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February 10,
2009
Autos
Speed Restructuring for General Motors
JP Morgan analyst Himanshu Patel said yesterday that a
bankruptcy filing by General Motors Corp. could allow the struggling
automaker to reduce its debt more aggressively than an out-of-court
restructuring and might not be as damaging as it would have been just a
few months ago, Reuters reported. GM has said it is aiming to reduce its
unsecured U.S. debt by about two-thirds from nearly $28 billion to $9
billion. The company also plans to halve the $20 billion it has promised
to a health care trust fund affiliated with the UAW by offering equity
instead of cash. Patel said that if GM fails to win substantial
concessions from bondholders and the UAW, the bailout could become 'a
political lightning rod' for the Obama administration.
href='http://uk.reuters.com/article/marketsNewsUS/idUKN0953236920090209'>Read
more.
GM to Cut Salaried Staff
by 14 Percent
General Motors Corp. will cut 10,000 jobs, or 14
percent of its salaried work force, this year as the auto maker
struggles to cope with a steep drop in worldwide vehicle sales,
the
size='3'>Wall Street Journal reported today.
The job cuts are part of the plan the company submitted to Congress in
December to secure bailout funding from the federal government. The
company still has a week to submit an update on the restructuring plan's
viability. Nearly 3,400 U.S. workers, or 12 percent of its U.S. salaried
work force, will be shed, with the bulk of the cuts happening by May 1.
Most of those remaining will see a 3-7 percent pay cut on that date
through year's end, while executives will get a 10 percent
reduction.
href='http://online.wsj.com/article/SB123427251478068135.html?mod=testMod'>Read
more. (Subscription required.)
Congressman Proposes to
Shore Up Banks with Pension Funds
Rather than rely more heavily on the Treasury, which
has already put $350 billion in the nation’s banks, Rep. Gary L.
Ackerman (D-N.Y.) sees an opportunity to harness state and local pension
funds to help financial institutions, the
face='Times






New
Roman'
size='3'>New York Times reported today.
Ackerman is sponsoring legislation that would allow public pension funds
to pool some of their money and use it to create a sole-purpose entity
that would buy $50 billion to $250 billion worth of preferred stock in
America’s banks. Since the nation’s banks are shaky, and
pension funds cannot afford more investment losses, Ackerman’s
measure also calls for the Treasury to guarantee the funds’
principal, plus an annual return of about 8.5 percent. This guarantee
would solve one of the biggest problems now facing most public pension
funds as they need to achieve average annual investment returns of 8
percent.
href='http://www.nytimes.com/2009/02/10/business/economy/10pension.html?ref=business&pagewanted=print'>Read
more.
Revamped Bank Bailout
Proposal Includes Lending “Stress Test”
Many U.S. banks will be subjected to rigorous
examinations to see if they are healthy enough to lend before receiving
additional financial aid, the
face='Times






