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June 18, 2009
Financial
Regulation
name='1'>Congressional Panels to Examine President’s Financial
Regulatory Overhaul Plan
The Senate Banking and House
Financial Services Committees will hold hearings today to examine the
proposal released yesterday by President Barack Obama to overhaul the
nation’s financial regulatory system. Treasury Secretary Timothy
Geithner is scheduled to be the lone witness at both hearings. The
Senate Banking Committee hearing will take place at 9:30 a.m. ET, while
the House Financial Services Committee hearing is scheduled to start at
1 p.m. ET.
href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=4912989a-1226-4fe5-899c-6d361d612a64'>Click
here to view a live webcast of the Senate Banking Committee
hearing.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/fullhr_061109.shtml'>Click
here to view a live Webcast of the House Financial Services
Committee hearing.
name='2'>Banks Brace for Fight over Proposed Agency to Bolster
Consumer Protection
The banking industry is
bracing for a fight over the proposed Consumer Financial Protection
Agency, a piece of the Obama administration’s plan to overhaul
regulation of the financial industry, the New York Times reported
today. The Consumer Financial Protection Agency is the brainchild of
Prof. Elizabeth
Warren of Harvard Law School, who argues that
the banking regulators have an inherent conflict of interest between
ensuring the safety and soundness of institutions and protecting
consumers. The new agency could, among other things, dictate standards
for some products before banks could bring them to market, and push
banks to favor plain vanilla loans over more exotic home loans, which
could be required to carry warnings. Unfair terms and practices among
credit card issuers would also be weeded out. The proposed agency also
sets up a potential turf battle among the myriad agencies that are
currently tasked with protecting consumers, including the Office of
Thrift Supervision, the Office of the Comptroller of the Currency and
the Federal Reserve, which the banks would like to see maintain this
oversight. Banking groups are concerned about the costs that a new layer
of regulation might impose, and the prospect of more examiners crowding
into their banks.
href='http://www.nytimes.com/2009/06/18/business/18consumer.html?ref=business&pagewanted=print'>Read
href='http://www.nytimes.com/2009/06/18/business/18consumer.html?ref=business&pagewanted=print'>
name='3'>Commentary: Too Big to Fail, or Succeed
According to the
regulatory overhaul proposed by President Barack Obama yesterday, the
Federal Reserve would be authorized to create a special regulatory
regime -- including requirements for capital, leverage and liquidity --
for any firm 'whose combination of size, leverage and interconnectedness
could pose a threat to financial stability if it failed,' according to a
commentary in today’s
size='3'>Wall Street Journal. In addition, if
a large financial firm is failing, the Treasury is to be given the power
-- in lieu of bankruptcy -- to appoint a conservator or receiver to
'stabilize' it. Designating particular financial firms for this kind of
special regulatory treatment clearly signals to the markets that these
institutions are too big to fail. The administration's plan, according
to the commentary, would create what are essentially
government-sponsored enterprises like Fannie Mae and Freddie Mac in
every sector of the financial economy -- insurers, securities firms,
finance companies, bank holding companies, and hedge funds -- where
these specially regulated firms are to be designated. The result will be
devastating for competition and larger firms will squeeze out smaller
ones and aggressive small companies will have less opportunity to
overcome the government-backed winners, according to the
commentary.
href='http://online.wsj.com/article/SB124528373595925623.html'>Read
more. (Subscription required.)
name='4'>Senate Judiciary Committee Set to Consider Bill to Limit
Bankruptcy Claims on High-interest Loans
The Senate Judiciary Committee
is scheduled today to consider a bill that would limit creditors from
collecting on high-interest rate loans in bankruptcy court and may give
consumers leverage to negotiate better terms. S. 257, the
“Consumer Credit Fairness Act” sponsored by Sen. Sheldon
Whitehouse (D-R.I.), covers “a wide spectrum of abusive consumer
loans,” including credit card agreements, payday loans, car loans,
overdraft loans and layaway plans, according to a Judiciary Committee
summary. The bill’s rate threshold, which would be 19.80 percent
based on yesterday’s 30-year Treasury yield, ensures that only
high-interest rate loans are affected, according to Whitehouse’s
staff.
