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March 13, 2009
Senate Democrats Seek
Support for Mortgage Modification Bill
Key Democratic lawmakers are courting support from the
financial services industry, including credit unions, for legislation
that would allow bankruptcy judges to modify mortgages, the
face='Times New Roman'>
size='3'>Washington Post reported today. The
provision passed the House last week but has not been scheduled for a
Senate vote as it was recently referred to the Senate Banking Committee.
The Senate had been expected to take up the bill as soon as this week,
but it now could be delayed a few weeks, perhaps until after Easter,
some congressional aides said. Two Democratic leaders who back the
legislation, Sens. Richard J. Durbin (Ill.) and Charles E. Schumer
(N.Y.), are working to line up financial industry backers. Some
congressional aides said that the bankruptcy legislation could be
combined with a measure to increase the Federal Deposit Insurance
Corp.'s borrowing authority.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/03/12/AR2009031203270_pf.html'>Read
more.
Congressman, New York
Attorney General Seek to Link Executive Pay with Company
Performance
New York State Attorney General Andrew Cuomo is in
discussions with House Financial Services Chairman Barney Frank
(D-Mass.) and other lawmakers on a plan to tie Wall Street pay to the
long-term performance of the firms, the
face='Times 

New
Roman' size='3'>Wall Street Journal reported
today. Executive compensation remains a big policy issue as the federal
government was forced to step in to cover mounting losses on Wall Street
in 2008. The giant federal stimulus package included pay caps for top
earners at firms receiving federal funds. Cuomo is investigating the
$3.62 billion in bonuses that were paid out at Merrill Lynch just before
it was acquired by Bank of America Corp. at the end of last year. He's
trying to determine if the firm violated securities laws by failing to
disclose information in the weeks leading up to the payouts.
href='http://online.wsj.com/article/SB123690181841413405.html#mod=testMod'>Read
more. (Registration required.)
Largest U.S. Pension Plans
Fall $217 Billion Short
A study by Watson Wyatt, a human resources consulting
firm, showed that last year's stock market collapse left the nation's
largest private pension plans with a deficit of more than $200
billion,
size='3'>USA Today reported yesterday. The
nation's 100 largest corporate pension plans were underfunded by $217
billion at the end of 2008, holding only 79 percent of the assets needed
to cover estimated long-term liabilities. That compares with an $86
billion surplus — 109 percent of estimated liabilities — at
the end of 2007, according to the report by Watson Wyatt. Pension plans'
assets fell 26 percent last year, primarily because of investment
losses, the study said. A separate study released Wednesday by Milliman
said the nation's largest plans lost an additional $54 billion in
February.
href='http://www.usatoday.com/money/perfi/retirement/2009-03-11-pension-plan-assets-short_N.htm'>Read
more.
GM Says It Won't Need $2
Billion Aid for Now
General Motors Corp. said yesterday that it has enough
cash to keep operating through the end of March and won't need the $2
billion government infusion this month it had requested, the
size='3'>Wall Street Journal reported today.
The Detroit-based company has received $13.4 billion in emergency
government loans and asked for as much as $16.6 billion more. GM has
delayed or canceled a number of major capital projects, including
development of a new diesel V8 engine, a small-engine factory in
Michigan and capacity increases in emerging markets. Eliminating the
engine factory alone will save about $120 million. The company also
virtually halted vehicle production in January to conserve money as auto
sales fell to multidecade lows.
href='http://online.wsj.com/article/SB123687168298308213.html'>Read
more. (Subscription required.)
Helped Seek Bailout Funds
Top federal regulators say they were taken aback when
they learned that Rep. Maxine Waters (D-Calif.), who helped set up a
meeting with bankers last year, had family financial ties to a bank
whose CEO asked them for up to $50 million in special bailout funds,
the
size='3'>New York Times reported today. Waters
requested the September meeting on behalf of executives at OneUnited,
one of the nation’s largest black-owned banks. Waters’s
husband, Sidney Williams, had served on the bank’s board until
early last year and has owned at least $250,000 of its stock. Treasury
officials said the session with nearly a dozen senior banking regulators
was intended to allow minority-owned banks and their trade association
to discuss the losses they had incurred from the federal takeover of
Fannie Mae and Freddie Mac. However, OneUnited CEO Kevin Cohee instead
seized the opportunity to plead for special assistance for his bank,
federal officials said. Waters declined to comment on the meeting, or to
say whether her husband still owned shares of OneUnited. Her staff
released two letters that showed the meeting had been initially called
to discuss industry concerns broadly.
href='http://www.nytimes.com/2009/03/13/us/politics/13waters.html?_r=1&ref=business&pagewanted=print'>Read
more.
Cash-Strapped Builder Warns
of Possible Chapter 11 Filing
Southern California real estate developer Meruelo
Maddux Properties Inc. disclosed Wednesday that it was rapidly running
out of cash and might be forced to file for chapter 11
protection,
size='3'>Bankruptcy Law360 reported yesterday.
Meruelo Maddux said it began 2009 with $4.5 million in unrestricted
cash, but that it requires $1.8 million each month to satisfy principal
and interest payments on 26 loans. In order to improve its financial
situation, the company has sought loan workout agreements with its
lenders, has reduced its employee base and has suspended all substantial
development efforts except for a project in Los Angeles.
href='http://bankruptcy.law360.com/articles/91344'>Read
more. (Subscription required.)
