href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif' />
October 23, 2009
name='1'>Fed Plans to Vet Banker Pay to Discourage Risky
Practices
The Federal Reserve announced yesterday that it would crack
down on pay packages that encouraged bankers to take excessive risks,
but officials acknowledged that the plan might not reduce the biggest
paychecks on Wall Street, the New York Times reported today.
Instead of pay limits, the Fed rules are intended to discourage pay
packages that may encourage risky practices. The Fed’s plan, which
will take effect sometime after a 30-day comment period, will create a
two-tier system of supervising pay, using different approaches for the
nation’s 28 biggest institutions and the thousands of smaller
banks, which would be subjected to a review with their regular bank
examinations. The money center bank holding companies, like JPMorgan
Chase, Goldman Sachs and Morgan Stanley, would have to present their
compensation plans to bank regulators, who would then evaluate whether
pay incentives properly balance goals of short-term growth and long-term
stability. Bank regulators could demand changes, and would monitor pay
practices as part of their regular examinations. The plan would apply to
senior executives and others, like loan officers and traders, whose
individual or collective decisions could expose the firm to significant
losses.
href='http://www.nytimes.com/2009/10/23/business/23pay.html?ref=business'>Read
more.
Freddie Mac Sees Increase in Mortgage
Delinquencies
Freddie Mac said that delinquencies in its mortgage portfolio continued
to rise last month, putting further pressure on the mortgage financier,
the Wall Street Journal reported today. Freddie reported today
that September delinquencies on single-family residences rose to 3.33
percent from 3.13 percent in August and 1.2 percent a year earlier. The
report also showed that Freddie's portfolio rose slightly after three
months of declines, climbing $4.8 billion to $784.17 billion. The change
was due to the month of mortgage-backed securities held by the company.
Unwinding of such positions was behind the recent declines for the
overall portfolio. Meanwhile, refinance-loan purchase volume slid to
$21.4 billion from $35.6 billion a month earlier.
href='http://online.wsj.com/article/SB125630192467903787.html'>Read
more. (Subscription required.)
Judge Delays Ruling on WaMu Request
Bankruptcy Judge Mary Walrath yesterday declined to issue an
immediate ruling on bankrupt Washington Mutual Inc.'s (WMI) request that
JPMorgan Chase & Co. be ordered to turn over some $4 billion in
disputed assets, the Associated Press reported yesterday. Judge Walrath
said that she would take WMI's request to grant it summary judgment
without a trial under advisement, but gave no indication when she might
issue a ruling. WMI, parent company of Washington Mutual Bank, filed for
chapter 11 reorganization along with its Washington Mutual Investment
Corp. affiliate last year, one day after the Office of Thrift
Supervision appointed the Federal Deposit Insurance Corp. as receiver
for Washington Mutual Bank and its banking subsidiaries, including
Washington Mutual Bank fsb in what was the largest bank failure in U.S.
history. After being appointed receiver, the FDIC sold substantially all
of WaMu's banking assets to JPMorgan Chase for $1.9 billion. In a
lawsuit filed earlier this year, WMI claimed that JPMorgan has refused
to turn over billions of dollars in deposit accounts at the WaMu banks
that are part of its bankruptcy estate and are needed to pay
creditors.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/10/22/AR2009102202385_pf.html'>Read
more.
CIT and Goldman Strike a Deal on Debt
CIT Group Inc. has reached a tentative deal with Goldman Sachs Group
Inc. over a disputed 'make whole' payment on a $3 billion loan the
investment bank had extended to the lender last year, the Wall Street
Journal reported today. The agreement ends weeks of tense
negotiations between Goldman Sachs and CIT's steering committee of
bondholders over a $1 billion payment Goldman was poised to receive if
CIT files for bankruptcy. The new agreement calls for Goldman to reduce
the loan to just over $2 billion. CIT in turn would pay Goldman about
$300 million if it files for bankruptcy. Separately, the deal with
Goldman would pave the way for CIT to secure billions of dollars in new
financing from its bondholders, who are currently voting on a sweeping
debt exchange plan or a pre-packaged bankruptcy.
href='http://online.wsj.com/article/SB125626252241103017.html'>Read
more. (Subscription required.)
