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August 20, 2008
American Home Mortgage to Pay Fraction
of Bankruptcy Claims
American Home Mortgage Investment Corp., which was among the largest
U.S. home loan providers before seeking bankruptcy protection a year
ago, said that it will pay unsecured creditors no more than 5.9 cents on
the dollar as it liquidates assets, Reuters reported yesterday. In a
disclosure statement filed Friday, the company said that many unsecured
creditors will recover zero to 2.2 cents on the dollar on their claims.
American Home and seven affiliates estimated they had $210 million of
cash as of June 30, several court filings show.
href='http://news.yahoo.com/s/nm/20080819/bs_nm/americanhomemortgage_bankruptcy_dc_1&printer=1;_ylt=AhHqEctdQ17_chaTIUPjPi6b.HQA'>Read
more.
Commentary: Congress Needs to
Act to Stunt Spiraling Financial Crisis
As news on the financial crisis gripping the United States is pointing
to signs of worse troubles ahead, Congress must take several steps now
to avert additional distress, according to an editorial in today's
New York Times. The next economic stimulus package should focus
on actions that are known to yield big economic benefits: bolstered food
stamps, which rapidly boost consumption, and aid to states and cities so
they can continue to provide essential services. Congress should be
ready to reform the bankruptcy law so that homeowners can have their
mortgages modified under court protection. The Bush administration and
federal regulators also need to develop a framework for resolving future
financial failures before they occur.
href='http://www.nytimes.com/2008/08/20/opinion/20wed1.html?ref=opinion&pagewanted=print'>Click
here to read the full editorial.
Higher Costs Taking a Toll on
Businesses
Data released yesterday by the Labor Department showed that prices for
goods purchased by American businesses surged more than expected in July
and have jumped by nearly 10 percent over the last year - the sharpest
increase since 1981, the New York Times reported today.
Producer prices - those charged to businesses for wholesale goods -
increased by 1.2 percent in July, or roughly twice as fast as most
economists had forecast. Core producer prices - which do not include
food and energy - rose by 3.5 percent between July of this year and July
2007, the largest annual increase since 1991.
href='http://www.nytimes.com/2008/08/20/business/economy/20econ.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Some Investors See Bailout of Housing
Giants as Inevitable
Financial conditions are continuing to worsen at Fannie Mae and Freddie
Mac, leading some investors to prepare for a government bailout of the
housing giants even as the Treasury Department and the companies say
such government intervention will not be necessary, the New York
Times reported today. Stock prices of both companies fell again on
Tuesday, and some large overseas investors slowed their purchases of
securities issued by the companies. Share prices at both Fannie and
Freddie have plummeted by more than 24 percent in the last two days, and
more than 85 percent since December. Freddie Mac yesterday was forced to
pay its steepest borrowing premium in 10 years.
href='http://www.nytimes.com/2008/08/20/business/20fannie.html?ref=business&pagewanted=print'>Read
more.
Air Purifier Plaintiffs Seek $767
Million from Sharper Image
The plaintiffs in two putative class actions over the Ionic Breeze air
purifier that helped drive Sharper Image Corp. into bankruptcy have
asked a court to certify the class for the purpose of seeking $767
million in damages, Bankruptcy Law360 reported yesterday. One
of the product liability suits over the air purifier sold by the gadget
retailer was filed in 2005 in U.S. District Court for the Southern
District of Florida; the other was filed in 2004 in state court in
California. Both were stayed after Sharper Image filed for bankruptcy in
February. The California class has been certified by the courts to
represent all those who purchased an Ionic Breeze after 1999; the
federal class action has not yet been certified.
href='http://bankruptcy.law360.com/articles/66575'>Read more.
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Weekly U.S. Mortgage Applications Fall to Lowest Levels in
Nearly 8 Years
Mortgage applications in the United States declined last week to the
lowest level since December 2000 as fewer homeowners sought to refinance
their mortgages, Bloomberg News reported today. The Mortgage Bankers
Association's index of applications to buy a home or refinance a loan
dropped 1.5 percent from the prior week to 419.3. The group's purchase
index fell 0.4 percent and its refinancing gauge slumped 3.7 percent.
Higher borrowing costs, stricter loan standards and falling property
values are preventing owners from tapping into home equity, raising the
risk that consumer spending will slow even more.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aNEDnW3ffyr0&refer=home'>Read
more.
Cerberus Giving Executives Time to Fix
Chrysler
Top Chrysler executives say that they are determined to fix the company,
and the company's owner, Cerberus Capital Management, is willing to give
them the chance, the New York Times reported today. With the
problems plaguing Chrysler and the rest of the American auto industry,
there has been a lot of speculation about whether Cerberus would decide
it had made an ill-timed bet and sell the company. Cerberus executives
say that they have a decade-long horizon for making their $7.4 billion
investment pay off. Chrysler executives are looking to a plan that
includes a wave of new vehicle offerings beginning in 2010 to help spur
another comeback for the company.
href='http://www.nytimes.com/2008/08/20/business/20chrysler.html?ref=business&pagewanted=print'>Read
more.
Hedge Fund Founder Ordered to Pay $300
Million
A federal court in Philadelphia has ordered Paul Eustace, the former
president and founder of the Philadelphia Alternative Asset Management
Co., to pay nearly $300 million for defrauding clients, the Associated
Press reported today. The government accused Eustace of creating false
account statements, raising management fees based on false profits and
transferring clients' money to himself. The government said Eustace
stole $200 million from clients from 2001 through 2005. The
Commodity Futures Trading Commission said yesterday that Eustace was
ordered to pay $279 million in restitution and a $12 million civil
penalty.
href='http://www.nytimes.com/2008/08/20/business/20hedge.html?ref=business&pagewanted=print'>Read
more.