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April 18, 2008
Committee to Act Quickly on Housing Rescue Measures
Members of the House
Financial Services Committee introduced two pieces of legislation
yesterday that focus on reversing the housing market crisis, and are
looking to mark up the bills next week, according to a House Financial
Services Committee press release. H.R. 5830, the FHA Housing and
Homeowner Retention Act, expands the Federal Housing Administration
program to help refinance at-risk borrowers into viable mortgages and
also requires the Federal Reserve Board to conduct a study on the need
for an auction or bulk refinancing mechanism.
size='3'>The second measure, H.R. 5818, the Neighborhood Stabilization
Act of 2008, will provide loans and grants to states and cities to deal
with problems associated with large numbers of foreclosures in
neighborhoods across the country. A House Financial Services Committee
mark-up session and vote on the two measures are scheduled for 10:00
a.m. on Wednesday, April 23rd and Thursday, April 24th.
href='http://www.house.gov/apps/list/press/financialsvcs_dem/press0417082.shtml'>Click
here to read the press release.
size='3'>House Passes Student Loan
Bill
The House of Representatives,
looking to avert a looming shortage in available student loans, approved
a measure yesterday allowing the Department of Education to buy
federally guaranteed loans that lenders are unable to sell to private
investors, Bloomberg News reported today. The action is intended to
address a crisis in the market that has forced Reston, Va.-based Sallie
Mae, Citigroup's Student Loan subsidiary and about 50 other lenders to
stop writing some forms of student loans. Companies are citing increased
borrowing costs, cuts in government subsidies for education loans and a
lack of investor interest in securities backed by loans. Congress is
considering other measures, and lawmakers have urged the Treasury
Department and the Federal Reserve to take action to provide liquidity
for federally backed loans.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/04/17/AR2008041702268_pf.html'>Read
more.
In related news, Bank of
America said yesterday that it plans to stop issuing private student
loans because the turmoil in the bond market has made the debt hard to
sell to investors, the Associated Press reported. Bank of America plans
to shut down that line of business as less than 15 percent of the
company's $6 billion in student loans are privately issued. The
Charlotte, N.C.-based bank plans to continue issuing government-backed
student loans. First Marblehead Corp., a Boston-based company that helps
banks package their private student loans into bonds and sell them to
investors, said Bank of America claimed it is closing its private
student loan business because of the 'ongoing disruption in the capital
markets.' About 15 percent of First Marblehead's annual revenue comes
from pooling and selling Bank of America's private student
loans.
href='http://www.forbes.com/feeds/ap/2008/04/17/ap4903839.html'>Read
more.
name='3'>Financial Firm Files for Chapter 11
Ceres Capital Partners
LLC, a firm specializing in forming structured investment vehicles
(SIVs), filed for chapter 11 protection yesterday saying that it was
unable to operate due to the subprime credit squeeze, Reuters reported.
Ceres, which is partly owned by XL Reinsurance America Inc. and
Stanfield Capital Partners, organized SIVs, including Stanfield Victoria
Finance Ltd., and other packaged investment products. Ceres, which filed
for bankruptcy in federal court in
w:st='on'>
York, said that although
its funds had 'little or no exposure to subprime mortgage risks,' it was
'unable to retain access to the credit markets' and was unable to find
buyers for its paper. It also said it initiated discussions with lenders
including XL Capital in March that allowed it to file for a
'prepackaged' bankruptcy that would allow 'a swift emergence' from a
court-supervised restructuring.
href='http://www.reuters.com/articlePrint?articleId=USN1717778520080417'>Read
href='http://www.reuters.com/articlePrint?articleId=USN1717778520080417'>
name='4'>Frontier CEO: Credit Card Processors Eyeing Airline
Industry
The head of Frontier Airlines
Holdings Inc., which is reorganizing under bankruptcy protection, said
yesterday that credit card processing companies are taking a close look
at the airline industry as the processors don't want to be on the
hook for ticket refunds if airlines stop flying, the Associated Press
reported. Frontier CEO Sean Menke said that the processors are concerned
because the industry is coping with persistently high fuel prices, a
credit market crunch and the slowing economy. Menke said that Frontier
was forced into the move because its credit card processing company,
First Data Corp., sought to hold up to 100 percent of proceeds from
ticket sales in reserve until the passengers' flights are
completed.
href='http://biz.yahoo.com/ap/080417/frontier_airlines_ceo.html?.v=1'>Read
more.
