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September 23,
2008
Federal Bailout
Package
Mortgage Modification Provision Resisted as Part of
Bailout
As negotiations on a $700 billion federal program to
purchase bad debt from struggling financial firms continued yesterday, a
proposal to change the Bankruptcy Code by allowing judges to reduce the
principal of the mortgage to a home's current market value faces an
uphill battle -- with some resistance even among Democrats,
face='Times New Roman'>
size='3'>CongressDaily reported
today. The bankruptcy provision has proven
to be problematic, though it was contained in the working legislative
drafts of both House Financial Services Chairman Barney Frank (D-Mass.)
and Senate Banking Chairman Christopher Dodd (D-Conn.) A Senate vote on
such a measure failed by a 58-36 tally in April as lenders lobbied
aggressively against the bill, arguing that it would drive interest
rates up by as much as 2 percent because investors would face fewer
guarantees on their investments. Frank had said that he thought he had
an agreement with Treasury on providing additional relief to homeowners
at risk of losing their home, though last night he said there was no
deal on that provision.
The Leadership Conference on Civil Rights, AARP and
the Center for Responsible Lending today will join a struggling
homeowner on a press call to urge Congress to pass the bankruptcy
provisions in the bailout bill. The call will take place at 11 a.m.
ET. Call-in Number: 800-791-4813 // Passcode: Main
Street.
Auto-Finance Firms Press
to Be Included in Bailout Plan
Automobile-finance companies lead a growing list of
liquidity-starved industries trying to get in on the huge government
rescue plan targeted originally at cleaning up bad mortgage bets,
the
size='3'>Wall Street Journal reported today.
As Congress crafts a $700 billion federal government plan to buy up
financial companies' troubled assets, auto-finance-company lobbyists are
pressing for specific language including them in the plan. Other
businesses, such as student and credit card lenders, also could
eventually access the program. To permit that, House and Senate versions
of the bill written overnight now include language broadening the types
of assets eligible for sale under the plan, from 'mortgage-related' to
'troubled assets.” So far, Congress has not agreed to include
auto-industry finance companies in the bill specifically.
href='http://online.wsj.com/article/SB122212851099465403.html'>Read
more. (Subscription required.)
Europe and Japan Balk at
U.S. Request on Bank Aid
Europe and Japan turned a cold shoulder yesterday
toward an American request that they bail out banks in the manner now
being proposed in the United States, the
face='Times






New
Roman'
size='3'>New York Times reported today.
“Each of us remains committed to taking further action,
individually and collectively as needed, consistent with our respective
domestic circumstances,” the Group of 7 industrialized nations
said in a statement. German officials explicitly ruled out any German
version of Washington’s plan, which is expected to cost American
taxpayers about $700 billion. British officials also made clear that
they would not create a fund to buy bad assets, although Alistair
Darling, the chancellor of the Exchequer, did promise new rules. The
Japanese finance minister, Bunmei Ibuki, said after the announcement
that he saw no need for Japan to set up an American-style rescue scheme
to help its own banks offload bad assets.
href='http://www.nytimes.com/2008/09/23/business/worldbusiness/23euro.html?ref=business&pagewanted=print'>Read
more.
House Floor Under Closed Rule
The House Rules Committee ruled yesterday that
legislation designed to protect consumers from unsuspecting interest
rate hikes on credit cards will come to the floor under a closed
rule,
size='3'>CongressDaily reported
today. Under a closed rule, no additional
amendments or substitutes to the bill may be offered from the floor.The
“Credit Cardholder Bill of Rights Act of 2008,” sponsored by
House Financial Services Financial Institutions Subcommittee Chairwoman
Carolyn Maloney (D-N.Y.), would call for major new regulations on credit
card issuers that the banking lobby has resisted for years. Banks would
have 45 days to notify consumers of any interest rate hikes and would
ban 'universal default,' a practice in which a consumer's interest rate
on one card increases if he or she misses a payment on another card or
the credit score drops. The bill also would end 'double-cycle billing,'
in which consumers are charged interest for the entire amount charged
during the billing cycle unless the bill was paid in full.
href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h5244rh.txt.pdf'>Click
here to read H.R. 5244.
Lehman Sale to Barclays
Challenged by Hedge Fund
size='3'>Bay
size='3'>Harbour
size='3'>Management LC, a hedge fund that invests in insolvent and
distressed companies, challenged a court order approving the sale of
bankrupt Lehman Brothers Holdings Inc.'s North American business to
Barclays Plc., Bloomberg News reported yesterday. Bay Harbour, which
didn't disclose grounds for the appeal, last week filed an objection
along with hedge fund Amber Capital claiming $8 billion was improperly
transferred out of the failed investment bank's European units prior to
its collapse. Bay Harbour may request that the bankruptcy court delay
the purchase while considering the appeal that was filed yesterday. The
case is
size='3'>In re Lehman Brothers Holdings Inc.,
08-13555, U.S. Bankruptcy Court, Southern District of New York
(
size='3'>Manhattan
size='3'>).
href='http://www.bloomberg.com/apps/news?pid=20601102&sid=aDDe6RybAlM4&refer=uk'>Read
more.
Fed Eases Rules to Allow
Private Funds to Purchase Larger Stakes in Banks
The Federal Reserve, unleashing its latest attempt to
inject more cash into the nation's ailing banks, loosened longstanding
rules that had limited the ability of buyout firms and private investors
to take big stakes in banks, the
face='Times






