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September 28,
2009
size='3'>$35 Billion Slated for Local
Housing
The Obama administration
is close to committing as much as $35 billion to help beleaguered state
and local housing agencies continue to provide mortgages to low- and
moderate-income families, the
size='3'>Wall Street Journal reported
today. The effort, which could be announced as early as this week, is
aimed at relieving pressure on government-operated housing finance
agencies (HFAs), which have been struggling to find funding amid the
downturn. While details are still being finalized, the program could be
in place for as long as three years, and would involve the
administration essentially buying the debt that these housing agencies
rely on for financing. The Treasury Department, along with
government-controlled mortgage giants Fannie Mae and Freddie Mac, is
expected to buy as much as $20 billion of new housing bonds issued by
the state agencies. It will also provide $15 billion in additional
funding, as needed, to help the agencies continue to use a type of
cheap, short-term financing.
href='http://online.wsj.com/article/SB125409967771945213.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Analysis: As Subprime
Lending Crisis Unfolded, the Federal Reserve Did Not Sound the
Alarm
Under a policy quietly formalized in 1998, the Fed
refused to police lenders' compliance with federal laws protecting
borrowers, despite repeated urging by consumer advocates across the
country and even by other government agencies about abusive subprime
mortgage lending, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported yesterday. The hands-off policy, which the Fed
reversed earlier this month, created a double standard. Banks and their
subprime affiliates made loans under the same laws, but only the banks
faced regular federal scrutiny. Under the policy, the Fed did not even
investigate consumer complaints against the affiliates. Between 2004 and
2007, bank affiliates made more than 1.1 million subprime loans, around
13 percent of the national total, federal data show. Thousands ended in
foreclosure, helping to spark the crisis and leaving borrowers and
investors to deal with the consequences.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/26/AR2009092602706_pf.html'>Read
more.
In related news, World Bank President Robert Zoellick
questioned the wisdom of giving the Federal Reserve more power over
banks, as the Obama administration has proposed, the
face='Times New Roman'>Wall
Street Journal reported today. Zoellick, in a
speech to be delivered today, said that central banks around the world
fell down as regulators -- and that the Treasury, which is more
accountable to Congress, should be given the authority to regulate big
financial institutions, not the Fed. 'Central banks failed to address
risks building in the new economy,' said Zoellick, who served in various
posts at the Treasury from 1985 to 1993. 'They seemingly mastered
product price inflation in the 1980s, but most decided that asset price
bubbles were difficult to identify and to restrain with monetary policy.
They argued that damage to the 'real economy' of jobs, production,
savings, and consumption could be contained once bubbles burst, through
aggressive easing of interest rates. They turned out to be
wrong.'
href='http://online.wsj.com/article/SB125409936849345249.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Additionally, the House Financial Services Committee
will resume its hearings this week to examine the proposed Consumer
Financial Protection Agency with a hearing on Wednesday titled
“Perspectives on the Consumer Financial Protection
Agency.”
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr_092309.shtml'>Click
here for this week’s full schedule of
hearings.
Claims Pile Up Ahead of
Lehman Deadline
On the eve of the deadline for filing claims against
bankrupt Lehman Brothers Holdings Inc., a slew of major financial
institutions — including Bank of America NA, U.S. Bank NA and
Ambac Financial Corp. — lined up to seek the recovery of billions
from the fallen investment firm, Bankruptcy Law360 reported on
Friday. Among some of the big-money, last-minute creditor claims filed
against the Lehman estate a day before the Sept. 22 deadline were: Ambac
subsidiary Ambac Assurance Corp's combined $1.3 billion claim, related
to mortgage securitization; German national bank Deutsche Bundesbank's
$10.3 billion claim for loans made to Lehman's German banking unit; Bank
of America's $2.8 billion claim, in addition to a $2.5 billion claim by
its recent acquisition, Merrill Lynch & Co.; and nearly $7.75
billion from U.S. Bank, related to securitization agreements. The single
largest claim filed against LBHI to date is a $49 billion claim by
Wilmington Trust Co., as trustee for various Lehman senior noteholders.
Bundesverband deutscher Banken E.V., a federation of German banks,
