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October 8, 2009
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Frank Pledges to Revise
Derivatives Draft
House Financial Services Chairman Barney Frank
(D-Mass.) said yesterday that he would narrow his proposal to better
regulate the multitrillion-dollar derivatives market, noting he agreed
with regulators' criticisms of the draft, CongressDaily reported
yesterday. Frank's proposal, which seeks to prevent gaps that led to the
downfall of American International Group Inc., sets a less-restrictive
standard than an Obama administration plan for derivatives regulation by
providing more flexibility to market participants. Commodity Futures
Trading Commission Chairman Gary Gensler testified at a hearing
yesterday that the draft would create a presumption against placing
standardized derivative contracts on a clearinghouse, which would force
trades to adhere to margin and collateral requirements. Gensler also
said there was a loophole in Frank's proposal that would allow major
swap participants to not be covered by the draft's regulations if they
used swaps for 'risk management purposes.' Gensler argued that a great
number of trades could be characterized as risk-management, or hedging,
swaps. Henry T.C. Hu, director of the SEC's division of risk, strategy
and financial innovation, also testified that the draft should be
strengthened. The measure would give his agency examination and
inspection authority over major swap participants. Hu asked that such
authority be extended to clearinghouses and swap repositories as well
'so that regulators can have quick access to comprehensive
data.'
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrfcder_100709.shtml'>Click
here to read the prepared testimony from yesterday’s House
Financial Services hearing.
In related news, the Senate Banking Subcommittee on Securities,
Insurance, and Investment held a hearing yesterday titled
“Securitization of Assets: Problems and Solutions.”
href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=3699770d-9c39-4aab-9b6a-7aec8941fe9b'>Click
here to read the prepared witness testimony.
Congressional Hearings to Examine Mortgage
Market, Expediting Credit Card Regulations and Credit Interchange
Fees
The Senate Banking Committee will hold a hearing today titled the
“
href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=0a0b4f0d-55bc-49ed-bb8b-18ba417fc3bf'>Future
of the Mortgage Market and the Housing Enterprises,” while the
House Financial Services Committee will be examining H.R. 2382, the
“
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/fchrCC_100809.shtml'>Credit
Card Interchange Fees Act of 2009” and H.R. 3639, the
“Expedited CARD Reform for Consumers Act of 2009.”
Additionally, the House Financial Services Subcommittee on Housing and
Community Opportunity will hold a hearing today titled “
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/scmhr_100809.shtml'>The
Future of the Federal Housing Administration’s Capital Reserves:
Assumptions, Predictions and Implications for Homebuyers.”
U.S. Consumer Credit Fell By $12 Billion in
August
The Federal Reserve reported yesterday that U.S. consumer credit fell
in August for a seventh straight month as banks maintained restrictive
terms and job losses made households reluctant to borrow, Bloomberg News
reported. Consumer credit fell by $12 billion, or 5.8 percent at an
annual rate, to $2.46 trillion, according to a Federal Reserve report.
Revolving debt, such as credit cards, decreased by $9.91 billion in
August, the Fed report showed. Non-revolving debt, including loans for
automobiles and mobile homes, fell by $2.07 billion. The Fed’s
report doesn’t cover borrowing secured by real estate.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=axr6fZVcWaAg#'>Read
more.
Extension Of Homebuyer Credit
Considered
House Democrats are open to a short-term fix so first-time homebuyers
can qualify for an $8,000 tax credit even if they do not close on a home
by Nov. 30, CongressDaily reported yesterday. The measure, still
in the discussion stage, would allow prospective homeowners to qualify
if they have a signed contract by that date but have not finished the
closing process, which can take up to two months. The House talks come
as a broad coalition led by Realtors and homebuilders continues a
furious lobbying effort in advance of the credit's Nov. 30 expiration.
The credit was expected to be a topic at the White House today when
House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry
Reid (D-Nev.) -- one of its biggest proponents -- met with President
Obama to discuss the jobless rate and extending some stimulus
provisions. Reid backs a six-month extension of the credit, important to
the battered housing market in Las Vegas and other parts of his home
state of Nevada. Conservative estimates peg the cost of such an
extension at roughly $6 billion, and some estimates are at least double
that figure, given that about 1.8 million taxpayers are expected to take
advantage of the provision by the end of November.
Ciena Offers to Buy Nortel Assets for $521
Million
Ciena Corp., the maker of fiber- optic gear for the biggest U.S.
phone companies, offered to buy Nortel Networks Corp.’s optical
networking business for about $521 million to expand internationally,
Bloomberg News reported yesterday. The price includes $390 million in
cash and 10 million shares of Ciena common stock, the companies said
today. Revenue generated by the assets topped $550 million in the first
half, Ciena said. Nortel, which entered bankruptcy protection nine
months ago, is selling its businesses piece by piece. The Toronto-based
company has raised more than $2 billion from asset sales.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aJ_9T.Bd1.Do'>Read
more.
