href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif' />
July 2, 2008
Consumer Bankruptcy Filings in First
Half of 2008 Up 30 Percent from a Year Ago
U.S. consumer bankruptcy filings increased 30 percent
nationwide during the first six months of 2008 (Jan. 1-June 30) from the
same period a year ago, according to ABI, relying on data from the
National Bankruptcy Research Center (NBKRC). The overall June consumer
filing total of 82,770 was 20.7 percent more than the 68,559 consumer
filings recorded in June 2007. While the June total represented an
increase over the previous year, it was a 9.3 percent decrease from the
May 2008 total of 91,214 consumer filings. Chapter 13 filings
constituted 32.6 percent of all consumer cases in June, a slight
increase from May.
href='http://www.abiworld.org/AM/Template.cfm?Section=Monthly_Bankruptcy_Statistics&Template=/MembersOnly.cfm&NavMenuID=3716&ContentID=46994&DirectListComboInd=D'>Click
here to view the consumer filing charts for June.
Treasury Secretary to Call for
Expansion of Financial Regulatory Powers
U.S. Treasury Secretary Henry Paulson today will call for an expansion
of regulatory powers to ensure that the failure of a nonbank financial
institution doesn't threaten the whole financial system, the Wall
Street Journal reported today. 'The financial landscape has
changed, and nonbank financial institutions play a significantly greater
role,' Paulson said. 'We need to consider broadly the resolution regime
in light of these changes.' His comments mark a further evolution of the
Treasury's plan for a complete overhaul of the U.S. regulatory system. A
blueprint released in March provided broad recommendations for
realigning the patchwork system of supervisors to be more effective,
with the Federal Reserve seen taking on the role of market stability
supercop. However, the Fed's central role in facilitating JP Morgan
Chase's rescue of Bear Stearns that month has given more urgency to the
effort. Last month, Paulson pushed for rapid progress in giving the Fed
greater authority over investment banks, while suggesting that the issue
of how to handle a nonbank failure also needs to be resolved.
href='http://online.wsj.com/article_print/SB121499579354022615.html'>Read
more. (Registration required.)
In related news, the House Financial Services Committee announced
yesterday that it would begin a series of hearings on Thursday, July 10,
on the policy implications of retooling U.S. regulatory structures for
the changing financial markets, according to a committee press release.
Scheduled witnesses include Treasury Secretary Henry Paulson and Federal
Reserve Board Chairman Ben Bernanke. The committee also plans to invite
New York Federal Reserve President Timothy Geithner, SEC Chairman
Christopher Cox, other federal regulators, academics, economists and
market participants to present their views at subsequent hearings later
in July and continuing in the fall.
href='http://www.house.gov/apps/list/press/financialsvcs_dem/press070108.shtml'>Read
more.
Moody's Says Workers Rated Some
Securities Incorrectly
Already under intense scrutiny for its role in the credit crisis,
Moody's Corp. said yesterday that some employees had violated its code
of conduct in rating complex European securities, the New York
Times reported today. The company said that it would discipline and
possibly fire employees who had been involved in rating the debt, which
are known as constant proportion debt obligations. Separately, Moody's
said it was replacing the executive, Noel Kirnon, who was in charge of
its structured finance business at its subsidiary, Moody's Investors
Service. The news comes as policymakers around the world are looking
into how Moody's and its competitors, Standard & Poor's and Fitch
Ratings, gave high ratings to mortgage and related securities that
turned out to be far riskier than their ratings would have implied and
have cost the financial system hundreds of billons of dollars. The
companies are the subject of several investigations in the United States
href='http://www.nytimes.com/2008/07/02/business/02moodys.html?ref=business&pagewanted=print'>Read
more.
Deepening Cycle of Job Loss Seen
Lasting into '09
Plummeting home prices have in recent months eliminated jobs for
hundreds of thousands of people, from bankers and real estate agents to
construction workers and furniture manufacturers, the New York
Times reported today. Tighter lending standards imposed by banks in
the wake of huge mortgage losses have made it hard for many Americans to
secure credit, crimping the appetite of consumers, whose spending
amounts to 70 percent of the economy. Adding to the tough economic times
is word from automakers that sales plunged in June - by 28 percent for
Ford, 21 percent for Toyota and 18 percent for General Motors - a sharp
sign that consumers are pulling back, making manufacturers more likely
to cut production and impose more layoffs. Goldman Sachs forecasts that
the unemployment rate will peak at 6.4 percent late in 2009 before the
picture improves, meaning that the painful process of shedding jobs may
be only halfway complete.
href='http://www.nytimes.com/2008/07/02/business/02jobs.html?_r=1&hp&oref=slogin'>Read
more.
Levitt Files Liquidation Plan, Settles
with Parent Company
Homebuilder Levitt & Sons LLC and its unsecured creditors have filed
a liquidation plan detailing a comprehensive settlement with Levitt's
parent company that will net the debtors $12.5 million, Bankruptcy
Law360 reported yesterday. In addition to outlining the liquidation
plan, which would provide some recovery for unsecured creditors, the
disclosure statement described the settlement with parent Woodbridge
Holdings Co., formerly known as Levitt Corp. The settlement, which
requires bankruptcy court approval, calls on Woodbridge to pay the
debtors' estates $12.5 million plus interest and drop its claims, except
for one secured claim concerning a specific loan, in exchange for a
mutual release of claims and a third-party injunction favoring
Woodbridge.
href='http://bankruptcy.law360.com/Secure/printview.aspx?id=60879'>Read
more. (Registration required.)
