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July 9, 2009
Consumer Protection Agency Plan; Legislation Introduced to Create
Agency
Facing skeptical House Energy and Commerce members
concerned about losing jurisdictional turf, Obama administration
officials said yesterday that the proposed Consumer Financial Protection
Agency would not seriously impact the FTC and would ultimately provide a
greater benefit to consumers who have been targeted for predatory loans
and abusive credit card practices,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported yesterday. Assistant Treasury Secretary Michael Barr
and FTC Chairman Jon Leibowitz both made their pitch to the Energy and
Commerce, Trade, and Consumer Protection Subcommittee today, arguing
that the FTC would gain new authority, such as streamlined rulemaking
and the ability to impose civil penalties for unfair and deceptive
practices, even though it would also have to give up some power to the
new agency over supervising financial firms. Leibowitz said that
consumers would 'be getting a better deal' under the Obama draft bill
because the FTC does not have authority over banks -- which resides with
banking regulators -- while the proposed agency would. Their testimony
comes as House Financial Services Chairman Barney Frank (D-Mass.) filed
a bill, H.R. 3126, yesterday to create the agency, which is strongly
supported by consumer groups but is ardently opposed by financial
lobbying groups.
href='http://energycommerce.house.gov/index.php?option=com_content&view=article&id=1702:energy-and-commerce-subcommittee-hearing-on-the-proposed-consumer-financial-protection-agency-implications-for-consumers-and-the-ftc&catid=129:subcommittee-on-commerce-trade-and-consumer-protection&Itemid=70'>Click
here to read the prepared witness testimony.
href='http://www.house.gov/apps/list/press/financialsvcs_dem/21frank_011_xml.pdf'>Click
here to view the text of H.R. 3126.
House Panel to Examine
“TARP for Main Street” Legislation
The House Financial Services Committee will hold a
hearing today at 10 a.m. ET
face='Times New Roman'>to examine
size='3'>H.R. 3068, the “TARP for Main Street Act of 2009.”
Additionally, the House Financial Services
size='3'>Subcommittee on Domestic Monetary Policy and Technology will
hold a hearing at 1:30 p.m. ET titled “Regulatory Restructuring:
Balancing the Independence of the Federal Reserve in Monetary Policy
with Systemic Risk Regulation.”
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr_070109.shtml'>Click
here to view the witness list and watch a live Webcast of the
hearing on H.R. 3068.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrdmp_070909.shtml'>Click
here to view the witness and watch a live
Webcast of the House Financial Services
size='3'>Subcommittee’s hearing.
Banks' “Courtesy
Overdraft” Fees Irk Consumers
Even as regulators crack down on abusive mortgage and
credit card practices, another type of lending called
size='3'>'courtesy overdraft' threatens to mire consumers in a credit
trap,
size='3'>USA Today reported today. The tactic
has long been used by banks to automatically pay transactions that
account holders don't have the money to cover — and then charge
them a steep fee. What began as a customer service has often become an
important revenue driver for banks at the expense of the most vulnerable
consumers, according to bank memos reviewed by
face='Times New Roman'>USA
TODAY and interviews with industry insiders.
In 2009, banks are expected to reap a record $38.5 billion from
overdraft fees, nearly twice the $20.5 billion they stand to collect
from credit card penalties such as late and over-limit fees. Banks say
consumers can avoid overdrafts by keeping track of their money.
Consumers contend, though, that banks' policies make it challenging to
avoid fees.
href='http://www.usatoday.com/money/perfi/credit/2009-07-08-banks-overdraft-fees_N.htm'>Read
more.
U.S. Unveils Scaled-Down
Bank Plan
After months of back-and-forth with the banking
industry, the Obama administration yesterday unveiled a scaled-down
version of its plan to buy troubled mortgage-related securities,
the
size='3'>New York Times reported
today. The
Treasury, Federal Reserve and the Federal Deposit Insurance Corp. said
that they would commit up to $30 billion of public money to buy bad
mortgage-related securities from banks. They named nine fund managers
who together would commit up to an additional $30 billion more and
oversee the funds to purchase the assets. The total of $60 billion to go
toward purchasing the assets from banks was significantly less than was
originally foreseen as being necessary to tackle the ailing financial
sector in March. The Treasury conceded that the program was
“modest” but that it could be expanded if the economy or
financial markets deteriorated.
href='http://www.nytimes.com/2009/07/09/business/09bank.html?_r=1&ref=business&pagewanted=print'>Read
more.