submitted a $25 billion claim Sept. 18.
href='http://bankruptcy.law360.com/print_article/124630'>Read
more. (Subscription required.)
The FDIC Should Not Be a Customer of Big Banks
Keeping the FDIC healthy, which is key to restoring
and maintaining confidence in banks, should not entail having the agency
borrow from private institutions, according to an editorial in
today’s
size='3'>New York Times. The FDIC has closed
95 banks, compared with 25 for all of last year and another 416 banks
are at high risk of failure. As a result, when the board of the FDIC
meets on Tuesday, it will have to sort through several options for
raising tens of billions of dollars of extra cash. The best solution,
according to the editorial, is to have the banks prepay their regular
premiums for the next two years or so. The next best alternative would
be for the FDIC to use some of its more-than-ample $500 billion credit
line with the Treasury, according to the editorial. The worst
alternative, according to the editorial, is for the FDIC to borrow from
select banks, which should be lending to business and consumers.
href='http://www.nytimes.com/2009/09/28/opinion/28mon1.html?ref=opinion'>Read
more.
Bernanke Says TALF Program
Still Needed
Federal Reserve Chairman Ben Bernanke on Friday said
that he sees a continuing need for the Term Asset-Backed Securities Loan
Facility (TALF), which seeks to boost lending to consumers and
businesses, even as other emergency lending programs wind down,
size='3'>CongressDaily reported on Friday. The
Fed has extended the TALF -- which has the potential to generate up to
$1 trillion in lending for households and businesses -- into next year.
Under the program, the Fed provides loans to investors who use that
money to buy newly issued securities backed by auto and student loans,
credit cards, business equipment, commercial real estate and loans
guaranteed by the Small Business Administration. Investors have
requested far less than the $200 billion the Fed has made available, but
Bernanke said that the program is responsible for indirectly financing
nearly 3 million loans to households and nearly 400,000 loans to small
businesses.
Media
face='Times New Roman' size='3'>Set to Emerge from
Bankruptcy
The
face='Times New Roman' size='3'>Star Tribune
size='3'>is preparing to emerge from bankruptcy protection and is
actively seeking a new publisher, the Associated Press reported today.
Minnesota's largest newspaper said that it will emerge from chapter 11
protection today, complying with the timeline agreed to under a
reorganization plan approved earlier this month. The bankruptcy filing
allowed the 142-year-old newspaper to wipe away nearly $400 million in
debt and extract $20 million annually in union concessions.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/28/AR2009092801004_pf.html'>Read
more.
Philadelphia Papers
Faulted by PBGC
The Pension Benefit Guaranty Corp. is objecting to
Philadelphia Newspapers LLC's reorganization plan, saying that the
publisher of the
face='Times New Roman' size='3'>Philadelphia Inquirer
size='3'>hasn't made clear how it will address its pension obligations,
the
size='3'>Wall Street Journal reported today.
The publisher's proposal provides 'for the improper and unlawful
treatment' of its pension plan because it claims it can deal with the
program as it would other contracts -- and choose to accept or reject
the pension plan as part of the bankruptcy process, according to a PBGC
filing on Thursday. Philadelphia Newspapers has an unfunded pension
liability of about $10.3 million, the agency said. PBGC attorneys also
are protesting Philadelphia Newspapers' failure to definitively state
whether it will continue the pension program for 251 current and former
workers or if it will use bankruptcy to dump the plan.
href='http://online.wsj.com/article/SB125409124090044737.html'>Read
more. (Subscription required.)
Young Broadcasting Files
Chapter 11 Plan
Television station owner and operator Young
Broadcasting Inc. filed its chapter 11 plan, following a bankruptcy
judge's approval of a purchase agreement under which the company would
sell substantially all of its assets to a group of secured lenders led
by Wachovia Bank NA in a deal worth $220 million,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported on Friday.
The senior secured lenders hold more than $338 million of allowed claims
against Young Broadcasting and its subsidiaries. On the plan's effective
date, a new corporation referred to as Holdco will take 100 percent of
the stock in reorganized Young Broadcasting, according to the plan. The
case is In re
Young Broadcasting Inc. et al., case number
09-10645, in the U.S. Bankruptcy Court for the Southern District of New
York.
href='http://bankruptcy.law360.com/print_article/124584'>Read
more. (Subscription required.)
to Liquidation
Bankruptcy Judge
face='Times