face='Times New Roman' size='3'>
name='5'>Delphi
size='3'> Requests Financing Extension after Collapsed Funding
Deal
Since a group of hedge
funds led by Appaloosa Management LP walked away from a deal to invest
$2.55 billion in Delphi Corp. earlier this month, the struggling auto
parts maker has been is asking the bankruptcy court to extend its
financing through the end of the year while it struggles to emerge from
chapter 11, Bankruptcy
Law360 reported yesterday. Delphi asked the
U.S. Bankruptcy Court for the Southern District of New York on Wednesday
to issue an order authorizing the company to extend the maturity date of
its debtor-in-possession (DIP) facility, and revise its arrangement with
General Motors over the timing of certain reimbursements, in order to
improve
size='3'>Delphi
liquidity. The
company wants to extend the term of the DIP facility from its current
maturity date of July 1 to Dec. 31.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=53327'>Read
more. (Registration required.)
name='6'>Financial Pains Pushing Hospitals to
Bankruptcy
With a faltering economy
and a tendency among state and local governments to let the market
decide which health care facilities survive, attorneys are expecting to
see more hospital reorganizations and collapses in the next few
years, Bankruptcy
Law360 reported yesterday. Among those that
have filed for chapter 11 protection in recent years are Brotman Medical
Center Inc. in
size='3'>Los Angeles
size='3'>South
face='Times New Roman' size='3'>Beach
size='3'>Community
face='Times New Roman' size='3'>Hospital
size='3'>in
size='3'>Miami
w:st='on'>New
Jersey
w:st='on'>
size='3'>Pascack
face='Times New Roman' size='3'>Valley
size='3'>Hospital
size='3'>Bayonne
face='Times New Roman' size='3'>Medical
size='3'>Center
size='3'>.
face='Times New Roman' size='3'>New York
City
Medical Centers emerged from bankruptcy last August, after two years in
chapter 11. Other hospitals have instead been forced to close
down.
size='3'>Holy
face='Times New Roman' size='3'>Cross
size='3'>Hospital
Lauderdale
w:st='on'>
size='3'>Fla.
announced that it had purchased the nearby, money-losing
size='3'>North
face='Times New Roman' size='3'>Ridge
size='3'>Medical
face='Times New Roman'
size='3'>Center
planned to shut its doors. Many of these hospitals have closed because a
drop in demand has left too many empty beds, and state governments have
often been reluctant to step up and provide funding, attorneys
said.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=52172'>Read
more. (Registration required.)
New
York Attorney General Launches Probe into Auction-Rate Debt
Market
New York Attorney General
Andrew Cuomo has launched a broad investigation into auction-rate
securities, instruments used by municipalities, schools, closed-end
mutual funds and others to raise money, the
size='3'>Wall Street Journal reported today.
Cuomo's office sent subpoenas to 18 institutions on Monday and Tuesday
seeking information on their auction-rate-securities, including some of
Wall Street's biggest, such as UBS AG, Citigroup Inc., Merrill Lynch
& Co., J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. The
$330 billion auction-rate market virtually collapsed in February when
demand for the securities dried up and Wall Street firms stopped
providing the support for the market they'd given in the past.
href='http://online.wsj.com/article_print/SB120844695149923113.html'>Read
more. (Registration required.)
International
size='3'>Britian Considering Proposals to Shore
Up Debt Market
The Bank of England and
the British government are considering actions that would mirror steps
taken by the U.S. Federal Reserve to restore liquidity to the money
markets by taking over mortgage-backed assets from banks, the
New York Times
size='3'>reported today. Details are still being decided for the plan,
which would offer government-backed bonds in exchange for securities
backed by British mortgages. British Prime Minister Gordon Brown and
Alistair Darling, the chancellor of the Exchequer, have come under
increasing pressure to act, as banks’ continued reluctance to lend
adds to woes in the British housing and consumer markets. Banks are
unwilling to lend even to each other because they do not trust the value
of their mortgage-backed assets at a time of falling property prices
in
face='Times New Roman'
size='3'>Britain
size='3'>.
href='http://www.nytimes.com/2008/04/18/business/worldbusiness/18boe.html?ref=business&pagewanted=print'>Read
more.
name='9'>French Bank Replaces Chief after Rogue Trading
Scandal
Société
Générale, the French bank that was rocked by a
multibillion-dollar rogue trading scandal, said late yesterday that
Daniel Bouton would step aside as chief executive but would remain
nonexecutive chairman as part of a management reorganization, the
New York Times
size='3'>reported today. Bouton will be succeeded by Frédéric
Oudea, the chief financial officer, who joined the bank’s senior
management team last month as a deputy chief executive.
For nearly three months, French politicians have been
pressuring Société Générale’s management to
take responsibility for nearly 5 billion euros ($7.9 billion) in losses
suffered after the bank closed out 50 billion euros ($79.3 billion) in
unauthorized bets made by a junior derivatives trader, Jérôme
Kerviel.
href='http://www.nytimes.com/2008/04/18/business/worldbusiness/18socgen.html?ref=business&pagewanted=print'>Read
more.