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August 28, 2009
Chrysler to Accept More Product Liability Claims
Chrysler Group LLC said yesterday that it will accept product liability claims in a broader number of cases than originally planned in its reorganization under bankruptcy protection, the Associated Press reported today. The automaker said it will now consider product-related lawsuits from consumers involved in accidents that occurred after Chrysler emerged from bankruptcy protection in June that involve vehicles manufactured by the old company. The company said that the changes do not include product liability claims filed before the company's April 30 filing. Consumer groups and individuals with product-related lawsuits contested a condition of the Chrysler sale to Italian automaker Fiat Group SpA that would release the company from product liability claims related to vehicles it sold before the asset sale. Read more.
name='2'>Commentary: New Rules Needed for Property Taxes
Local governments cannot undo their previous tax lien sales, but changes in federal policy can reduce the foreclosure risk from unpaid property taxes, according to a New York Times editorial today. During the mortgage bubble, some lenders kept monthly loan payments low by not tacking on an extra amount to cover taxes and insurance. For the loans in question Ñ which generally fell into the categories of subprime, Alt-A (a notch above subprime) or jumbo loans Ñ neither federal law nor pressure from mortgage investors compelled the inclusion of taxes and insurance in the monthly payment. Housing advocates say that many homeowners did not realize the amounts were excluded. In 2008, after the bubble had burst, the Federal Reserve altered the rules, but the changes were weak, according to the editorial. They require taxes and insurance to be included, but only for subprime loans and only for a year. After that, lenders can let borrowers opt out of paying those charges as part of their monthly bills. What is needed, according to the editorial, is a rule that requires the inclusion of taxes and insurance in the monthly payment for all types of mortgages and that disallows opt-outs until borrowers have made at least five years of steady payments. Read more.
Financial Institutions
name='3'>FDIC: Number of At-Risk Banks Growing
The banking industry continues to deteriorate, with federal regulators adding 111 lenders to their list of endangered banks in the latest quarter, the Wall Street Journal reported today. The Federal Deposit Insurance Corp. (FDIC) said that it had 416 banks on its 'problem list' at the end of June, equivalent to about 5 percent of the nation's banks, up from 305 at the end of March and 117 at the end of June 2008. Problem banks had a combined $299.8 billion of assets at the end of June, compared with $78.3 billion a year ago. State and federal regulators have already shut 81 banks this year. The FDIC's insurance fund, which guards $6.2 trillion in U.S. deposits, fell to $10.4 billion at the quarter's end, the lowest since mid-1993. Read more (subscription required).
Analysis: Banks 'Too Big to Fail' Have Grown Even Larger
Federal regulators pumped tens of billions of dollars into the nation's leading financial institutions last year because the banks were so big that officials feared their failure would ruin the entire financial system, and now those banks are even bigger, according to a Washington Post report today. A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms and have allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit. JPMorgan Chase now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show. Read more.
name='5'>U.S. Household Income Flat as Consumer Spending Rises
The Commerce Department reported today that consumer spending edged up in July with help from the popular 'cash for clunkers' program, but household incomes, the fuel for future spending increases, were flat, according to the Associated Press. Consumer spending rose 0.2 percent in July, but personal incomes were unchanged from last month, according to the report. With incomes flat in July as spending rose, the personal savings rate dipped slightly to 4.2 percent from 4.5 percent in June. The savings rate was 2.6 percent a year ago. Read more.
name='6'>Plaintiffs Firms Show Support for SEC Shareholder Rights Proposal
A group of defense law firms on Tuesday sent a letter to the U.S. Securities and Exchange Commission supporting the SEC's proposal to allow shareholders to nominate directors, exactly what the defense firms argued against last week, the New York Law Journal reported yesterday. At the center of the dispute is a proposal before the SEC that would allow shareholders to nominate and elect individual directors to corporate boards. If approved in its current form, public companies would be required to include in their proxy materials shareholder nominees for directors that could comprise up to a quarter of the board. Shareholders also could put forward proposals for broader access to the ballot than the commission's regulations would require. In an Aug. 17 letter, the seven corporate law firms urged the SEC not to adopt the proposal and, if it did, 'to be cautious in implementing what all participants in this debate acknowledge will be one of the most significant rule changes in SEC history.' The defense firms said they did not support requiring companies to allow shareholder nominations. However, they said they were open to allowing shareholders to submit proposals for governance changes that would allow them to nominate directors. Read more.
name='7'>Judge Approves Michael Vick's Reorganization Plan
Bankruptcy Judge Frank J. Santoro yesterday approved Michael Vick's plan to repay creditors $20 million and emerge from bankruptcy, the Associated Press reported yesterday. The plan approved by Judge Santoro was supported by all but one creditor, which is owed $13,000. It hinges on Vick liquidating an estimated $9 million in assets, including houses, boats and high-end sport utility vehicles and future NFL earnings. He would not have to pay creditors during his first year with the Philadelphia Eagles. If successful, creditors would be paid in six years. After paying creditors and investing his earnings, Vick would have annual living expenses of $300,000. Read more.
name='8'>Auto Supplier FormTech Files for Chapter 11 to Sell Assets
Hard-hit by the decline in auto production sparked by the financial crisis, automotive supplier FormTech Industries LLC has filed a prepackaged chapter 11 plan to sell its assets to a newly formed subsidiary of HHI Holdings Co., Bankruptcy Law360 reported yesterday. The company also noted it had reached an agreement with its first- and second-lien debt holders over the going-concern sale. FormTech Industries listed assets between $100 million and $500 million and liabilities of between $50 million and $100 million. The case is In re FormTech Industries LLC, case number 09-12964, in the U.S. Bankruptcy Court for the District of Delaware. Read more. (Subscription required.)
name='9'>WCI Set to Emerge from Chapter 11 after Plan Approval
WCI Communities Inc. said it expects to emerge from bankruptcy protection by the end of August following a bankruptcy judge's approval of the homebuilder's chapter 11 reorganization plan, Bankruptcy Law360 reported yesterday. Bankruptcy Judge Kevin J. Carey approved the plan on Wednesday, noting that several of the 13 objections that had been filed had been settled, including those of several insurance companies. WCI said it would exit bankruptcy protection on Aug. 31. The case is In re WCI Communities Inc. et al., case number 08-11643, in the U.S. Bankruptcy Court for the District of Delaware. Read more (subscription required).
name='10'>Judge Allows Bondholders to File Plan in Trump Casinos Case
Bankruptcy Judge Judith Wizmur yesterday ruled that Trump Entertainment Resorts bondholders can pursue their offer to invest $175 million in the casino operator, the Associated Press reported yesterday. The bondholders, who stand to lose the $1.25 billion they already have invested in the operator, asked Judge Wizmur to revoke the exclusive right of Trump Entertainment's managers to propose a reorganization plan. The bondholders had filed a motion earlier this month asking Wizmur to block the $100 million Trump deal and instead accept their offer. The Trump Entertainment board had voted this month to let Trump, his daughter Ivanka and Beal Bank buy the company in a deal that would wipe out other creditors. Read more.
name='11'>Creditors to Vote on Hawaiian Telcom Plan
Bankruptcy Judge Lloyd King yesterday approved the disclosure statement for Hawaiian Telcom's reorganization plan, the Associated Press reported yesterday. Judge King's decision will allow creditors of the largest telephone company in Hawaii to vote on the $460 million plan beginning next week. The judge also scheduled a confirmation hearing for Oct. 7. The company is proposing a stand-alone plan that would reduce its debt by nearly $800 million. Read more.
International
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