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July 31, 2008
House Committee to Mark Up Credit Card
Bill of Rights Legislation
The House Financial Services Committee today will mark up the
“Credit Card Bill of Rights Act of 2008” that would curb
questionable credit card practices, CongressDaily reported.
H.R. 5244, sponsored by Financial Institutions Subcommittee Chairwoman
Carolyn Maloney (D-N.Y.), would require companies to give customers a
45-day notice of any interest rate increase, prevent double-cycle
billing and bar 'universal default.' Opponents to the legislation are
favoring an amendment that would also include nonbinding language
supporting the Federal Reserve's recent proposed rules to rein in
certain credit card practices, which is similar to Maloney's
bill.
href='http://www.house.gov/apps/list/speech/financialsvcs_dem/mu073008.shtml'>Click
here to view the live Webcast of the committee mark-up
hearing.
Connecticut Sues Credit Rating Firms over
Municipal Bonds
Connecticut sued the nation's leading credit rating firms yesterday,
accusing them of giving artificially low credit ratings to cities and
towns that ultimately cost taxpayers millions of dollars in unnecessary
insurance and higher interest payments, the Associated Press reported.
Connecticut State Attorney General Richard Blumenthal and Consumer
Protection Commissioner Jerry Farrell Jr. filed the lawsuit in Hartford
Superior Court against Moody's Corp., Fitch Inc. and the McGraw-Hill
Companies, the parent company of Standard & Poor's. The lawsuit
accuses the agencies of establishing a dual ratings system that gives
lower credit ratings to bonds issued by states, municipalities and other
public entities than corporate debt.
href='http://www.nytimes.com/2008/07/31/business/31rating.html?pagewanted=print'>Read
more.
In related news, the House Financial Services Committee approved
legislation yesterday designed to eliminate a perceived market bias
against municipal bonds by requiring credit-rating agencies to score
them in the same way as corporate debt, CongressDaily reported
today. The bill would require the ratings agencies -- such as Moody's
Investors Service, Fitch Ratings and Standard & Poor's -- to assess
the risk of the tax-exempt municipal bonds on the basis of repayment
alone.
Accounting Board Delays Asset Rule for
Banks
The Financial Accounting Standards Board, under pressure from
banks and auditors, voted unanimously yesterday to delay a new
accounting rule that is aimed at forcing banks to put more assets on
their balance sheets rather than hide them in so-called special-purpose
entities, the New York Times reported today. The board, reversing a
decision it made on June 11, decided that the rule would go into effect
for companies in calendar-year 2010, rather than a year earlier.
The board said that it still hopes to require additional disclosures of
off-balance-sheet entities in 2009, even though the accounting for them
would not change until the following year.
href='http://www.nytimes.com/2008/07/31/business/31audit.html?ref=business&pagewanted=print'>Read
more.
Fed Extends Lending Programs as
Economic Threats Persist
The Federal Reserve announced yesterday that it is extending programs
through January that allow investment banks to borrow from the central
bank, the Wall Street Journal reported today. The Fed's
extension of its loan program for securities firms, started in March
after the collapse of Bear Stearns Cos., allows the investment banks to
take overnight loans directly from the Fed's discount window. That
program, known as the primary-dealer credit facility, was set to expire
in September. The Fed extended the program through Jan. 30, though it
said 'the facilities would be withdrawn should the board determine that
conditions in financial markets are no longer unusual and
exigent.'
href='http://online.wsj.com/article/SB121742140378196767.html?mod=us_business_whats_news'>Read
more. (Subscription required.)
Judge Converts Enesco Group Case to
Chapter 7
In a ruling handed down on Monday, Bankruptcy Judge A. Benjamin
Goldgar of the U.S. Bankruptcy Court for the Northern District
of Illinois granted a motion filed by the U.S. Trustee and ordered
Enesco to enter chapter 7 liquidation, Bankruptcy Law360
reported yesterday. The order came in response to a request filed by
U.S. Trustee Kathryn Gleason on June 23 in which she
asked the court to either convert or dismiss the case. Enesco, which
owns gift brands including Walt Disney Classics and Gund, filed for
chapter 11 in January 2007. The company listed $155,350,698 in assets
and $107,903,518 in debts at the time of its filing.
href='http://bankruptcy.law360.com/articles/64290'>Read
more. (Subscription required.)
