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September 14,
2009
Law in North Carolina
North Carolina homeowners could get a reprieve before
a foreclosure under legislation signed into law last week by Gov.
Beverly Perdue (D), the
face='Times New Roman' size='3'>Raleigh (N.C.) News &
Observer reported on Friday. The measure would
allow clerks of court to postpone foreclosure hearings for up to 60 days
to allow homeowners additional time to work out payment plans with their
mortgage holders and to remain in their homes. Court records show that
nearly 40,000 homes in the state have gone into foreclosure so far in
2009. According to the Center for Responsible Lending, more than 2.2
million North Carolina homeowners will see their property values decline
over the next three years because of foreclosures in their
neighborhoods.
href='http://www.newsobserver.com/news/story/1682428.html'>Read
more.
Financial Reform
Obama Turns Efforts to
Financial Reforms
President Obama will head to Wall Street today to try
to breathe new life into efforts to overhaul the financial regulatory
system, an undertaking he has said is essential to halting the abuses
and failures that led to the current crisis, the
face='Times New Roman'>
size='3'>Washington Post reported today.
Treasury Secretary Timothy F. Geithner said recently that 'greater
urgency' is needed to push through regulatory reform and insisted that
'fundamental change is necessary.' National economic adviser Lawrence H.
Summers said in an interview that 'this crisis will leave a legacy of
strengthened regulation.' The toughest challenge to the administration's
agenda is likely to arise in the Senate, where few lawmakers seem
obligated to follow the White House's blueprint of reform, and where
some of the president's proposals could get steamrollered in coming
months. In June, Treasury unveiled an 85-page paper that laid out a
vision of regulatory reform in painstaking detail. Key pieces include a
new federal consumer agency to oversee financial products such as
mortgages and credit cards, expanded authority for the Federal Reserve
to monitor the economy for systemic risks, streamlining the system of
banking regulation, and creating a mechanism that allows the government
to take over and unwind large, failing financial institutions.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/13/AR2009091302412_pf.html'>Read
more.
to Fail?
Under the Treasury reform blueprint, any financial
company, whether a regulated bank or not, could be rescued or seized by
the Federal Deposit Insurance Corp. if regulators believe it poses a
systemic risk; however, the term “systemic risk” is not
defined by government officials, according to a Wall
Street Journal editorial today. To this day, taxpayers can only
guess at the specific reasons behind the ad hoc rescues that began with
Bear Stearns in March 2008.
size='3'>For rescues of institutions deemed 'too big to fail,' this lack
of disclosure is striking. A year after the epic financial meltdown,
this is the debate Congress needs to undertake before legislating any
new federal authority. Regulators should not receive a blank check to
prevent systemic risk without even defining what that term means,
according to the editorial.
href='http://online.wsj.com/article/SB10001424052970204731804574386932897872954.html'>Read
more. (Subscription required.)
Financial System
As President Obama is scheduled to deliver a major
speech today on the financial crisis, the important work of regulatory
reform remains incomplete, according to a
face='Times New Roman' size='3'>New York Times
size='3'>editorial today. The administration has proposed legislation
that would bring most of the financial system under a regulatory
umbrella, and impose higher capital requirements to cushion against
losses. However, administration officials will have to fight to ensure
that lawmakers do not water down the administration’s intent in
areas such as consumer protection. The proposed Consumer Financial
Protection Agency would take on the consumer protection responsibilities
that are currently dispersed among numerous regulators and police the
financial system with a sole focus on the best interest of the consumer.
In another area — the regulation of derivatives — Congress
must improve the administration’s proposal, according to the
editorial.
href='http://www.nytimes.com/2009/09/14/opinion/14mon1.html?ref=opinion&pagewanted=print'>Read
more.
Its Role in Business Hard to Unwind
When President Obama travels to Wall Street today to
speak from Federal Hall, where the founders once argued bitterly over
how much the government should control the national economy, he is
likely to cast himself as a “reluctant shareholder” in
America’s biggest industries and financial institutions,
the
size='3'>New York Times reported today. One
year after the collapse of Lehman Brothers set off a series of federal
interventions, the government is the nation’s biggest lender,
insurer, automaker and guarantor against risk for investors large and
small. Between financial rescue missions and the economic stimulus
program, government spending accounts for a bigger share of the
nation’s economy — 26 percent — than at any time since
World War II. “These were extraordinary provisions of support, not
part of a permanent program,” said Lawrence H. Summers, director
of the National Economic Council at the White House. “You’re
seeing a process of exit every day. It’s a process that’s
going to take quite some time, but the prospects are much brighter today
than they were nine months ago.”
href='http://www.nytimes.com/2009/09/14/business/14big.html?_r=1&ref=business&pagewanted=print'>Read
more.
Analysis: Lehman Legacy
Alters Global Markets
In the depths of the financial crisis a year ago,
short sellers were blamed for driving some of the world's biggest
financial institutions to the brink of ruin and regulators around the
globe responded with emergency bans on selling those stocks short,
the
size='3'>Wall Street Journal reported today.
While those bans have nearly all disappeared, the legacy of the crisis
may turn out to be rules that address longstanding controversies with
short selling and attempt to prevent selling frenzies like those that
occurred last fall. Still, critics of short selling, including some in
Congress, haven't stopped their calls for tighter rules, even though
there is little evidence these restrictions are effective. Last October,
the SEC adopted a temporary rule -- made permanent this summer -- that
bars a brokerage firm from shorting a stock for itself or another
account if its client fails to deliver that stock within the time limits
href='http://online.wsj.com/article/SB125287484799406733.html#mod=article-outset-box'>Read
more. (Subscription required.)
