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December 3, 2008
GAO
Report Critical of Bailout Oversight
The Government Accountability
Office (GAO) said that the Bush administration has failed to adequately
oversee its $700 billion bailout program and must move rapidly to
guarantee that banks are complying with the plan's limits on conflicts
of interest and executive compensation, the
face='Cambria' size='3'>Washington Post
size='3'>reported today. The GAO said that the Treasury Department has
yet to impose necessary safeguards or decide how to determine whether
the program is achieving its goals. The auditors
size='3'>said that itwas too soon for them to tell whether the bailout
was working.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/12/02/AR2008120202219_pf.html'>Read
more.
href='http://www.gao.gov/new.items/d09161.pdf'>Click here to read
the GAO’s full report.
Homeless
Moving into Foreclosed Homes
Some homeless advocates are
helping those out on the street find refuge in houses abandoned in the
foreclosure crisis, the
face='Cambria' size='3'>Chicago Sun Times
size='3'>reported yesterday. Activist Max Rameau is helping homeless
people illegally move into foreclosed homes. ''We're matching homeless
people with people-less homes,'' Rameau said. Elsewhere around the
country, advocates in Cleveland are working with the city to allow
homeless people to legally move into and repair dilapidated houses. In
Atlanta, some property owners pay homeless people to live in abandoned
homes as a security measure.
href='http://www.suntimes.com/news/nation/1308610,CST-NWS-housing02.article'>Read
more.
Autos
Big Three
Automakers Seek $34 Billion in Government Aid
Detroit's Big Three automakers
presented turnaround plans to Congress yesterday that indicate both
General Motors Corp. and Chrysler LLC could collapse by the end of the
month unless they get billions of dollars in emergency government loans,
the Wall Street
Journal reported today. As part of a renewed
bid for a bailout, GM said that it needs an immediate injection of $4
billion to stay afloat until the end of the year, a fact it hadn't
before disclosed. In total, the company said that it needs $18 billion
in loans -- $6 billion more than it said that it would need just two
weeks ago. Chrysler requested $7 billion, and it said that it needs the
funds by Dec. 31. Chrysler also wants $6 billion from a Department of
Energy program aimed at promoting fuel-efficient vehicles. Ford MotorCo.
is seeking a $9 billion line of credit from the government, though it
adds it may not need to tap it. In addition, Ford wants $5 billion from
the Energy Department program. All three makers
said that theywill consolidate operations and accelerate production of
higher-mileage vehicles. In addition, GM and Ford plan to trim their
brands.
href='http://online.wsj.com/article/SB122823078705672467.html'>Read
more. (Subscription required.)
Vehicle sales in the United
States sank 36.7 percent in November to the lowest rate in 26 years as
the Big Three automakers plead their case for a federal bailout,
the New York
Timesreportedtoday. General Motors, down 41.3
percent, Ford Motor, down 30.5 percent, and Chrysler, down 47.1 percent,
hope the ugly numbers will help them explain their desperation as they
ask Congress for $34 billion in government-backed loans to keep them
alive. However, foreign competitors also were stung by the economic
downturn. Toyota, which was offering loans with zero percent interest on
11 of its normally popular models, sales fell 33.9 percent.
Honda’s sales dropped 31.6 percent and Nissan’s plunged 42.2
percent. Over all, vehicle sales are 16.3 percent lower than they were
for the first 11 months of 2007. In November, the decline for cars and
trucks was roughly the same: down 36.9 percent for trucks and 36.5
percent for passenger cars.
href='http://www.nytimes.com/2008/12/03/business/03sales.html?ref=business&pagewanted=print'>Read
more.
Paulson
Considers Second Infusion of Bailout Funds
U.S. Treasury Secretary Henry
Paulson is debating whether to ask Congress for the second installment
of the $700 billion bailout package, concerned about competing demands
for the funds and a potentially hostile reaction from lawmakers,
the Wall Street
Journal reported today. If Paulson decides to
request the next $350 billion, he is expected to do so by next week.