General Motors
GM Will Exit Bankruptcy
with $48 Billion in Debt
General Motors Corp., which is preparing to sell its
best assets to a streamlined new entity, will carry with it liabilities
of $48.4 billion, Bloomberg News reported yesterday. Bankruptcy
Judge Robert
Gerber previously approved the sale of most of
GM’s business to a U.S. Treasury-funded buyer and said that the
company could complete the deal any time after July 9 at noon. The
Treasury has set a July 10 deadline for the sale.
size='3'>Detroit-based GM entered bankruptcy court on May 1 reporting
global liabilities of $176.4 billion as of Dec. 31. The old GM will be
left with GM’s remaining obligations and unwanted assets,
including contaminated factory sites, a parking lot in Flint, Mich., and
a nine-hole golf course in New Jersey.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aEase9gu2e1U'>Read
more.
Negotiations Continue on
Exit Package for Former GM CEO
Rick Wagoner, who is still employed by General Motors
Corp. almost four months after his ouster as CEO, will soon learn when
he'll be cut loose from the company and what he'll receive as an exit
package, the
size='3'>Wall Street Journal reported today.
Wagoner, forced out of his job by President Barack Obama amid a federal
rescue, remains on GM's payroll making $1 a year and receiving the same
benefits afforded to him during his tenure as chief executive. GM is
keeping Wagoner on staff -- albeit only technically -- as the government
decides on pay and benefit criteria for the company's top officers,
obligations that will be the responsibility of the new GM once it
emerges from bankruptcy protection. Wagoner, who agreed to work for $1 a
year as part of his fight to win federal funding, could be eligible for
pensions that were worth around $20 million, according a regulatory
filing at the end of 2008. The amount includes benefits accumulated over
href='http://online.wsj.com/article/SB124709407501714781.html#mod=testMod'>Read
more. (Subscription required.)
Court Rules Quality Stores
LBO Payouts Exempt from Lawsuits
A federal appeals court has ruled that payouts made to
former shareholders of Quality Stores Inc. as a result of a leveraged
buyout transaction that helped tip the company into bankruptcy cannot be
recovered by the estate because the transfers were made through an
intermediary bank, and not directly by the retailer,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
Weighing in on an issue of first impression within its circuit, the U.S.
Court of Appeals for the Sixth Circuit affirmed prior rulings that
Bankruptcy Code §546(e), which protects certain payments made
through financial institutions from avoidance actions in bankruptcy
court, applies to payments made to the former Quality shareholders. The
ruling stems from an adversary proceeding in the bankruptcy of Quality
Stores Inc. and affiliate QSI holdings Inc., in which the debtors were
seeking to recover payments made to about 170 former shareholders of
Quality who were paid for their shares from the proceeds of the 1999
LBO, the opinion said.
href='http://bankruptcy.law360.com/articles/110208'>Read
more. (Subscription required.)
CCS Medical Files for
Chapter 11 with Prearranged Plan
CCS Medical Inc., a Florida-based provider of medical
supplies, filed for chapter 11 protection yesterday after reaching an
agreement with some of its lenders to restructure its debt and improve
its capital structure,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The company said that the plan with certain
holders of its first lien loan would reduce its debt from about $522
million to about $200 million. Under the proposal, CCS debt would be
swapped for $200 million in new notes and 100 percent of the new equity.
Other secured and unsecured creditors would receive cash or warrants,
and all the debtors' common stock and preferred shares would be
canceled, according to an affidavit by company CFO Stephen Saft. The
majority of the reorganized company's new common stock would be owned by
Highland Capital Management, Saft said.
href='http://bankruptcy.law360.com/articles/110168'>Read
more. (Subscription required.)
Ritz Camera Warns of
Possible Liquidation
Ritz Camera, the ubiquitous national photo chain that
got its start as an Atlantic City portrait studio 91 years ago, said
yesterday it is unable to raise the cash it needs to operate through the
summer, the
size='3'>Washington Post reported today. The
Beltsville, Md.-based company has been attempting to reorganize since it
filed for chapter 11 protection in February. The company said in court
documents yesterday that it now hopes to sell its assets. The documents,
filed in the U.S. Bankruptcy Court in Wilmington, Del., say that the
company has been negotiating with two potential bidders who would take
over all of its 370 stores. The company asked to schedule an auction for
July 20. If the effort to sell the company is not successful, according
to the filing, Ritz is seeking permission to liquidate and close by July
24, to avoid paying $3 million in rent going into September.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/08/AR2009070803261_pf.html'>Read
more.