Corus Bank Is the Latest to
Be Seized by Regulators
Federal regulators seized Chicago-based Corus Bank on
Friday, bringing to 91 the total failures this year and marking one of
the first banks to be undone by deteriorating construction and
commercial real-estate loans during the downturn, the
face='Times New Roman'>Wall
Street Journal reported on Saturday. The
branches and deposits of Corus will be assumed by MB Financial Inc.,
which has more than $8 billion in assets and over 70 branches in Chicago
and its suburbs. Corus, with 11 branches and an active online
certificates of deposit business, had $6.6 billion in deposits as of the
end of August. Corus, which was owned by holding company Corus
Bankshares Inc., concentrated heavily on condo construction lending in
South Florida and other housing markets that are now struggling. More
than half of the bank's $3.9 billion in condo-construction loans were in
nonaccrual or foreclosure in April.
href='http://online.wsj.com/article/SB125271292382705189.html'>Read
more. (Subscription required.)
Chrysler to Pay $22.6
Million to End Dodge Crash Suit
Chrysler LLC and two insurers have agreed to pay $22.6
million to Gilbert Mohr — who was awarded more than $18 million
over the death of his wife and mother-in-law in a Dodge Caravan wreck
resulting from an alleged design defect — rather than wait for
Tennessee's high court to determine whether it will hear an
appeal,
size='3'>Bankruptcy Law360 reported on Friday.
Mohr will have a general unsecured nonpriority claim against Chrysler,
now known as Old Carco LLC, in the amount of $22.6 million, and the two
sureties will cover the settlement, according to the order. Safeco
Insurance Co. of America will have to put up $15.1 million and Chrysler
Insurance Co. will cover close to $7.5 million, the order said.
href='http://bankruptcy.law360.com/articles/121630'>Read more.
(Subscription required.)
Cygnus' Chapter 11 Plan
Receives Court Approval
Cygnus Business Media Inc. won confirmation for a
prepackaged chapter 11 plan that allows it to trim away $146 million in
secured debt, less than two months after seeking bankruptcy protection
because one of 24 lenders refused to acquiesce to the terms of an
out-of-court restructuring plan,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. CommerceConnect Media Holdings Inc. —
the parent company of Cygnus, which filed for bankruptcy along with
Cygnus and two other affiliates on Aug. 3 — had its disclosure
statement and reorganization plan approved by Bankruptcy
Judge Brendan L. Shannon on
Wednesday. The plan calls for the company to cut $146 from the $206
million it owed secured lenders as of the petition date. Senior lenders
will get $60 million in new term debt issued by the reorganized Cygnus
Business Media in addition to 87,400 shares of new common stock in the
reorganized Commerce Connect, according to the chapter 11 plan.
href='http://bankruptcy.law360.com/articles/121777'>Read
more. (Subscription required.)
Philadelphia’s
Newspapers Face a Big Court Date
After all the dramatic turns Philadelphia’s
newspapers have taken — rapid-fire ownership changes, layoffs, an
advertising collapse and bankruptcy — the contest to control them
and determine their future could turn on a crucial court hearing
tomorrow, the
size='3'>New York Times reported today.Some of
the local investors who bought the
size='3'>Philadelphia Inquirer and
the
size='3'>Daily News in 2006, led by Brian P.
Tierney, have fought to defy the odds and remain in charge after the
bankruptcy, rather than turning ownership over to banks and investment
firms that hold their debts. Bankruptcy has wiped out the $150 million
investment made by Tierney, the former advertising executive who became
CEO of the papers, and his partners. The creditors will recover, at
best, a small fraction of what Tierney’s group borrowed. And even
with debt payments suspended, the papers are barely making money —
they reported a cash cushion of $13 million on Aug. 2, just $2.2 million
more than when they filed for bankruptcy in February. Read
href='http://www.nytimes.com/2009/09/14/business/media/14philly.html?ref=business&pagewanted=print'>more.
for Nortel Unit
Nortel Networks, which has been operating under
bankruptcy protection since January, has selected Avaya as the
successful bidder for its segment that makes communications systems for
businesses, the Associated Press reported today. Basking Ridge,
N.J.-based Avaya Inc. will pay $900 million in cash for Nortel
Enterprise Solutions and contribute $15 million to an employee retention
program. Avaya had previously made a stalking-horse bid of $475 million
for the unit in a court-supervised bankruptcy auction. Canada-based
Nortel Networks Corp. expects the deal to close in the fourth quarter.
Canadian and U.S. court approvals will be sought at a joint hearing
tomorrow.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/14/AR2009091400824_pf.html'>Read
more.
Offer for Asarco
Sterlite Industries Ltd. raised its bid Friday for
Asarco LLC by 20 percent to $2.57 billion in cash, topping rival Grupo
Mexico's offer to regain control of the mining company that has been
operating under bankruptcy protection, the Associated Press reported on
Friday. Mumbai-based Sterlite said that the bid was revised to provide
full cash payments to asbestos creditors and surplus cash after closing
for Asarco's operations. The latest offer came nearly two weeks after
Bankruptcy Judge
face='Times New Roman' size='3'>Richard Schmidt
size='3'>recommended Grupo Mexico be allowed to reacquire Tucson,
Ariz.-based Asarco. The Mexico City-based conglomerate lost control over
Asarco shortly after its subsidiary filed for bankruptcy four years ago.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/11/AR2009091101746_pf.html'>Read
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/11/AR2009091101746_pf.html'>
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