Golf Firm True Temper files for Chapter
11
U.S. golf club shaft maker True Temper Sports Inc filed for Chapter
11 protection, hurt by the downturn in the golf equipment industry,
Reuters reported today. In a filing with the U.S. Bankruptcy Court for
the District of Delaware, True Temper listed estimated assets of about
$180.5 million and estimated liabilities of about $319 million. The
company, which also makes bicycle tubing, forks, and seat posts said
last week it had reached an agreement with secured lenders, bondholders
and shareholders to restructure all of its outstanding debt. The case
In re True Temper Sports Inc., U.S. Bankruptcy Court, District
of Delaware, No 09-13446.
href='http://www.reuters.com/article/domesticNews/idUSTRE5971OB20091008'>Read
more.
Thousands of U.S. Homeowners Cite Drywall
for Ills
Many American homebuyers are filing suits against companies that used
drywall from China, imported during the housing boom to meet heavy
demand, that they says is contaminated with various sulfur compounds,
the New York Times reported today. Hundreds of lawsuits are
piling up in state and federal courts, and a consolidated class action
is moving forward in Louisiana before U.S. District Judge Eldon E.
Fallon, who will begin hearing cases in January. Three hundred cases
have been filed in Louisiana alone, many with similar complaints from
homeowners — a noxious smell, recurrent headaches and difficulty
breathing. In Florida, the health department has received over 500
complaints with such symptoms. In addition, these suits say, metal
objects in homes corrode quickly, causing kitchen appliances,
air-conditioners, televisions and plumbing to fail. This month, the
Consumer Product Safety Commission, whose investigation into Chinese
drywall is the largest in its history, will release the results of a
study to determine why the drywall is causing the problem, and what kind
of remediation programs might be effective.
href='http://www.nytimes.com/2009/10/08/business/08drywall.html?_r=1&adxnnl=1&ref=business&pagewanted=print&adxnnlx=1254996006-3Dsdjv5ridm1b+nCFXyHyw'>Read
more.
Analysis: In Merrill’s Failed
Executive Pay Plan, Lessons for Government’s Pay Czar
Merrill Lynch voluntarily adopted strict executive pay guidance in
2006 — two years before the company collapsed into the arms of
Bank of America – but the Merrill program did not keep workers
from taking risks that nearly sank the brokerage giant, the New York
Times reported today. Some of the restrictions included tying
executives’ compensation to their company’s stock price,
withholding big paydays for years, claw back bonuses if things go wrong
and force risk-loving traders to gamble with their own money, not just
their company’s. As the Obama administration’s pay czar,
Kenneth R. Feinberg, contemplates curbing compensation for the top 100
executives at each of the seven companies that received big bailouts
— including Bank of America — the Merrill experience raises
some sobering questions. At Merrill Lynch — whose 2008 bonuses
have come under sharp scrutiny in Congress — some employees stand
to profit from the 2006 incentive plan, which was turbo-charged by the
company’s own money. The payments, due in January, are outside
Feinberg’s purview, because they were guaranteed before pay
restrictions were imposed on bailed-out banks.
href='http://www.nytimes.com/2009/10/08/business/08pay.html?ref=business&pagewanted=print'>Read
more.
Retail Vacancies Hit Multiyear
Highs
According to Reis Inc., a New York real-estate research firm, 10.3
percent of the retail space at U.S. shopping centers -- open-air centers
typically anchored by a grocery store or big-box retailer -- was vacant
in the third quarter, the Wall Street Journal reported today.
That was up from 8.4 percent in the same period a year earlier and was
the highest vacancy rate since 1992. At enclosed malls, the vacancy rate
rose two percentage points to 8.6 percent, the highest rate since Reis
began tracking mall data in 2000. The Federal Reserve has tallied nearly
8,300 store closings announced by retailers so far this year, including
more than 1,500 large anchor stores. Last year, the International
Council of Shopping Centers, an industry trade association, counted
6,900 such announced closures. The next-highest annual total recorded by
the trade association was 7,000 in 2001.
href='http://online.wsj.com/article/SB125497024478172583.html?mod=WSJ_hpp_LEFTWhatsNewsCollection'>Read
more. (Subscription required.)
GM Behind on Some Goals, CEO Says
General Motors Co. CEO Frederick 'Fritz' Henderson said that the
company is falling short on several significant goals it plans to meet
by year's end, including worker reductions and the sale of failing
brands, the Wall Street Journal reported today. Henderson
yesterday outlined progress made by GM in the 90 days since it emerged
from bankruptcy protection. He said that GM is on track to meet cash
flow and cost-reduction targets and that GM will release financial
results for the third quarter in the middle of November, he said. GM's
global market share rose slightly in the third quarter to 11.9 percent
compared to 11.6 percent the first half of this year, he said. However,
GM has about 10,000 more U.S. workers than it plans to have by the end
of 2009 after buyout programs for hourly and salaried programs fell
short. GM aims to have 64,000 workers and isn't as far along toward that
goal as it expected by this point.
href='http://online.wsj.com/article/SB10001424052748703298004574459101334336622.html?mg=com-wsj'>Read
more. (Registration required.)
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