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June 13, 2008
Senate Committee Hearing Examines
Supreme Court's Treatment of Consumer Protection Laws
The Senate Judiciary Committee held a hearing on Wednesday that examined
the effect of the U.S. Supreme Court's treatment of laws that aim to
protect Americans' health, safety, jobs and retirement. Prof.
Robert Lawless of the University of Illinois College of
Law was a witness at the hearing and testified that the Court's
decisions are weighted toward business and that banking interests
frequently outweigh those of consumers in bankruptcy cases. Prof.
Lawless proposed that “an interpretive rule that ambiguities
should be resolved in favor of consumers could be enacted as a blanket
rule or on a statute-by-statute basis.”
href='http://judiciary.senate.gov/testimony.cfm?id=3404&wit_id=7237'>Click
here to read Prof. Lawless testimony.
Click
here to read the rest of the hearing testimony.
Foreclosure Filings Surge 48 Percent
in May
RealtyTrac Inc. reported that 261,255 homes nationwide received
at least one foreclosure-related filing in May, up 48 percent from
176,137 in the same month last year and up 7 percent from April, the
Associated Press reported today. One in every 483 U.S. households
received a foreclosure filing in May, the highest number since
RealtyTrac started the report in 2005 and the second-straight monthly
record. Foreclosure filings increased from a year earlier in all but 10
states. Nevada, California, Arizona, Florida and Michigan had the
highest statewide foreclosure rates. Nearly 74,000 properties were
repossessed by lenders nationwide in May, while more than 58,000
received default notices, the company said.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/06/13/AR2008061300755_pf.html'>Read
more.
Moody's Considers Aligning Municipal Debt Ratings
With Corporate
Criticized by states and cities for how it rates their bonds, Moody's
Investors Service said yesterday that it was considering rating
municipal debt on the same scale it uses for corporate debt, the New
York Times reported today. This year, California and 10 other
states called on Moody's and its rivals, Standard & Poor's and Fitch
Ratings, to change how they rated municipal debt because bonds issued by
public entities default far less often than comparably rated corporate
securities. The states said that because of their lower rating they were
forced to buy bond insurance so they could issue bonds that pay lower
interest rates. In March, Moody's proposed allowing municipalities to
request a corporate-scale rating on a bond-by-bond basis. Company
officials said they were now going further because most of the 160
comments received asked that the dual rating scales be
eliminated.
href='http://www.nytimes.com/2008/06/13/business/13moodys.html?ref=business&pagewanted=print'>Read
more.
In related news, House Financial Services Committee Chairman Barney
Frank (D-Mass.) said yesterday that he would propose legislation as
early as next week to change the way debt of states, cities and other
municipalities are rated, the Wall Street Journal reported
today. Moody's bond rating unit, Moody's Investors Service, yesterday
proposed changing the municipal scale to one that looks more like the
corporate scale, but Frank said that he is gathering fellow legislators
to essentially make Moody's proposal a law for all bond rating
firms.
href='http://online.wsj.com/article_print/SB121331163024469687.html'>Read
more. (Registration required.)
UAW Calls on Plastech Asset Buyer to
Honor Labor Deal
The United Auto Workers, representing nearly 3,000 workers of bankrupt
auto supplier Plastech Engineered Products Inc., is one of more than a
dozen parties that filed objections Wednesday in response to Plastech's
bid for court approval of a plan to sell off key assets, Bankruptcy
Law360 reported yesterday. The United Auto Workers' conditional
objection asks Bankruptcy Judge Phillip J. Shefferly
not to approve the proposed sale of Plastech's interiors and exteriors
businesses unless the purchaser assumes Plastech's obligations under a
previous collective bargaining pact or otherwise comes to terms with the
union. In addition, the UAW has reached an understanding with Johnson
Controls Inc., which owns and controls the entity that would pick up
Plastech's interiors business as well as the UAW-represented exteriors
plant in Lansing, Mich., under the proposed sale, according to the
motion.
href='http://bankruptcy.law360.com/secure/printview.aspx?id=58901'>Read
more. (Registration required.)