While Paulson wants to steer more funds to financial institutions,
Congress has its own ideas, including aid for the auto industry and
troubled homeowners.
href='http://online.wsj.com/article/SB122826667852274509.html'>Read
more. (Subscription required.)
States
Express Concern over Timing, Deployment of Potential
Stimulus
As President-elect Barack Obama
has vowed to infuse hundreds of billions of dollars into the nation's
infrastructure, some state officials are warning that public works
projects will fail to effectively lift the country out of recession
unless they are chosen carefully and implemented rapidly, the
Washington Post
size='3'>reported today. In a private meeting yesterday in Philadelphia
with 48 of the nation's governors, Obama stressed the importance of
identifying projects that could put people to work quickly. He raised
the specter of Japan, which languished in a decade-long recession in
part because massive spending on construction projects in the late 1990s
flowed too slowly to boost economic activity. During the two-hour
meeting, governors from both parties assured Obama that they could break
ground almost immediately if the federal government put up the cash to
make up for state budget shortfalls. However, the National Governors
Association said that less than half of the $136 billion in projects
they said were ready to go could get underway within the next six
months.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/12/02/AR2008120203491_pf.html'>Read
more.
Retail
Tweeter
Abruptly Shuts Stores, Fires 600
Bankrupt electronics chain
Tweeter yesterday converted its case to a chapter 7 liquidation,
abruptly shuttered its stores, and fired more than 600 employees at 70
stores across the country, the
size='3'>Boston Globe reported today. The
owners of the chain, Schultze Asset Management, shut down Tweeter and
filed for chapter 7 after they paid off millions of dollars to Wells
Fargo, the company’s largest secured creditor. Tweeter employees
are still owed at least one week's pay, vacation time and hundreds of
thousands of dollars in bonuses that were promised as part of the
liquidation sale. Customers are unable to pick up merchandise they had
already purchased and the liquidators handling the closing also have not
been paid. Meanwhile, there is roughly $14 million worth of goods left
in the locked stores. In its chapter 7 filing, Tweeter requested
$900,000 to be put in a fund for unpaid wages, commissions and payroll
taxes for employees.
href='http://www.boston.com/business/articles/2008/12/03/tweeter_abruptly_shuts_stores_fires_600?mode=PF'>Read
more.
More
Landlords Balk at Circuit City DIP Deal
Two more landlords have filed an
objection to Circuit City Stores Inc.'s debtor-in-possession financing
plan, seeking to halt the company's ability to cancel any nonresidential
leases that were part of the DIP financing,
face='Cambria' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Monday's filing, by Eatontown Commons
Shopping Center of New Jersey and South Barrington Shopping Center of
Illinois, follows a slew of filings by landlords seeking to stop the
approval of Circuit City's $1.1 billion DIP financing plan. Bankruptcy
Judge Kevin R.
Huennekens gave preliminary approval for the
DIP financing on Nov. 10. The Eatontown and South Barrington shopping
centers are objecting to provisions in the credit agreement that provide
for an extension of time to assume or reject nonresidential leases,
according to the motion. A final hearing on the DIP financing plan is
scheduled for Friday.
href='http://bankruptcy.law360.com/articles/78599'>Read more.
(Subscription required.)
Real Estate
name='9'>LandAmerica's Collapse Leaves Investors Looking for
Cash
The collapse of title-insurance
company LandAmerica Financial Group Inc. has left hundreds of real
estate investors scrambling to recover money in what was supposed to be
a short-term and low-risk arrangement, the
face='Cambria' size='3'>Wall Street Journal
size='3'>reported today. The investors, from retirees to a public
company, had $400 million on deposit with the LandAmerica subsidiary to
take advantage of a real estate strategy known as a 1031 exchange. They
must reinvest the money in a new property within six months.
LandAmerica, a provider of title insurance for real
estate transactions, placed itself and its LandAmerica 1031 Exchange
Services subsidiary into chapter 11 bankruptcy protection in the U.S.
