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April 22009

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April 2, 2009

House Panel
Moves to Delay Credit Card Rules until 2010

The House Financial Services
Financial Institutions Subcommittee yesterday voted to delay
implementation of credit card rules until July 2010, denying an attempt
to speed up regulations designed by the Federal Reserve to better
protect consumers,

size='3'>CongressDaily
reported yesterday. The

subcommittee voted to stick to a July 2010 timetable instead of speeding

up the process under a measure sponsored by Rep. Carolyn Maloney
(D-N.Y.) that would have required banks to adhere to the new changes
three months after enactment. The vote was a setback for consumer
activists who wanted banks to implement the changes as quickly as
possible, arguing that the Fed's timetable was too generous to the
banking industry. However, members on the panel -- especially some
Democrats -- were persuaded by the testimony of Saundra Braunstein of
the Federal Reserve, who said more time was needed to implement new
rules that include giving customers a 45-day advance notice of any
change in terms and providing 21 days to pay a bill.

In related news, the House
Judicary Subcommittee on Commercial and Administrative Law will hold a
hearing today titled 'Consumer Debt — Are Credit Cards Bankrupting

Americans?' ABI Fall Resident Scholar Prof.
face='Calibri' size='3'>Adam J. Levitin
of
Georgetown University Law is among the witnesses scheduled to testify.
Click here for more information.


name='2'>
Thornburg Mortgage to Shut Down, File Chapter 

11

Embattled home lender Thornburg
Mortgage Inc. announced yesterday that it would liquidate its remaining
assets through chapter 11 proceedings and cease operations in the coming

weeks, Bankruptcy
Law360
reported yesterday. The announcement
came on the same day that the Santa Fe, N.M.-based mortgage real estate
investment trust said that several additional counterparties to existing

finance agreements had agreed to hold off on filing deficiency claims
stemming from unpaid debts on those agreements, which totaled around $4
billion, for an additional month. The lenders, including JPMorgan Chase
Funding Inc., Greenwich Capital Markets Inc., the Royal Bank of Scotland

PLC and Credit Suisse Securities (USA) LLC, will take possession of and
sell many of Thornburg's assets during the agreed-upon forbearance
period, which expires April 30. 
href='
http://bankruptcy.law360.com/articles/95011'>Read more.
(Subscription required.)

House Passes
Legislation to Tie Executive Pay to Performance for TARP
Recipients

The House of Representatives
approved legislation yesterday that would tie pay to performance at
companies that have received direct capital investments under the
Troubled Asset Relief Program, according to a House Financial Services
press release yesterday. 
The legislation
would prohibit certain compensation at these institutions to better
align the public’s interest with the health of the financial
institutions. In addition, the bill also repeals a controversial
provision in the American Recovery and Reinvestment Act that exempts
bonuses due under employment contracts entered into or before Feb. 11,
2009. The bill passed by a vote of 247-171. 

href='http://www.house.gov/apps/list/press/financialsvcs_dem/press040120091.shtml'>Click

here to read the press release outlining H.R. 1664, the
“Grayson-Himes Pay for Performance Act.”

Customers
Move to Force Madoff into Chapter 7

Customers of Bernard L. Madoff
Investment Securities LLC who say they hold more than $64 million in
claims against the defunct broker-dealer and Madoff himself filed a
motion yesterday asking a district court judge for approval to file an
involuntary bankruptcy petition against Bernard Madoff,

face='Calibri' size='3'>Bankruptcy Law360

size='3'>reported yesterday. Under a prior order from the district
court, creditors need court approval to file an involuntary chapter 7
case against Madoff. The SEC and the U.S. Department of Justice will now

decide whether or not to oppose the bid for permission to commence the
involuntary bankruptcy proceedings. Madoff’s former customers
argued that their motion should be granted because the
“well-established provisions of the Bankruptcy Code” should
govern the distribution of Madoff’s assets to creditors, according

to the motion. 
href='
http://bankruptcy.law360.com/articles/95128'>Read more.
(Subscription required.)

