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December 15,
2008
name='1'>U.S. Regulators Aim to Rein In Credit Card
Rates
U.S. federal regulators are poised to adopt tough restrictions to make
it harder for credit card companies to raise interest rates on millions
of existing customers, the Wall Street Journal reported today. The new
standards, expected to be issued Thursday, would represent the biggest
changes to the industry in a generation and will apply to more than
16,000 companies, including major credit-card issuers Citigroup Inc.,
Bank of America Corp., J.P. Morgan Chase & Co. and Capital One
Financial Corp. The most controversial new policy is expected to
prohibit banks from raising interest rates on existing card balances as
long as a customer doesn't fall more than 30 days behind on payments.
Industry officials have estimated the new rules could cost banks $12
billion in annual revenue. The Federal Reserve, Office of Thrift
Supervision and National Credit Union Administration, which drafted the
rules, are also expected to require that banks give customers a
'reasonable' amount of time to make payments and prevent banks from
raising a customer's interest rate if the person has fallen behind
paying other bills.
href='http://online.wsj.com/article/SB122930067098005381.html'>Read
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name='2'>Fannie Mae Allows Renters to Stay
Loan giant Fannie Mae said yesterday that it would sign new leases with
renters living in foreclosed properties owned by the company, the
New York Times reported today. It is the first nationwide
effort to provide widespread relief to renters ensnared by the unfolding
mortgage crisis that may also increase pressure on private lenders to
establish similar programs and on lawmakers to pass renter relief. In
recent months, skyrocketing foreclosure rates have exposed as many as
70,000 renters to evictions, even though many never missed rent
payments, according to analysts who track housing data. Many financial
institutions - including JPMorgan Chase and Bank of America - have
policies to evict renters after foreclosure. Fannie Mae's initiative is
expected to initially benefit as many as 4,000 renters living in
foreclosed homes owned by the company.
href='http://www.nytimes.com/2008/12/15/business/15evict.html?ref=business&pagewanted=print'>Read
more.
name='3'>White House Sizes Up Auto Rescue
In weighing a much larger rescue effort for U.S. automakers than
originally envisioned, the Bush administration faces a complex set of
decisions over what terms to seek -- including whether to push the
companies to file for bankruptcy -- and how to raise necessary funds,
the Wall Street Journal reported today. The administration is
trying to determine how much money it will take to help the car
companies, and is discussing a rescue totaling $10 billion to $40
billion or more. One possible source of funding is the Treasury
Department's $700 billion fund set up to rescue the financial industry.
Only about $15 billion remains uncommitted from the first tranche of
$350 billion, so the Bush administration could be forced to request the
second half to cover the car companies' needs. That likely would compel
the administration to outline its plans for a range of other needs,
including foreclosure prevention for struggling homeowners and possibly
aid for state and local governments. That could spark another
confrontation with lawmakers, who are increasingly divided over industry
bailouts.
href='http://online.wsj.com/article/SB122930098160805305.html'>Read
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name='4'>Creditors, U.S. Trustee Object to Washington Mutual
Asset-Sale Plan
Unsecured creditors and the U.S. trustee monitoring Washington Mutual
Inc.'s chapter 11 proceedings filed limited objections Thursday to the
failed savings and loan's proposal to sell off some of its investment
assets ahead of a hearing scheduled for this week, Bankruptcy
Law360 reported on Friday. Washington Mutual is also facing
challenges to its motion to settle vendor contracts from IBM Corp. and
the U.S. Trustee's Office, which filed objections Thursday on that issue
as well. A hearing on both matters is scheduled for tomorrow.
href='http://bankruptcy.law360.com/articles/80052'>Read more.
(Subscription required.)
name='5'>PBGC Looks to End Lehman Pension Plan
The Pension Benefit Guaranty Corp. (PBGC) has asked a bankruptcy court
for approval to end Lehman Brothers Holdings Inc.'s pension plan,
arguing that the move would protect the benefits of some 26,500 workers
and retirees, Bankruptcy Law360 reported on Friday. The move
came in anticipation of a Dec. 22 hearing on the sale of Lehman's
subsidiaries. Ending the pension plan now will ensure that the
subsidiaries sold will still be liable for the plan's unfunded benefits,
the PBGC said in a statement. The agency argues that Lehman's plan
“stands to be abandoned” after the sale of its assets,
putting the PBGC under greater financial burden if the subsidiaries
“escape liability” for the plan. The agency estimates that
the pension plan - which has $940.8 million in liabilities - is 95
percent funded. The PBGC expects to pay out $17.9 million of the $42.6
million shortfall if the plan ends now.
href='http://bankruptcy.law360.com/articles/80045'>Read
more. (Subscription required.)
Pension Costs Could Shave Corporate
Financial Results This Week
With assets in corporate pension plans decimated this year, some of
America's largest companies may need to funnel additional money into
sponsored retirement plans, potentially trimming next year's profits --
despite pension relief approved by Congress last week, Barrons.com
reported on Saturday. Companies in the Standard & Poor's 500-stock
index collectively face a pension deficit of at least $200 billion,
according to a Credit Suisse analysis. If [BILL] is signed by President
George W. Bush, it would reduce firms' near-term pension requirements.