New
Roman'
size='3'>Kevin R. Huennekens approved Circuit
City Stores Inc.’s disclosure statement, clearing the way for
creditors to vote on a chapter 11 plan that the consumer electronics
retailer says will lead to a speedy liquidation,
face='Times New





Roman'>
face='Times






New
Roman'
size='3'>Bankruptcy Law360 reported yesterday.
The liquidation plan estimates a full recovery for as much as $20
million in miscellaneous secured claims and $95 million in non-tax
priority claims while unsecured creditors owed about $2 billion stand to
receive at most 13.5 percent of their claims, according to the
disclosure statement. Judge Huennekens scheduled a confirmation hearing
on Nov. 23 for the liquidation plan.
href='http://bankruptcy.law360.com/print_article/124579'>Read
more. (Subscription required.)
Judge Urges Rejection of
New Sterlite Bid for Asarco
Bankruptcy Judge
face='Times






New
Roman'
size='3'>Richard S. Schmidt has recommended
that a district judge approve Grupo Mexico SAB de CV's $2.2 billion bid
to acquire bankrupt copper mining operator Asarco LLC and reject the
latest rival bid from India-based Sterlite Industries
Ltd.,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. Sterlite's bid is part of a reorganization
plan submitted by Asarco, while Grupo Mexico submitted its own rival
plan. Judge Schmidt also said that it was important to bring the
bankruptcy, which has been pending for four years, to a conclusion as
soon as possible for the benefit of Asarco's creditors, and that the
Grupo Mexico plan, which has been extensively negotiated, could be
confirmed by the end of the year. Judge Schmidt already recommended
Grupo Mexico's plan in August, but Sterlite asked him to reconsider on
Sept. 21.
href='http://bankruptcy.law360.com/print_article/124529'>Read
more. (Subscription required.)
Trustee Plans to Sue
Madoff Family Members for $198 Million
Irving H. Picard, the
court-appointed trustee in the case of Bernard L. Madoff, plans to sue
Madoff’s two sons, his niece and his brother this week seeking the
return of $198 million, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The lawsuits will accuse the four family
members of breach of fiduciary duty and negligence, among other charges,
according to Picard and his deputy, David J. Sheehan of the Baker
Hostetler law firm. Madoff’s sons Mark and Andrew, his brother
Peter and niece Shana all were executives with his firm and should have
known about the $65 billion fraud that went on for more than 20 years,
Sheehan said. The trustee and his lawyers have filed 13 suits seeking to
recover about $15 billion, including one against Madoff’s wife,
Ruth, and several claims against big investors who had funneled money to
href='http://www.nytimes.com/2009/09/28/business/28madoff.html?_r=1&ref=business&pagewanted=print'>Read
more.
Congressional
Investigators Ask for More Information on Countrywide VIP Mortgage
Program
The discovery that Countrywide Financial Corp.
recorded phone conversations with borrowers in a controversial mortgage
program that included public officials -- and that those recordings have
been destroyed -- has prompted new congressional calls for more
information about the program, the
face='Times






New
Roman'
size='3'>Wall Street Journal reported today.
Rep. Darrell Issa (R-Calif.), the ranking member on the House Oversight
and Government Reform Committee, is trying to subpoena the remaining
records of Countrywide's VIP loan program. So far, the committee's
chairman, Rep. Edolphus Towns (D-N.Y.), has turned down that request.
Bank of America Corp., which purchased Countrywide in July 2008,
confirmed the existence of the recording system, but said that all the
VIP program-related calls had been disposed of. Issa sent a letter on
Thursday to Bank of America CEO Kenneth Lewis with a dozen questions
seeking more information on what happened to the recordings. Arguing
that those call records could have shed light on what public officials
were being told by Countrywide personnel about the favorable treatment
they were receiving, Issa wrote that Bank of America's 'refusal to fully
explain' what happened to the recordings 'raises important
questions.'
href='http://online.wsj.com/article/SB125409393986744897.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Suppliers Balk at Working
on Chrysler's New Models
The board of Chrysler Group LLC on Friday will review
new models Chief Executive Sergio Marchionne is proposing as part of his
turnaround plan, but the company faces pushback from suppliers that
worry about making money on the cars' parts, the Wall
Street
Journal reported today. The directors will be
shown a range of models, including updated versions of existing Chrysler
cars and Jeeps and early versions of new compact and midsized sedans to
be based on components developed by Chrysler's alliance partner, Fiat
SpA. It is unclear whether the board will be able to approve the
five-year product plan at this point, however, because Marchionne's
management team is still trying to work out many of the details of how
Chrysler would build the vehicles.
href='http://online.wsj.com/article/SB125383804282139581.html'>Read
more. (Subscription required.)
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