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June 29, 2009
Logistical
Shortfalls Constrain Plan to Stem Foreclosures
In the four months since the Treasury Department
program was put in place to help as many as four million distressed
homeowners avoid foreclosure, millions of new homeowners have slipped
into delinquency and foreclosure due to difficulties in processing
mortgage modifications, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. For now, progress is constrained by the limited
capacities of mortgage servicing companies, said Michael S. Barr, the
assistant Treasury secretary for financial institutions. “They
need to do a much better job on the basic management and operational
side of their firms,” Barr said. “What we’ve been
pushing the servicers to do is improve their infrastructure to make sure
their call centers are doing a better job. The level of training is not
there yet.” Under the plan, the government offers mortgage
companies $1,000 for each loan they agree to modify, then another $1,000
a year for up to three years. The administration still does not know how
many mortgages have been modified under the program. In a recent
interview, Barr estimated the number at “over 50,000,”
explaining that precise figures must wait for a soon-to-be-completed
tracking system.
href='http://www.nytimes.com/2009/06/29/business/29loanmod.html?_r=1&hp=&pagewanted=print'>Read
more.
Wary Banks Hobble
Administration’s Toxic-Asset Plan
The government's plan to enable banks to dump troubled
assets from their balance sheets is facing troubles of its own,
the
size='3'>Wall Street Journal reported today.
The Public-Private Investment Program (PPIP) has lost momentum as big
banks worry about having to sell at fire-sale prices while small banks
fear they would be shut out. Potential buyers have balked at the risk of
doing business with the government, concerned that politicians might
demonize them for making big profits. U.S. officials and investors are
playing down expectations for the plan -- originally billed as a $1
trillion endeavor. Some federal officials say the banking environment
has improved since the program was unveiled. They assert that because a
dozen or so big banks recently succeeded in raising capital, they are
under less pressure to sell bad assets.
href='http://online.wsj.com/article/SB124622976702566007.html#mod=testMod'>Read
more. (Subscription required.)
to End
Financial Accounting Standards Board Chairman Robert
Herz on Friday urged a moratorium on government bailouts of major banks
and other financial institutions, warning that they could spark a
massive public backlash,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported on Friday. Herz said that he supported the recent
bailouts as necessary to spare the economy from deeper harm. However, he
added that the 'too-big-to-fail phenomenon is clearly fraught with
danger and is perceived by many as downright unfair.” Herz said
that financial industry reform proposals had to convince the public that
the government is taking steps to move the country beyond the 'heads, I
win; tails, everybody else loses' approach to business that has caused
such widespread outrage. Herz endorsed voluntary efforts to rein in
executive compensation as a way to restore public confidence in the
financial markets.
Asarco Inc. Challenges $1.1
Billion Environmental Settlement
Asarco LLC parent Asarco Inc. is challenging a
settlement agreement under which Asarco LLC would resolve about $3.6
billion in environmental claims for about $835 million in unsecured
claims and $275 million in cash, arguing that the debtor is being held
responsible for contamination that it did not cause,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported on Friday.
There was a $187.5 million claim for lead contamination at a site in
Omaha, Neb., and multiple studies showed that the contamination
underlying the claim stemmed from peeling lead paint on homes, not
Asarco. However, the bankruptcy court never considered that evidence
because it applied the wrong standard, using a “range of
reasonableness” standard instead of the federal environmental law
settlement approval standard, according to Asarco counsel. Asarco Inc.,
the debtors and Harbinger Capital Partners have all introduced competing
restructuring plans in the long-running, complicated Asarco
bankruptcy.
href='http://bankruptcy.law360.com/articles/108461'>Read more.
(Subscription required.)
in Bid to Clear Sale
General Motors Corp. agreed to accept liability for
future product defects as one of several concessions offered in a bid to
win court approval for a quick sale from bankruptcy, Reuters reported
yesterday. In addition, GM said it would change the terms of its
proposed asset sale to address objections raised by over 20 suppliers
and was working to resolve a question over the future of a joint-venture
plant with Toyota Motor Corp. A group of nine state attorneys general,
including Ohio and Connecticut, previously objected to the GM
reorganization brokered by the Obama administration because it would
have robbed consumers of protections against product defects under state
laws. In response, GM said it would continue to pay 'lemon law' claims
so that consumers would be entitled to a refund or replacement for
defective vehicles.
href='http://www.reuters.com/article/businessNews/idUSTRE55R2BZ20090628'>Read
more.