Alabama County Debt Soars
after JPMorgan Ends Swaps
Jefferson County, Ala., which narrowly avoided
becoming the largest municipal bankruptcy in history in October, has
reportedly received notice from JPMorgan Chase & Co. that the
financial firm will end its interest-rate swap agreements — worth
$748 million — with the county, ballooning Jefferson's sewer debts
to nearly $4 billion, Bankruptcy Law360 reported yesterday. The
county had sought to use the swaps to keep down the growing costs on
bonds Jefferson issued in order to support a disastrous project to
upgrade the county's sewer system. The swaps — which the county
took on between 1996 and 2004 — essentially served as complex bets
that it could trade the interest rates on its bonds for a better value,
but the deal failed to pay off and landed Jefferson with even more debt,
according to the
face='Times New Roman' size='3'>Birmingham News
size='3'>. After credit ratings agencies downgraded the county's rating,
JPMorgan could end the swaps since Jefferson no longer had enough cash
to serve as collateral for the deal. The bank's action locks in the
county's losses, though a forebearance agreement shields Jefferson from
having to pay up on the deal until it expires on April 20.
href='http://bankruptcy.law360.com/articles/91337'>Read more.
(Registration required.)
Brink of Bankruptcy
Six Flags Inc., the world's largest regional theme
park operator, disclosed that it may file for chapter 11 protection if
it fails to renegotiate $318 million in debt by mid-August, Bankruptcy
Law360 reported yesterday. In its annual report to the Securities and
Exchange Commission, Six Flags said on Wednesday that it has an Aug. 15
deadline to repay $287.5 million to its preferred income equity
redeemable shares, plus $31.3 million in accrued and unpaid dividends.
The theme park operator is exploring a variety of refinancing options,
including restructuring in or out of court, according to the filing. As
of Dec. 31, 2008, Six Flags was $2.37 billion in debt, including an
accumulated stockholders' deficit of $443.8 million, according to the
SEC filing.
href='http://bankruptcy.law360.com/articles/91296'>Read more.
(Subscription required.)
Three months after seeking chapter 11 protection and
canceling the remainder of the 2008-09 season, the board of trustees of
the Baltimore Opera Company voted yesterday to pursue chapter 7
liquidation and dissolve the 58-year-old organization, the
face='Times New Roman'>
size='3'>Baltimore Sun reported today. The
company will sell off its assets, including a warehouse, scenery,
costumes and technical equipment, and distribute the proceeds among
creditors. The Baltimore Opera, like many arts organizations,
experienced a steep drop in income from tickets and contributions last
fall as the national economy soured. Cash flow reached such a critical
state that a board member had to personally guarantee cast salaries for
what turned out to be the company's final production in November at the
Lyric Opera House.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/03/12/AR2009031203447_pf.html'>Read
more.
Second Stimulus Bill Not
Coming Soon, According to House Speaker
House Speaker Nancy Pelosi (D-Calif.) said yesterday
that a second economic stimulus package is not 'in the cards' in the
short term, disappointing those seeking another quick infusion of
federal money into the struggling economy, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today.Pelosi helped nudge the idea of another stimulus
Tuesday when she said that Congress should 'keep the door open' to the
possibility. House Appropriations Chairman David Obey (D-Wis.) also said
this week that he will begin 'preparing options' for a second stimulus
package. However, Democratic aides have cautioned strongly that another
such plan is not a serious possibility in the short term, and Pelosi
said yesterday that she 'really would like to see this stimulus package
play out' before contemplating another one.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/03/12/AR2009031203314_pf.html'>Read
more.
House Financial Services
Committee Approves Legislation to Bolster TARP Inspector
General
The House Financial Services Committee yesterday
approved legislation intended to bolster the operations of the special
inspector general appointed to root out fraud and abuse in the $700
billion Troubled Asset Relief Program (TARP), according to
face='Times New Roman'>
size='3'>CongressDaily. The bill, cleared on a
voice vote, would give Inspector General Neil Barofsky fast-track hiring
power to bring his staff up to strength with experienced specialists
over the next six months without having to comply with all federal
personnel procedures. The bill passed the Senate last
month.
Hedge Funds Proceed with
Caution on TALF
Hedge funds of all sizes and strategies are expressing
strong interest in the government's plan to unclog consumer-lending
pipelines, but must decide today if they will participate in the first
round of borrowing through the Term Asset-Backed Securities Loan
Facility (TALF), the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Some of the biggest hedge funds have
participated in calls and meetings with other hedge-fund managers,
lawyers and regulators about the program. They include Harbinger Capital
Management, Highbridge Capital Management, Elliott Management Corp.,
Paulson & Co., Perry Capital, Citadel Investment Group, Cerberus
Capital Management and D.E. Shaw Group. Dealers, mostly Wall Street
banks, are in the program acting as the lender, using financing provided
by the Federal Reserve through a master loan agreement. It is the
dealers' job to select eligible investors. At issue still are terms in
the agreements between dealers and funds that hedge funds say would
expose them to losses greater than what they invest in the program.
Dealers are saying they have to protect themselves from potential
losses.
href='http://online.wsj.com/article/SB123690363713413941.html#mod=testMod'>Read
more. (Subscription required.)
Americans See 18 Percent
of Wealth Vanish in 2008
The wealth of American families plunged nearly 18
percent in 2008, erasing years of sharp gains on housing and stocks and
marking the biggest loss since the Federal Reserve began keeping track
after World War II, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today.The Fed said yesterday that U.S. households' net
worth tumbled by $11 trillion -- a decline in a single year that equals
the combined annual output of Germany, Japan and the United Kingdom. The
decline in Americans' net worth, which was the first in six years,
follows an extraordinary boom. Not accounting for inflation, household
wealth more than doubled from 1990 to 2000, and then, after a pause,
rose nearly 50 percent before the bust of 2008.
href='http://online.wsj.com/article/SB123687371369308675.html'>Read
more. (Subscription required.)
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