July 24, 2008
Housing Bill Will Extend Federal Role In Markets
A sprawling bill that reaches deep into the U.S. housing
industry is close to becoming law in what will likely stand as the
federal government's most expansive effort to stabilize the mortgage and
financial markets, the Wall Street Journal reported today. The
bill, which began seven months ago as a modest attempt to help
struggling homeowners, will now likely touch a vast array of borrowers,
lenders and investors. The package could also come at a significant cost
to the U.S. government, which would be authorized to invest billions of
dollars in troubled mortgage giants Fannie Mae and Freddie Mac, as well
as insure up to $300 billion in refinanced mortgages. As a result of the
bill, Congress would raise the national debt ceiling to $10.6 trillion
from $9.8 trillion. It would also give Fannie Mae and Freddie Mac a new,
tougher regulator. To help consumers, Congress is providing a phalanx of
tax breaks, incentives and refinancing options. One of the bill's
central planks is a government program to insure up to $300 billion in
new loans for struggling homeowners. Its effectiveness will hinge on
lenders' willingness to take voluntary losses and write down the balance
outstanding of troubled loans. The House of Representatives
overwhelmingly passed the package yesterday by a 272-152 vote
and the White House dropped a longstanding veto threat. The Senate
is expected to take up the bill later this week and appears almost
certain to pass it. President George W. Bush is expected to sign the
bill quickly, with little fanfare and no signing ceremony.
href='http://online.wsj.com/article/SB121681776929477089.html?mod=djemTMB'>Read
more.
In related news, the Bush Administration yesterday issued a Statement
of Administration Policy supporting the housing package of H.R. 3221
despite concerns about a provision that would provide grants to
communities to buy and repair foreclosed homes. The Bush Administration
previously threatened to veto the measure, but said that the legislation
is needed promptly to address the current housing and credit
crisis. Click here to read the Statement of Administration
Policy.
Joint Economic Committee Hearing Looks at Economic Factors
Weighing on American Families
The Joint Economic Committee held a hearing yesterday to examine the
serious impact of rising household costs and stagnant wages in a
slumping economy. Hearing witnesses included Prof. Elizabeth Warren
of Harvard University; David Kreutzer, a senior policy analyst with the
Heritage Foundation; Kristen Lewis, co-director of the American Human
Development Project and Jared Bernstein, a Senior Economist with the
Economic Policy Institute.
href='http://jec.senate.gov/index.cfm?FuseAction=Hearings.HearingsCalendar&ContentRecord_id=4b4275bc-d7b2-8563-4faf-a21bf4898ba4'>Click
here to read the written materials from the hearing.
House Committee Continues Examination of Financial Regulatory
Restructuring
The House Financial Services Committee today will hold the second in a
series of hearings on the policy implications of the transformation of
domestic and international financial markets entitled 'Financial Market
Regulatory Restructuring.' The committee will explore the adequacy of
current oversight and regulatory tools and the extent to which existing
structures are adequate to respond to future problems. Witnesses
scheduled to testify include New York Federal Reserve President Timothy
Geithner and Securities and Exchange Commission Chairman Christopher
Cox. The hearing will be held at 10 a.m. ET in room 2128 of the Rayburn
House Office Building.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr072408.shtml'>Click
here to watch the hearing live via Webcast.
Business Bankruptcies Jump 17 Percent
Driven by a sour economy and skittish consumers, U.S. business
bankruptcies saw their sharpest quarterly rise in two years, jumping 17
percent in the second quarter of 2008, according to an analysis by
McClatchy Newspapers, the Idaho Statesman reported today.
Commercial filings for the first half of 2008 are up 45 percent from
last year, as the national climate for commerce continues to deteriorate
amid rising energy and food costs, mounting job losses, tighter credit
and a reticence among consumers to part with discretionary income. In
Idaho, filings are up 46 percent, to 134. From April through June,
15,471 U.S. businesses called it quits, according to data from Automated
Access to Court Electronic Records, an Oklahoma City bankruptcy
management and data company. States that saw the biggest increase in
filings were Delaware, Montana, Oregon, Maryland and Connecticut,
suggesting that the economic gloom is spreading beyond large population
centers. It was the tenth straight quarter that business bankruptcy
filings have increased. Nearly 29,000 companies filed in the first half
of 2008.
href='http://www.idahostatesman.com/business/story/450454.html'>Read
more.
Judge Hears Opening Arguments in Vallejo Case
Resurrecting negotiations between Vallejo, Calif., employee unions
and city negotiators could be the next step in Vallejo's chapter 9
bankruptcy saga, attorneys for the city and unions agreed yesterday, the
San Jose Mercury News reported. The attorneys disagreed,
however, on what that move would mean for Vallejo's future. Opening
arguments on Vallejo's bankrupt status were heard in U.S. Bankruptcy
Court before Chief Justice Michael McManus. McManus must first decide if
the city meets the criteria for bankruptcy before considering voiding
employee union contracts, set to expire in June 2010. City bankruptcy
attorney Marc Levinson said that if McManus threw the case out, the city
would be forced into accepting the unions' offers, but would reappear
before the court with the same or worsening general fund debt.