New Century
Trustee Seeks $1 Billion from KPMG

The liquidating trustee of New
Century Financial Corp. is suing KPMG LLP to recover at least $1 billion

for creditors, claiming that the auditor’s negligence is largely
responsible for the subprime mortgage lender’s downfall,
Bankruptcy Law360
size='3'>reported yesterday. Rather than provide an independent audit of

New Century, once the second-biggest mortgage lender in the country, the

auditor subverted the core principles of its industry and became
complicit in its client’s abuses, authorizing filings it knew to
be inaccurate, according to the complaint filed by New Century’s
liquidating trustee and plan administrator
face='Calibri' size='3'>Alan M. Jacobs
.
According to the complaint, as auditor KPMG was fully cognizant of New
Century’s false statements and lack of internal controls but chose

to protect its client’s interests and its own fees rather than the

public interest. 
href='
http://bankruptcy.law360.com/articles/95075'>Read more.
(Subscription required.)

GMAC to Free
Up $5 Billion for Consumer Loans

GMAC Financial Services, the
finance company in which General Motors is a minority owner, said
yesterday that it is setting aside $5 billion for consumer auto loans
over the next 60 days and easing wholesale financing charges for dealers

to improve car sales, the
size='3'>Detroit Free Press
reported today.
GMAC also said that it would relax its lending standards, accepting
financing applications from customers with credit scores below 620. At
the end of December, following the U.S. Treasury's infusion of $6
billion into the struggling GMAC, the financing company eased lending
rules that had grown more stringent in late 2008 as credit across the
country began to tighten. As part of the terms to win government aid,
GMAC became a bank holding company, which required GM and Cerberus
Capital Management to drastically reduce their ownership in the company.

GMAC President Bill Muir said in a statement that the company has
financed more than $2 billion in new and used retail auto contracts
since January. 
href='
http://www.freep.com/article/20090402/BUSINESS01/904020386'>Read
more.

AIG Targeted
by Shareholder Lawsuit

Even as American International
Group Inc. was sliding into insolvency in recent years and negotiating a

massive federal bailout last year, it was constructing a compensation
package for top executives that would provide as much as $1 billion in
bonuses, according to a shareholder lawsuit filed yesterday, the
Los Angeles Times
size='3'>reported. AIG, which has been heavily criticized for the
bonuses, has contended that it was legally obligated to pay because its
compensation program was put in place before the company was given
access to $70 billion in direct federal bailout money and much more in
loans. The suit, among the first to hit the once-dominant insurance
giant, puts together a detailed timetable for AIG's financial meltdown
and outlines the company's compensation system, set against the backdrop

of two criminal investigations that were being conducted into the
company's practices over the last eight years. The suit names AIG Chief
Executive Edward M. Liddy, retirement services Chief Jay Wintrob and
Director Stephen Bollenbach, among others, alleging that they helped put

together the bonus scheme that breached the company's fiduciary duty to
shareholders. 

FDIC Chief
Calls for Higher Capital for Banks

FDIC Chairwoman Sheila Bair said
yesterday that new rules to prevent the troubles of big financial
institutions from threatening the overall economy should include higher
capital requirements,

size='3'>CongressDaily
reported. Bair is
calling for a new system of regulation that prevents institutions from
taking on excessive risk and becoming so big that their failure would
endanger the financial system. 'We simply need to end 'too big to fail,'

' Bair said.

Vick to Make
First Court Appearance in Bankruptcy

A judge wants to know more about
suspended NFL star Michael Vick's bankruptcy plan, which is based on his

goal of resuming his football career when he gets out of jail, the
Associated Press reported yesterday. Vick is scheduled to make his first

personal appearance in a Virginia bankruptcy court since filing his
chapter 11 case from prison. Vick must testify at the hearing, which
begins today in Newport News. The former Atlanta Falcons quarterback is
serving a 23-month sentence for bankrolling a dogfighting ring and is
due to be released in July. Vick’s reorganization plan would allow

him to keep the first $750,000 of his salary and then creditors would
get part of any additional earnings. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/04/02/AR2009040200476_pf.html'>Read

more.

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