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December 12,
2008
size='3'>Autos
name='1'>Automaker Bailout Bill Fails in Senate
The Senate abandoned efforts yesterday to fashion a government rescue of
the American automobile industry, as Senate Republicans refused to
support a bill endorsed by the White House and congressional Democrats,
the New York Times reported today. After Senate Republicans
balked at supporting a $14 billion auto rescue plan approved by the
House on Wednesday, negotiators worked late yesterday to broker a deal,
but deadlocked over Republican demands for steep cuts in pay and
benefits by the United Automobile Workers union in 2009. The failure to
reach agreement on Capitol Hill raised a specter of financial collapse
for General Motors and Chrysler, which say they may not be able to
survive through this month.
href='http://www.nytimes.com/2008/12/12/business/12auto.html?ref=business&pagewanted=print'>Read
more.
name='2'>Commentary: U.S. Automakers Ponder Next
Steps
While the automaker rescue plan that failed in the Senate yesterday
wouldn't have fixed the ailing automakers that are hemorrhaging cash as
sales plummet, one or more of these companies may now collapse into a
bankruptcy that could potentially cause the loss of hundreds of
thousands of jobs and even greater economic havoc, according to an
editorial in today's New York Times. Furthermore, if the
Detroit carmakers are going to survive, they will have to completely
overhaul the way they do business - and start building cars that people
will buy. For that, they are going to need new leadership, a rational
assessment of their long record of failure and, yes, a much larger
infusion of government cash.
href='http://www.nytimes.com/2008/12/12/opinion/12fri1.html?ref=opinion&pagewanted=print'>Read
more.
name='3'>Senate Passes Pension Fix
The Senate yesterday cleared legislation to ease companies' pension
funding requirements after resolving the concerns of Sen. Jim Bunning
(R-Ky.), who initially felt the bill was too generous to companies that
had underfunded pension plans, CongressDaily reported today.
The Senate action came after a months-long lobbying effort by hundreds
of companies, unions and trade groups seeking relief from pension
funding obligations enacted in 2006. With billions of dollars in pension
assets' value evaporated due to the financial crisis, many companies
were faced with decisions on whether to make their pension
contributions, or make payroll. The bill would enable companies to
account for future earnings when determining the value of a plan's
assets, and it would enable firms to avoid paying 100 percent of their
plans' funding requirements if they miss their yearly transition targets
enacted in 2006. Also, seniors aged 70 1/2, required to begin taking
minimum distributions from their diminished retirement accounts or face
a tax penalty, won a one-year reprieve from the requirement.
href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h7327eh.txt.pdf'>Click
here to read the bill text.
Retail
name='4'>KB Toys Files for Bankruptcy Protection
KB Toys filed for bankruptcy protection for the second time in
four years yesterday, joining fellow retailers Linens 'n Things and
Steve & Barry's in seeking chapter 11 protection amid the recession,
the Associated Press reported. The retailer said in its filing in U.S.
Bankruptcy Court in Delaware that it had debts between $100 million and
$500 million and total assets in the same range. KB Toys had
aggressively cut prices to entice cash-strapped shoppers, offering
hundreds of toys for $10 or less. It also expanded its value program,
which offers deals on new items each week, to include video games and
DVD movies. The toy retailer owes Hong Kong-based toy manufacturer Li
& Fung about $27.2 million, El Segundo, Calif.-based Mattel Toys
$1.3 million and St. Louis-based Energizer Battery more than $728,000.
Other creditors are Hasbro Inc. and the maker of Legos.
href='http://www.google.com/hostednews/ap/article/ALeqM5ixmweyZKNsf_naElFXtszcmotoEAD950MA8O0'>Read
more.
name='5'>Analysis: Liquidations Threaten Retail
Landscape
Retailers grappling with the grimmest holiday shopping season in decades
face another threat: a boom in liquidation sales by competitors, the
Wall Street Journal reported today. The sour retail market is
leading to a flood of store closings, followed by the inevitable
going-out-of-business sales. In a vicious cycle, the 'everything must
go' banners and ads are siphoning off shoppers from already-struggling
retailers, further weakening their results, analysts say. In the last
few weeks, retailers ranging from Signet Jewelers Ltd. to Bed Beth &
Beyond Inc. blamed competitors' liquidations, in part, for sharply
reduced revenue and profit in the fiscal third quarter.
href='http://online.wsj.com/article/SB122904142826800109.html'>Read
more. (Subscription required.)
Pierre Foods Prepares to Exit Chapter
11
Things are looking sweet for prepackaged baked goods maker Pierre Foods
Inc., which expects to emerge from chapter 11 within the next few days
after a bankruptcy court on Wednesday confirmed its reorganization plan,
Bankruptcy Law360 reported yesterday. The bankruptcy court also
waived the statutory 10-day stay period and authorized the company to
emerge immediately, as all parties consented to the confirmation, Pierre
Foods said yesterday. The plan was approved just days after Pierre Foods
lodged a second amended plan of reorganization with some technical
modifications, as well as a plan supplement in response to a number of
objections filed last week by the U.S. Trustee and one of Pierre's
creditors. Pierre has said it expects to emerge from bankruptcy with
about $141 million in consolidated debt, compared with $367 million in
debt when it filed for chapter 11 in July.
href='http://bankruptcy.law360.com/articles/79862'>Read more.
