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September 21, 2004
Fed Expected to Boost Rates Again
The Federal Reserve, wanting to keep inflation at bay, is expected to
boost short-term interest rates for a third time this year today, a move
that would come in the final stretch of the presidential campaign, the
Associated Press reported. Private economists have mixed opinions on
whether the economy is still working through or has already emerged from
its late spring blues, but most believe the economy is in good enough
shape for the Fed to raise the rates again. Economists anticipate Fed
policy-makers will increase the target for the federal funds rate from
1.50 percent to 1.75 percent. Such an increase would mean that
commercial banks’ prime lending rate, a benchmark for many
short-term consumer and business loans, would climb from 4.50 percent to
4.75 percent, the newswire reported.
Senate Leaders Continue Asbestos Talks, but Insurers Are
Pessimistic
Insurers aren’t holding their breath for asbestos-reform
legislation to pass this year, although leaders in the U.S. Senate still
are exchanging proposals for an asbestos trust fund bill. Senate
Minority Leader Tom Daschle (D-S.D.), representing labor and trial
lawyers, has made some concessions in his latest counter-proposal to
Republican Leader Bill Frist of Tennessee. Daschle accepted a $140
billion trust proposed by Frist, which is $1 billion less than Daschle
had sought. The $140 billion also includes $4 billion from bankruptcy
agreements, while in the past, Daschle treated bankruptcy funds
separately. Daschle also calls for $42 million be paid in the first
three years, rather than over a three-to-five-year period.
There are other provisions Daschle agreed to in a Sept. 15 letter to
Frist, but what’s still missing is an agreement on insurer
allocation—who would pay how much into the national asbestos trust
fund, the newswire reported. Insurers—holding firm for more than a
year that their contribution shouldn’t exceed $46
billion—haven’t been discussing this matter because it
doesn’t appear to them that a bill will get passed this year.
“There is very little, if any chance, that an asbestos trust fund
bill is going to move forward in this Congress,” said Julie
Rochman, a senior vice president with the American Insurance
Association. “We would still like to see reform, but we’re
realistic.” Read the full article at
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Lawmakers Press United to Keep Retirement Plan
More than 100 lawmakers have signed a letter being sent to United
Airlines’ chief in opposition to its plan to terminate its pension
plans to survive bankruptcy, the Associated Press reported. “While
we understand that the airline faces difficult challenges in emerging
from bankruptcy, the employees and retirees have already agreed to job
reductions and significant concessions in their wages and
benefits,” said the letter to Chief Executive Glenn Tilton.
“We strongly believe it is unfair to insist that their retirement
security be sacrificed as well.” The letter by Reps. George Miller
(D-Calif.) and Jan Schakowsky (D-Ill.), has attracted signatures from
104 House members and eight senators, including two Republicans. It will
be sent later this week, the newswire reported.
Jury Nearly Set for Enron Criminal Trial
Opening arguments in the first criminal case against former Enron
Corp. employees are set to begin after a federal court spent Monday to
find an impartial jury, Reuters reported. In comments to the panel of
150 people, U.S. District Court Judge Ewing Werlein Jr. acknowledged the
publicity that had swirled around the energy company that collapsed in
scandal into bankruptcy in December 2001. The case against the two
ex-Enron workers and four former employees from Wall Street giant
Merrill Lynch & Co Inc concerns a 1999 deal to sell power-generating
barges in Nigeria, the newswire reported.
Tucson Catholic Diocese Files for Bankruptcy
The Roman Catholic Diocese of Tucson, faced with possible
multimillion-dollar legal verdicts from sex abuse cases pending against
its priests, filed for bankruptcy protection on Monday, church officials
said, Reuters reported. Saying the decision was the best option, Tucson
Bishop Gerald Kinacas said church attorneys filed for chapter 11
reorganization Monday morning in the U.S. Bankruptcy Court in Tucson,
Ariz. The bankruptcy filing by the 350,000-member institution follows a
July bankruptcy declaration by the Archdiocese of Portland. Critics have
challenged the chapter 11 filings as a ploy by the church to hide assets
and avoid liability for decades of abuse by priests.
Delta and Pilots Reach Pact in Early Retirement Dispute
Delta Air Lines and its pilots’ union reached a tentative
agreement yesterday on a plan to avoid service disruptions that could
result from a flood of early pilot retirements, a situation the
struggling airline warned could put it closer to bankruptcy, the
New York Times reported. As part of the agreement, Delta
promised the union it would not terminate the pilots’ pension plan
before Feb. 1, even if the airline files for chapter 11 protection, the
Air Line Pilots Association said.
Creditors’ Committee Appointed for US Airways
US Airways’ four major unions and nine of its largest creditors
were appointed yesterday to a creditors’ committee, which will
play a critical role in the carrier’s reorganization, the
Washington Post reported. U.S. Trustee W. Clarkson McDow
Jr. appointed the Air Line Pilots Association, the International
Association of Machinists and Aerospace Workers, the Communication
Workers of America, and the Association of Flight Attendants. Several
aircraft and engine manufacturers, including Airbus North America
Holdings Inc., General Electric Co. and Bombardier Inc., also were
appointed. The committee will include the Pension Benefit Guaranty
Corp., the federal agency that took over the airline’s pilots
pension plan during its first bankruptcy nearly two years ago. Also on
the committee is Electronic Data Systems Corp., Sabre Holdings Corp.,
U.S. Bank, Wachovia Corp. and the airline’s food supplier LSG
Skychefs.
MCI Hires Advisers for Likely Sale Bid
Just five months after emerging from bankruptcy protection, MCI Inc.
has hired investment and legal advisers to solicit potential buyers for
the telecommunications giant, sources close to the company confirmed,
the Washington Post reported. MCI declined to comment
yesterday on its decision to hire advisers to guide it through a
possible sale. The company has already attracted one prospective buyer,
Leucadia National Corp., which informed regulators in July that it may
acquire more than 50 percent of MCI’s stock.
Investor raises stake in Global Crossing
Texas billionaire Richard Rainwater has increased his stake in
telecommunications firm Global Crossing Ltd. to 8.1 percent, according
to a filing with federal regulators on Tuesday, Reuters reported. The
report came hours after Global Crossing said it was expecting to reissue
its financial reports for 2001 through 2003 by Oct. 8, and had asked the
Nasdaq for an extension to its delisting process.
Armstrong Gets Another Extension from Bankruptcy Court
A bankruptcy court judge agreed to make sure that Lancaster,
Pa.–based Armstrong World Industries’ bankruptcy
reorganization plan will remain the only proposal on the table for at
least six more months, Knight-Ridder reported. Armstrong had sought this
eighth extension of the so-called “exclusive period” as its
plan goes before a district court judge for final approval. This latest
extension lengthens the “exclusive period” to April 4,
2005.
U.S. Bankruptcy Court Judge Judith K. Fitzgerald also approved a
settlement between Armstrong and its web site developer, ending a
three-year pay dispute. Reston, Va.–based Proxicom Inc. will
receive about $654,000 more, on top of the $2.3 million already received
from Armstrong. Proxicom had claimed it deserved $2.5 million more.
Armstrong, alleging Proxicom had breached its contract, had contended
any extra payment was unwarranted. Final approval of its reorganization
plan—the blueprint for paying the asbestos claimants and other
creditors—has been on hold for nearly a year.