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March 18, 2010
Obama Overstates Loan Modifications,
Republicans Say
The Obama administration is inflating the success of programs that
prevent foreclosures by skewing data on loan modifications and revising
the goals, according to House Republicans, Bloomberg News reported
yesterday. Reports on the Home Affordable Modification Program are
“glossing over disappointing results” by counting temporary
changes toward the goal of permanent relief for as many as 4 million
borrowers, said a letter sent yesterday to Treasury Secretary Timothy F.
Geithner by Republican representatives Darrell Issa (R-Calif.) and Jim
Jordan (R-Ohio). HAMP was designed last year to curb record foreclosures
after housing markets began to collapse in 2007. About 2.82 million U.S.
homeowners lost their properties to foreclosure in 2009, and 4.5 million
filings are expected in 2010, according to RealtyTrac Inc., the Irvine,
Calif.-based seller of default data. Treasury’s Phyllis Caldwell,
chief of the Homeownership Preservation Office, told lawmakers last
month that the program was designed to give homeowners the
“opportunity for a mortgage modification, not a permanent
modification.”
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aK_QEql'
vnbpg='vnbpg'>Read more.
Bernanke Defends Broad Banking Powers for
Fed
Faced with the prospect of having his agency greatly revamped by
financial reform legislation, Federal Reserve Board Chairman Ben
Bernanke called on Congress yesterday to maintain the central bank's
broad bank supervision duties, the Deal Pipeline reported
yesterday. A draft bill unveiled by Senate Banking Committee Chairman
Christopher Dodd (D-Conn.) on Monday would focus the Federal Reserve's
oversight responsibilities on the largest money center institutions and
strip it of regulating all but the largest bank holding companies.
Oversight of state-chartered banks that belong to one of the 12 regional
Federal Reserve banks would also be transferred to the Federal Deposit
Insurance Corp. Bernanke urged Congress to preserve the Fed's
supervisory duties with banks of all sizes, including the many small
state-chartered banks it regulates now. 'The insights provided by our
role in supervising a range of banks, including community banks,
significantly increases our effectiveness in making monetary policy and
fostering financial stability,' he said.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005403573'>Read
more. (Subscription required.)
href='http://www.federalreserve.gov/newsevents/testimony/bernanke2010031'>Click
here to read Bernanke's prepared testimony before the House
Financial Services Committee yesterday.
Judge Approves Lehman Deal to Settle $7.7
Billion J.P. Morgan Claim
Bankruptcy Judge James Peck yesterday approved a
deal tentatively resolving a $7.68 billion claim JPMorgan Chase &
Co. has against Lehman Brothers Holdings Inc. stemming from
controversial collateral demands made by J.P. Morgan, Dow Jones Daily
Bankruptcy Review reported today. The settlement allows J.P. Morgan
to keep $7.1 billion in cash collateral it's holding while transferring
a pool of illiquid securities to Lehman that Lehman says could be worth
billions of dollars. Judge Peck raised a number of questions about the
agreement at a court hearing yesterday, including why Lehman was paying
off one of its largest secured creditors instead of wrapping the deal
into a bankruptcy plan that would satisfy all creditor claims at once.
However, Judge Peck ultimately approved the agreement, saying that he
was satisfied that it doesn't prevent Lehman from later challenging J.P.
Morgan's claims and attempting to reduce them.
In related news, U.S. Securities and Exchange Commission Chairwoman
Mary Schapiro yesterday acknowledged that the agency's oversight of
Lehman Brothers Holdings Inc. may have been inadequate during a critical
period when the company may have masked its losses. The SEC was not
aware of an accounting gimmick, dubbed Repo 105, that allowed Lehman to
hide some of the risks it took before collapsing in 2008, Schapiro told
the House Appropriations Subcommittee on Financial Services. The House
Financial Services Committee, meanwhile, announced yesterday that it
will hold a hearing on the recent report from a bankruptcy court showing
that Lehman routinely hid $50 billion in debt from the public.
