March 7, 2008

Bankruptcy an Option
for Alabama County

Alabama's Jefferson County may consider a bankruptcy filing to resolve a

financial crisis surrounding $3.2 billion of sewer debt, the county's
commissioner for finance said on yesterday, Reuters reported.
'Bankruptcy is certainly an option,' County Commissioner Bettye Fine
Collins told a reporter at a commission meeting in Birmingham. Collins
spoke a day after a lawyer representing the county, which is home to
Alabama's largest city, said Jefferson County had no plans to file for
bankruptcy protection. Collins also said county officials were meeting
in New York to work out a solution to a liquidity crisis that may force
the sewer system to pay $184 million in costs tied to interest rate
derivatives based on outstanding revenue bonds. 

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Sharper Image Will Take

Gift Cards Again

Sharper Image Corp. said yesterday that it would immediately resume
honoring gift cards and other vouchers that were suspended last month
when the company filed for chapter 11 bankruptcy, the Associated Press
reported today. The luxury retailer said it would redeem gift cards
issued before it sought bankruptcy protection on Feb. 19 if customers
use them in full during one transaction and apply them toward items
costing double the value of the cards. In a statement, the company
explained that a customer holding a $25 gift card could only use it to
buy at least $50 worth of items.

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Mortgage
News

Partisan Charges Fly on

Eve of Hearing on Executive Pay

House Oversight and Government
Reform Committee Democrats and Republicans began battling yesterday
ahead of a hearing today on large compensation packages awarded to
former chief executive officers of three companies involved in the
subprime mortgage crisis, Congress Daily reported today.
Committee Democrats blasted Countrywide Financial Corp., Merrill Lynch
and Citigroup for awarding their CEOs massive compensation packages even

as their companies lost about $20 billion in the second half of 2007 due

to investments in subprime and other risky mortgages. The memo cites 'a
breakdown in the alignment between the compensation of the CEOs and
their shareholders' interests,' driven in part by outside compensation
consultants more eager to please management than stockholders. But
committee Republicans responded by dismissing the probe as a 'CEO witch
hunt' and 'a sanctimonious search for scapegoats' responsible for the
subprime mess. 'Markets correct themselves and we need to let that
process proceed,' Oversight and Government Reform ranking member Tom
Davis, R-Va., said in a statement. Davis also argued today's hearing is
the latest in a series of instances where House Oversight and Government

Reform Chairman Waxman appears be aiding plaintiffs in ongoing
lawsuits.

size='3'>Merrill Shuts Unit Making Home Loans

Merrill Lynch said on Wednesday that it would stop making subprime
mortgages through its First Franklin Financial unit and would eliminate
650 jobs, Reuters reported yesterday. Merrill said it was quitting the
subprime lending business. The company said it would try to sell Home
Loan Services, a unit of First Franklin that handles billing and
collections. It expects to incur $60 million of charges related to First

Franklin, mainly for severance payments and the cost of closing offices.

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Fannie, Freddie Loan Limits
Raised

More than 70 counties across the United States will see limits for
mortgage loans backed by Fannie Mae and Freddie Mac rise to $729,750 --
the new maximum limit set by the economic stimulus bill, the Federal
Housing Administration announced yesterday, the Wall Street
Journal reported. The counties now eligible for the highest
limits are mostly in California, New York, New Jersey, Virginia,
Maryland and Washington, D.C.But hundreds of counties across the country

had their loan ceilings increased from $417,000, the previous limit.
Allowing mortgage giants Fannie Mae and Freddie Mac to guarantee bigger
loans will likely encourage lenders to drop interest rates for loans
over $417,000, known as 'jumbos.' Before the credit crunch, rates on
jumbo loans were about 0.25 percentage point higher than those on
smaller loans. Now, with credit tighter, jumbo rates are as much as a
percentage point higher. 

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Bernanke Wants Banks

to Rework Mortgages< />

Federal Reserve Chairman Ben S.

Bernanke called on mortgage lenders on Tuesday to be more willing to
renegotiate with borrowers who are at risk of losing their homes and
said that the crush of mortgage foreclosures is likely to continue 'for
a while longer,' the Washington Post reported on
Wednesday. Bernanke's comments positioned him between the Bush
administration and congressional Democrats on how far the government
should go to try to ease the mortgage crisis. He publicly and explicitly

urged banks to reduce the principal owed on certain loans, which the
administration has not been willing to do. But he stopped well short of
endorsing ideas embraced by some congressional Democrats, who want to
force mortgage issuers to delay foreclosures and who support a
government program to buy problem loans. 

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Commentary: How to Stop the Mortgage Crisis

The potential collapse of house prices,
accompanied by widespread mortgage defaults, is a major threat to the
American economy, but a voluntary loan-substitution program could reduce

the number of defaults and dampen the decline in house prices -- without

violating contracts, bailing out lenders or borrowers, or increasing
government spending, according to an editorial in today’s
Wall Street Journal. The
real danger is that prices could fall substantially further if there are

widespread defaults and foreclosures. The 1.8 million mortgages now in
default have created substantial personal hardship. The 10 percent
decline in house prices has cut household wealth by more than $2
trillion, reducing consumer spending and increasing the risk of a deep
recession. Defaults also damage the capital of lending institutions,
causing further declines in credit and economic activity. Optimists note

that homeowners with negative equity have generally been reluctant to
default in past years. That was sensible when house prices were rising.
But with house prices falling, defaulting on the mortgage is the
rational thing to do. Limiting the number of such defaults, and
preventing the overshooting of price declines, requires a public policy
to reduce the number of homeowners who will slide into negative equity.
Since house prices still have further to fall, this can only be done by
a reduction in the value of mortgages. None of the current
mortgage-reduction proposals are satisfactory. Although bankers
sometimes have the incentive to reduce mortgage-loan balances
voluntarily in order to avoid a foreclosure, this is usually not
possible because the syndication of mortgage loans means that there is
generally not a single lender who can agree to the mortgage
writedown. 

