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August 28, 2008
Total U.S. Bankruptcies in First Half
of 2008 Up 29 Percent from a Year Ago
The total number of U.S. bankruptcies filed during the first six months
of 2008 increased 29.2 percent over the same period in 2007, according
to data released yesterday by the Administrative Office of the U.S.
Courts. Total filings reached 522,205 during the first half of the
calendar year of 2008 (January 1-June 30), compared to 404,090 cases
filed over the same period in 2007. Filings by consumers increased
28.8 percent to 503,749 for the six-month period ending June 30, 2008,
from the 2007 first-half total of 391,105. Business filings for the
six-month period ending June 30, 2008, totaled 18,456, representing a
42.1 percent increase over the first-half 2007 total of 12,985. Chapter
7 business liquidations increased to 13,002 in the first half of 2008, a
54.7 percent increase over the 8,404 business chapter 7 filings during
the same period in 2007. Chapter 11 reorganizations also rose from 2,713
in the first half of 2007 to 3,470 in the same period of 2008, a 27.9
percent increase.
href='http://www.abiworld.org/AM/TemplateRedirect.cfm?template=/CM/ContentDisplay.cfm&ContentID=54478'>Click
here to read ABI's press release on the fist half 2008
filings.
Judge Tosses Appraisal Suit against
IndyMac, FDIC
href='http://bankruptcy.law360.com/articles/67418'>
U.S. District Court Judge John G. Koeltl on Tuesday dismissed a lawsuit
against bankrupt IndyMac Bancorp Inc. and the Federal Deposit Insurance
Corp., claiming that IndyMac Bank hired appraisers that intentionally
inflated home values so the bank could charge higher interest rates on
home equity loans, Bankruptcy Law360 reported yesterday. Judge
Koeltl ruled that a feedback loop where IndyMac awarded appraisal
contracts to a firm called Supreme Appraisals in return for inflated
estimates did not constitute a kickback scheme and dismissed the case.
The claims made by Vergen Cedeno, a Brooklyn homeowner who filed a class
action against IndyMac Bancorp in August 2006, did not stand up to
federal law, the judge said. Cedeno alleged that IndyMac violated the
Real Estate Settlement Procedures Act and the Truth in Lending Act, as
well as state lending laws in New York and California. The FDIC became a
party to the suit because of its role first as the receiver and now as
the conservator for IndyMac Bank, which the Office of Thrift Supervision
shut down on July 11.
href='http://bankruptcy.law360.com/articles/67418'>Read
more. (Subscription required.)
Commentary: A Wake-Up Call on Home
Equity Loans
An increase in consumer complaints over the cancellation or reduction of
home equity lines of credit has prompted one federal banking regulator
to remind financial institutions about the laws governing this type of
loan, according to a commentary in today's Washington Post. The
Office of Thrift Supervision, which supervises savings associations and
their holding companies, has warned institutions that if they curtail or
terminate a home equity line of credit, the action must comply with
federal laws and rules designed to protect customers, including
regulations covered in the Truth in Lending Act, the Equal Credit
Opportunity Act, the Fair Housing Act and the OTS nondiscrimination
rule. A suspension or reduction of a home equity line must be based on
an assessment of the value of 'the dwelling that secures the plan,' the
OTS said in its letter of guidance to the institutions. Consequently, a
financial institution would violate the law if it attempted to yank
credit limits of all home equity credit line accounts in a geographic
area where real estate values are generally declining.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/08/27/AR2008082703076_pf.html'>Read
more.
SEC Moves to Pull Plug on U.S.
Accounting Standards
The Securities and Exchange Commission signaled the demise of U.S.
accounting standards, kicking off a process yesterday that could
ultimately require all publicly listed American companies to follow an
international model instead, the Wall Street Journal reported
today. The SEC's proposal would allow some large multinational companies
to report earnings according to international accounting beginning in
2010. The SEC estimates that at least 110 U.S. companies would qualify
based on their market capitalization, among other factors. The agency
also laid out a road map by which all U.S. companies would switch to
International Financial Reporting Standards, or IFRS, beginning in 2014,
at the expense of U.S. Generally Accepted Accounting Principles. The
proposals will be open for public comment for 60 days and could be
finalized later this year.
href='http://online.wsj.com/article/SB121985665095476825.html?mod=hpp_us_whats_news'>Read
more. (Subscription required.)
Mervyn's Wins Approval of DIP
Financing
Bankruptcy Judge Kevin Gross on Tuesday approved a $465
million debtor-in-possession financing package for department store
chain Mervyn's LLC, Bankruptcy Law360 reported yesterday. Judge
Gross had already granted interim approval to the financing on July 31,
soon after the company filed for bankruptcy. The financing will be
provided by a group of institutions led by Wachovia Capital Financing
Corp., according to court documents.
href='http://bankruptcy.law360.com/articles/67460'>Read more.
(Subscription required.)
Court Approves Chapter 11 Plans for
Vertis, ACG
Vertis Communications and American Color Graphics Inc. are on the verge
of completing their merger after the federal judge overseeing the
prepackaged bankruptcy cases approved the companies' disclosure
statements and reorganization plans, Bankruptcy Law360 reported
yesterday. Bankruptcy Judge Christopher Sontchi on Tuesday confirmed the
prepackaged reorganization plans, which were jointly filed on July 15 to
facilitate the merger of the print and premedia companies. Vertis will
close its merger with ACG when the chapter 11 plan becomes effective,
which is expected to occur in mid-September, the company said.
href='http://bankruptcy.law360.com/articles/67472'>Read
more. (Subscription required.)
