling last week. On Tuesday, United said it lost $537 million during
the first quarter due to sharply higher costs for jet fuel. The
airline, which spent more than three years under bankruptcy protection
earlier this decade, said it would cut flights and eliminate 1,000 more
jobs. Directors at Continental, who met Sunday afternoon, feared that a
merger with United could put their company in peril.
href='http://www.nytimes.com/2008/04/28/business/28air.html?ref=business&pagewanted=print'>Read
more.
name='8'>Former Le-Nature Director Pleads Guilty to
Fraud
Tammy Andreycak, the
former director of accounting for collapsed bottler Le-Nature Inc., pled
guilty Thursday to bank and wire fraud, conspiracy and aiding in the
preparation of false income tax returns in connection with an alleged
massive scheme of deception,
size='3'>Bankruptcy Law360 reported on Friday.
Prosecutors said that Andreycak allegedly created false accounting
records at the direction of Le-Nature's CEO Gregory J. Podlucky, who has
not been charged. Andreycak and Podlucky allegedly had a computer only
accessible to them to generate periodic general ledgers that became the
basis for the company's balance sheets and income statements, all of
which “grossly overstated” the gross receipts and assets of
the company, court documents said.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54313'>Read
more. (Registration required.)
Object to Fabrikant Liquidation Plan
A group of lenders has objected
to M. Fabrikant & Sons Inc.'s latest proposed chapter
face='Times New Roman'>11 liquidation plan, saying that
if approved, it would prejudge a dispute between the lenders and the
company's creditors,
size='3'>Bankruptcy Law360 reported on Friday.
The objection was filed on Tuesday by JPMorgan Chase Bank NA, ABN Amro
Bank NV, Bank of America NA, HSBC Bank
w:st='on'>
size='3'>USA
others. The banks said that the plan filed jointly by Fabrikant and its
creditors' committee on April 16 improperly addressed the lender's right
to recover attorneys' fees in an adversary proceeding brought by the
creditors. That should be decided as part of the adversary proceeding
itself, the objection said.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54282'>Read
more. (Registration required.)
w:st='on'>
name='10'>Calpers-Linked
w:st='on'>
size='3'> Land
face='Times New Roman' size='3'> Partnership Gets Default
Notice
A large
w:st='on'>
size='3'>California land partnership
involving one of the largest
w:st='on'>
size='3'>U.S.
size='3'>pension funds has received a notice of default on a $1 billion
loan after failing to meet certain terms of its lenders, the
Wall Street Journal
reported on Saturday. LandSource Communities Development
LLC, a partnership that involves the California Public Employees'
Retirement System, received the default notice Tuesday amid talks to
restructure $1.24 billion of debt. The partnership, which owns 15,000
acres in
size='3'>Southern California
received an extension to meet its current loan terms, including a
required payment, but the deadline expired on April 16. The default
notice applies to about $1 billlion of the total debt.
href='http://online.wsj.com/article_print/SB120916479361446151.html'>Read
more. (Registration required.)