Bankruptcy Court in Richmond, Va., last week. In the filing, the company
said that it had put much of the money it was holding for real estate
investors into commingled accounts that invested in auction rate
securities that have becomeilliquid. Customers are furious that
LandAmerica continued to solicit business and put customers' money in
the commingled funds even after the company had admitted its problems
with auction rate securities months earlier
href='http://online.wsj.com/article/SB122826673326474523.html'>. Read
more. (Subscription required.)
Agrees to Foreclosure Plan
Comstock Homebuilding Cos., which
said this summer that it would be forced to cease
payments on nearly 60 percent of its bank loans, has reached an
agreement with one of its lenders that will extend loan payments for 10
years in exchange for foreclosing on certain properties, the
Washington
BusinessJournalreported yesterday. Bank of
America will foreclose on three housing developments in Atlanta and will
also release Comstock of $5.7 million in obligations associated with
those projects. The bank will also extend until 2018 the maturity on
Comstock’s $3.1 million in outstanding debt under its line of
credit. Reston, Va.-based Comstock will not be required to make any
payments until January 2010. It agreed to make interest-only payments
from 2010 to 2012, and then principal and interest payments after that.
href='http://www.bizjournals.com/washington/stories/2008/12/01/daily18.html?t=printable'>Read
more.
Choice Settlements Get Preliminary Approval
A bankruptcy judge on Monday
preliminarily approved settlements between a trustee and former
employees of People's Choice Home Loan Inc. seeking payments under the
Worker Adjustment Retraining and Notification Act and California
law, Bankruptcy
Law360 reported yesterday. The joint
settlement motion was filed by
size='3'>Ronald F. Greenspan, trustee of the
bankrupt home lender's liquidating trusts, and attorneys for two groups
of former employees who worked for the company in California. One group
of former employees asserted claims in an adversary proceeding,
commenced in April 2007, against the debtors under the federal WARN Act
and the California labor code. The second group asserted putative class
claims in March 2007 against the debtors for unpaid wages and benefits,
as well as penalties, under California's labor code. The order
preliminarily approved settlement of the first group's WARN Act class
claims and the second groups' wage and wage penalties claims. The order
also approved the form and manner of notice to class members notifying
certain members, among other things, of their right to opt out. Any
objections to the settlements, reached in the U.S. Bankruptcy Court for
the Central District of California, are due prior to a Feb. 3 fairness
hearing. Read
more. (Subscription required.)
Credit Programs through April 30
The Federal Reserve has extended the
life of key programs aimed at busting through credit clogs and restoring
stability to financial markets, the Associated Press reported yesterday.
The Fed said yesterday that the programs, originally slated to last
through Jan. 30, would be extended through April 30. The Fed’s
emergency lending facility, which investment firms can tap for a ready
source of cash, is covered by the decision. This category was recently
broadened to include any loans that were made to the American- and
London-based broker/dealer subsidiaries of Goldman Sachs, Morgan Stanley
and Merrill Lynch. A program that lets financial institutions
temporarily swap risky investments, such as mortgage-backed securities,
for Treasury securities also is covered.
href='http://www.nytimes.com/2008/12/03/business/economy/03fed.html?ref=business&pagewanted=print'>Read
more.
Funding
Approved for Bankrupt Meatpacker to Reopen Iowa Plant
A bankruptcy court in New York has
approved funding that will allow Agriprocessors Inc. to reopen its
kosher meatpacking plant in Iowa that was the site of one of the
nation's largest immigration raids, the Associated Press reported
yesterday. The court on Monday approved a $2.5 million advance from
First Bank Business Capital to Agriprocessors. The money will allow
Agriprocessors to resume the processing of its inventory of about
750,000 chickens through Jan. 9 and could help ease a nationwide
shortage of kosher meat. First Bank is owed about $34 million by
Agriprocessors and has foreclosed on the company, but without the
advance the chickens would probably starve and become a liability
instead of an asset.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/12/02/AR2008120202423_pf.html'>Read
more.
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