Financing Deal
Bankruptcy Judge
face='Times New Roman' size='3'>Mary F. Walrath
size='3'>(D. Del.) yesterday approved Eddie Bauer Holdings Inc. to tap a
$100 million debtor-in-possession loan facility, while also allowing the
bankrupt retailer to use its cash collateral to pay employees, customers
and suppliers,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. In late June, Judge Walrath signed off on
Eddie Bauer's proposed $202 million stalking horse sale agreement to an
affiliate of global private equity firm CCMP Capital Advisors LLC.
Concluding that the bidding procedures and agreement were in the best
interest of the debtors and their creditors, the judge scheduled the
auction for July 16. CCMP Capital intends to operate Eddie Bauer under a
business-as-usual model, keeping the majority of its 371 stores open and
retaining most employees.
href='http://bankruptcy.law360.com/articles/110352'>Read
more. (Subscription required.)
for Chapter 11 Bankruptcy Protection
Lenny Dykstra filed for chapter 11 protection in a
petition that says the former Major League Baseball All-Star owes
between $10 million and $50 million, Bloomberg News reported today. The
former center fielder for the New York Mets and Philadelphia Phillies
has less than $50,000 worth of assets and between 50 and 99 creditors,
according to a petition filed with the U.S. Bankruptcy Court for the
Central District of California in the San Fernando Valley. Dykstra faces
about 20 lawsuits stemming from his entrepreneurial work, including The
Players Club, a start-up magazine. He owes JPMorgan Chase & Co.
$12.9 million, according to the filing, and Bank of America
Corp.’s Countrywide and credit card units a combined $4.2
million.
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a_asLn6KrGCc'>Read
more.
for Chapter 7
Consolidated Resorts Inc. and 13 affiliated companies
filed for chapter 7 this week, seeking to liquidate the time-share
companies, the
size='3'>Las Vegas Review Journal reported
today. Consolidated has between $100 million to $500 million in
liabilities and $1 million to $10 million in assets, according to court
papers. A locally based subsidiary of ASNY Corp., Consolidated operated
14 resorts in Las Vegas, Hawaii and Orlando, Fla. ASNY did not file for
bankruptcy. Analysts said time-share resort developers have been slammed
as cash-strapped consumers stop paying on time-share loans and use their
money for their home and car payments.
href='http://www.lvrj.com/business/50347922.html'>Read
more.
Director of SEC
Inspections Office Resigns
A senior Securities and Exchange Commission official
who oversaw an office that conducted key probes of Bernard L. Madoff's
business is resigning, following a period when the agency reevaluated
how it conducts oversight of brokers and investment advisers, the
size='3'>Washington Post reported today. Lori
A. Richards is stepping down after 14 years as director of the Office of
Compliance Inspections and Examinations (OCIE), which has come under
scrutiny for its role in the SEC's monitoring of Madoff's business. Her
office reviewed his firm at least three times, in 1999, 2004 and 2005,
without finding the multibillion-dollar fraud he was conducting. With a
staff of more than 700, the OCIE is responsible for ensuring that
brokers and investment advisers, including mutual funds, comply with
securities laws.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/08/AR2009070802698_pf.html'>Read
more.
Connecticut Bank Sued in
Madoff Investment Scheme
The holders of more than two dozen retirement accounts
have sued the Westport National Bank in Connecticut over its role in
handling their investments in Bernard L. Madoff’s long-running
Ponzi scheme, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The lawsuit, filed yesterday in Connecticut
Superior Court in Stamford, seeks to recover $60 million that the
retirement plans lost when the Madoff fraud collapsed in December, as
well as millions of dollars in fees that the bank charged customers who
maintained the accounts. The focus of the lawsuit is the custodian
agreement that the bank required each account-holder to sign before it
accepted any money to be invested with Madoff.
href='http://www.nytimes.com/2009/07/09/business/09madoff.html?ref=business&pagewanted=print'>Read
more.
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