Meanwhile, the unions would gain a tighter hold over the city's
finances.
href='http://www.mercurynews.com/breakingnews/ci_9978005?nclick_check=1'>Read
more.
Atlanta Health Care Company files for Chapter 11
MedAvant Healthcare Solutions, which sells health care technology and
transaction services, has filed for chapter 11 reorganization, Tech
Journal South reported today. The company also said that it has
received a debtor-in-possession financing commitment of $8.1 million
from its senior lender, Laurus Master Fund. The company has filed a
motion to sell its assets to Marlin Equity, a private equity firm,
subject to higher and better bids at an auction sale in eigh-to-10
weeks.
Las Vegas Master Developer Files for Chapter 11
Citing a combination of poor liquidity, substantial debt service,
extremely challenging real estate market conditions and other legal and
financial issues, Lake at Las Vegas Joint Venture LLC, the master
developer of the Lake Las Vegas Resort and several of its interdependent
subsidiaries, has filed for chapter 11 in the District of Nevada in Las
Vegas, Building Online reported today. In conjunction with the
chapter 11 filing, the company has received commitments for up to $127
million in DIP financing from a group of lenders led by Credit Suisse as
agent. The company said that subject to court approval, the new
financing would be used in part to fund ongoing operations and
assessments related to certain pre-petition obligations. Additionally,
pending court approval, the company said it would work to satisfy
certain of its financial and infrastructure-related obligations.
href='http://www.buildingonline.com/news/viewnews.pl?id=7303&subcategory=13'>Read
more.
Pa. Financial Company Files for Chapter 11
Creditron Financial Corp., a 23-year-old Erie, Pa., company with more
than 400 employees, is reorganizing its finances under chapter 11
bankruptcy protection, the Erie Times News reported today.
Creditron, which also does business as Teletron, handles customer
service for some major U.S. commercial banks and provides mostly inbound
call center services. Up until late 2006, much of its work focused on
student-loan consolidation. According to documents filed with the U.S.
Bankruptcy Court in Erie, the company has liabilities of $1.49 million
with the Internal Revenue Service and $485,000 with the Pennsylvania
Department of Revenue.
href='http://www.goerie.com/apps/pbcs.dll/article?AID=/20080724/NEWS02/807240398/-1/NEWS'>Read
more.
International
U.K. Firms Facing Credit Crunch
According to a survey, more than 400 firms across
Yorkshire, England, are in deep trouble in the wake of the credit
crunch, the Huddersfield Daily Examiner reported today.
Figures from insolvency firm Begbies Traynor show there were 405
companies with critical problems in the second quarter of 2008. That is
more than 22 percent above the total of 328 companies on the critical
list in the previous quarter and almost six times higher than the 53 in
the second quarter of 2007. The annual increase is the fourth highest in
the United Kingdom. Companies rated as ‘critical’ are those
facing county court judgments totaling £5,000 or more or those
facing winding-up petitions. Nationally, 4,258 companies faced critical
problems in the first quarter of 2008 compared with 3,309 in the first
quarter of the year and just 542 in the second quarter of 2007. The
worst-hit region was the southeast with almost 2,000 companies with
critical problems during the second quarter of this year. It is
estimated that about 15 percent of companies experiencing the most
difficult circumstances will enter into formal insolvency proceduress
within 12 months.
Second Circuit Says: New Parmalat Liable for Old Parmalat
Suits
The newly reorganized Parmalat SpA has lost its bid to
enjoin shareholders from bringing class actions against it in U.S.
courts, after an appeals court refused to grant the dairy giant's motion
to overturn a lower court ruling, BankruptcyData.com reported
yesterday. In a ruling handed down on Tuesday, the U.S. Court of Appeals
for the Second Circuit refused to grant Parmalat's motion to enjoin
actions brought against the Italian company in U.S. courts, finding that
the U.S. District Court for the Southern District of New York had in its
initial ruling “acted within its sound discretion.” The
court said that although it would not weigh in on the possible
consequences of trying the securities fraud cases in the United States,
it had determined that in allowing them to proceed, Judge Lewis A.
Kaplan had not abused his discretion. “We cannot say with
certainty what effect the expansion denial order may have on the economy
and expeditiousness with which the Old Parmalat estate will be
administered,” the appeals court said in its ruling. “But we
cannot conclude that the district court abused its discretion on that
score. And our review of the record satisfies us that Judge Kaplan did
not act inconsistently with any of the six considerations mandated by
[bankruptcy law].”
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=63411'>Read
more (subscription required).