However, that wouldn't reduce the earnings impact, as Credit Suisse is
predicting that 128 S&P companies could face a pension-related hit
to earnings in 2009.
href='http://online.wsj.com/article/SB122921316250204495.html?mod=googlenews_wsj'>Click
here to read more. (Subscription required.)
name='7'>KB Toys Receives Approval of First-day Motions
/>
Bankruptcy Judge Kevin Carey on Friday granted KB Toys'
requests to use its existing cash management system and continue paying
its workers as it prepares for going-out-of-business sales, the
Associated Press reported on Friday. The nation's largest mall-based toy
retailer filed for chapter 11 bankruptcy protection on Thursday and
announced it will begin liquidation sales. Judge Carey granted all of
the Pittsfield, Mass.-based company's first-day motions, including a
request to use cash collateral on liens to pay operating expenses.
However, he said he wants more details on the company's bankruptcy plan.
A second hearing on the company's proceeding is set for Dec. 18.
href='http://news.yahoo.com/s/ap/20081212/ap_on_bi_ge/kb_toys_bankruptcy_1/print;_ylt=AodgfTZcRVnG8.E1pqQdsnlv24cA'>Read
more.
name='8'>States' Funds for Jobless Drying Up
With unemployment claims reaching their highest levels in decades,
states are running out of money to pay benefits, and some are turning to
the federal government for loans or increasing taxes on businesses to
make the payments, the New York Times reported today. Thirty
states are at risk of having the funds that pay out unemployment
benefits become insolvent over the next few months, according to the
National Association of State Workforce Agencies. Funds in two states
- Indiana and Michigan - have already dried up, and both
states are borrowing from the federal government to make payments to the
unemployed. California, New York, Ohio, Rhode Island and other states
are inching toward insolvency as well, and may have to borrow from the
federal government to get through at least the first quarter of
2009.
href='http://www.nytimes.com/2008/12/15/us/15funds.html?_r=1&hp=&pagewanted=print'>Read
more.
name='9'>Executive Pay Limits May Be Difficult to
Enforce
A small change to a mechanism lawmakers included in the $700 billion
bailout package for reviewing executive compensation and penalizing
firms that break the rules may provide a big loophole for financial
firms, the Washington Post reported today. The change
stipulated that the penalty would apply only to firms that received
bailout funds by selling troubled assets to the government in an
auction, which was the way the Treasury Department said that it
planned to use the money. In a reversal, the Bush administration has not
used auctions for any of the $335 billion committed so far from the
rescue package, nor does it plan to use them in the future. Lawmakers
and legal experts say that the change has effectively repealed the only
enforcement mechanism in the law dealing with lavish pay for top
executives.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/12/14/AR2008121402670_pf.html'>Read
more.
GMAC Woos Investors as It Seeks Fed
Backing
GMAC LLC is racing to raise $1.25 billion in fresh capital necessary for
the Federal Reserve to begin backstopping the company's finances, the
Wall Street Journal reported today. GMAC is in talks with
potential investors, including private-equity firms. Late Friday, the
company received a reprieve from lenders, who agreed to amended terms of
a $38 billion restructuring of debt obligations that were threatening to
overwhelm the company. The changes are all part of GMAC's plan to become
a bank holding company, regulated by the Fed. GMAC owns an industrial
bank chartered in Utah that doesn't have the full powers of a commercial
bank. If it succeeds in becoming a bank holding company, GMAC Bank will
become a Utah-chartered Fed member bank, and the lender could receive
funds from the U.S. Treasury and gain flexibility in funding its
operations.
href='http://online.wsj.com/article/SB122930751751305891.html'>Read
more. (Subscription required.)
name='11'>Charter Communications Looks at Renegotiating
Debt
Amid a deep credit crunch, highly leveraged cable operator Charter
Communications Inc. will attempt to persuade some of its creditors to
either roll over its debt or exchange it for equity, the Wall Street
Journal reported today. The move comes as some ratings services
have said that the company could be forced to make a bankruptcy filing
because of its $21 billion in debt and affiliated interest payments,
despite signs that its underlying operations show signs of strength.
Charter, the country's fourth-largest cable operator by subscribers,
said Friday that Lazard is advising the company in talks with creditors.
The company has hired Kirkland & Ellis LLP as bankruptcy legal
counsel and Microsoft Corp. co-founder Paul Allen, Charter's founder and
chairman, has hired advisers that include boutique investment-banking
firm Miller Buckfire & Co. and law firm Skadden, Arps, Slate,
Meagher & Flom LLP. With Lazard's help, Charter has begun organizing
its largest bondholders, a group that includes Fidelity, Franklin and
Cap Re, and telling them to prepare in the coming weeks for talks on a
debt-for-equity swap.
href='http://online.wsj.com/article/SB122929991080305287.html'>Read
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