Irish Investment Funds File for
Chapter 11
Five months after a bankruptcy court approved their $452.5 million
sales, two Irish investment companies established by Ritchie Capital
Management LLC have each filed chapter 11 plans, predicting limited
recovery for creditors holding general unsecured claims, Bankruptcy
Law360 reported yesterday. Ritchie Risk-Linked Strategies Trading
(Ireland) Ltd., known as Ritchie I, and Ritchie Risk-Linked Strategies
Trading (Ireland) Ltd. II, known as Ritchie II, also filed a joint
disclosure statement in Wednesday in the U.S. Bankruptcy Court for the
Southern District of New York. Both plans contemplate using the proceeds
of the sales to pay off administrative claims as well as the costs and
expenses of maintaining the post-bankruptcy estates in full, according
to the disclosure statement. The case is Ritchie Risk-Linked
Strategies Trading (Ireland) Ltd., case number 07-11906, in the
U.S. Bankruptcy Court for the Southern District of New York.
href='http://bankruptcy.law360.com/Secure/printview.aspx?id=58969'>Read
more. (Registration required.)
AIG Group Tied to Credit-Default Swaps
Draws Focus of Probes
Government probes of American International Group Inc. have cast a
spotlight on its entrepreneurial financial-products business, which has
been the source of profits and controversy for years, the Wall Street
Journal reported today. The probes, by the Securities and Exchange
Commission and the U.S. Justice Department, center on whether the
insurer and its financial-products division intentionally overstated the
value of contracts linked to subprime mortgages. The company has about
$60 billion of those contracts, known as credit-default swaps, which
insure buyers against the risk of losses from certain securities,
including those backed at least in part by risky subprime mortgages.
They have accounted for about $20 billion in write-downs, or unrealized
paper losses, disclosed by AIG this year.
href='http://online.wsj.com/article_print/SB121332627054470909.html'>Read
more. (Registration required.)
More Airlines Add Fees for Checking
Luggage
United Airlines and US Airways joined American Airlines yesterday to
begin charging their passengers $15 to check their first bag, the New
York Times reported today. United Airlines said that it would put the
charge into effect today. The $15 fee, for passengers flying on leisure
fares booked in advance, is on top of a $25 fee for checking a second
suitcase that airlines began charging recently. US Airways said that its
$15 baggage-check fee would be effective July 9 and would also apply to
flights to and from Canada, Latin America and the Caribbean, making its
program broader than its rivals. Airlines are attributing new fees and
surcharges to high fuel prices, up 91.5 percent from this time last
year, according to the International Air Transport Association.
href='http://www.nytimes.com/2008/06/13/business/13bags.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
House Committee Chairman Says 401(k)
Disclosure Legislation Is Dead
Despite some earlier momentum, House Education and Labor Chairman George
Miller (D-Calif.) yesterday proclaimed a bill to increase disclosure of
retirement-account fees dead for the year, CongressDaily
reported today. The House Ways and Means Committee has a jurisdictional
claim on the legislation, Miller said, adding that he has not been able
to work out differences with that panel. Miller's comments came a little
more than a week after he hosted a joint workshop with Ways and Means
Chairman Charles Rangel (D-N.Y.) for House staff about the importance of
moving a bill to improve reporting of fees charged by financial services
providers on 401(k)-style retirement plans. On a party-line vote, the
Education and Labor panel approved a bill in April, opposed by mutual
fund companies, to require firms to provide estimates of total fees and
expenses to be paid under service contracts with plan administrators. It
would also require 401(k) plans to offer at least one low-cost index
fund option.
Prosecutors Seek Stiff Jail Term for
Ex-Refco CEO
U.S. prosecutors argued that former Refco Inc. CEO Phillip Bennett
deserves a long prison term when he is sentenced for fraud after
presiding over 'a conspiracy of historic proportions,' Reuters reported
yesterday. Bennett pleaded guilty in February -- a month before he was
set to go on trial -- to 20 counts of fraud and other charges stemming
from the 2005 collapse of the futures and commodities broker. He faces a
maximum of 315 years in prison at sentencing, set for July 3 in
Manhattan federal court. The date was rescheduled from an earlier date
of June 19.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/06/12/AR2008061203314_pf.html'>Read
more.