NYC, Tavern on the Green Spar over Name Rights
/>
New York City and the bankrupt operator of its famed Tavern on the
Green have launched competing lawsuits attempting to claim ownership of
the Central Park restaurant’s name, valued at as much as $19
million and the largest asset in the company’s bankruptcy estate,
Bankruptcy Law360 reported yesterday. The city contends in its
suit that it is the rightful owner of the Tavern on the Green mark and
has merely licensed it to the restaurant operators in an agreement that
is set to expire Dec. 31, when a new leaseholder is scheduled to take
over the property. However, in their countersuit, LeRoy Adventures Inc.
and Tavern on the Green LP say that they have already registered the
name, and that the city has acknowledged it does not have ownership of
the name. The case is Tavern on the Green Limited Partnership,
case number 09-15450-alg, in the U.S. Bankruptcy Court for the Southern
District of New York.
href='http://bankruptcy.law360.com/print_article/129925'>Read
more. (Subscription required.)
Pilgrim's Pride Chapter 11 Plan Heads to
Stockholders
Bankrupt poultry processor Pilgrim's Pride Inc. announced it will begin
soliciting votes from stockholders to approve an amended joint
reorganization plan that would sell a 64 percent stake of the company's
new common stock to Brazil-based JBS SA for $800 million, Bankruptcy
Law360 reported yesterday. The transaction — which represents
an enterprise value of approximately $2.8 billion — was announced
on Sept. 17 in tandem with a joint of reorganization plan and disclosure
statement. Ballots must be returned to the company no later than Dec. 1,
with the plan's confirmation hearing scheduled for Dec. 8, according to
the statement. The case is In re Pilgrim's Pride Corp., case
number 08-45664, in the U.S. Bankruptcy Court for the Northern District
of Texas.
href='http://bankruptcy.law360.com/print_article/129901'>Read
more. (Subscription required.)
Parties Bristle at Altering $24 Million
Chrysler Settlement
Old Carco LLC — Chrysler LLC's castoff — and Safeco
Insurance Co. of America are trying to prevent plaintiffs from amending
a $24 million settlement the parties entered in September to resolve a
wrongful death suit, Bankruptcy Law360 reported yesterday.
Suspecting that Safeco will try to recoup costs if the settlement is
amended, Carco said it was too late to alter a resolution that has
already been approved by the court and carried out, according to the
objection. On Sept. 24, Bankruptcy Judge Arthur Gonzalez approved
the $24 million settlement and put an end to Chrysler’s pending
appeal of the $55 million award for the death of Richard Mraz. The jury
found that a transmission defect in Mraz’s 1992 Dodge Dakota
caused his death in 2004. The plaintiffs filed an emergency motion to
amend the settlement on Oct. 13 in order to structure the distributions
to the numerous recipients. The motion requested the court to allow the
plaintiffs to return the $24 million to Safeco so that the insurer could
make payments directly to the companies overseeing the annuities. A week
later, however, Safeco opposed the move on the grounds that it placed
“an indefinite and ongoing obligation on Safeco despite the fact
that Safeco has already paid” the $24 million in exchange for a
full release.
href='http://bankruptcy.law360.com/print_article/129745'>Read more.
(Subscription required.)
Economic Adviser Predicts 10 Percent Jobless
Rate
One of President Obama’s top economic advisers warned yesterday
that the nation’s unemployment rate was likely to climb above 10
percent by the middle of next year and that job growth would remain
anemic through the end of 2010, the New York Times reported
today. Christina Romer, chairwoman of the White House Council of
Economic Advisers, said that she agreed with private sector forecasters
who expected that the economy would expand at a moderate pace through
the end of next year as it slowly recovered from its deep recession. She
cautioned, however, that unemployment usually recovers much more slowly
than economic growth, and that any job creation has to make up for a
great deal of lost ground from the last two years.
href='http://www.nytimes.com/2009/10/23/business/23outlook.html?ref=business&pagewanted=print'>Read
more.
