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September 10,
2008
District Court Strikes Down BAPCPA's Provision Banning
Attorneys from Providing Debt Advice
U.S. District Court Judge Christopher Droney yesterday struck down
BAPCPA's provision restricting advice that lawyers can give to debtors,
the Associated Press reported. Judge Droney of the U.S. District Court
for the District of Connecticut ruled that the restriction was too broad
because it prohibits attorneys from advising their clients to incur any
debt, including debts that are legal and desirable in some cases. 'A
lawyer who represents consumers contemplating bankruptcy bears the duty
of zealous representation and the prohibition on giving legal advice
unnecessarily interferes with this duty,' Droney wrote. 'If the
government seeks to prevent manipulation of the bankruptcy system, a
more narrowly tailored approach would be to penalize those who take on
certain types of debts.' Judge Droney's ruling follows a ruling by
the U.S. Court of Appeals for the Eighth Circuit last week that also
struck down BAPCPA's provision that barred attorneys from advising
clients to take on more debt before they filed for bankruptcy
protection.
href='http://news.yahoo.com/s/ap/20080909/ap_on_re_us/challenging_bankruptcy&printer=1;_ylt=AueBVkX_OVDUINU8vkBKknVH2ocA'>Read
more.
U.S. Trustee Objects to Fee Requests in Tricom
Case
U.S. Trustee Diana G. Adams filed an objection to the professional fees
and expenses requested in Tricom SA's chapter 11 case, Bankruptcy
Law360 reported yesterday. Adams' objection contended that the
debtors would be harmed if they paid the full $3.6 million requested in
fees and expenses for four months' work. While the monthly compensation
order entitles counsel and other professionals to 80 percent of their
fees and 100 percent of their expenses on a monthly basis, all the
applicants sought payment for every hour worked. Noting the 80 percent
standard, Adams requested that 20 percent of the requested fees be held
back until final resolution of the bankruptcy.
href='http://bankruptcy.law360.com/articles/68655'>Read
more. (Subscription required.)
Bill to Ease Discovery Burdens Moves to White
House
The House of Representatives on Monday passed a bill that would
establish a new federal rule of evidence aimed at reducing the cost and
time of reviewing e-mails and other documents requested in discovery to
avoid accidental disclosure of privileged materials, Bankruptcy
Law360 reported yesterday. The Senate passed S. 2450, sponsored by
Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.), in February
and it is now being sent to the President for his signature. Leahy said
that the legislation would reduce the burdens of electronic discovery.
“The process of discovery was antiquated for the information age.
Inflating litigation costs and outsourcing the review of thousands of
documents is simply not the answer,” Leahy said.
href='http://bankruptcy.law360.com/articles/68768'>Read
more. (Subscription required.)
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here to read S. 2450.
Bear to Pay $28 Million to Settle Loan Complaint
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Bear Stearns and its mortgage servicing unit agreed to pay $28 million
to settle federal charges it had deceived subprime borrowers and had
engaged in abusive loan practices before the investment bank's collapse,
Bloomberg News reported yesterday. The Federal Trade Commission said
that Bear Stearns, acquired May 30 by JPMorgan Chase in a bailout
orchestrated by the Federal Reserve, and its EMC Mortgage Corporation
unit had violated consumer lending laws. The companies imposed
unauthorized charges such as fees for late payments, property
inspections and loan modifications, the commission said. The companies
are also accused of misrepresenting to borrowers what they owed on
mortgages.
href='http://www.nytimes.com/2008/09/10/business/10bear.html?ref=business&pagewanted=print'>Read
more.
Reduced Exit Packages Urged for Ousted Fannie and Freddie
Executives
Sen. Barack Obama (D-Ill.) and two other prominent Democrats urged
federal housing regulators yesterday to cut the exit-compensation
packages of Daniel H. Mudd of Fannie Mae and Richard F. Syron of Freddie
Mac, the New York Times reported today. Together, Mudd and
Syron of Freddie Mac are eligible for as much as $24 million in
severance, retirement benefits and deferred compensation. “Under
no circumstances should the executives of these institutions earn a
windfall at a time when the U.S. Treasury has taken unprecedented steps
to rescue these companies with taxpayer resources,” Obama said.
