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January 18, 2008
Mortgage
Lending
name='1'>FDIC Chief Urges Lenders to Do More on Troubled
Loans
A top bank regulator
continued pressing lenders to rework troubled mortgages as the industry
reported it had modified the terms of just 28,000 subprime loans in the
third quarter, the Wall
Street Journal reported today. 'Lawmakers at
all levels of government...will look to take additional action if
foreclosures keep rising and the economic fallout continues,' Federal
Deposit Insurance Corp. Chairman Sheila Bair said. The Mortgage Bankers
Association released a study showing that lenders and servicers modified
about 54,000 loans -- 28,000 of which were subprime -- in the third
quarter and temporarily altered payment plans on an additional
183,000.
href='http://online.wsj.com/article_print/SB120059903797698393.html'>Read
more. (Registration required.)
name='2'>Hit Hard by Mortgage Losses, Merrill and Others Pull Back
from Riskier Businesses
A number of businesses
that fall under the umbrella of structured finance, from packaging
mortgages to big corporate loans, have been hit hard, forcing companies
such as Merrill Lynch & Co. and Citigroup Inc. to focus their
energies on sometimes less-profitable but steadier businesses,
the Wall Street
Journal reported today. Exposure to the
subprime market and bad bets in the mortgage sector led to Merrill's big
write-down, S&P analyst Matthew Albrecht says. Like Merrill, other
big financial players are undergoing similar shifts as they pull back
from riskier businesses. Big banks such as Citigroup are holding on to
more of the loans they make, rather than sell them to investors. That
requires that they set aside more capital on their balance sheet, a move
that drags on future earnings growth.
href='http://online.wsj.com/article_print/SB120056782485697411.html'>Read
more. (Registration required.)
name='3'>Potential Bond Insurer Default Unnerves
Markets
Struggling bond insurer
ACA Financial Guaranty Corp. will ask its trading partners today for
more time as it scrambles to unwind more than $60 billion of insurance
contracts it sold to financial firms but can't fully pay off, the
Wall Street Journal
reported today. The contracts were intended to protect
Wall Street firms from losses on mortgage securities and other debt they
own. Yesterday Merrill Lynch & Co. wrote down $3.1 billion on debt
securities it had tried to hedge through ACA insurance contracts as part
of a larger Merrill write-down. Earlier this week, Citigroup Inc. set
aside reserves of $935 million to cover the likelihood that trading
partners won't make good on trades in this market.
href='http://online.wsj.com/article_print/SB120061980722699349.html'>Read
more. (Registration required.)
name='4'>Creditors Find New Century Probe Too
Costly
Creditors of New Century
Financial Corp. say that a court-ordered investigation of the failed
mortgage lender's flawed accounting has cost too much and should not be
allowed to continue, the Associated Press reported yesterday. The
creditors opposed a request to extend the deadline on a probe being run
by Michael J. Missal, who was appointed by a bankruptcy court in June to
investigate the accounting missteps that preceded New Century's collapse
into bankruptcy last year. Missal said that he needs until March to
complete his inquiry into why the former subprime giant filed false
financial statements for 2006 and 2005. Federal bankruptcy monitors
support his request to keep working on the investigation. Missal has
blamed delays in getting documents for his difficulties in completing an
investigation report that was due this month. U.S. Trustee
Kelly Beaudin
Stapleton said that the slip-up is grounds to
give Missal more time to complete his work.
href='http://biz.yahoo.com/ap/080117/new_century_bankruptcy.html?.v=1'>Read
more.
size='3'>Enron Investors Petition Justices Ruling
Protects Banks from Suits
Enron investors suing the company's former
lenders for $40 billion asked the Supreme Court to clarify a decision
limiting the ability of shareholders to sue banks and advisers for
securities fraud, Bloomberg News reported today. The investors, the
Regents of the
w:st='on'>
size='3'>University
size='3'>California
questioned whether the high court's Tuesday decision in
face='Times New Roman' size='3'>StoneRidge v.
Scientific-Atlanta bars their claims against
Enron even though the justices' ruling limited shareholder lawsuits. The
regents urged the high court to review an appeals court ruling throwing
out suits against the banks, which include Merrill Lynch, Credit Suisse
Group and Barclays. The investors said that the justices should hear
Enron's appeal or send the case back to the lower court to reconsider
its decision blocking the claims. The Supreme Court is scheduled to
consider the request today and announce a decision as early as next
week. The investors' request follows a brief by the banks urging the
court to reject the Enron appeal. The banks claimed there is no reason
to send the case back to the federal appeals court in
w:st='on'>
Orleans
favor of the banks would end the claims against them.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/01/17/AR2008011703047.html'>Read
more.
