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June 23, 2008
House Panel to Examine Credit Card
Practices Aimed at Students
The House Financial Services Subcommittee on Financial
Institutions and Consumer Credit will hold a hearing entitled
“Problem Credit Card Practices Affecting Students” at 2 p.m.
ET on Thursday, June 26. Witnesses to be announced. The hearing will
take place in room 2128 of the Rayburn House Office Building.
COMMENTARY: BAPCPA Faces Tough Test
from Housing Crisis
While BAPCPA has managed to reduce the number of bankruptcies
filed in the United States from 1.6 million in 2004 to 850,912 in 2007,
according to ABI, the subprime mortgage and home foreclosure crises are
showing that you can't argue that either American lenders or consumers
are exhibiting more personal financial responsibility, according to a
Washington Times commentary yesterday. Congress refused to cap interest
rates at 30 percent when it passed the law in 2005 and predatory lenders
remain free to charge usurious interest rates, as well as to assess
late-payment penalties. A report, 'For a New Thrift: Confronting the
Debt Culture,' released last month by the Institute for American Values,
Public Agenda and other groups catalogs the many ways private and public
institutions make it fast and easy for working people to do the wrong
thing with their hard-earned dollars. Financial institutions that
previously encouraged Americans to save a portion of their income now
encourage consumers to borrow for daily household expenses such as
groceries. The credit card industry pioneered a set of 'practices and
products that ensured long-term consumer dependency on expensive
credit,' the report noted.
href='http://www.washingtontimes.com/news/2008/jun/22/going-for-broke-bigtime/'>Read
the full commentary.
Senate Prepared to Vote on
Housing-Rescue Package This Week
The Senate is set to pass its housing-rescue package this week, setting
up negotiations with the House on a few disputed
items, CongressDaily reported today. Senate Majority
Leader Harry Reid (D-Nev.) filed cloture on the legislation Friday,
setting up a Tuesday vote. Votes on amendments last week indicated
strong bipartisan support. The measure, by Banking Chairman Christopher
Dodd (D-Conn.) and ranking member Richard Shelby (R-Ala.), would revamp
oversight at government-sponsored enterprises Fannie Mae and Freddie
Mac, overhaul the Federal Housing Administration's mortgage insurance
program, and allow the FHA to guarantee up to $300 billion in new loans
for subprime borrowers. It also would provide about $14.5 billion in
housing tax breaks. House Financial Services Chairman Barney Frank
(D-Mass.) said that the Senate bill is not that far apart from a
House-passed version, but he has a few issues he wants to press:
allowing Fannie and Freddie loan limits to be higher than $625,000 in
some high-cost areas, providing more ability for the GSEs to hold more
jumbo loans in their portfolios and requiring that the new oversight
system for the two and the Federal Home Loan Bank System starts six
months after enactment.
Mortgage Lender Settles License
Dispute with States
Bankrupt subprime lender Mortgage Lenders Network USA Inc. has reached
settlement agreements with banking authorities in five northeastern
states over its mortgage licenses,
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=59817'>Bankruptcy
Law360 reported on Friday. In a motion filed Thursday in the
U.S. Bankruptcy Court for the District of Delaware, Mortgage Lenders
said that it had agreed to give up licenses in Maine, Pennsylvania,
Rhode Island, Massachusetts and Vermont and pay Rhode Island a $42,714
penalty in order to avoid a costly legal battle over the licenses. Under
the agreements with Maine and Pennsylvania, Mortgage Lenders voluntarily
surrendered its licenses and agreed to permanently end its licensing
activities in the state. It has also surrendered its license in
Massachusetts but will be allowed to reapply to do business there in two
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=59817'>Read
more. (Registration required.)
Bankrupt California City Looks to Void
Four Labor Pacts
A month after declaring bankruptcy as a result of spiraling payroll
costs and declining revenue, the City of Vallejo, Calif., has asked a
judge to void all four of its employee labor contracts, including those
covering police and firefighters, the San Francisco Chronicle
reported today. The request, which the city filed last week in U.S.
Bankruptcy Court in Sacramento, will receive a hearing on July 23.
Officials from the city will try to show how skyrocketing employee costs
and the imploding housing market have resulted in a $16 million deficit,
while the unions will argue that the city has money hidden in other
accounts and is using bankruptcy as a ploy to scrap its employee
contracts.
href='http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/06/23/BAKR11CR8R.DTL&type=printable'>Read
more.
Appaloosa Loses Bid for Dana to Pay
$2.5M Bankruptcy Fees
Bankruptcy Judge Burton R. Lifland rejected the
Appaloosa Management's bid to have the auto supplier Dana Corp. pay a
$2.5 million tab run up by the hedge fund's lawyers and financial
advisers, Dow Jones Daily Bankruptcy Review reported today.
“Rather than contributing to (Dana's) reorganization, Appaloosa
has cost the parties in these chapter 11 case considerable time and
expense on nonviable proposals,” Judge Lifland said in his ruling.
Dana spurned Appaloosa in favor of a $790 million buyout offer from a
consortium led by Centerbridge Capital Partners, a private equity firm.
However, Appaloosa said that its “continued persistent
counteroffers” resulted in “significant improvements”
in Centerbridge's initial $500 million proposal for Dana. Judge Lifland
disagreed, saying that the hedge fund simply acted “in its own
self-interest” and not for the benefit of creditors as a whole,
the legal standard for reimbursement.
