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September 22,
2009
FDIC May Borrow Funds from
Banks
Senior regulators say that they are considering a plan
to have the nation’s healthy banks lend billions of dollars to
rescue the Federal Deposit Insurance Corp.’s insurance fund that
protects bank depositors, the
face='Times
New
Roman' size='3'>New York Times reported today.
That would enable the fund, which is rapidly running out of money
because of a wave of bank failures, to continue to rescue the sickest
banks. Bankers and their lobbyists like the idea because it is more
attractive than the alternatives: yet another across-the-board emergency
assessment on them, or tapping an existing $100 billion credit line to
the Treasury. The FDIC is said to be reluctant to use its authority to
borrow from the Treasury, though, and bankers worry that a special
assessment of $5 billion to $10 billion over the next six months would
crimp their profits and could push a handful of banks into deeper
financial trouble or even receivership.
href='http://www.nytimes.com/2009/09/22/business/22bailout.html?_r=1&ref=business&pagewanted=print'>Read
more.
$12.1 Billion Since Filing for Bankruptcy
Chrysler LLC’s old assets remaining in
bankruptcy lost $12.1 billion in three months, Bloomberg News reported
yesterday. A report filed yesterday in Manhattan bankruptcy court shows
a net loss of $344 million for the month ended July 31. Revenue of just
$2 million was outweighed by $235 million in reorganization costs as the
company, now known as Old Carco LLC, winds down what’s left of its
assets following a sale. Chrysler filed for bankruptcy April 30 and sold
substantially all of its assets to a group led by Italy’s Fiat SpA
in June, creating the world’s sixth-largest automaker. According
to the operating report, cost of sales was $11 million in July, and loss
before reorganization costs was $20 million. Total current assets are
$2.28 billion, and total current liabilities are $3.86 billion.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aYWWNSAS8yRk'>Read
more.
Firms Back Change in
Executive Pay Practices
A coalition of blue-chip companies yesterday endorsed
the idea of voluntarily overhauling executive compensation practices in
an effort to restore public confidence in corporate America and to get
out ahead of potentially more burdensome rules that could emerge from
the government, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. Pay practices such as huge severance payments,
personal use of corporate jets and incentives not tied to long-term
performance should vanish unless a specific justification exists,
according to a task force convened by the business organization the
Conference Board. Early supporters of the overhaul initiative include
AT&T, Hewlett-Packard, Tyco and Cisco, as well as investors such as
the California State Teachers' Retirement System.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/21/AR2009092102121_pf.html'>Read
more.
White House Stepping Up
Defense of Consumer Agency
Looking to regain the offensive in the overhaul of the
nation's financial regulatory structure, the Obama administration is
renewing its push for a proposed Consumer Financial Protection Agency
(CFPA), which has been stalled among qualms from moderate Democrats and
strong industry opposition,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported today. White House National Economic Council Director
Lawrence Summers threw down the gauntlet Friday when he said that
opponents of the agency were running 'death panel' ads trying to scuttle
it by claiming that the CFPA would be so burdensome that a small
business such as a florist would not be able to extend credit to
customers. Though not mentioned by name, Summers was referring to the
U.S. Chamber of Commerce's campaign against the proposed CFPA, where it
has used an advertisement featuring a butcher who offers credit to his
customers. The Chamber claims the proposed agency would collect
information about his customers' financial accounts and strip them of
their credit choices. The House Financial Services Committee will begin
hearings tomorrow on the proposed agency.
href='http://financialservices.house.gov/schedule.html'>Click
here for this week’s hearing schedule and links to the
witness lists.
SEC Widens Probe of Bank of
America
The Securities and Exchange Commission said yesterday
that it will broaden its investigation into alleged wrongdoing at Bank
of America and may seek additional charges as it prepares for a trial
against the bank, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. The move was the latest effort by the agency to
combat the impression that it took a soft approach in a high-profile
investigation stemming from Bank of America's acquisition last year of
Merrill Lynch. The SEC suffered a serious setback last week when a
federal judge ordered a trial after rejecting a $33 million settlement
in the case. In August, the SEC accused Bank of America of concealing
from investors the plans to pay billions of dollars in bonuses to
employees of Merrill Lynch, the troubled Wall Street firm it bought at
the peak of the financial crisis. Bank of America agreed to settle
without admitting or denying charges. However, U.S. District Judge Jed
S. Rakoff rejected the settlement, saying that it suited the immediate
interests of the SEC and Bank of America, but neither the public
interest nor that of Bank of America's shareholders. Judge Rakoff
ordered the case to trial in February. New York Attorney General Andrew
M. Cuomo and congressional investigators are also probing the Bank of
America-Merrill Lynch deal. Sources familiar with Cuomo's investigation
have said he is drawing up charges against top Bank of America
executives.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/21/AR2009092103671_pf.html'>Read
more.