Grupo México Gets Boost in Fight
for Asarco
Bankruptcy Judge Richard Schmidt yesterday gave Grupo
México permission to file a reorganization plan for Asarco LLC,
despite Asarco's plan to sell its assets to an Indian metals group, the
Wall Street Journal reported today. the decision was a setback
for Asarco's plans to sell itself to Sterlite Industries Ltd., a unit of
London-based Vedanta Resources PLC. Sterlite surprised the copper world
in May when it offered $2.6 billion for Asarco. Grupo México said
that its own plan would top $2.7 billion and satisfy Asarco's many
creditors, including federal and state environmental agencies. Grupo
México said it intends to file its competing reorganization plan by
the end of September. A final ruling on which group prevails in the race
for Asarco probably will come from the bankruptcy court before the end
of the year.
href='http://online.wsj.com/article_print/SB121496061431721589.html'>Read
more. (Registration required.)
Goody's Clothing Gets $175 Million DIP
Loan
Bankrupt retailer Goody's Family Clothing Inc. has received a $175
million debtor-in-possession (DIP) credit facility from General Electric
Commercial Finance Corporate Lending, Bankruptcy Law360
reported yesterday. Goody's Family Clothing Inc. filed for chapter 11
protection June 9 after closing a number of its less-profitable stores.
The company said that tightening credit markets, merchandise flow
problems and underperforming stores had left the company with as many as
50,000 creditors.
href='http://bankruptcy.law360.com/Secure/printview.aspx?id=60852'>Read
more. (Registration required.)
Judge Clears U.S. Request for UBS
Clients' Names
A federal judge cleared the way yesterday for prosecutors to force the
Swiss banking giant UBS to turn over the names of wealthy clients as
part of an investigation of its offshore private banking practices, the
New York Times reported today. An order signed by Judge Joan A.
Lenard of Federal District Court in Miami gives investigators the
authority to request the information from UBS. The Internal Revenue
Service said that the agency, which was working with federal
prosecutors, was expected to serve UBS with a summons for names within
several days. The bank can either turn the names over - an unprecedented
move for a Swiss bank under secrecy laws - or appeal the judge's ruling.
The embattled bank, which is struggling against investor concerns about
further write-downs and its ability to retain vital private clients,
also announced a major overhaul of its corporate governance rules
yesterday.
href='http://www.nytimes.com/2008/07/02/business/worldbusiness/02ubs.html?ref=business&pagewanted=print'>Read
more.
Building Loan Delinquencies Hurting
Bank of America
While the most-visible worry over Bank of America Corp. involves its
acquisition of home-mortgage lender Countrywide Financial Corp., the
Charlotte, N.C.-based bank is the largest construction lender in the
country, and it is seeing a rapid run-up in delinquencies, the
Wall Street Journal reported today. At least part of the blame
comes from its acquisition of Chicago-based LaSalle Bank, a deal that
closed in the fourth quarter of 2007. The LaSalle deal 'added a
disproportionate share of problem loans' to Bank of America's
construction portfolio, notes Matthew Anderson, a partner at real-estate
research firm Foresight Analytics LLC. Moreover, the deterioration of
the LaSalle loans is a timely reminder of the liabilities that Bank of
America will be taking on with Countrywide, which had $5 billion in
problematic loans at the end of the first quarter -- nearly five times
as many as a year earlier. The $2.5 billion Countrywide deal closed
yesterday.
href='http://online.wsj.com/article_print/SB121495120594020993.html'>Read
more. (Registration required.)
Groups Target Conservative Democrats
on Lobbying Efforts for Housing-Recovery Package
Low-income housing advocacy groups are targeting the Blue Dog Coalition
over the congressional break as they believe the conservative Democrats
are the key to whether Congress will pass a housing-recovery package
that includes $4 billion for communities to buy and rehabilitate
foreclosed properties, CongressDaily reported yesterday. The
proponents of the funding are zeroing in on the Blue Dogs after the
Senate last week voted 79-16 on a key procedural test for the housing
package that contains the Community Development Block Grant funding.
That vote indicated significant support for a veto override in the upper
chamber. However, the House of Representatives is now getting more
attention because advocates are concerned that the funding, which is not
offset, could pose a problem to bring the bill up for debate. Votes over
rules for House debate typically follow party lines, so if nearly 20
Blue Dogs oppose the measure because it does not adhere to pay/go
spending rules, they could sink the bill.
/>
Sales of new cars and trucks plunged to their lowest level in more than
a decade in June, as high gas prices and a weak economy kept American
consumers away from dealer showrooms, the New York Times
reported today. With the drop last month of more than 18 percent,
automakers now expect to sell well below 15 million new vehicles this
year, far fewer than the norm this decade of more than 16 million
vehicles a year. Detroit automakers were hit hard. Ford Motor was down
28 percent in June, General Motors was off 18 percent, and Chrysler
dropped 36 percent.
href='http://www.nytimes.com/2008/07/02/business/02auto.html?sq=bankruptcy&st=nyt&scp=2&pagewanted=print'>Read
more.