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July 16, 2009
face='Times New























Roman'
size='3'>Congressional Hearings to Examine
Preventing Foreclosures, Consumer Perspectives on Financial Regulation
and the Federal Reserve’s Consumer Protection
Role
The Senate Banking Committee will hold a hearing today
at 9:30 a.m. ET titled “Preserving Homeownership: Progress Needed
to Prevent Foreclosures.”
href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=fd0c5b5b-5659-4da7-85e7-551089e06d29'>Click
here to view the witness list and information on the
hearing.
The House Financial Services Committee will hold a
hearing at 10 a.m. ET titled “Community and Consumer
Advocates’ Perspectives on the Obama Administration’s
Financial Regulatory Reform Proposals.”
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/fchr_071809.shtml'>Click
here to view the witness list and prepared testimony.
Also, the House Financial Services Domestic Monetary
Policy and Technology Subcommittee will hold a hearing titled
“Regulatory Restructuring: Safeguarding Consumer Protection and
the Role of the Federal Reserve” at 2 p.m. ET.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrdmp_071609.shtml'>Click
here to view the hearing information and to watch a live
Webcast of the hearing.
Ailing business lender CIT Group Inc. said yesterday
that 'there is no appreciable likelihood' it will receive fresh
government support in the near future, marking the first time since the
collapse of Lehman Brothers that the U.S. has declined to aid a
struggling financial company of significant scope and size, the
size='3'>Wall Street Journal reported today.
CIT representatives scrambled Wednesday night to line up at least $2
billion in rescue financing from existing debtholders. CIT has given the
debtholders 24 hours to decide if they will come up with new cash. The
company indicated to investors that without the rescue financing, it
would likely have to file for bankruptcy protection as more borrowers
draw down credit lines. The Federal Reserve conducted a stress test on
CIT Tuesday night, much like the ones performed on the nation's largest
financial institutions earlier this year. The test found that the
company would need $4 billion to cover losses under the most stressed
economic conditions.
href='http://online.wsj.com/article/SB124768727832747201.html'>Read
more. (Subscription required.)
White House Voices
Opposition to Dealer Provision in Appropriations Bill
Although the Obama administration supports passage of
the FY10 Financial Services spending measure the House will take up
today, it criticized a provision in the $24.1 billion bill that would
restore dealer franchise agreements terminated by General Motors Corp.
and Chrysler LLC,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported yesterday. In a Statement of Administration Policy,
OMB praised the bill for boosting funding to oversee the financial
system, including $1.03 billion for the SEC. However, it said that it
'strongly opposes' the provision to help car dealers, which the House
Appropriations Committee added. The provision is also supported by House
Majority Leader Stenny Hoyer (D-Md.). The automakers' call to sever the
agreements 'was a critical part of their overall restructuring to
achieve long-term viability in order to save jobs in the long run, and
to improve the prospects for the companies' repayment of the substantial
taxpayer investments. Without the significant steps these automakers
have taken to revamp their operations, the companies would have failed -
imperiling every GM and Chrysler dealer in the country,' said the
statement. The White House added that the provision 'would set a
dangerous precedent, potentially raising legal concerns, to intervene
into a closed judicial bankruptcy proceeding on behalf of one particular
group at this point.'
href='http://www.whitehouse.gov/omb/asset.aspx?AssetId=1491'>Click
here to read the Statement of Administration
Policy.
Members Named for Financial
Crisis Probe
Former California State Treasurer Phil Angelides has
been picked to be chairman of a 10-member bipartisan commission to
investigate what caused the worst economic downturn in the United States
since the Great Depression,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported yesterday. Former House Ways and Means Chairman Bill
Thomas (R-Calif.) will serve as the panel's vice chairman, according to
the roster of appointees announced yesterday by House and Senate
Democratic and Republican leaders. The Financial Crisis Inquiry
Commission, armed with subpoena power and designed to operate
independently of Congress, was created as part of legislation signed
into law in May to combat fraud in the mortgage and other industries.
The commission will report its findings and conclusions to Congress by
Dec. 15, 2010. It is anticipated that the panel will hold its initial
meeting around Labor Day. Democratic congressional leaders choose six
commissioners and Republican leaders were given four
appointees.
Tricom Disclosure Statement
Gets Court Approval
Bankruptcy Judge
face='Times
New
Roman' size='3'>Stuart M. Bernstein approved
Dominican telecommunications company Tricom SA's disclosure statement,
pushing the company further toward an exit from chapter
11, Bankruptcy Law360 reported
yesterday. Tricom filed its second amended reorganization plan and
disclosure statement in June, incorporating a new settlement with
Bancredito Panama SA, fleshing out an earlier settlement with Banco
Multiple Leon SA and addressing objections by Bancredit Cayman Ltd.
Under the new settlement, Bancredito Panama will be allowed a $29.1
million unsecured claim. The bank, which was placed into compulsory
liquidation by Panamanian authorities in 2003, originally filed a $92
million claim against Tricom. Objections to the confirmation of the plan
are due Aug. 5, and a confirmation hearing is set for Aug. 12.
href='http://bankruptcy.law360.com/articles/111117'>Read
more. (Subscription required.)
Frontier Sale Gets Approval
in $109 Million Republic Deal
Bankruptcy Judge
face='Times
New
Roman' size='3'>Robert D. Drain has approved
bankrupt Frontier Airlines Holdings Inc. to start the process of selling
itself off as part of a $108.75 million agreement with Republic Airways
Holdings Inc., Bankruptcy Law360 reported
yesterday. The sales proposal calls for Republic to provide $108.75
million in cash for the entirety of the new common stock of Frontier. If
Frontier receives a proposal other than the Republic deal, an auction
will be held Aug. 11. Frontier proposed the sale in its disclosure
statement and reorganization plan filed in June. Frontier and affiliate
Lynx Aviation Inc. would continue to operate under their current names
after the sale.
href='http://bankruptcy.law360.com/articles/111331'>Read
more. (Subscription required.)