In related news, Dow Jones reported that Bank of
America failed to meet a deadline yesterday to give congressional
investigators further details about its acquisition of Merrill Lynch.
House Oversight and Government Reform Committee Chairman Edolphus Towns
(D-N.Y.) and a Bank of America executive are scheduled to meet today to
discuss providing the necessary documents related to acquisition
'without violating attorney-client privilege.'
href='http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=200909211628dowjonesdjonline000330&title=update-bank-of-america-to-meet-with-lawmaker-about-probe-tuesday'>Read
more.
Separately, Bank of America announced several measures
yesterday to reduce its reliance on federal aid, the
face='Times New Roman'>New York
Times reported today. The moves are likely to
presage a wider effort to repay the many billions of bailout dollars
that propped up the bank during the worst of the financial crisis. The
bank said that it would pay the government $425 million for unused
federal guarantees against losses at Merrill Lynch, which it acquired at
the end of last year. Bank of America said that its next step would be
to start repaying $45 billion in federal bailout money. If regulators
approve, the bank hopes to pay back at least $20 billion within
months.
href='http://www.nytimes.com/2009/09/22/business/22bank.html?ref=business&pagewanted=print'>Read
more.
FDIC Appeals Ruling in Bid
to Dismiss WaMu Suits
The Federal Deposit Insurance Corp. filed an appeal
brief over a bankruptcy court's denial of motions to stay or dismiss two
adversary cases in Washington Mutual Inc.'s chapter 11
proceedings, Bankruptcy Law360 reported
yesterday. As the receiver in WaMu's chapter 11 case, the FDIC on Friday
filed its brief in the U.S. District Court for the District of Delaware,
arguing that the bankruptcy court should not have denied two motions to
stay or dismiss the adversary proceedings. In June, the FDIC and
JPMorgan Chase NA fired back against WaMu in their feud over which court
should hear the adversary proceedings, which concern the control of
assets that include $4 billion in demand deposits. JPMorgan and the FDIC
claimed that a district court should have jurisdiction over the
adversary cases because substantial questions of federal law exist in
the conflicts. The bankruptcy case is In re Washington Mutual
Inc., case number 08-12229, in the U.S.
Bankruptcy Court for the District of Delaware.
href='http://bankruptcy.law360.com/print_article/123458'>Read
more. (Subscription required.)
Energy Partners Exits
Bankruptcy
Oil and natural gas exploration and production company
Energy Partners, Ltd. said that it has emerged from chapter 11
protection with its second amended joint reorganization plan becoming
effective yesterday, RTTNews.com reported today. Energy Partners had
filed for bankruptcy protection on May 1 this year. Under the terms of
the reorganization plan, the holders of the company's 8.75 percent
senior notes due 2010, 9.75 percent senior unsecured notes due 2014 and
senior floating notes due 2013 collectively will receive their
size='3'>pro rata share of 95 percent of the
outstanding common stock in the reorganized company upon its emergence
from bankruptcy, and the company's existing shareholders will receive
the remaining 5 percent. Energy Partners will issue a total of 40
million shares of its reorganized common stock under the plan.
href='http://www.rttnews.com/Content/BreakingNews.aspx?Node=B1&Id=1072511%20&Category=Breaking%20News'>Read
more.
Lear's Disclosure Statement
Approved
Bankruptcy Judge
face='Times
New
Roman' size='3'>Allan L. Gropper on Friday
approved bankrupt car-seat maker Lear Corp.'s disclosure statement for
an amended chapter 11 reorganization plan that calls for converting
about $3.7 billion in debt into new loans and preferred and common
stock,
size='3'>Bankruptcy Law360 reported yesterday.