href='http://judiciary.senate.gov/hearings/hearing.cfm?id=3926'>Click
here to view a webcast of the Senate Judiciary Committee’s
business meeting in which S. 257 will be considered.
size='3'>District Court Reverses Approval of New
Century's Liquidation Plan
The U.S. District Court
for the District of Delaware on Tuesday reversed last year’s
decision to confirm a liquidation plan for bankrupt subprime lender New
Century Financial Corp., ruling that the plan treats the claims of
certain classes, including the beneficiaries of the company’s
compensation and retirement plans, less favorably than others,
Bankruptcy Law360
reported yesterday. The dispute stems from the July 2008
decision by the U.S. Bankruptcy Court for the District of Delaware to
confirm a liquidation plan filed by the debtors of New Century TRS
Holdings, which filed for chapter 11 in April 2007. The bankruptcy court
approved the plan despite the objections from an ad hoc committee of
former employees who had contributed funds currently held in a trust
that contained more than $43 million as of December 2006. The committee
has objected to the liquidation plan, arguing that the trust is not an
asset of the bankruptcy estates that can be used to satisfy other
creditors’ claims. The approved plan separates the 16 debtors into
three groups to facilitate distributions to unsecured creditors. The
appellants voted against the plan, arguing that it provides 'substantive
consolidation' of the debtors in violation of precedent cases and also
provides for disparate treatment of claims within the same class. The
case had been remanded to the bankruptcy court. The case is
Gregory J. Schroeder et al. v
New Century Liquidating Trust et al., case
number: 08-cv-00546, in the U.S. District Court for the District of
Delaware.
href='http://bankruptcy.law360.com/articles/106978'>Read more.
(Subscription required.)
Bauer Files for Bankruptcy Protection
Struggling retailer Eddie Bauer
Holdings Inc. filed for chapter 11 protection yesterday, but said that a
bidder already has agreed to keep the majority of its 371 stores open,
honor gift cards and retain most employees, the Associated Press
reported yesterday. Eddie Bauer, known for outdoors clothing, said that
CCMP Capital Advisors LLC has bid $202 million in cash for its assets.
Other buyers may also make bids while the company is under court
protection. The retailer had $476.1 million in assets and $426.7 million
in debt listed in its filing. Eddie Bauer said that it has a commitment
from its existing lenders for debtor-in-possession financing of $90
million.
href='http://news.yahoo.com/s/ap/20090617/ap_on_bi_ge/us_eddie_bauer_bankruptcy_3/print'>Read
href='http://news.yahoo.com/s/ap/20090617/ap_on_bi_ge/us_eddie_bauer_bankruptcy_3/print'>
Autos
name='7'>Senate Bill Would Provide $30 Billion in Loans to Auto
Suppliers
U.S. auto suppliers and
other small manufacturers would gain access to $30 billion in government
loans under a proposal unveiled yesterday by Sen. Sherrod Brown
(D-Ohio), Dow Jones
size='3'>Daily Bankruptcy Review reported
today. The bill would create a revolving loan program for manufacturers
to finance “clean energy” projects such as the development
of fuel-efficient vehicles, wind turbines and solar panels, Brown said.
States would determine which projects receive funding, using federal
guidelines for improving energy efficiency and creating jobs. The funds
would go to manufacturing companies with 500 employees or fewer, a
sector predominantly consisting of auto parts suppliers. The White House
recently denied a request by auto suppliers for up to $10 billion in new
aid, determining a consolidation of the supply base was
necessary.
size='3'>ear Vendors Seek Cash Payment on Bankruptcy
Concern
Lear Corp., the auto-seat maker
trying to amend its loan terms, is being asked by suppliers to use cash
for new orders and speed payment on older bills on the concern that the
company may file for bankruptcy, Bloomberg News reported yesterday.
