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April 23, 2009
Credit Union
Group Drops Support for Cramdown Compromise
The National Association of
Federal Credit Unions (NAFCU) has come out against a potential
compromise on legislation that would give bankruptcy judges greater
power to modify home mortgages,
size='3'>CongressDaily reported yesterday.
NAFCU's board has voted unanimously to oppose a broad-based cramdown
measure being negotiated by Senate Majority Whip Dick Durbin (D-Ill.)
with lobbyists from the Credit Union National Association, JPMorgan
Chase, Wells Fargo, Bank of America and with consumer groups led by the
Center for Responsible Lending. In a letter to Durbin, NAFCU President
Fred Becker cited unanswered questions about the proposal, such as how
to resolve second liens and private mortgage insurance contracts under
expanded bankruptcy authority. Becker added that NAFCU would like to
limit cramdown to subprime and nontraditional loans, a proposal similar
to a measure approved by the House Judiciary Committee in 2007 that
later stalled. Sen. Charles Schumer (D-N.Y.) has said that he would not
accept such limitations because the housing crisis has affected even
prime mortgages, while at-risk borrowers have lost their
jobs.
Credit
Cardholder Bill of Rights Clears House Committee
The House Financial Services
Committee yesterday approved H.R. 627 to protect consumers from what
lawmakers called the abusive interest rate increases by credit card
companies, sending the bill to the full House for a vote, possibly next
week, CongressDaily
reported today. The “Credit Cardholder Bill of
Rights” Act would prohibit issuers from imposing higher interest
rates retroactively to existing balances, require a 45-day notice of any
rate increase and prohibit the use of the universal default that issuers
use to raise interest rates on a consumer who was late in making a
payment to a different creditor. The committee approved the bill,
sponsored by Rep. Carolyn Maloney (D-N.Y.), on a 48-19 vote just as
President Obama was preparing to meet with credit card industry
executives at the White House today. Obama is expected to seek his own
changes in the House bill, mainly to increase disclosure requirements
for credit card issuers.
href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h627ih.txt.pdf'>Click
here to read the text of H.R. 627.
Senate
Judiciary Chair Calls for Quick Action on Anti-Fraud Bill; House Panel
to Examine Mortgage Reforms
Senate Judiciary Chairman Patrick
Leahy (D-Vt.) urged lawmakers yesterday to vote swiftly on legislation
he has co-sponsored with Senate Finance ranking member Charles Grassley
(R-Iowa) authorizing $165 million in FY10 and FY11 to bolster efforts by
the Justice Department and FBI to fight mortgage and financial
fraud, CongressDaily
reported yesterday. The measure would fund hundreds of
new agents and prosecutors as well as expand the definition of
'financial institution' in federal fraud statutes to include
mortgage-lending businesses that are not directly regulated or insured
by the government. Leahy said penalties should include jail time,
arguing that fines alone are considered 'part of the cost of doing
business.'
In related news, the House
Financial Services Committee will hold a hearing today to examine
H.R. 1728, the “Mortgage Reform and Anti-Predatory
Lending Act of 2009.' The hearing will take place at 10 a.m. ET in room
2128 in the Rayburn House Office Building.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr041609.shtml'>Click
here to view the witnesses and a link to the live Webcast of
the hearing.
Autos
Michigan
Attorney General Looks to Keep Potential Automaker Bankruptcies in
State
Michigan Attorney General Mike
Cox urged that if General Motors and Chrysler have to file for
bankruptcy, then they should file in their home state rather than in
Delaware or New York, Automotive
News reported yesterday. Cox sent letters
yesterday to GM CEO Fritz Henderson and Chrysler CEO Bob Nardelli urging
them to meet with him and his staff before any chapter 11 filing. A
filing outside Michigan “would inconvenience and unfairly impact
the vast majority of your creditors who are located in Michigan,”
Cox wrote. “The cost for many of these creditors to participate in
a New York or Delaware bankruptcy is overwhelming and would undoubtedly
lead to unjust results.”
href='http://www.abiworld.org/e-news/CoxLetters4-22-09.pdf'>Click
here to read the letters.
In related news, GM CFO Ray Young
toughened the company's message to bondholders, saying yesterday that
the company doesn't plan to pay off $1 billion in debt due June 1 and
instead will rely on an exchange for shares or bankruptcy court
protection to clear its balance sheet, the
face='Cambria' size='3'>Wall Street Journal
size='3'>reported today. By taking a tougher public stance on
bondholders, GM executives are laying the groundwork for what promises
to be a debt-for-equity offer that they expect to launch by next week.
The carmaker will offer to exchange $28 billion in unsecured debt for
company stock that could be rendered worthless without a significant
turnaround. GM faces a June 1 deadline from the Treasury to slash its
debt and gain concessions from the UAW or face possible
bankruptcy.
href='http://online.wsj.com/article/SB124041946006244177.html'>Read
more. (Subscription required.)
In addition, the
face='Cambria' size='3'>Wall Street Journal
size='3'>reports that GM plans to idle most of its plants for about two
months this summer as the company races to cut costs and production to
keep pace with sinking demand. GM is saddled with a 113-day supply of
cars and a 123-day supply of trucks sitting unsold on dealer lots as of
March 31, according to Ward's
Automotive Reports.
Banks Get
New Offer for Debt in Chrysler
The U.S. Treasury made a
counter-offer to Chrysler lenders that rejected an earlier Treasury bid
to slash the carmaker's debt, the
size='3'>Wall Street Journal reported today.