Silicon Graphics, Samsung Settle
Bankruptcy Appeal
Samsung Electronics Co. Ltd. has agreed to dismiss its appeal of the
amended settlement in Silicon Graphics Inc.'s bankruptcy case,
Bankruptcy Law360 reported yesterday. Samsung's appeal, filed
in January, centered around the approval of the settlement with the DRAM
Claims Liquidation Trust in November 2007 over two objections filed by
Samsung and Samsung Semiconductor Inc. The original agreement in the
bankruptcy provided for the trust to take on the rights to handle any of
Silicon Graphics' claims having to do with the purchase of DRAM between
April 1999 and June 2002, Samsung said. However, in DRAM litigation in
the U.S. District Court for the Northern District of California, the
trust moved to amend its complaint to include purchases that took place
between January 1997 and December 2002.
href='http://bankruptcy.law360.com/articles/67486'>Read
more. (Subscription required.)
Bank of America to Buy Auction-Rate
Securities from Massachusetts
Bank of America Corp. agreed to buy back $43 million in auction-rate
securities from government agencies in Massachusetts, the Wall
Street Journal reported today. In talks this week with the office
of Massachusetts Secretary William Galvin, the bank agreed to repay $18
million to the financially troubled Massachusetts Turnpike Authority and
$25 million to the Massachusetts Housing Partnership. In May, in a
settlement with the Massachusetts attorney general, a division of UBS AG
agreed to return $37 million to the Massachusetts Turnpike Authority and
17 municipalities that invested in auction-rate securities.
href='http://online.wsj.com/article/SB121986624594077135.html?mod=us_business_whats_news'>Read
more. (Subscription required.)
MBIA to Aid Troubled Bond
Insurer
MBIA agreed yesterday to take control of nearly $200 billion of
municipal bonds currently backed by rival bond insurer FGIC Corp. in a
move that could help its competitor avoid bankruptcy, the Associated
Press reported yesterday. The agreement between the two companies calls
for the municipal bond issuers to pay their premiums in advance,
transferring $741 million to MBIA. In exchange, MBIA will pay FGIC a
commission worth nearly $200 million.
href='http://www.nytimes.com/2008/08/28/business/28bond.html?ref=business&pagewanted=print'>Read
more.
Pension Funds Watch Fannie,
Freddie
Some of the largest public pension funds holding millions of shares of
Fannie Mae and Freddie Mac are watching closely as Treasury Department
officials consider whether to step in to help the mortgage-lending
giants, the Wall Street Journal reported today. As of last
week, the California Public Employees' Retirement Fund (Calpers) held
4.2 million shares of Fannie Mae, which were valued at $26.1 million,
but the pension fund held 4.5 million shares of the lender valued at
$292.6 million as of June 30, 2007. Its 3.9 million shares of Freddie
were valued at about $16.3 million last week, but the fund held 4.2
million shares valued at $252 million as of July 30, 2007. Other large
pension funds such as the New York State Common Retirement Fund and the
Florida Retirement System Pension Fund also hold millions of shares in
the two government-sponsored enterprises, which own or guarantee more
than half of the nation's mortgages.
href='http://online.wsj.com/article/SB121988796894078535.html?mod=us_business_whats_news'>Read
more. (Subscription required.)
Commentary: The Legal Ties that Bind
the Bidens
Although he hasn't practiced law in over 30 years, newly minted vice
presidential nominee Joe Biden remains a favorite son in the legal
community, the American Lawyer reported today. Like all
potential VPs, Joe Biden was thoroughly vetted by the Obama campaign,
his relationships to lobbyists carefully analyzed. Older son Beau
followed his father into politics, and is currently the attorney general
of Delaware, while Biden's younger son Hunter is a partner at Oldaker,
Biden & Belair, a Washington law and lobbying firm. Hunter stepped
down from the firm's lobbying affiliate in 2006 in keeping with a Senate
ethics bill requirement. Biden has long-standing relationships with law
firms that donated to his campaigns, including the Law Office of Peter
Angelos, SimmonsCooper, Pachulski Stang Ziehl & Jones and Young
Conaway Stargatt & Taylor. Many of those firms have handled asbestos
and bankruptcy cases, issues Biden has weighed in on from his seat on
the judicial committee. Biden was a critic of the failed Fairness in
Asbestos Injury Resolution (FAIR) Act of 2005 , which would have trimmed
returns on future litigation.
href='http://www.law.com/jsp/article.jsp?id=1202424110233'>Read
more.
Chrysler Explores Sale of Dodge
Viper Unit
Chrysler is exploring strategic options for its Dodge Viper sports car
business as the struggling company tries to raise cash to ride out a
deepening industry downturn, Reuters reported today. The Dodge Viper is
a low-volume V10-powered sports car, which was first produced in 1992.
Chrysler has sold 682 Vipers so far this year, up 111 percent from the
previous year. Chrysler said the decision on Viper is “a
stand-alone strategic review, unique to Viper” and it has not set
a definitive timetable for completion of the review.
href='http://www.nytimes.com/2008/08/28/business/28viper.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
UAL “Sickout” Lawsuit
Heard
UAL Corp., parent of United Airlines, and its pilots union appeared in
U.S. District Court in Chicago yesterday, as the airline seeks a
preliminary injunction against its pilots, alleging an illegal 'sickout'
in July, the Wall Street Journal reported today. The Chicago
airline asked Judge Joan Lefkow to stop pilots from taking unnecessary
sick days, as well as other actions that could further disrupt passenger
service and cause financial harm to the airline. Last month, United --
the nation's second-largest airline by passenger traffic -- sued the Air
Line Pilots Association, alleging that four union pilots organized a
protest of United's plan to save money by cutting unprofitable flights
and laying off 950 pilots. United also accused the union of discouraging
pilots from volunteering for overtime.
href='http://online.wsj.com/article/SB121988791084878513.html?mod=us_business_whats_news'>Read
more. (Subscription required.)