href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif' />
July 7, 2008
Credit Card Regulation Overhauls Seem
Likely
The proposals for banks and other general-use credit card
issuers are gaining traction from both the regulatory and legislative
realms, the New York Times reported on Saturday. Working with
the Office of Thrift Supervision and the National Credit Union
Administration, the Federal Reserve introduced its proposals in early
May and expects to formalize the proposals by the end of the year. At
the same time, Rep. Carolyn B. Maloney (D-N.Y.) and Senate Banking
Committee Chairman Christopher J. Dodd both introduced legislation,
saying that they plan to bring their measures to the floor for votes
before Congress adjourns in September. The House and Senate bills as
well as the Federal Reserve require that lenders apply payments to the
debt with the highest interest rate. All would ban “double
cycle” billing, in which interest is charged on some already
repaid debt, and all would extend the time required, currently 14 days,
between a statement mailing and payment due date. All the measures
would, under various conditions, prohibit lenders from raising interest
rates on existing debt. The central bank proposes that except for
increases caused by changes in stated variable and introductory offers,
lenders may increase interest rates only if minimum payments are more
than 30 days late.
href='http://www.nytimes.com/2008/07/05/business/05cards.html?_r=1=slogin=business=print'>Read
more.
Small Companies Struggle to Pay Credit
Card Debt
Entrepreneurs have long used credit cards as quick financing, but with
the sputtering economy, tightening credit market and cards' notoriously
changing terms, more small business owners are struggling to pay their
debt, accumulated on personal as well as small-business credit cards,
the Washington Post reported Friday. As credit standards
loosened at the beginning of the decade, banks expanded their
small-business credit card offerings. As a result, small businesses will
charge two and a half times more this year than they did in 2002, when
credit card charges ran about $140 billion, according to estimates from
TowerGroup, a financial service research and advisory firm. However,
payments by small businesses on the cards have also slowed with the
economy. Major small-business credit card issuers reported a sharp
increase in late payments and bad debt over the past year. Advanta --
one of the largest issuers of small-business credit card debt -- wrote
off $16.3 million, or 6.5 percent, of their small-business credit card
receivables, up from 3.05 percent for the first quarter of 2007. Last
year, Bank of America wrote off 5.57 percent of its domestic
small-business portfolio, compared with 3 percent in 2006, with a
disproportionate percentage related to credit card loans.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/07/03/AR2008070303456_pf.html'>Read
more.
New Century Liquidation Plan
Approved
Bankrupt New Century Financial Co., once the second-largest subprime
lender in the country, has won approval of its liquidation plan,
Bankruptcy Law360 reported on Thursday. Bankruptcy Judge
Kevin J. Carey on Wednesday approved the plan proposed
by the New Century debtors and their unsecured creditors in April,
dismissing a lone surviving objection to the plan from an ad hoc
committee made up of beneficiaries of New Century's deferred
compensation plan. The liquidation plan splits New Century's creditors
into three categories: creditors of the holding company debtors,
creditors of the operating company debtors and creditors of Access
Lending and a company New Century acquired in 2006. Each creditor is
allowed to make claims against the specific debtors, with assets from
each debtor group distributed among creditors in each group.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=61194'>Read
more. (Registration required.)
Vacancies Rise at Retail
Centers
Vacancies at retail properties rose to multiyear highs in the second
quarter as retailers closed stores and curtailed expansion plans, the
Wall Street Journal reported today. Meanwhile,
apartment-complex vacancies remained unchanged and rents rose by a
stronger-than-expected 1.1 percent in the quarter, according to
real-estate research firm Reis Inc. in New York. The higher retail
vacancy rate stems from the slowdown in consumer spending and the weak
housing market, among other economic pressures. Vacancies at enclosed
malls in 76 major U.S. markets rose from 5.9 percent in the first
quarter to 6.3 percet in the second quarter, the highest level since
early 2002, according to Reis. Faring worse were open-air retail venues
such as big-box centers and grocery-anchored strip centers. Vacancy in
those formats climbed from 7.7 percent to 8.2 percent in the second
quarter, the highest tally since 1995.