Fifth Circuit Denies Stay of Pacific
Lumber Chapter 11 Plan
Clearing the way for Pacific Lumber Co. to emerge from chapter 11, a
federal appeals court on Tuesday dashed a last-minute plan by
bondholders to put a freeze on the hard-fought reorganization plan
proposed by two of the timber company's largest creditors,
Bankruptcy Law360 reported yesterday. The U.S. Court
of Appeals for the Fifth Circuit denied an expedited motion by the Bank
of New York, acting as indenture trustee for a group of disgruntled
Pacific Lumber noteholders, to stay effective confirmation of the plan
pending an appeal. The ruling clears the path for the takeover of much
of Pacific Lumber's vast timber holdings in northern California by
creditors Mendocino Redwood Co. and Marathon Structured Finance Fund
LLP, which put forth the contested plan.
href='http://bankruptcy.law360.com/articles/64300'>Read
more. (Subscription required.)
GM to Cut 5,000 White-Collar Jobs by
Nov. 1
General Motors Corp. said that it will remove about 5,000 people
from its salaried head count by Nov. 1, amounting to nearly 15 percent
of GM's North American white-collar work force, the Wall Street
Journal reported today. The head count move is part of a 20 percent
reduction GM plans for its North American white-collar cost structure
this year. It plans to shave $10 billion over the next 17 months. GM
will also suspend the dividend, cut capital spending and trim retiree
benefits to meet its target.
href='http://online.wsj.com/article/SB121743238233397231.html?mod=us_business_whats_news'>Read
more. (Subscription required.)
United Sues Pilots, Saying Job Action
Canceled Hundreds of Flights
United Airlines sued its pilots' union yesterday, asking it to halt
slowdowns that it said had led to the cancellation of hundreds of
flights in the last 10 days, the New York Times reported today.
The airline said that the union was conducting a “public campaign
of intimidation” meant to discourage pilots from filling in for
the pilots who used their sick time, “effectively engaging in a
slowdown.” United said it was trying to avoid a repeat of a
similar slowdown that occurred in 2000 that cost United hundreds of
millions of dollars and contributed to a financial slide that eventually
landed the airline in bankruptcy protection.
href='http://www.nytimes.com/2008/07/31/business/31united.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Bennett, SEC Settle in Refco Civil
Case
Phillip R. Bennett, the former CEO of defunct commodities broker Refco
Inc., reached a settlement with the Securities and Exchange Commission
for his role in an alleged scheme to hide the firm's financial troubles,
the Wall Street Journal reported today. The judgment, signed
Tuesday by U.S. District Judge Gerard E. Lynch in Manhattan, enjoins
Bennett from further violations of federal securities laws and prohibits
him from serving as an officer or director of a public company. Bennett
pleaded guilty to a 20-count criminal indictment in February, but is
appealing his 16-year prison sentence. The charges included conspiracy,
securities fraud, bank fraud and making false filings with the
SEC.
href='http://online.wsj.com/article/SB121743369143697285.html?mod=us_business_whats_news'>Read
more. (Subscription required.)
Broker Goes Missing Amid Potential
Securities Criminal Charges
Federal prosecutors suspect that a Wall Street broker who is the target
of a criminal investigation into sales of mortgage-related securities
has left the United States and could have fled to his native Bulgaria,
the Wall Street Journal reported today. The move comes as
prosecutors prepare to bring criminal charges in a high-profile probe
into the activities of two former Credit Suisse brokers. Authorities
have been investigating whether the brokers -- Eric Butler and Julian
Tzolov, who is Bulgarian-born -- lied to investors about how they placed
their money in so-called 'auction rate' securities tied to subprime
mortgages.
href='http://online.wsj.com/article/SB121746841444299461.html?mod=hpp_us_whats_newsNicholas
Ratzenboeck/AFP/Getty Images'>Read more. (Subscription
required.)
International
Italy Denies Bankruptcy Plans for
Alitalia
Italy's government yesterday denied plans to take state-controlled
airline Alitalia into bankruptcy as it came under attack from the
centre-left opposition over mass layoffs expected at the troubled
carrier, Reuters reported. The airline is awaiting a new rescue plan
from bank Intesa Sanpaolo, which is expected to suggest filing for
special administration -- similar to U.S. bankruptcy -- followed by a
split-off of its healthy units for investors. An Italian news agency
said the Italian cabinet would modify the bankruptcy law at an Aug. 29
meeting to pave the way for the special administration procedure, but
Prime Minister Silvio Berlusconi's office called the report 'totally
groundless.' Five major Alitalia unions appealed to the government to
clarify its intentions.
href='http://www.reuters.com/article/companyNewsAndPR/idUSL072831220080730'>Read
more.