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size='3'>Commencement of Class Action Against Levitt
Corp.

South Burlington, Vt.-based
attorneys Johnson and Perkinson announced the commencement of a class
action lawsuit naming Levitt Corp. in a press release yesterday, CNN
Money reported. The action, docket numbered 08-60111, was filed in the
U.S. District Court for the Southern District of Florida. Individuals or

other entities that purchased common stock between Jan. 31, 2007, and
Aug. 14, 2007, inclusive, have the opportunity to participate as lead
plaintiffs in the currently pending class action litigation. Johnson and

Perkinson are both former employees of the Securities and Exchange
Commission. The complaint alleges that Levitt violated federal
securities laws. On Aug. 15, 2007, Levitt announced that a proposed
merger agreement with BFC had been terminated. On this news, Levitt's
stock fell $0.79 per share to close at $2.96 per share. Subsequently, on

Nov. 9, 2007, it was announced that Levitt and Sons filed for
bankruptcy. 

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size='3'>Conyers' Credit Card Bill Likely to Set off Lobbying
Battle

House Judiciary Chairman Conyers unveiled legislation yesterday that
would require credit card companies to negotiate with stores over fees
they charge for processing each transaction, kicking off a massive
lobbying battle between banks and retailers, Congress Daily
reported today. The Conyers bill would require credit card companies
possessing 'substantial market power' to negotiate with merchants to
strike a voluntary agreement on terms and conditions. If an
agreement cannot be reached, both sides would be required to submit to
binding arbitration by a three-judge panel appointed by the Justice
Department and FTC. Judiciary Administrative and Commercial Law
Subcommittee ranking member Chris Cannon (R-Utah) is the main GOP
co-sponsor. The bill represents a victory for retailers, who complain
credit card company contracts require stores to build the transaction
fee into the price of merchandise, forbid the fee from being shown on
receipts and block cash discounts for some purchases. Some banks
and card companies have formed a group, the Electronic Payments
Coalition, which contends that retailers are free to decide if they

want to participate in credit and debit programs, and those who opt to
use electronic charges usually tend to bring in greater sales than
cash. Retailers also benefit by keeping the bill within the
jurisdiction of the Judiciary Committee, instead of the House Financial
Services Committee, where banks have a considerable amount of influence.

The bill is likely to trigger a possible jurisdictional spat, as members

of the House Energy and Commerce Committee have weighed in on the
issue.

size='3'>Automotive

/>Delphi Claims Backer Betting on Collapse

Delphi
Corp. heads into bankruptcy court today in an effort to hold together
its exit-financing plan amid signs of increasing tension among its
financial backers, the Wall Street
Journal reported today. The issues include an

allegation by Delphi that at least one of the backers is investing in
the parts maker's securities, possibly betting the deal will collapse.
In papers filed with the court, Delphi's attorney said the company has
'credible information' that at least one member of its investor group
has been 'trading and/or shorting' the company's public securities. It
didn't identify an investor. Attorney Jack Butler of
Skadden, Arps, Slate, Meagher & Flom made the statement in a Feb. 20

letter to an attorney for private-equity firm Appaloosa Management LP,
which leads a group of six investors funding Delphi's plan. In court
papers, Mr. Butler warned that the company might ask a judge to take up
the matter. 'One or more' of the investors 'may have material unrealized

or realized gains on these investments,' Butler wrote. At least one of
the investors may have discussed with Appaloosa's representatives the
possibility that the $2.55 billion investment deal might unravel, he
said. 
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GM Restores
Wagoner's Salary

General Motors Corp. gave chairman and CEO Rick Wagoner a 33 percent
raise for 2008 and equity compensation of at least $1.68 million for his

performance in 2007, a year for which the auto maker reported a loss of
$38.7 billion, the Wall Street Journal reported today. The
salary increase, disclosed in a Securities and Exchange Commission
filing, puts Mr. Wagoner's salary for this year at $2.2 million,
compared with $1.65 million in 2007. In addition to his base pay, Mr.
Wagoner has been awarded 75,000 restricted stock units valued at $1.68
million, based on GM's closing stock price yesterday. He was also given
stock options representing 500,000 shares. Last year, he received $2.8
million worth of restricted stock and 500,000 options. 
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Florida Developer Seeks
Bankruptcy Protection

Key Developers Group LLC, developer of the 469-unit The Place at
Channelside, filed for chapter 11 bankruptcy protection Wednesday in the

U.S. Bankruptcy Court's Middle District of Florida, Tampa Division,
citing assets between $100 million and $500 million, and liabilities
between $50 million and $100 million, The Tampa Bay Business Journal
reported today. Few details about the bankruptcy filing are known as
documentation listing major creditors as well as a case management
summary have yet to be filed. Key Developers had been hit with a number
of lawsuits in recent months, mostly from those committed to buy in the
complex. As of last November, nearly 100 suits had been filed against
the company for a range of actions including rescission demands and
breach of contract. 

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