href='http://online.wsj.com/article/SB121540139050031905.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
Finance Group Questions Bond-Rating
Proposals
A key financial-industry investment group said that U.S. regulatory
proposals to improve the credibility of bond ratings may not go far
enough, the Wall Street Journal reported today. The CFA
Institute, which represents 96,000 investors, brokers, analysts and
others in finance-related professions, said in a poll to be released
this week that many of its members want a new regulatory organization to
police rating firms and a different set of rating symbols for structured
products such as mortgage-backed securities and collateralized debt
obligations. Officials from the CFA Institute, which awards the
chartered-financial-analyst designation, have met with officials of
large ratings firms, such as McGraw-Hill Cos.' Standard & Poor's and
Moody's Corp.'s Moody's Investors Service, in recent months to discuss
their concerns about ratings being influenced too much by bond issuers
that pay for the ratings and have a financial interest in higher ratings
href='http://online.wsj.com/article/SB121539441179031431.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
Commentary: Keep Private Equity Away
from Banks
The recent efforts by Congress and the Federal Reserve to facilitate
capital injections by private-equity firms into banks may seem like a
welcome development to help the ailing banks, but the could hurt the
banks and saddle taxpayers with steep debts, according to a commentary
in today's Wall Street Journal. A growing number of ailing
banks and thrifts need cash fast - and private-equity funds are anxious
to deliver. With built-in cash cows in the form of mortgages, credit
cards and accounts subject to an endless array of fees and interest-rate
hikes, banks are a ripe target for private-equity firms seeking returns
of 20-30 percent or higher over relatively short periods. However,
short-term capital infusions from private-equity funds will only make
the banking crisis worse by encouraging risky behavior and abusive
banking practices.
href='http://online.wsj.com/article/SB121538911268431155.html?mod=opinion_main_commentaries'>Read
more. (Registration required.)
Without Funds, New Jersey Hospitals
Face Financial Crisis
As more hospitals are expected to shut their doors in the state, New
Jersey faces a culmination of health-care crises, the Washington
Post reported today. The state has an estimated 1.3 million people
without health insurance who cannot pay a doctor or a hospital bill. New
Jersey law requires that hospitals treat anyone who walks through their
doors, and then get reimbursed later by the state. However, the state's
looming budget shortfall has forced it to cut back on the
reimbursements, leaving hospitals to pick up the tab. New Jersey
hospitals, in turn, are going broke as six have closed in the past 18
months, and half of those remaining are operating in the red.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/07/06/AR2008070602334_pf.html'>Read
more.
Autos
GM Weighs More Layoffs, Sale of
Brands
Bruised by a deep sales slump and a half-century-low in its stock price,
General Motors Corp. is preparing to cut thousands more white-collar
jobs and is considering whether it should sell or shutter more of its
brands, the Wall Street Journal reported today. The job cuts
are likely to be approved when GM's board of directors meets in early
August. Management may also present the board with options for raising
additional cash to help GM make it through the downturn. The board will
probably also hear management's latest thoughts on whether GM should
trim the number of brands it offers in the U.S.
href='http://online.wsj.com/article/SB121539865693931653.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
Auto Makers Resist Steel Firms'
Surcharges
In an effort to curb the relentless rise in steel prices and bolster
their own frail finances, some auto makers are beginning to push back on
price increases, saying that they won't pay surcharges on agreed-upon
supply contracts, the Wall Street Journal reported today. Some
auto makers are threatening to fight the additional charges in court,
saying that financial terms of a contract can't be altered. The standoff
comes as most steelmakers in the United States, including ArcelorMittal,
U.S Steel Corp. and AK Steel Corp., are engaged in the latest cycle of
negotiations with Ford Motor Co., General Motors Corp., Toyota Motor
Corp. and others to set the price and terms of steel bought on a
contract.
href='http://online.wsj.com/article/SB121537883164930715.html?mod=us_business_whats_news'>Read
more. (Registration required.)
Former Refco CEO Gets 16-Year
Sentence
Phillip R. Bennett, Refco Inc.'s former CEO, was sentenced to 16 years
in prison Thursday for his role in a scheme to hide the commodities
broker's financial troubles, the Wall Street Journal reported
on Saturday. U.S. District Judge Naomi Reice Buchwald didn't impose a
fine and said that restitution will be discussed at a later date.
Bennett has agreed to forfeit essentially all of his assets with the
government seeking forfeiture of up to $2.4 billion. Bennett had pleaded
guilty to a 20-count indictment in February just before a trial was to
begin. A British citizen, Bennett will be deported upon completing his
prison term.
href='http://online.wsj.com/article/SB121510345006926865.html'>Read
more. (Registration required.)
International
Austrian Court Convicts Bankers
over Heavy BAWAG Losses
A Vienna court sentenced nine people to prison on Friday for their roles
in causing losses at Austrian bank BAWAG P.S.K. of as much as 1.7
billion euros ($2.7 billion) through risky investments, Reuters
reported. The losses, which surfaced in 2006, were linked to the
bankruptcy of U.S. futures trader Refco Inc, a BAWAG affiliate. Helmut
Elsner, BAWAG's former CEO, was found guilty of breach of trust, fraud
and false accounting and was sentenced to nine and a half years in
prison by Judge Claudia Bandion-Ortner and her three co-judges. Fund
manager Wolfgang Floettl, who made the investments that went awry,
mainly in yen derivatives, was sentenced to two and a half years in
prison, with 20 months of his sentence suspended.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/07/04/AR2008070400625_pf.html'>Read
more.