Creditors Win Bid to End
Fremont Plan Exclusivity
Creditors in the Fremont General Corp. chapter 11 case
have won a bid to terminate the bankrupt subprime lender’s
exclusive period to file a reorganization plan on the grounds that the
company repeatedly failed to negotiate with creditors in its recently
filed plan,
size='3'>Bankruptcy Law360 reported yesterday.
Fremont said the termination was premature, arguing that its management
and legal team “have devoted months of very intense effort to
resolve contingencies, maximize value and reach consensus among all
parties in interest.” The creditors’ committee filed a
motion to terminate the exclusive period shortly after Fremont filed a
reorganization plan and disclosure statement on June 1. According to the
committee, Fremont General’s plan and disclosure statement, the
filing of which automatically extended exclusivity until September, were
both missing key exhibits, including liquidation analysis and balance
sheets. Read
more. (Subscription required.)
Card Fees Pit Retailers
Against Banks
Merchants across the nation, from Wal-Mart and Home
Depot to gas stations, mom-and-pop restaurants and 7-Eleven, have spent
years unsuccessfully fighting the costs of interchange fees, which
generate an estimated $40 billion to $50 billion in income annually for
banks that issue credit cards, the
face='Times
New
Roman' size='3'>New York Times reported today.
However, after Congress passed a law last month to protect consumers
from excessive fees and interest on credit cards, merchants are mounting
a fresh offensive. Every time a consumer uses plastic, about 2 percent
to 3 percent of the charge goes to banks and payment networks, which
price the fee differently in different countries. Of that, the
interchange fee is paid to the cardholder’s bank, and at roughly
1.8 percent of each purchase in the United States, according to June
report by JPMorgan, it is the largest and most controversial of these
costs. Legislation is winding its way through Congress, a government
audit has been ordered and petitions are surfacing in hundreds of
convenience store,s encouraging customers to voice their opposition to
the fees. However retailers may have a tough time convincing Congress
that consumers would benefit if the effective interchange rate, which
has increased slightly in recent years, is dialed back.
href='http://www.nytimes.com/2009/07/16/business/16fees.html?_r=1&ref=business&pagewanted=print'>Read
more.
Sanction by U.S. Regulators
Bank of America Corp. is operating under a secret
regulatory sanction that requires it to overhaul its board and address
perceived problems with risk and liquidity management, the
face='Times New Roman'>Wall
Street Journal reported today. Rarely
disclosed publicly, the so-called memorandum of understanding gives
banks a chance to work out their problems without the glare of outside
attention. Financial institutions that fail to address deficiencies can
be slapped with harsher penalties that include a publicly announced
cease-and-desist order. The order was imposed in early May, shortly
after shareholders of the Charlotte, N.C., bank stripped CEO Kenneth
Lewis of his duties as chairman. Bank of America faces a series of
deadlines, some at the end of July and others in August. The company
might get more time to complete some of the steps it is taking, such as
reconstituting its board with a majority of new directors. Since early
June, Bank of America has named four directors to its 16-person board,
leaving the bank considerably short of the government's
requirement.
href='http://online.wsj.com/article/SB124771415436449393.html'>Read
more. (Subscription required.)
In related news, House Committee on Oversight and
Government Reform Chairman Edolphus Towns (D-N.Y.) and members of the
committee will be looking to get answers at a hearing today from Henry
M. Paulson Jr., the former Treasury secretary, about the hastily
arranged merger between Bank of America and Merrill Lynch, the
size='3'>New York Times reported today.
According to testimony prepared for the committee hearing, Paulson will
say that he warned the chief executive, Kenneth D. Lewis, last December
that abandoning the Merrill deal could result in his immediate
dismissal. Paulson will address questions from committee members,
including many who contend that he went too far by threatening to oust
Lewis if he did not complete the Merrill deal, even if Lewis thought
newly discovered losses at Merrill would hurt Bank of America’s
shareholders. Paulson, now a visiting scholar at Johns Hopkins
University, plans to defend his record vigorously.
href='http://www.nytimes.com/2009/07/16/business/16paulson.html?ref=business&pagewanted=print'>Read
more.
name='10'>Congressman Does Not See Need to Scrap Federal Thrift
Charter
House Financial Services Chairman Barney Frank
(D-Mass.) said yesterday that his panel would not abolish the federal
thrift charter as proposed by the Obama administration as part of its
financial regulatory overhaul,
face='Times
New
Roman' size='3'>CongressDaily reported
yesterday. 'The problem with the thrift charter is that it's both a
charter to engage in thrift activity and to some extent a hunting
license to go and do other things with less regulation,” Frank
said. “I believe we are capable of rewriting that so that it's a
thrift charter and a thrift charter only.' The Obama administration has
proposed abolishing the thrift charter and merging the Office of Thrift
Supervision (OTS) and the Office of Comptroller of the Currency into one
national bank supervisor at the federal level. Thrifts, also known as
savings and loan institutions, have had their own charter since 1933 and
are required to have at least 65 percent of their portfolio in mortgages
and consumer-related assets. The charter was a prime vehicle for nonbank
mortgage companies that invested heavily in the subprime mortgage
market. Since the ensuing housing crisis, the OTS has been on political
shaky ground as the regulator of such notable thrift failures as
Washington Mutual, Countrywide Financial, IndyMac Bank and entities
operated by American International Group.
International
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