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September 8,
2008
U.S. Government Seizes Fannie Mae,
Freddie Mac
Treasury Secretary Henry Paulson announced plans yesterday for the
United States to take control of troubled mortgage giants Fannie Mae and
Freddie Mac and replace the companies' chief executives, the Wall
Street Journal reported today. The Treasury will acquire $1 billion
of preferred shares in each company without providing immediate cash,
and has pledged to provide as much as $200 billion to the companies as
they cope with heavy losses on mortgage defaults. The Treasury's plan
puts the two companies under a conservatorship, giving management
control to their regulator, the Federal Housing Finance Agency, or FHFA.
Paulson noted that more than $5 trillion of debt and mortgage-backed
securities issued by Fannie and Freddie is owned by central banks and
other investors worldwide. 'Failure of either of them would cause great
turmoil in our financial markets here at home and around the globe,'
Paulson said. At Fannie, Herb Allison, who formerly served as chairman
of the investment company TIAA-CREF, succeeds Daniel Mudd. Freddie's
chief executive, Richard Syron, was succeeded by David Moffett, who has
been vice chairman and chief financial officer of U.S. Bancorp.
href='http://online.wsj.com/article/SB122079276849707821.html?mod=hps_us_whats_news'>Read
more. (Subscription required.)
Judge Approves Bankruptcy Filing for California
City
Bankruptcy Judge Michael McManus ruled Friday
that the city of Vallejo, Calif., could push forward with its bankruptcy
case, rejecting a legal challenge by police and firefighters unions, the
Associated Press reported. The San Francisco Bay area suburb of 120,000
became the largest California city to file for bankruptcy in May, citing
shrinking revenue and escalating labor costs for police and
firefighters. Vallejo faces a $16 million budget deficit after seeing
revenue decline amid an economic downturn and deepening housing market
crisis. The city has been forced to reduce staff and cut services to
deal with its chronic budget problems. Compensation for firefighters and
police officers now make up 75 percent of Vallejo's $87 million general
fund budget, a much larger portion than most California cities.
href='http://news.yahoo.com/s/ap/20080906/ap_on_re_us/vallejo_budget_crisis_2=1;_ylt=AqhxnZmCcQxf_oybIQngtA1H2ocA'>Read
more.
Silver State Bank Shut Down
State and federal regulators on Friday shut down Silver State
Bank, the latest in a series of bank failures, the Wall Street
Journal reported today. Until July 26, Andrew McCain, the son of
Republican nominee Sen. John McCain, sat on Silver State's board and was
a member of its three-person audit committee. McCain left the Henderson,
Nev.-bank after five months on the board citing personal reasons, and
there is no evidence that he committed any wrongdoing. The lender, the
11th bank to fail in the United States this year, was overexposed
to risky real-estate loans, a problem hurting many banks amid the worst
financial crisis in a generation. Silver State had nearly $2 billion in
assets and 17 branches in Arizona and Nevada. The Federal Deposit
Insurance Corp. said Nevada State Bank, a Las Vegas-based unit of Zions
Bancorp., is taking over the insured deposits of the failed bank, as
well as some of its assets. Some $20 million of Silver State's $1.7
billion in deposits were uninsured by the FDIC, representing about 500
customer accounts, the agency said.
href='http://online.wsj.com/article/SB122066426856206115.html?mod=us_business_whats_news'>Read
more. (Subscription required.)
Auto Executives Set to Lobby for
Government Aid
Top auto executives will launch a lobbying push this week for billions
in government loans to help beleaguered auto makers and their suppliers,
the Wall Street Journal reported today. The executives are
aiming to get as much as $50 billion in low-cost loans, and will try to
play down the idea they are seeking a bailout, arguing that the federal
government has offered similar help to a range of other troubled
industries. The auto makers and their congressional supporters also will
argue that they need funding to meet new fuel-economy standards imposed
by Congress, and that the debt markets have broken down in the credit
crisis, leaving them few other options.
href='http://online.wsj.com/article/SB122083515707008703.html?mod=us_business_whats_news'>Read
more. (Subscription required.)
Boscov's $250 Million DIP Financing
Approved
Bankrupt department store chain Boscov's Inc. received final approval of
a $250 million debtor-in-possession loan (DIP) that the company says
will allow it to continue its operations into the holiday sales
season, Bankruptcy Law360 reported on Friday. The final order
approving the loan provided by prepetition lender Bank of America NA was
issued Aug. 29 by Judge Kevin Gross of the U.S.
