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Economy Expands by 2.4 Percent As Defense Spending Surges
The economy experienced a growth spurt in the second quarter amid the
largest jump in defense spending since the Korean War, the Wall
Street Journal reported. Business spending also picked up. Gross
domestic product rose at a 2.4 percent annual rate, much faster than the
1.4 percent pace in the previous two quarters, the Commerce Department
said on Thursday. Spending by the federal government jumped 25.1
percent, the largest increase since 1967. That jump was attributed to a
44.1 percent rise in defense spending, the largest since the Korean War,
due to the war in Iraq. Federal spending was more than enough to offset
a slight decline in spending by state and local governments. The
increase in government spending added 1.4 percentage points to GDP
growth for the second quarter, reported the Journal.
Snow Urges No Changes In Financial Privacy Provisions
Treasury Secretary John Snow yesterday urged the Senate Banking
Committee not to modify the 1999 Gramm-Leach-Bliley Act's financial
privacy provisions as it works to reauthorize the Fair Credit Reporting
Act (FCRA), CongressDaily reported. Testifying at a hearing in
support of a permanent extension of FCRA's uniform national credit
reporting standards, Snow called those rules 'an experiment that has
clearly proven successful.' But Snow argued that the Gramm-Leach-Bliley
financial services modernization law is 'almost brand new' and should
not be modified in the near future. 'It's just being implemented, and
we're just figuring out how it really works,' he said.
One of those proposed modifications of the FCRA's state pre-emption
provisions would require credit reporting agencies to provide consumers
with one free credit report per year upon request. 'They're available
today under certain circumstances, but we think an annual free credit
report from the credit reporting agencies is appropriate,' Snow said.
Sen. Robert Bennett (R-Utah) said he favors requiring credit reporting
agencies to provide a free, annual credit report to consumers who
request it. But Bennett also noted that such a mandate could raise 'all
kinds of questions about who's going to pay for it eventually.'
Separately, CongressDaily reported that a recent attempt by
the GAO to analyze the extent and impact of inaccuracies in the nation's
credit reporting system has yielded more questions than answers. Senate
Banking Committee Chairman Richard Shelby (R-Ala.) said he was troubled
by the GAO's findings. 'Considering the importance of credit reports to
the credit process ... isn't it worth the effort to begin an objective
understanding as to how accurate the reports are?' asked Shelby during
the FCRA hearing. Treasury Secretary Snow shared Shelby's concerns. 'I
think having a better understanding of this whole question is very
important,' Snow told the committee, reported the newswire.
WORLDCOM
MCI Suspended From Receiving New Contracts From
Government
The government said it would immediately suspend WorldCom from receiving
new federal contracts due to lingering concerns about its business
ethics and internal controls, the Wall Street Journal reported.
The General Services Administration (GSA) has been reviewing MCI's
fitness to receive government work for months and had been coming under
increasing pressure from lawmakers to sever ties with the company over
last year's massive financial and accounting scandal. New allegations
that the company defrauded rivals such as Verizon Communications Inc. of
billions of dollars by improperly routing calls have only fueled the
calls to permanently bar the company from new government work. The GSA
is still weighing whether to take such a step, and MCI has 30 days to
challenge its current suspension. The new allegations come from a former
employee who is now cooperating with federal prosecutors in New York,
reported the Journal.
WorldCom Confirmation Hearing Postponed
A bankruptcy court judge on Thursday postponed a hearing to confirm
WorldCom Inc.'s reorganization plan and ordered the telephone company to
disclose details about whether it illegally routed telephone calls to
avoid costly fees, Reuters reported. The hearing was delayed until Sept.
8, from Aug. 26, according to a filing with the U.S. Bankruptcy Court
for the Southern District of New York. Judge Arthur Gonzalez ordered
WorldCom to provide information about recent investigations or actions
by government agencies.
Retailer May Shed Card Business
Circuit City says it will look at selling its credit card operations,
Collections and Credit Risk magazine reported. Company spokesman
Steve Mullins says the retailer is examining all options as financial
operations last year were down significantly from the year before.
Income from 2002 financial operations was $62 million, down from $106
million the previous year. 'It's not really surprising that companies
like Sears are looking to sell and now Circuit City is investigating the
possibility,' says Kurt Barnard, president of Barnard's Retail
Consulting Group. 'Many retailers feel that the credit card business
impedes their ability to be good retailers.'
