href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif'>
June 27, 2008
Suit Claims UBS Misled
Investors
The top securities regulator in Massachusetts has filed a lawsuit
against UBS on the grounds of fraud, saying that the firm misled clients
when it sold them auction-rate securities and that it pushed the
increasingly risky instruments on individual investors to reduce its own
potential losses, the New York Times reported today. In the
complaint, William F. Galvin, secretary of the Commonwealth of
Massachusetts, cited numerous and sometimes urgent e-mail messages
indicating that as early as last August UBS executives knew the market
was imperiled. As sellers began to outnumber buyers, the messages show,
UBS executives urged the sales force to promote the notes and shares as
aggressively and widely as possible. The roughly $300 billion market for
auction-rate securities ground to a halt last February when buyers
retreated from the market. Existing holders were locked into shares and
notes issued by municipalities, tax-exempt institutions, student loan
companies and closed-end funds.
href='http://www.nytimes.com/2008/06/27/business/worldbusiness/27rate.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Judge Says AHM Can End Executives'
Contracts
Bankruptcy Judge Christopher S. Sontchi gave American
Home Mortgage (AHM) Corp. approval to reject its employment contracts
with five of its top executives as it continues to negotiate a chapter
11 plan with its creditors' committee, Bankruptcy Law360
reported yesterday. Judge Sontchi ruled Wednesday on the rejection of
the contracts of AHM's CFO, general counsel, controller, treasurer and
executive vice president of capital markets. Any claims arising from the
rejection of the contracts must be filed within 30 days of the order,
Judge Sontchi said. AHM will not be barred from arguing that any claims
for damages arising from the rejection are limited to the termination
provisions in the contracts, according to the order.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=60435'>Read
more. (Registration required.)
Senator Concerned over IndyMac Share
Drop-off
Sen. Charles Schumer (D-N.Y.) sent letters to federal regulators asking
them to more closely monitor the financial health of IndyMac, the
Pasadena, Calif.-based mortgage lender whose share price dropped below
$1 as worries grew about the mortgage lender's ability to deal with
heavy losses on defaults, the Wall Street Journal reported
today. Schumer wrote that he is 'concerned that IndyMac's financial
deterioration poses significant risks to both taxpayers and borrowers
and that the regulatory community may not be prepared to take measures
that would help prevent the collapse of IndyMac or minimize the damage
should such a failure occur.' The letters were sent yesterday to the
Federal Deposit Insurance Corp. and the Office of Thrift Supervision,
which regulate IndyMac, as well as to the Federal Housing Finance
Board.
href='http://online.wsj.com/article/SB121450668689407987.html?mod=us_business_whats_news'>Read
more. (Registration required.)
Chrysler Denies Bankruptcy
Rumor
Chrysler LLC said yesterday that market rumors of a bankruptcy filing by
the privately held automaker were 'without merit' and that the company
had ample liquidity, Reuters reported. Fitch Ratings on Wednesday cut
ratings for both Chrysler, now controlled by Cerberus Capital Management
LP and its larger rival General Motors Corp., citing the industrywide
downturn in sales. Liquidity concerns for U.S. automakers have been
rising as evidence grows the downturn in sales that began earlier this
year accelerated in June in the face of record gas prices and a consumer
defection from trucks and SUVs.
href='http://www.nytimes.com/reuters/business/business-chrysler.html?sq=bankruptcy&st=nyt&scp=2&pagewanted=print'>Read
more.
Fed May Give Private Equity More
Leeway to Help Banks
The Federal Reserve may soon make it easier for private-equity firms and
others to invest in the nation's ailing banks, the Wall Street
Journal reported today. The move comes as regulators grow
increasingly worried about the ability of many banks to replenish
capital amid the worst banking crisis in decades. Small and regional
lenders are expected to have a tougher time lining up new investors,
particularly since some recent capital infusions have stuck banks' new
shareholders with big losses. Fed officials recently have met with big
buyout firms and banking lawyers to discuss the obstacles to allowing
private-equity firms to invest in banks.
href='http://online.wsj.com/article/SB121450979069408179.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
More Banks Utilize Fed Loans as Wall
Street Firms Scale Back Borrowing
Wall Street companies scaled back their borrowing from the Federal
Reserve's emergency lending program over the past week, while commercial
banks stepped it up, the Associated Press reported yesterday. A Fed
report released yesterday said that the investment firms averaged $6.1
billion in daily borrowing for the week ending June 25, compared with
$8.6 billion the previous week. The investment houses were given similar
loan privileges as commercial banks in March after a run on Bear Stearns
pushed the nation's fifth-largest investment bank to the brink of
bankruptcy and raised fears that other Wall Street firms might be in
jeopardy. Banks, meanwhile, averaged $14.7 billion in daily borrowing
for the week, compared with $13.4 billion in the previous week.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/06/26/AR2008062602595_pf.html'>Read
more.
Maine Energy Firm Seeks Bankruptcy
Reorganization
Red Shield Environmental LLC said yesterday that it planned to file for
chapter 11 protection, the Associated Press reported. The bankruptcy
filing will clear the way for 145 employees who have been out of work
for nearly three weeks to be paid, debtor attorney Robert
Keach said. Keach said that the action is due to a short-term
cash flow problem and the privately owned mill is expected to reopen.
Red Shield purchased the mill in 2006 when former owner Georgia-Pacific
announced it was going to close the facility. It has been shut down
temporarily since June 6 and all but about 30 employees were laid
off.
href='http://biz.yahoo.com/ap/080626/me_red_shield_chapter_11.html?.v=1'>Read
more.
Countrywide CEO Helped Many Get
Loans
As the mortgage market was wobbling a year ago, it is now apparent that
Countrywide Financial Corp. CEO Angelo Mozilo, CEO and his aides
shepherded loans for a wide variety of people, in addition to the recent
disclosures about favorable loan terms to certain members of Congress,
the Wall Street Journal reported today. Mozilo intervened to
help the daughter of a casino manager and her fiancé borrow to buy
a home in Nevada, despite problems that ordinarily would have
disqualified them for a loan. Mozilo and his lieutenants also smoothed
the way for mortgages for retired professional athletes, according to
company insiders and property records, including former Indiana Pacers
center Rik Smits and former San Francisco 49ers offensive lineman Harris
href='http://online.wsj.com/article_print/SB121451744958908571.html'>Read
more. (Registration required.)
Bank of America to Eliminate 7,500
Jobs after Closing on Countrywide Deal
Bank of America Corp. plans to cut 7,500 jobs, or about 2.9 percent of
its combined work force, after completing the acquisition of Countrywide
Financial Corp. on Tuesday, the Wall Street Journal reported
today. Bank of America said that the cuts will come from the combined
mortgage, home-equity and insurance units, which employ about 60,000
people. The Charlotte, N.C., company will begin notifying affected
employees in the third quarter and will make the cuts over two years.
Both companies have already cut positions in recent months. Countrywide
employed 50,358 people in the first quarter, according to regulatory
filings. It eliminated about 11,000 jobs last year. Bank of America
employed 209,096 people at the end of the first quarter; it has been
cutting positions in its troubled investment-banking unit.
href='http://online.wsj.com/article/SB121450936018508181.html?mod=us_business_whats_news#http___online_wsj_com_article_SB121450936018508181_html_mod_us_business_whats_news'>Read
more. (Registration required.)