New
Roman'
size='3'>Wall Street Journal reported today.
Regulators have grown worried about a shortage of capital at banks, in
particular smaller thrifts and regional institutions. The Fed has been
crafting this policy for at least two years, and private-equity firms
have been aggressively lobbying for more lenient policies. Yesterday's
move by the Fed is intended to encourage private-equity firms,
government investment funds and others to buy stakes in banks,
transferring capital from those that have it to those that need it.
Previously, if the Fed determined that a private-equity firm had a
controlling stake in a bank, it could classify the investor as a 'bank
holding company,' directly supervise the parent firm and impose
restrictions on outside investments. The rules were designed to prevent
investors from abusing their bank stakes to benefit their nonfinancial
investments.
href='http://online.wsj.com/article/SB122212703717165255.html?mod=article-outset-box'>Read
more. (Subscription required.)
New York to Regulate Credit
Default Swaps
New York Governor David A. Paterson (D) said yesterday
that the state would begin regulating credit-default swaps, the
financial instruments that were little known outside Wall Street before
the credit crisis, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. New state regulations will take effect on Jan.
1, but Paterson said that New York had jurisdiction to regulate only
about a fifth of the sprawling market, and he called on the federal
government to take steps of its own to oversee credit-default swaps,
which have gone unregulated. Exposure to the roughly $62 trillion
credit-default swap market was one of the main reasons that the American
International Group, the insurance giant, required a federal bailout,
and contributed to the crises that led to the collapses of Bear Stearns
and Lehman Brothers.
href='http://www.nytimes.com/2008/09/23/business/23swap.html?ref=business&pagewanted=print'>Read
more.
Democrats to Offer Stimulus
Measures in Continuing Resolution
House Democrats plan to unveil legislation this week
that would offer tens of billions of dollars to stimulate the domestic
economy, relax restrictions on offshore oil drilling and guarantee loans
for the auto industry as part of the measure that Congress must pass to
fund the federal government into next year, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. As they prepare to consider a separate plan to
address the nation's financial crisis, Democrats made clear that they
would include a 13-week extension of unemployment benefits and at least
$25 billion in loan guarantees for the auto industry in the 'continuing
resolution' needed to keep government functioning. Aides and key
lawmakers were drafting the final details of the package last night,
with the aim of releasing it today and moving it to the floor for
passage later this week. Rather than placing the measures in a separate
stimulus bill, Democrats are leaning toward adding them to the massive
continuing resolution needed to fund federal agencies because Congress
did not pass any of the 12 annual appropriations bills.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/09/22/AR2008092203178_pf.html'>Read
more.
Aloha Trustee, Pilots Union
Reach Deal on Fees
Dane S. Field, the
chapter 7 trustee overseeing the liquidation of Aloha Airlines Inc., on
Friday asked Bankruptcy Judge
face='Times






New
Roman'
size='3'>Lloyd King to approve a settlement
with the defunct airline's pilots union over payments for the
administration and termination of the pilots' benefit
plans,
face='Times






New
Roman'
size='3'>Bankruptcy Law360 reported today.
According to the motion, the total costs of administration and
termination of the plans is just under $588,000. As part of the
settlement, Aloha will pay for any legal and accounting services
incurred by the trustee as well as payments to cover fiduciary liability
insurance on the ALPA plans out of an existing estate expenses
account. Read
more. (Subscription required.)
New W.R. Grace Plan
Appeases Asbestos Claimants
Mining company W.R. Grace & Co. has filed a
reorganization plan and disclosure statement that it says achieves a
fair resolution of the asbestos-related claims that pushed the company
to seek chapter 11 bankruptcy protection over seven years ago,
size='3'>Bankruptcy Law360 reported yesterday.
The terms of the plan and disclosure statement, filed Friday in the U.S.
Bankruptcy Court for the District of Delaware, are consistent with the
previously announced $1.8 billion asbestos personal injury settlement
and are supported by the asbestos personal injury claimants’
committee, the representative for future asbestos personal injury
claimants and the equity securityholders’ committee. A hearing to
consider approval of the disclosure statement is scheduled for Oct.
27. Read
more. (Subscription required.)
International
EU Lawmakers Seek
Stricter Rules for Hedge Funds, Buyout Firms
European Union lawmakers pushed for stricter financial
rules in response to the credit crisis in a nonbinding vote that demands
capital and disclosure rules for buyout firms and hedge funds, Bloomberg
News reported today. The European Parliament in Brussels called for the
EU's executive agency to subject the funds to the same rules as banks
and securities firms. The assembly, which doesn't have the power to
propose laws, approved the resolution today by a vote of 562 to 86. The
parliament also called for tighter rules on lenders and credit rating
companies, signaling support for binding measures to come from the
European Commission in the next month.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aPD_prVa1owQ&refer=home'>Read
more.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aPD_prVa1owQ&refer=home'>