Conseco Resolves Holders' Objections to Bankruptcy Plan
Conseco Inc., the insurer that filed the third-largest U.S. bankruptcy
case, told a bankruptcy judge that it had resolved objections to its
reorganization plan by
holders of $2 billion in trust originated preferred securities,
Bloomberg News reported. A Conseco lawyer said that a revised plan to
come out of bankruptcy would be filed with the court. The holders had
objected that the Carmel, Ind.-based insurance company was undervalued
under the reorganization plan, leaving their securities almost
worthless. The agreement removes a hurdle to the company's
restructuring.
Daewoo Can't Stop General Motors, Suzuki From Selling Cars
Daewoo Motor America Inc., the bankrupt sales unit of insolvent Daewoo
Motor Co., can't block General Motors Corp. and Suzuki Motor Corp. from
selling Daewoo vehicles in the United States under their own brand
names, a judge indicated, Bloomberg News reported. U.S. Bankruptcy Judge
Sheri Bluebond said in Los Angeles she will probably deny Daewoo's
request for a temporary restraining order. Daewoo claimed General Motors
and Suzuki are violating a 1999 agreement in which the South Korean
automaker gave Calif.-based Daewoo Motor America exclusive U.S.
distribution rights for its cars and trucks for 10 years.
General Motors, Japan's Suzuki and their partners acquired factories
and other assets from Daewoo in 2002 for $1.17 billion, creating GM
Daewoo Auto & Technology Co. The new company started shipping cars
to the United States this month to be sold under the Suzuki and General
Motors' Chevrolet brands. Daewoo knew in October 2002 of General Motors
and Suzuki's plans, 'yet it waited until a shipment of vehicles was on
its way to bring this motion,'' Bluebond wrote. 'The court has no
inclination to treat as an emergency a motion that only became an
emergency due to the passage of so much time,'' reported the
newswire.
Superior TeleCom Recovery Plan Sheds $1 Billion in Debt
Superior TeleCom Inc., a copper-wire and cable products supplier that
filed for bankruptcy in March, said it would shed more than $1 billion
in debt as part of a
proposed reorganization plan, Bloomberg News reported. Under the plan,
senior secured creditors would get up to 100 percent of the company's
new common stock, $145 million in new senior notes and $5 million in
preferred stock. General unsecured creditors would share $2 million,
while holders of $220 million in subordinated notes would get warrants
to buy new stock. Existing common shareholders and holders of $167
million in convertible debentures would get nothing, the company said.
Filing the plan with the court 'represents a major step toward a
successful financial restructuring,'' David S. Aldridge, Superior
TeleCom's chief financial officer, said in a statement
yesterday, reported the newswire.
ABB Seeks U.S. Judge's Approval of $1.3 Billion Asbestos
Settlement
ABB Ltd. asked a U.S. judge overseeing asbestos-related litigation to
confirm a $1.3 billion settlement of asbestos claims that's part of the
bankruptcy reorganization plan
for a U.S. unit, Bloomberg News reported. U.S. District Judge Alfred
Wolin, a federal judge in Newark, N.J., assigned to oversee asbestos
litigation arising from Delaware bankruptcy cases, said he would rule on
Thursday on ABB's request. The settlement would resolve 130,000 lawsuits
stemming from boilers made by ABB's Norwalk, Conn.-based Combustion
Engineering unit.
An attorney for ABB, David Bernick, urged Wolin to sign off on the
accord, which has been approved by 111,000 plaintiffs in those suits, he
said. 'Each and every constituency has taken full advantage of the
negotiation process,'' Bernick said. 'Everybody had an opportunity,''
reported the newswire.
GLOBAL CROSSING
Global Crossing Seeks Approval of $100 Million Loan
Global Crossing Ltd. asked a federal judge to approve a $100 million
loan to help the bankrupt operator of a 100,000 mile high-speed data
network cover costs
while national security officials review a planned sale, Bloomberg News
reported.
Global Crossing on July 1 won approval from U.S. Bankruptcy Judge
Robert Gerber to sell a 61.5 percent stake to Singapore Technologies
Telemedia Pte., complicating efforts by competitors and some creditors
to derail the buyout. Carl Icahn's XO Communications Inc., IDT Corp. and
lenders led by J.P. Morgan Chase & Co. had argued that Global
Crossing would run out of money before U.S. regulators approved the
transaction.