(Subscription required.)
name='7'>Jarden Wants Lehman Taken Off $1.5 Billion Credit
Deal
Jarden Corp., a Fortune 500 consumer products maker, is asking for a
court order forcing the resignation of bankrupt Lehman Brothers
Commercial Paper Inc. from its role in a $1.5 billion credit agreement,
Bankruptcy Law360 reported yesterday. Jarden is a borrower
under a $1.53 billion agreement involving several financial
institutions, with Lehman Commercial Paper as administrative agent.
Several types of loans have been made available under the agreement to
Jarden, including term loans, revolving loans, swing line loans and
letters of credit. Also Wednesday, Parsec Trading Corp. filed a motion
seeking relief as it attempts to recover $13 million in “excess
collateral” in the form of treasury notes pledged to Lehman
Brothers in a 1997 trading agreement.
href='http://bankruptcy.law360.com/articles/79936'>Read more.
(Subscription required.)
Corporate
Accountability
name='8'>Executive Accused of Mortgage-Securities
Scheme
Federal prosecutors allege that a financial executive altered credit
scores and reclassified mobile homes as single-family houses, inflating
the value of thousands of mortgages that were repackaged and sold to
investors, the Wall Street Journal reported today. Federal
prosecutors in Miami yesterday charged Steven Gordon, a former partner
at Bayview Financial LP, with one count of wire fraud in one of the
first cases highlighting investigators' efforts to move beyond low-level
mortgage schemes and delve into suspected fraud in the
mortgage-securities business involving bigger financial firms. Gordon, a
former director of residential acquisitions at Bayview, made more than
$2.8 million in additional commissions by altering the value of 2,800
loans from 2001 to 2006, according to documents filed by prosecutors in
U.S. District Court in Miami. Bayview said in a securities filing that
after it discovered the fraud, it bought out or substituted potentially
fraudulent loans valued at $66 million. It said that there were no
investor losses.
href='http://online.wsj.com/article/SB122904079529200047.html'>Read
more. (Subscription required.)
name='9'>Top Broker Accused of $50 Billion Fraud
Bernard L. Madoff, a former chairman of the Nasdaq Stock Market
and a prominent figure in Wall Street trading for nearly 50 years, was
arrested by federal agents yesterday, a day after his sons turned him in
for running what they said their father called 'a giant Ponzi scheme,'
the Wall Street Journal reported today. The Securities and
Exchange Commission, in a civil complaint, said that it was an ongoing
$50 billion swindle, and asked a judge to seize the firm and its assets.
'Our complaint alleges a stunning fraud that appears to be of epic
proportions,' said Andrew M. Calamari, associate director of enforcement
in the SEC's New York office. In a separate criminal complaint, Federal
Bureau of Investigation agent Theodore Cacioppi said Madoff's investment
advisory business had 'deceived investors by operating a securities
business in which he traded and lost investor money, and then paid
certain investors purported returns on investment with the principal
received from other, different investors, which resulted in losses of
approximately billions of dollars.'
href='http://online.wsj.com/article/SB122903010173099377.html'>Read
more. (Subscription required.)
name='10'>Fed's Assets Top $2 Trillion
U.S. financial institutions continued to make extensive use of the
Federal Reserve's growing list of credit facilities last week, pushing
the Fed's balance sheet well past $2 trillion, the Wall Street
Journal reported today. Meanwhile, deposits held at the Fed by
banks jumped again last week by over $100 billion to more than $777
billion. The latest increase in the Fed's balance sheet was spurred by
term auction credit as well as currency swap arrangements with foreign
central banks. Once recently announced programs to help consumer credit
and mortgage markets are up and running, that figure should climb toward
$3 trillion. The balance sheet was under $1 trillion as recently as
mid-September.
href='http://online.wsj.com/article/SB122904716815700747.html'>Read
more. (Subscription required.)
name='11'>Many Banks Opt Out of FDIC Program
More than a fifth of U.S. banks opted out of a new program to
guarantee bank debt, casting doubt on the program's role in combating
the financial crisis, the Wall Street Journal reported today.
Of the 8,384 banks or thrifts insured by the Federal Deposit Insurance
Corp., 2,027, or 24 percent, have chosen to drop out of the program,
according to a list of the institutions released by the FDIC on
Thursday. The 2,027 banks represent a small slice of the overall
industry as they have a combined $701.67 billion in assets, representing
roughly 5 percent of industry assets. Meanwhile, the bulk of the
industry opted to stay in a separate program that provides blanket
insurance on certain business transaction accounts. Just 866 banks chose
to discontinue the coverage.
href='http://online.wsj.com/article/SB122904547714200583.html'>Read
more. (Subscription required.)
name='12'>Treasury to Invest in Struggling Hawaii-Based Bank with
Bailout Funds
Central Pacific Financial, a Honolulu bank recently told by regulators
that it needed to raise capital to address its financial problems, this
week said that it would receive bailout funds from the Treasury
Department, Washington Post reported today. The federal
investment is part of the Treasury's plan to inject $250 billion into
financial institutions. Officials presented the program as a way to spur
lending and said investments would be restricted to healthy banks.
However, the inclusion of Central Pacific shows that the Treasury is
investing even in ailing banks that may not be able to expand lending
because they need the government's money simply to cover projected
losses. The Treasury has invested taxpayer dollars in all but one of the
25 largest domestic banks, including several that continue to lose
money. It has allowed institutions to fund acquisitions and to pay
dividends to shareholders. In the case of Central Pacific, it is bailing
out a company that otherwise would need to find investors willing to bet
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/12/11/AR2008121103719_pf.html'>Read
more.
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