Freddie Mac’s Secrecy Pacts Face Court
Test
One year after the government took over and bailed out Freddie Mac,
lawyers for shareholders say that federal regulators are blocking former
employees from revealing information to investors who are suing the
company for fraud, the New York Times reported today. Federal
prosecutors in Virginia and the Securities and Exchange Commission are
already investigating whether the company misled investors about the
risks it was taking with securities backed by subprime mortgages and
no-document loans. However, the battle over disclosure will surface
today in a federal courtroom in New York as the company and its primary
government overseer, the Federal Housing Finance Agency, are trying to
enforce secrecy agreements that scores of former employees signed as a
condition for receiving severance payments when they left the company.
However, lawyers for shareholders will argue that Freddie Mac’s
secrecy agreements amount to buying silence from willing witnesses who
may have crucial information about what the company’s top
executives knew at the time they were assuring investors that all was
well. The lawyers will ask a judge to invalidate the restrictions, a
move that Freddie Mac and federal regulators will say the court has no
right to do.
href='http://www.nytimes.com/2009/10/23/business/23mortgage.html?adxnnl=1&ref=business&adxnnlx=1256302868-BSQNAGuk8IvvdUzW5YkbAA&pagewanted=print'>Read
more.
Top Employees Leave Financial Firms Ahead of
Government Pay Cuts
Even before the Obama administration formally tightened executive
compensation at bailed-out companies, the prospect of pay cuts had led
some top employees to depart, the Washington Post reported today.
The administration had tasked Kenneth Feinberg, the Treasury
Department's special master on compensation, to evaluate the pay
packages of 25 of the most highly compensated executives at each of
seven firms receiving exceptionally large amounts of taxpayer
assistance. Feinberg ruled yesterday on only slightly more than three
quarters of the pay packages that were to be under his purview. The
balance reflected executives who have left since he began his work in
June or will be gone by the end of the year. Many executives were driven
away by the uncertainty of working for companies closely overseen by
Washington, opting instead for firms not under the microscope, including
competitors that have already returned their bailout funds to the
government, according to executives and supervisors at the companies. At
Bank of America, for instance, only 14 of the 25 highly paid executives
remained by the time Feinberg announced his decision. Under his plan,
compensation for the most highly paid employees at the bank would be a
maximum of $9.9 million. The bank had sought permission to pay as much
as $21 million, according to Treasury Department documents.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/10/22/AR2009102204422.html'>Read
more.
Chrysler Board Shows Its Independence from
Fiat
The new board of directors at Chrysler Group LLC is pushing back against
the company's aggressive chief executive, showing signs that it won't
simply rubber-stamp Fiat SpA's plans to revamp the car maker, the
Wall Street Journal reported today. 'I form some points of view
on things we should do differently' and then share them with the chief
executive, Sergio Marchionne, said C. Robert Kidder, Chrysler’s
Chairman. Kidder's only prior auto-industry experience came early in his
career when he was a McKinsey & Co. consultant and did studies for
Ford Motor Co. One reason Chrysler's board is likely to have lively
debates is its highly unusual nature. Its members were chosen by four
constituents that have a stake in the company: the U.S. government,
which lent Chrysler $12 billion and got to appoint four directors; Fiat,
which got three directors in exchange for technology and management; a
health care trust for the United Auto Workers union, which agreed to
cost cuts and received one director; and the Canadian government, which
also lent Chrysler money and got a director. Chrysler will go public
with its product strategy on Nov. 4, when it is expected to announce it
will start making the Fiat 500 small car in Mexico, and another Fiat
small car at a U.S. plant. A Chrysler engine plant in Dundee, Mich.,
will likely make a fuel-efficient, four-cylinder engine developed by
Fiat.
href='http://online.wsj.com/article/SB10001424052748703816204574489550622871832.html'>Read
more. (Subscription required.)
International
href='http://global.abiworld.org/?q=news'>Click here to review
today's global insolvency news from the GLOBAL INSOLvency
site.