Gemini Air Cargo Seeks Bankruptcy
Protection
Blaming soaring fuel costs and a 2007 accident, Gemini Air Cargo Inc.
has filed for bankruptcy protection and is looking to sell the company
as a going concern or sell off substantially all its assets, Bankruptcy
Law360 reported on Friday. Gemini Air Cargo and three affiliates filed
for chapter 11 listing both assets and liabilities in the $100 million
to $500 million range. Gemini also filed for chapter 11 in March 2006,
recipitated by the Sept. 11, 2001, terrorist attacks and an industrywide
decline in cargo volumes, according to court papers.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=59843'>Read
more. (Registration required.)
Ethanol Plant Owner Files for
Bankruptcy
London-based Renova Energy Plc, which has suspended construction on a
new ethanol plant in Idaho, said that its U.S. subsidiaries have filed
for chapter 11 protection, the Associated Press reported on Friday. The
company that it has secured $4 million from lenders and that seeking
protection from creditors is part of its plan to move forward with
financial restructuring. Renova stopped construction at the plant near
Heyburn, Idaho, in late 2007 after the cost of the project rose to
nearly $60 million, up from $45 million. The company also said Friday
that it is in talks with interested parties to sell the partially
finished facility.
href='http://biz.yahoo.com/ap/080620/id_ethanol_plant.html?.v=1'>Read
more.
Court Grants Ex-Refco Execs' Demand
for Insurance
Former executives of now-defunct futures brokerage Refco Inc. have won
the most recent battle in their fight to access their directors and
officers liability insurance after a judge threw out part of a suit
filed by the insurer seeking to shed its liability to the executives,
Bankruptcy Law360 reported on Friday. In a decision handed down
on Thursday, Judge Gerard E. Lynch of the U.S. District Court for the
Southern District of New York partially granted a motion for summary
judgment filed by former Refco officers Dennis A. Klejna, William M.
Sexton, Gerald Sherer, Joseph Murphy, Philip Silverman, Tone Grant, Leo
R. Breitman, Nathan Gantcher, David V. Harkins, Scott L. Jaeckel, Thomas
H. Lee, Ronald L. O'Kelley and Scott A. Schoen. Axis Reinsurance Company
had asked the court for a declaration that the company did not have any
obligation to the executives under the terms of the 2005-2006 insurance
contract signed by Refco.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=59783'>Read
more. (Registration required.)
Analysis: Financial Firms Struggle
to Get Capital
As banks rack up billions of dollars in losses from bad loans and
blundered investments, large investors are becoming skittish about
pumping more money into them, the Wall Street Journal reported
today. In the past several weeks, bank executives have encountered
unexpected resistance from investors, who have expressed reluctance to
participate in the capital-raising transactions sweeping through the
industry. The change in sentiment could have sweeping implications for
financial institutions that are trying to shore up their balance sheets
by issuing stock and other securities to their investors. Some may be
forced to lure investors with sweeter terms, further raising the costs
of doing these deals.
href='http://online.wsj.com/article_print/SB121417644960795349.html'>Read
more. (Registration required.)
SEC Chief under Fire as Fed Seeks
Bigger Wall Street Role
Critics say that Securities and Exchange Commission Chairman Christopher
Cox, America's top securities regulator, did not act boldly enough to
restore confidence when Bear Stearns was collapsing in March, the Wall
Street Journal reported today. The Bear Stearns meltdown has fueled
calls to reorganize U.S. financial regulation, just as a proposal was
published to eliminate the SEC and shift responsibility for Wall Street
to the Fed. Cox's defenders say that he acted within his powers as an
SEC chief and didn't step beyond them. On Thursday, Treasury Secretary
Henry Paulson called for broadening the Fed's oversight role over a
range of institutions, likely including investment banks. The SEC and
the central bank are in the final stages of negotiating an agreement
that would start that process. Congress is planning hearings on the
matter beginning next month.
href='http://online.wsj.com/article_print/SB121418338517895735.html'>Read
more. (Registration required.)
Auto-Parts Firms Face Trouble as Car
Makers Retool Production
U.S. auto-parts makers are bracing for a summer that promises to cut
profits, increase layoffs and may drive more companies into bankruptcy,
the Wall Street Journal reported today. Suppliers such as American Axle
& Manufacturing Holdings Inc., Lear Corp. and Visteon Corp. are
scrambling to realign their work forces and production as U.S. auto
makers slash production of sport-utility vehicles and pickup trucks
because of plunging sales. Last week, Ford Motor Co. announced deeper
production cuts than those unveiled just one month ago. With the pace of
the sales decline accelerating, concerns are mounting that General
Motors Corp. and Chrysler LLC also might be forced to move more
aggressively.
href='http://online.wsj.com/article_print/SB121418036812095641.html'>Read
more. (Registration required.)
Company Buys TVT Records in
Bankruptcy Auction
The Orchard will buy TVT Records as the winning bidder in the chapter 11
auction held Thursday, according to Billboard Magazine on
Friday. The Orchard will pay $6.05 million, with the acquisition
expected to close by July 3. TVT filed for chapter 11 protection on Feb.
19 and the bankruptcy court moved quickly into the auction process.
Sources say that there were four qualified bidders. To win the auction,
the Orchard offered $50,000 more than the $6 million required to cover
the $1 million break-up fee for the stalking-horse bidder D.B. Zwirn,
which bid $5 million. Zwirn is the label's secured creditor.
href='http://www.billboard.biz/bbbiz/content_display/industry/e3i76a689103c1b2ad6abab4cbe3637eec7'>Read
more.