In related news, Wisconsin has joined 41 other states
in objecting to efforts by bankrupt General Motors Corp. to force
dealerships to sign new agreements or risk being shut down as part of
the car giant's restructuring plan,
face='Times
New
Roman' size='3'>Bankruptcy Law360 reported on
Friday. Wisconsin Attorney General J.B. Van Hollen said that GM had sent
letters to dealerships on June 1 asking them to modify current
agreements with the automaker that would force them to waive protections
under state laws. The law in Wisconsin prevents automakers from
unilaterally modifying dealer agreements, Van Hollen said. A hearing on
the restructuring plan and the states’ objections is scheduled for
June 30.
href='http://bankruptcy.law360.com/print_article/108578'>Read
more. (Subscription required.)
WaMu Wins Approval to
Examine JPMorgan’s Records
Bankruptcy Judge
face='Times
New
Roman' size='3'>Mary F. Walrath approved
Washington Mutual Inc.’s request to examine the records of
JPMorgan Chase & Co. for evidence supporting allegations that the
bank sabotaged WaMu before its collapse last year,
face='Times New



Roman'>
face='Times
New
Roman' size='3'>Bankruptcy Law360 reported on
Friday. WaMu's request on May 1 sought production of documents and
depositions connected to potential business tort claims against
JPMorgan, potential fraudulent transfer claims, potential turnover
claims and potential preferential transfer claims. JPMorgan objected to
the request, stating that WaMu must seek the information it wanted in
already pending litigation. WaMu could not use Rule 2004 of the U.S.
Bankruptcy Code to pursue discovery on issues that were involved in two
separate lawsuits, JPMorgan contended in its objection filed May 13.
WaMu filed an adversary proceeding in the Delaware bankruptcy court on
April 27, seeking $4 billion in cash that was held in the deposit
accounts of subsidiary Washington Mutual Bank at the time WMB was seized
and sold by the Federal Deposit Insurance Corp. to JPMorgan for $1.9
billion. WaMu also sued FDIC in the U.S. District Court for the District
of Columbia, alleging that the purchase price was too low and that the
agency sold assets it had no right to seize.
href='http://bankruptcy.law360.com/print_article/108412'>Read
more. (Subscription required.)
Judge Allows Wine Museum
Bankruptcy to Proceed
Bankruptcy Judge Alan Jaroslovsky ruled that a Napa
food and wine museum founded by the late vintner Robert Mondavi can
proceed with its plan to get out of bankruptcy, despite objections from
some creditors, Associated Press reported on Saturday. Copia, a
nonprofit also known as The American Center for Wine, Food and the Arts,
filed for chapter 11 protection on Dec. 1, 2008. Copia was co-founded by
Mondavi and chef Julia Child in 2001. The approved plan would make the
$78 million complex the property of Copia's largest creditor, Bank of
New York Mellon. A community group could then buy it from the bank, and
turn Copia into a conference center. A small group of creditors have
filed a lawsuit objecting to the settlement.
href='http://www.sacbee.com/308/story/1982889.html'>Read
more.
Analysis: How a Loophole
Benefits GE in Bank Rescue
General Electric, the world's largest industrial
company, has quietly become the biggest beneficiary of one of the
government's key rescue programs for banks, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. The company did not initially qualify for the
program, under which the government sought to unfreeze credit markets by
guaranteeing debt sold by banking firms. However, regulators soon
loosened the eligibility requirements, in part because of
behind-the-scenes appeals from GE. Public records show that GE Capital,
the company's massive financing arm, has issued nearly a quarter of the
$340 billion in debt backed by the program, which is known as the
Temporary Liquidity Guarantee Program, or TLGP. The government's actions
have been 'powerful and helpful' to the company, GE chief executive
Jeffrey Immelt acknowledged in December. GE's finance arm is not
classified as a bank. Rather, it worked its way into the rescue program
by owning two relatively small Utah banking institutions, illustrating
how the loopholes in the U.S. regulatory system are manifest in the
government's historic intervention in the financial crisis.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/28/AR2009062802955_pf.html'>Read
more.
Investors Compete for a
Piece of the Madoff Assets
As Bernard L. Madoff prepares to be sentenced today in
the Federal District Court in Manhattan, former investors are warring
over who should get how much from the Securities Investor Protection
Corporation, the government-chartered agency that insures customers of
failed brokerage firms, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. Some investors are angry that they could get
less favorable treatment than others, depending on how they invested
with Madoff — directly, or indirectly through so-called feeder
funds — and how much they withdrew before the Ponzi scheme
collapsed. The central problem being played out among Madoff victims is
that only a small fraction of the nearly $65 billion that disappeared
has been recovered. While insurance will fill some of that gap, it is
clear that many people will not come close to recouping their
losses.
href='http://www.nytimes.com/2009/06/29/business/29madoff.html?ref=business&pagewanted=print'>Read
more.
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