The Committee on Foreign Investment in the United States is reviewing
the proposed sale. Meanwhile, Global Crossing continues to spend cash
after being in bankruptcy more than a year and a half. The Bermuda-based
company reported an $86 million net loss for May, and losses totaled $75
million in April, court papers show. The new financing is needed 'to
provide a cushion to protect against unexpected delays or an economic
downturn,'' Global Crossing said in a filing in U.S. Bankruptcy Court
in
Manhattan, reported the newswire. Global Crossing said it needs the loan
'in the unlikely event'' it can't get national security approval of the
deal and needs to 'implement alternative restructuring strategies,
including discussions with other potential investors.'' General Electric
Capital Corp. and Merrill Lynch Capital have agreed to provide the
proposed credit line, Global Crossing said in the filing. A hearing on
the loan-approval request is scheduled for Aug. 14, Bloomberg
reported.
Two Senators Urge U.S. to Reject Global Crossing
Deal
Two U.S. senators on Thursday urged the government to stop a company
owned by an arm of the Singapore government from purchasing a majority
stake in bankrupt Global Crossing, which operates a high-speed fiber
optic telecommunications network, Reuters reported. Sen. Conrad Burns
(R-Mont.), chairman of the Senate Commerce Subcommittee on
Communications, and Sen. Ernest Hollings (D-S.C.), the Commerce
Committee's senior Democrat, said they had 'serious reservations' about
the deal to sell the 61.5 percent stake to Singapore Technologies
Telemedia. The Committee on Foreign Investment in the United States,
chaired by the Treasury Department, has been reviewing whether the deal
would threaten U.S. national security. So far, the panel's economic and
defense officials have been divided, reported the newswire.
Justice Dept. Honors Two U.S. Trustee Program Employees
Two employees of the United States Trustee Program were among those
honored yesterday at the Justice Department's 51st Annual Awards
Ceremony at Constitution Hall in Washington, D.C., the Executive Office
for U.S. Trustees announced in a press release. More than 140 Justice
Department employees, along with 21 other federal employees and law
enforcement officers, received awards at the ceremony. Clifford J. White
III, deputy director of the Executive Office for U.S. Trustees in
Washington, D.C., received the Department's second highest award, the
Attorney General's Award for Distinguished Service. The Department
presented 13 Distinguished Service Awards this year. White received the
award for his extraordinary leadership of the U.S. Trustee Program's
fraud fighting efforts and his superior management of program
activities. Martha J. Watson, a Legal Clerk in the U.S. Trustee
Program's Norfolk, Va., office, was one of two Department employees to
receive the Attorney General's Award for Excellence in Legal Support
(Legal Secretary). She was recognized for her dedication and
accomplishments, which have been critical to the Norfolk office's
transition to electronic case filing.
Penn Traffic Says Court OKs Bankruptcy Financing
Penn Traffic Co., which runs 212 supermarkets in six states, on Thursday
said a White Plains, N.Y., bankruptcy court approved $270 million of
debtor-in-possession financing, which will help the retailer pay down
loans and run its business, Reuters reported. The Syracuse, N.Y.-based
retailer obtained the secured financing from Fleet Capital Corp. and
other lenders. It said it will use about $200 million to pay in full the
lenders' pre-bankruptcy secured loans. Penn Traffic also said the deal
gave it more time to decide whether to reject unexpired real estate
leases. The company said it still intends to exit bankruptcy as soon as
possible, reported the newswire.
PG&E Disclosure Statement Gets Conditional Approval
A federal judge presiding over Pacific Gas & Electric Co.'s
two-year-old bankruptcy case conditionally approved the utility's
disclosure statement on Wednesday, a spokesman for the utility said,
Reuters reported. U.S. Bankruptcy Judge Dennis Montali also set Nov. 3
as the start date for a hearing to confirm the reorganization plan for
the PG&E Corp.-owned utility. The disclosure statement must be
approved by the court before creditors vote on PG&E's
reorganization. The statement spells out how the utility plans to
reorganize, pay creditors and emerge from bankruptcy. The utility's
creditors will vote on the plan between Aug. 15 and Sept. 29, reported
the newswire.
StorageNetworks to Close; Shares Rise on Cash Payout
StorageNetworks Inc. will liquidate after it was unable to sell the
company at a high
enough price, Bloomberg News reported. Investors will get about $1.60 to
$1.70 a share, the company said in a statement on its web site, pushing
the stock up as much
as 19 percent. The Waltham, Mass.-based company had been turning itself
into a software maker after its computer data-storage management
business failed to make a profit. In March, it hired investment bankers
to evaluate options, including a sale. The only offers to buy the
company were too low, StorageNetworks said, reported the newswire.
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