Bankruptcy Court for the District of Delaware. Boscov's secured initial
approval of the $250 million loan on Aug. 5, a day after the company
filed for chapter 11 citing current economic conditions and their effect
on consumer spending. The case is In re Boscov's Inc et al,
case number 08-11637-KG, in the U.S. Bankruptcy Court for the District
of Delaware.
href='http://bankruptcy.law360.com/articles/68445'>Read
more. (Subscription required.)
Judge Approves Nutritional Sourcing
Corp.'s Disclosure Plan
Bankruptcy Judge Peter J. Walsh on Thursday approved
Nutritional Sourcing Corp.'s disclosure statement, paving the way for
creditors and the judge to weigh the company's joint liquidation plan,
Bankruptcy Law360 reported on Friday. Nutritional Sourcing and
its subsidiaries, Pueblo International LLC and FLBN LLC, filed for
chapter 11 protection in August 2007, reporting assets of nearly $131
million and liabilities of close to $267 million. Judge Walsh set an
Oct. 3 deadline to file objections to the liquidation plan and an Oct.
14 hearing for approval of the plan.
href='http://bankruptcy.law360.com/articles/68364'>Read
more. (Subscription required.)
Sixth Circuit Sustains Mortgage Cos.'
Trademark Suit
The U.S. Court of Appeals for the Sixth Circuit ruled that the owner of
a trademark registered by a Texas corporation that filed for chapter 7
has the right to sue for violation of the mark in Michigan, reversing a
district court's ruling that the owner lost the right to sue when his
company dissolved, Bankruptcy Law360 reported. In December
2004, Guaranty Residential Lending Inc., a Michigan-based mortgage
company, sued Homestead Mortgage Company LLC, another mortgage company
in Michigan, for intentional misappropriation of its common-law
trademark, “Homestead Mortgage.” In 2005, GRL sold its
mortgage business to AssuraFirst Financial Co., which joined the lawsuit
as a plaintiff in June 2005. However, the trademark belonged to Bob
Fitzner, a resident of Texas and president of Bob Fitzner Inc., who had
registered the mark with the U.S. Patent and Trademark Office in 1996,
and who filed for chapter 7 in 2001.
href='http://bankruptcy.law360.com/articles/68441'>Read more.
(Subscription required.)
Washington Mutual CEO Forced Out Amid
Mounting Losses
Washington Mutual, the country's biggest savings and loan, said today
that Alan H. Fishman has been appointed CEO, succeeding Kerry K.
Killinger, who had been forced out after leading the company for 18
years, the New York Times reported today. Killinger had built
Washington Mutual into one of the nation's biggest financial
institutions through a series of acquisitions. However, his departure
was largely due to failure to properly integrate those deals and manage
the growing losses from subprime mortgages and credit card loans.
Fishman was previously the president and chief operating officer of
Sovereign Bank. Seattle-based Washington Mutual has been one of the
lenders hit hardest by the downturn in the housing market. It has one of
the biggest portfolios of subprime mortgages, and had long focused its
operations on lower-income urban borrowers.
href='http://www.nytimes.com/2008/09/08/business/08chief.html?ref=business&pagewanted=print'>Read
more.
International
Real Estate Bankruptcies Surge in
Japan
The number of Japanese real estate companies filing for bankruptcy
protection surged 23.5 percent in August from a year earlier, Bloomberg
News reported today. The number of developers filing for bankruptcy
protection reached 42 last month, Tokyo Shoko Research Ltd., a credit
research firm, said in a report today. Liabilities at failed real estate
companies more than doubled from July to 438.97 billion yen ($4
billion), though they fell 24.9 percent over the year because of
the bankruptcy in August 2007 of unlisted Azabu Tatemono KK, which left
behind 564.8 billion yen in debt.
href='http://www.bloomberg.com/apps/news?pid=20601101&sid=a9qyIiyiK5Xg&refer=japan'>Read
more.
U.K. Mortgage Lender Takes over
Two Rivals
Nationwide, the world's largest building society and the U.K.'s
second-largest mortgage lender, said today that it will take over the
Derbyshire and Cheshire Building Societies as both struggle with rising
defaults and an uncertain future in the current economic climate, the
Wall Street Journal reported today. Because both the
smaller building societies have flagged losses for the first six months
of the year, and in order to preserve capital within the enlarged group,
their total 925,000 members won't receive any compensation. The enlarged
building society will have assets of more than £191 billion ($337.4
billion) and retail deposits of £122 billion.
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more. (Subscription required.)