The deadline for voting on and filing objections to the reorganization
plan was set for Oct. 26, and a confirmation hearing was scheduled for
Nov. 5, according to Judge Gropper’s order. Lear, a leading
supplier of seat systems and electronic products to BMW AG, Chrysler
Group LLC, Ford Motor Co., General Motors LLC and Toyota Motor Corp.,
filed for chapter 11 protection on July 7, citing the economic downturn
and a drop in automobile production, especially in trucks and
SUVs.
href='http://bankruptcy.law360.com/print_article/123445'>Read more.
(Subscription required.)
Million Deal in SunCal Plan
Lehman Brothers Holdings Inc. has asked the judge
overseeing its chapter 11 proceedings to sign off on a proposed $15
million settlement involved in its competing reorganization plan for
SunCal Cos., which has sued Lehman over the more than $2 billion in
loans it provided the bankrupt real estate developer,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
The motion, filed Sept. 16 in the U.S. Bankruptcy Court for the Southern
District of New York, seeks the court's approval of the transactions
involved in the plan Lehman filed in SunCal's own bankruptcy in the U.S.
District Court for the Central District of California on Sept. 9.
Seventeen SunCal entities entered chapter 11 protection last November,
and creditors forced another nine units into bankruptcy involuntarily,
according to Lehman's motion. In January, SunCal launched an adversary
proceeding against its Lehman lenders, claiming that the company 'acted
so egregiously' in cutting off funding to the developer that its $2
billion in claims and liens should be subordinated to those of all the
creditors harmed by Lehman's actions.
href='http://bankruptcy.law360.com/print_article/123620'>Read more.
(Subscription required.)
GAO Report Says AIG Has
Stabilized
The Government Accountability Office reported
yesterday that the American International Group’s financial
condition had stabilized but that it was not clear whether the giant
insurance group would ever be able to repay the federal government,
the
size='3'>New York Times reported today. The
GAO said the $182 billion bailout package had succeeded in breaking
AIG’s calamitous fall and had produced signs of improvement in its
insurance businesses. However, the company’s ability to
restructure and survive over the long term depends on “market
conditions and continued government support,” the report
concluded. Paying off the debt to the government will be a slow, hard
process, the report suggested, because raising the money will mean
selling businesses that make up 65 percent of the company and employ
roughly 70,000 people.
href='http://www.nytimes.com/2009/09/22/business/22aig.html?adxnnl=1&ref=business&adxnnlx=1253625062-PfOmvub0v6pI53yLHiDIqg&pagewanted=print'>Read
more.
Judge Denies Former
Congressman’s Request for a New Trial on Corruption
Charges
U.S. District Judge T.S. Ellis III on Friday denied
the request for a new trial by former Rep. William Jefferson convicted
on corruption charges, the Associated Press reported yesterday.
Jefferson was convicted Aug. 5 on 11 of 16 federal counts for using his
influence to broker business deals in Africa after federal agents found
cash in his freezer. A jury ruled Jefferson must forfeit roughly
$470,000 and the former Louisiana congressman later filed for chapter 7
liquidation.
href='http://rds.yahoo.com/_ylt=A0WTTkhB0bhKsGoAMCDQtDMD;_ylu=X3oDMTBkYTNuNGk0BHBvcwMxMARzZWMDc3I-/SIG=12ok4eitd/EXP=1253712577/**http%3a//news.yahoo.com/s/ap/20090921/ap_on_re_us/us_jefferson_trial_1'>Read
more.
Judge Orders Hearing on
Coyotes Mediation Request
Bankruptcy Judge
face='Times
New
Roman' size='3'>Redfield T. Baum scheduled an
emergency hearing for Wednesday at the request of Phoenix Coyotes owner
Jerry Moyes to force the NHL into mediation over the contentious issues
surrounding the sale of the team, the Associated Press reported
yesterday. Moyes wants the judge to force mediation over, among other
things, the NHL's rejection of Canadian billionaire Jim Balsillie as an
owner. Judge Baum is expected to rule in the next few days whether to
award the team to the NHL or to Balsillie, who would move the team to
Hamilton, Ontario, over the league's vehement objection.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/21/AR2009092102696.html'>Read
more.
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