New
Roman'
size='3'>Wall Street Journal reported today.
The stress tests will be part of the bailout revamp to be announced
today by Treasury Secretary Timothy Geithner. In addition to fresh
capital injections into banks, the new approach will include programs to
help struggling homeowners, a significant expansion of a Federal Reserve
program designed to jump-start consumer lending and a private-public
partnership to relieve banks of bad assets. The expanded effort could
see as much as $2 trillion in financing flowing through the system,
according to Congressional officials. The expanded Fed facility and the
'bad bank' could each reach $1 trillion in size, both of which would be
seeded with bailout funds.
href='http://online.wsj.com/article/SB123420518851764681.html'>Read
more. (Subscription required.)
Senate to Vote Today on
Stimulus Package
The Senate overcame a key parliamentary hurdle
yesterday to clear the path for a final vote today on its $838 billion
version of an economic stimulus bill, the Washington Post
reported today. The Senate’s version would provide money for a
wide variety of purposes, including a $15,000 tax credit for home buyers
and $3.4 billion in repairs to public parks, hoping that the two-year
package of spending and tax cuts would provide a cushion in the ongoing
economic recession. After full approval of the package today, the Senate
will send its version of the legislation to a conference with the House,
which approved its own $819 billion stimulus bill on Jan. 28 with no
Republican votes. While the overall dollar amounts are similar in scope,
the packages have pronounced differences. The Senate version, for
instance, includes $110 billion more in tax cuts.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/02/09/AR2009020901020_pf.html'>Read
more.
for Retailers
Fitch Ratings reported yesterday that losses on
private label credit cards, those issued for use at a single retailer,
are rising at a faster pace than the broader credit card market,
the
size='3'>New York Times reported today. Fitch
Ratings reported that losses on the cards reached a three-year high of
10.51 percent in January, up 44 percent from a year ago. That compares
with general credit card losses of 7.5 percent, up 40 percent from the
year before. While private label cards account for only about 11 percent
of all credit card loans outstanding, their troubles may prove to be a
warning of deeper problems ahead for general cards as the economy
weakens and unemployment climbs. Perhaps the best indication of the
strains on the market is that the largest issuer of private label cards,
General Electric, has indicated that it would like to quit the business
altogether.
href='http://www.nytimes.com/2009/02/10/your-money/credit-and-debit-cards/10private.html?_r=1&ref=business&pagewanted=print'>Read
more.
S&K Famous Brands Files
for Bankruptcy
S&K Famous Brands Inc., a menswear retailer with
136 stores throughout the United States, sought bankruptcy protection
from creditors after failing to restructure operations following its
first annual loss, Bloomberg News reported yesterday. The company listed
assets and debt of $10 million to $50 million each in chapter 11
documents filed today in U.S. Bankruptcy Court in Richmond, Va. The
retailer plans to borrow as much as $13 million from Wells Fargo Retail
Finance LLC, as agent for a group of lenders, according to court papers.
The company said its business won’t be interrupted and obligations
to customers and workers will be fulfilled. The case is
face='Times New Roman'>In re
S&K Famous Inc., 09-30805, U.S. Bankruptcy
Court, Eastern District of Virginia (Richmond).
href='http://www.bloomberg.com/apps/news?pid=20601205&sid=a78CT7Wv9ktk#'>Read
more.
to Force Company into Chapter 11
Creditors of recreational vehicle maker Country Coach
LLC filed an involuntary chapter 11 against the company last week in a
bankruptcy court in Oregon, Reuters reported yesterday. Riley Investment
Management LLC, B. Riley & Company LLC and Fluid Connector Products
Inc filed the petition on Friday claiming $1 million in dues. In
January, Wells Fargo Bank sued Country coach after it defaulted on a $25
million credit facility. In court filings, Wells Fargo said as of
December, 2008, Country Coach owes about $8 million. The case is
In
re Country Coach LLC No 09-60419, U.S.
Bankruptcy Court, District of Oregon.
href='http://www.reuters.com/article/marketsNews/idUSBNG43418420090209'>Read
more.
with SEC
Days before a deadline in his criminal case, Bernard
L. Madoff has agreed to a partial settlement of civil accusations that
he ran a $50 billion Ponzi scheme, the
face='Times






New
Roman'
size='3'>New York Times reported today. The
settlement with the Securities and Exchange Commission, disclosed
yesterday, does not affect the criminal securities fraud charges that
were also filed against Madoff on Dec. 11. Wednesday is the latest
deadline for federal prosecutors either to file a formal indictment
against Madoff or submit to a court hearing to explain why he was
arrested. The first deadline was extended last month at the request of
the prosecutors, who notified the court that progress was then being
made toward a “resolution” of the case. Neither Marc O.
Litt, the assistant U.S. attorney who is leading the prosecution,
nor Ira Lee Sorkin, a lawyer for Madoff, would say Monday whether a
second postponement was being discussed.
href='http://www.nytimes.com/2009/02/10/business/10madoff.html?ref=business&pagewanted=print'>Read
more.
Top Enforcer at the SEC
Steps Down
The Securities and Exchange Commission accepted the
resignation Monday of Linda Chatman Thomsen, its top enforcement
officer, amid blistering criticism that the commission had failed to
protect investors in recent years, the
face='Times






New
Roman'
size='3'>New York Times reported today.
Critics say her unit failed to detect and prosecute improprieties among
mortgage companies, the nation’s brokerage firms and powerful
investment advisers and hedge funds that led to the financial crisis.
The enforcement division, which investigates and files civil suits
against securities law violators, has also come under criticism from
inside the SEC. The most recent report from its inspector general
reprimanded the enforcement unit for its “common practice”
of allowing outside lawyers representing people before the commission to
communicate with supervising staff lawyers who are investigating the
matters.
href='http://www.nytimes.com/2009/02/10/business/10sec.html?ref=business&pagewanted=print'>Read
more.
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