Sens. Charles E. Schumer (D-N.Y.) and Jack Reed (D-R.I.) of Rhode Island
called the pay packages “out of line” and urged that
regulators “substantially reduce or eliminate” them.
href='http://www.nytimes.com/2008/09/10/business/10comp.html?ref=business&pagewanted=print'>Read
more.
Analysis: Presidential Candidates and Parties Tied to Loan
Giants
Senators Barack Obama (D-Ill.) and John McCain (R-Ariz.) each look to
end the lobbying activities of Fannie Mae and Freddie Mac, but each
candidate and their respective party have ties to the fallen mortgage
giants that will likely complicate the next President's job of reshaping
the mortgage finance companies that have been essential to the economy,
the New York Times reported today. McCain has a number of close
relationships with and contributions from current and former company
lobbyists. Obama is second among members of Congress in donations from
the firms' employees and political action committees.
href='http://www.nytimes.com/2008/09/10/us/politics/10fannie.html?ref=business&adxnnlx=1221049101-ynnPf%20vl%20Cy5PRysSsgwXg&pagewanted=print'>Read
more.
Lehman Sees $3.9 Billion Loss and Plans to Shed
Assets
The investment bank Lehman Brothers said today that it expected a loss
of $3.9 billion in the third quarter after $5.6 billion in write-downs,
the New York Times reported. The investment bank also said that
it would spin off the majority of its remaining commercial real estate
holdings into a new public company. And it confirmed plans to sell a
majority of its investment management division in a move that it expects
to generate $3 billion. The moves come after Lehman's stock lost nearly
half its value on Tuesday as investors feared it was running out of
options to raise capital and shore up its ailing balance sheet. Shares
in Lehman, a major underwriter of mortgage-related securities during the
credit boom, are down over 90 percent since hitting their peak last year
before the subprime mortgage crisis took hold.
href='http://www.nytimes.com/2008/09/11/business/11lehman.html?_r=1&hp=&oref=slogin&pagewanted=print'>Read
more.
Mall Glut to Clog Market for Years
While struggling with a darkening economy, slowing consumer spending and
store closings by retailers, shopping-mall owners face long-term
problems associated with a decade of overbuilding, the Wall Street
Journal reported today. Developers have built one billion square
feet of retail space in the 54 largest U.S. markets since the start of
2000, 25 percent more than what they built during the same period of the
1990s, according to Property & Portfolio Research Inc. of Boston.
U.S. retail space now amounts to 38 square feet for every person in
those 54 markets, up from 29 square feet in 1983, the firm says. Though
retail landlords struggle and store vacancies rise in every economic
downturn, experts say that the overbuilding means that high occupancy
rates at malls and strip centers may not return for years.
href='http://online.wsj.com/article/SB122100092574816923.html?mod=us_business_whats_news'>Read
more. (Subscription required.)
Developers Turn to Auctions to Shed Units
With the condo glut growing as new towers are finished and buyers are
walking away from presale contracts, developers increasingly are
resorting to auctions to unload units at steep discounts, the Wall
Street Journal reported today. Unlike ubiquitous foreclosed-home
auctions, these events seek to establish market prices for untainted,
often upscale properties. Auctions are by no means sure-fire successes.
Recent events in Sarasota and Panama City, Fla., resulted in fewer condo
sales and lower prices than developers anticipated. Developers typically
set minimum acceptable bids and won't sell below that price, though some
events, known as absolute auctions, have no threshold price.
href='http://online.wsj.com/article/SB122100073257616909.html'>Read
more. (Subscription required.)
International
EU Slashes Growth Forecasts for 2008
The European Union today sharply cut its 2008 growth forecasts, saying
that inflation would be worse than expected as financial market turmoil,
high commodity prices and housing market shocks are undermining the
region's economy, the New York Times reported. The European
Commission, the executive body of the 27-country bloc, said it now
expected growth in EU gross domestic product this year of 1.4 percent,
down from its forecast April of 2.0 percent. It also expects growth in
the euro zone of 1.3 percent, down from its forecast of 1.7 percent. It
also revised upward its forecast for inflation in the EU to 3.8 percent
from 3.6 percent, and for inflation in the euro zone to rise to 3.6
percent from 3.1 percent. During the second quarter, GDP contracted by
0.1 percent in all of the EU, and fell by 0.2 in the euro zone.
href='http://www.nytimes.com/2008/09/11/business/worldbusiness/11euro.html?ref=business&pagewanted=print'>Read
more.