The Treasury now proposes that the banks and other lenders accept as
payment 22 percent of the $6.9 billion they are owed plus a 5 percent
equity stake in Chrysler. That's up from an earlier Treasury proposal
that the banks and other lenders accept 15 percent of what Chrysler owes
them and receive no Chrysler stock. The lenders, which include Citigroup
Inc. and JPMorgan Chase & Co., rejected that offer outright and
instead proposed Monday that they get paid about 65 percent of the debt,
or about $4.5 billion. In addition, the lenders sought a 40 percent
Chrysler stake and a seat on the company's board. The new government
offer leaves the U.S. and Chrysler lenders at least $3 billion apart
with one week left before an April 30 Treasury deadline to determine the
href='http://online.wsj.com/article/SB124044878863646087.html#mod=testMod'>Read
more. (Subscription required.)
Financial Services
House
Financial Services Chair Slows Market Regulation Bill
Slowing a rapid-fire attempt to
revamp regulation of financial markets, House Financial Services
Committee Chairman Barney Frank (D-Mass.) said that he no longer plans
to expedite a bill that would allow the government to place large
financial companies into receivership, the
face='Cambria' size='3'>Wall Street Journal
size='3'>reported today. Rep. Frank said that the complexity of the bill
and the fact that his Senate counterparts were poised to move more
slowly prompted him to instead decide to package the measure with
broader legislation to create a new regulator to oversee systemic risks
to the economy later in the year. Frank, a key architect of the coming
regulatory overhaul, had hoped to pass a version of the legislation
through his committee next month to give the government the power to
place large financial companies such as American International Group
Inc. into receivership. President Barack Obama and Treasury Secretary
Timothy Geithner personally lobbied lawmakers last month to move the
provision quickly, arguing that they needed these powers to respond to a
fast-moving financial market crisis aggressively.
href='http://online.wsj.com/article/SB124045153751646097.html'>Read
more. (Subscription required.)
to Meet with Banks Tomorrow on “Stress”
Tests
Federal regulators have scheduled
face-to-face meetings tomorrow with leaders of the nation’s
biggest banks to reveal the preliminary results of “stress
tests,” the New York
Times reported
face='Cambria' size='3'>today. Officials plan to meet separately with
top executives from each of the 19 major banks at the offices of the
Federal Reserve Bank in their district and the banks will then have
until Tuesday to dispute any of the findings. Federal officials are
preparing to disclose the final results on May 4, and they expect to
rely on the banks to release findings specific to their
institution.
href='http://www.nytimes.com/2009/04/23/business/economy/23stress.html?_r=1&ref=business&pagewanted=print'>Read
more.
Bank of
America CEO Testifies that U.S. Urged Silence on Merrill
Deal
Bank of America CEO Kenneth Lewis
testified yesterday that Federal Reserve Chairman Ben Bernanke and
then-Treasury Department Secretary Henry Paulson pressured Bank of
America Corp. to not discuss its increasingly troubled plan to buy
Merrill Lynch & Co., a deal that later triggered a government
bailout of BofA, the Wall Street
Journal reported today. Lewis, testifying
under oath before New York Attorney General Andrew Cuomo in February,
told prosecutors that he believed Paulson and Bernanke were instructing
him to keep silent about deepening financial difficulties at Merrill,
the struggling brokerage giant. Lewis said that the government wanted
him to keep quiet while the two sides negotiated government funding to
help BofA absorb Merrill and its huge losses.
href='http://online.wsj.com/article/SB124045610029046349.html#mod=testMod'>Read
more. (Subscription required.)
Court Approval for Severance and Bonus Payments
Tribune Co. asked a bankruptcy
court yesterday to authorize severance payments to workers laid off
before the media company's chapter 11 filing in December and to pay
bonuses to about 700 employees, Reuters reported yesterday. In two
motions filed with the U.S. Bankruptcy Court in Delaware, the company
said the bonus payments would amount to about $13 million. The severance
payments, which were halted by Tribune's bankruptcy filing, would be
about $2.5 million. Tribune's top 10 executives, including CEO Sam Zell,
would not be eligible for the bonuses. The motions come on the same day
that the Chicago
Tribune, the company's hometown paper, said it
would cut 53 newsroom positions, or about 11 percent of its news staff,
to save money and refocus its efforts on local news coverage.
href='http://www.reuters.com/article/bondsNews/idUSN2225319620090422'>Read
more.
Citing
Labor Shortages, Produce Company Files for Chapter 11
Greenhouse tomatoes and cucumbers
producer EuroFresh Inc. on Tuesday filed for chapter 11 protection,
citing the need to restructure following steady revenue losses from
diseased tomato crops and labor shortages,
face='Cambria' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The company, which markets its products
directly to major U.S. food retailers under the labels “Eurofresh
Farms” and “Sweet Star,” said that it expected to
submit its reorganization plan in May and complete its financial
reorganization during the third quarter of 2009. The debtors' petitions
listed assets between $50 and $100 million and liabilities of
approximately $300 million in the form of both secured and unsecured
debt. The case is In re
Eurofresh Inc. et al., case number 09-07970,
in the U.S. Bankruptcy Court for the District of Arizona.
href='http://bankruptcy.law360.com/articles/98023'>Read
more. (Subscription required.)
New York
Takes Aim at Pension Agents
New York state said that its
public pension fund, one of the nation's largest, would ban the use of
middlemen to help private-equity funds and other investors secure its
business, the Wall Street
Journal reported today. New York’s
recent actions center on whether government officials and these
middlemen engaged in a scheme to extract illegal payments from firms
trying to woo state business. 'It is unacceptable that a placement agent
have any influence in the investments of the state pension fund,' said
New York Gov. David A. Paterson (D). The size of New York's fund -- it
has $122 billion in assets -- and the state's status as home to the
nation's financial industry could lead other states to follow
suit.
href='http://query.nytimes.com/search/sitesearch?query=bankruptcy&x=0&y=0&type=nyt'>Read
more. (Subscription required).
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