Demands for upfront cash would add to the strain on Lear while
renegotiating its borrowing after getting a waiver through June 30 on
some conditions and a 30-day grace period for $38 million in interest
payments that were due June 1. Lear said on May 14 that it hopes to
restructure debt outside of chapter 11 even as the U.S. auto market
collapses.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aaOK203fNxOg'>Read
more.
name='9'>Buyers Still Heading for GM Vehicles Despite
Bankruptcy
Consumers appear undaunted by
General Motors Corp.'s bankruptcy, assuaging one of the automaker's
biggest fears heading into chapter 11 protection, Dow Jones Newswires
reported yesterday. Early signs point to stable demand for GM cars and
trucks since it filed for chapter 11 protection on June 1 as GM CEO
Fritz Henderson said yesterday that June retail sales are tracking
higher than May. AutoNation Inc., the nation's largest auto retailer,
reported that showroom traffic at GM dealerships has held steady since
the auto maker entered court as part of a government-mandated
restructuring.
href='http://money.cnn.com/news/newsfeeds/articles/djf500/200906171705DOWJONESDJONLINE000854_FORTUNE5.htm'>Read
more.
name='10'>Energy Partners’ Disclosure Statement
Approved
Bankruptcy Judge Jeff
Bohm on Tuesday approved Energy Partners Ltd.'s disclosure statement,
giving Energy Partners a green light to start soliciting votes on its
prenegotiated restructuring plan,
size='3'>Bankruptcy Law360 reported yesterday.
Under the proposed plan, three series of outstanding senior unsecured
notes, representing about $455 million in indebtedness, would be
converted into 100 percent of the outstanding common stock in the
reorganized company, Energy Partners said. All outstanding shares of
prepetition stock in Energy Partners would be canceled, and holders of
allowed equity interests would receive a
size='3'>pro rata share of warrants to acquire
12.5 percent of the fully diluted new common stock that would be issued
pursuant to the proposed plan. Energy Partners will start soliciting
votes on the plan on June 22, and the voting deadline has been set for
July 22, the company said. Judge Bohm scheduled July 29 for a hearing to
consider confirmation of the plan.
href='http://bankruptcy.law360.com/articles/106861'>Read more.
(Subscription required.)
name='11'>LandSource Lenders Join Bid for Chapter 7
Conversion
The Bank of New York has
joined forces with unsecured creditors of LandSource Communities
Development LLC in the fight to convert the real estate developer's
chapter 11 case to a chapter 7 liquidation proceeding,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. In a joinder filed in the U.S. Bankruptcy
Court for the District of Delaware on Tuesday, Bank of New York said
that it agreed with the company’s unsecured creditors’
committee that liquidation would serve them better than the
reorganization plan proposed by the company's postpetition financier.
The creditors’ committee filed its motion for conversion on June
5, saying that Barclays Bank PLC, which submitted a second amended
alternative reorganization plan on behalf of LandSource in early May,
was using chapter 11 as a vehicle to ensure a return on the first-lien
lenders' investment while leaving other creditors empty-handed.
href='http://bankruptcy.law360.com/articles/106846'>Read more.
(Subscription required.)
name='12'>S&P Cuts Credit Ratings at 22 Banks, 5 to
Junk
Standard &
Poor’s said yesterday that it was cutting the credit ratings and
outlooks of 22 banks — most of them regional ones — and
downgraded five to junk status, renewing questions over how some of the
industry’s weaker players would weather the recession, the
New York Times
size='3'>reported today. The portfolios of many regional banks are
stocked with corporate loans, mortgages and commercial real estate loans
from hard-hit housing markets like those in Florida, Atlanta and the
Rust Belt. While the banks have already lost billions on defaults, their
balance sheets could remain in red ink if unemployment rises and housing
prices keep tumbling, analysts said. In their report, the analysts said
that they expected tougher operating conditions for banks, greater loan
losses and more volatility in financial markets. Total charge-offs on
bank loans were running at 1.94 percent in the first quarter of the
year, a near record, according to the Federal Deposit Insurance Corp.
Analysts have said that dozens of weaker lenders were likely to close
down over the rest of the year.
href='http://www.nytimes.com/2009/06/18/business/18bank.html?ref=business&pagewanted=print'>Read
more.
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