Fed
Chief’s Reassurance Fails to Halt Market Unrest
The stock market plunged
again yesterday on bad economic news, taking little comfort from
reassuring words by the chairman of the Federal Reserve or an emerging
consensus about a stimulus plan that many worry could be too late,
the New York
Times reported today. President Bush publicly
confirmed for the first time that he would propose a package of
emergency measures, outlining its basic principles today, in an effort
to restore the eroding confidence of investors and consumers. The
package is expected to include more than $100 billion in one-time tax
rebates for individuals and an opportunity for businesses to rapidly
write off their capital investments. In a rare sign of his willingness
to cut a deal with Democrats in Congress, White House officials said Mr.
Bush would not demand that the stimulus package include provisions that
permanently extend his signature tax cuts from 2001 and 2003. Federal
Reserve Chairman Ben Bernanke testified before Congress yesterday that a
recession could be averted and insisted that despite concerns about
“slowing growth,” the economy remained
“extraordinarily resilient.”
href='http://www.nytimes.com/2008/01/18/business/18fed.html?_r=1&hp=&oref=slogin&pagewanted=print'>Read
more.
name='7'>GM to Cut Annual
w:st='on'>
size='3'>U.S.
size='3'>Labor Costs $5 Billion by 2011
General Motors Corp., the
largest
size='3'>U.S. automaker, said
that it plans to reduce its annual
w:st='on'>
size='3'>U.S.
size='3'>labor costs by about $5 billion in the next three years,
Bloomberg News reported yesterday. The bulk of the savings will come
from the United Auto Workers contract negotiated last year, the
Detroit-based automaker said. GM also said it will pay less to Delphi
Corp., its biggest parts supplier, and expects
size='3'>U.S.
size='3'>auto-industry sales to strengthen starting next year. GM is
targeting more cost reductions after Chief Executive Officer Rick
Wagoner said on Jan. 4 that $9 billion in cuts last year still won't be
enough to generate cash in 2008.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aSi06Ch1GE4Y'>Read
more.
name='8'>Asarco to Pay $33.4 Million in Toxic Cleanup
Claims
Bankrupt mining company
Asarco LLC on Wednesday asked a judge to approve a settlement resolving
disputes with the state of
w:st='on'>
size='3'>California
subsidiary of ConocoPhillips over cleanup costs for a contaminated
smelter site, allowing claims totaling almost $34 million,
Bankruptcy Law360
reported yesterday. The California Department of Toxic
Substances Control would receive the bulk of the settlement, a general
unsecured claim of about $33.4 million. The California State Lands
Commission would receive a claim of $258,895, and ConocoPhillips
subsidiary
face='Times New Roman' size='3'>C.S.
size='3'>Land
purchased the site in 1989, would receive a claim of $285,895.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=44478'>Read
more. (Registration required.)
name='9'>Ritchie Capital Cos. Sold for $452.5 Million
Two Irish investment
companies established by Ritchie Capital Management LLC persuaded a
bankruptcy court to approve their sales for a combined total of $452.5
million, winding down their chapter 11 cases,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Bankruptcy Judge
face='Times New Roman' size='3'>Burton R. Lifland
size='3'>signed the two companies' asset purchase
size='3'>agreements yesterday to authorize their sales. According to the
asset purchase agreements, Ritchie Risk-Linked Strategies Trading
(
face='Times New Roman'
size='3'>Ireland
Ltd. was sold to AMB Amro Bank NV, which were both companies' pre- and
post-petition lenders, for $396 million. Ritchie Risk-Linked Strategies
Trading (
face='Times New Roman'
size='3'>Ireland)
Ltd. II was sold to Nutmeg Life Settlements Trust for $56.5
million.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=44526'>Read
more. (Registration required.)
w:st='on'>
name='10'>U.S.
face='Times New Roman' size='3'> Trustee Objects to Massive Claims
against SFC
A
w:st='on'>
size='3'>U.S.
size='3'>trustee has objected to a pair of claims totaling nearly $1
billion against
bankrupt loan company Student Finance Corp., saying the investors on
whose behalf the claims were originally filed have already been paid
in full,
Bankruptcy Law360
reported yesterday. In court documents filed Wednesday
with the U.S. Bankruptcy Court for the District of
w:st='on'>
size='3'>Delaware
chapter 7 Trustee
size='3'>Charles A. Stanziale Jr. took issue
with a $468 million claim filed by MBIA Inc. and a $466 million claim
filed by Wells Fargo Bank NA. “To the extent MBIA purported to
file its claim on behalf of holders of certificates and notes issued by
securitization trusts affiliated with the debtor, those certificate and
noteholders have now been paid in full as part of the settlement of
another, nonbankruptcy litigation,” Stanziale said in a
motion. Stanziale
added that if MBIA was directly damaged by SFC, then it had failed to
explain or quantify such damages.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=44465'>Read
more. (Registration required.)