Extended Stay Chooses Starwood over Paulson
& Co., Centerbridge
Extended Stay Inc., which filed for chapter 11 protection last June,
has accepted a reorganization plan proposed by an investor group led by
Barry Sternlicht's Starwood Capital Group, Dow Jones Daily Bankruptcy
Review reported today. The hotel chain, which owns 680 properties,
had proposed a plan earlier this month that was backed by two investment
firms, Centerbridge Partners LP and Paulson & Co. However, Extended
Stay's board has dropped support for that plan in favor of the one
proposed by the Starwood group. The Starwood investor group - including
TPG and Five Mile Capital Partners LLC - is proposing to put in more
than $600 million in new equity, the people said. The rival plan had
proposed as much as a $450 million investment from Centerbridge and
Paulson.
The Senate yesterday approved and sent to President Obama a bill
intended to spur employment by providing businesses with incentives to
hire new workers, the New York Times reported today. The
legislation, approved 68 to 29, would give employers an exemption from
payroll taxes through the end of 2010 on workers they hire who have been
unemployed for at least 60 days. It also extends the federal highway
construction program, shifts $20 billion to road and bridge building and
takes other steps to bolster public improvement projects. Democrats hope
to follow up with legislation by extending more than $30 billion in
corporate tax breaks and aid to small business.
href='http://www.nytimes.com/2010/03/18/us/politics/18cong.html?ref=busi'>Read
more.
Union Challenges Tribune over $21 Million
Executive Bonuses
The union that challenged Tribune Co. over its plans to hand out $67
million worth of management bonuses says the company is trying to stage
a retreat to save $21 million worth of rewards for 24 top executives,
Dow Jones Daily Bankruptcy Review reported today. Tribune asked a
bankruptcy judge to approve three separate bonus programs for leaders
during its stay in chapter 11. It won approval of one program, worth
$45.6 million, but moved to dismiss its bid for court approval of the
remaining two. When lawyers for Tribune moved to drop the two unapproved
bonus plans from consideration, however, the Washington-Baltimore
Newspaper Guild cried foul. The bankruptcy bonuses were the subject of a
court contest last year, the union said, and so Tribune can't just make
them disappear from the courtroom and reappear in the chapter 11
plan.
Small Banks Lag in Repaying Treasury for
Bailout Funds
While the largest banks have borne the brunt of criticism for their
role in triggering the crisis, they were among the quickest to give back
their federal bailout funds, the Washington Post reported today.
However, hundreds of community banks have yet to return their bailouts.
More than 10 percent of the 700 banks that got federal bailouts and are
still holding the money even failed to pay the government a quarterly
dividend in February. The list of 82 delinquent banks is significantly
longer than the 55 banks that failed to make payments in November,
according to an analysis by Linus Wilson, a finance professor at the
University of Louisiana at Lafayette. Wilson calculated that the missed
payments totaled $78.1 million in February and that banks now have
missed a total of $205 million in dividend payments to the government.
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/03/17/AR'>Read
more.
GM Has a 'Reasonable Chance' of Profit This
Year, According to CFO
General Motors CFO Christopher P. Liddell said yesterday that the
automaker has a “reasonable chance” of earning a profit this
year, the New York Times reported today. Liddell said that a
stock offering for the carmaker, which is 60 percent owned by the
federal government, is “possible” this year, but that
executives were in no hurry to hold one. Liddell said that GM would
first need to earn a profit and be able to show that it could remain
profitable, so that the government could get the most value from its
stake. The new-vehicle market and broader economy would also need to
improve.
href='http://www.nytimes.com/2010/03/18/business/18auto.html?ref=busines'>Read
more.
Baseball's Dykstra Sues J.P. Morgan for
$100 Million
Lenny Dykstra filed a $100 million lawsuit against JPMorgan Chase
& Co yesterday alleging that he was fraudulently induced into
borrowing more money than he could afford, leading to the former star
baseball center fielder's bankruptcy, Reuters reported yesterday.
Dykstra contended that Washington Mutual Inc, now owned by J.P. Morgan,
let him borrow $20.5 million even though it knew the sum was 'well
beyond' his means. He said that the thrift then reneged on an assurance
it would let him refinance a mortgage used to buy a mansion from hockey
legend Wayne Gretzky. 'Defendant issued a loan designed to fail,'
Dykstra said in a complaint filed on Wednesday in Manhattan federal
court. 'The end result was that plaintiff incurred losses of
approximately $100 million.' Dykstra is seeking triple and punitive
damages.
href='http://www.reuters.com/article/idUSN1710191020100317'>Read
more.
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