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December 9, 2009
size='3'>CIT Group Wins Approval of
Reorganization Plan
CIT Group Inc., the 101-year-old commercial lender,
won court approval of a plan to cancel old shares, shed debt and exit
bankruptcy court protection with new stock worth as much $11 billion,
Bloomberg News reported yesterday. Bankruptcy Judge Allan
Gropper yesterday confirmed CIT’s pre-packaged chapter 11
reorganization plan, which already had creditor support when CIT filed
for bankruptcy last month. The U.S. won’t recover much, if any of
the $2.3 billion in taxpayer money used in a bailout of CIT, and
shareholders will be wiped out. CIT’s plan reduces the
company’s debt by eliminating $10.5 billion to $11 billion in
unsecured debt. It extends maturity dates of the company’s bank
and bond debt by three years. CIT solicited support from its large debt
holders in advance of the bankruptcy, with an exchange offer that
covered $34.3 billion in debt.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=a2GT_nYf99xA'>Read
more.
Year-End Audit Finds TARP
Program Effective
The Congressional Oversight Panel, the independent
panel that oversees the government’s financial bailout program,
concluded in a year-end review that, despite flaws and lingering
problems, the program “can be credited with stopping an economic
panic,” the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The panel, headed by Prof.
face='Times New Roman'>
size='3'>Elizabeth Warren of Harvard
University, has often been critical of the Treasury Department’s
management of the bailout operation, especially at its start in the Bush
administration but also under the Obama administration. In the latest
monthly report released today, the panel again criticized the Treasury
Department under Secretary Timothy F. Geithner for “failure to
articulate clear goals or to provide specific measures of success for
the program” as it has morphed over time from rescuing financial
institutions to propping up securitization markets, auto manufacturers
and home mortgages in danger of default. The panel also described the
program’s foreclosure mitigation efforts as inadequate.
“Even so,” the panel concluded, “there is broad
consensus that the TARP was an important part of a broader government
strategy that stabilized the U.S. financial system by renewing the flow
of credit and averting a more acute crisis.”
href='http://www.nytimes.com/2009/12/10/business/economy/10audit.html?_r=1&ref=business&pagewanted=print'>Read
more.
href='http://cop.senate.gov/reports/library/report-120909-cop.cfm'>Click
here to read the full report from the Congressional Oversight
Panel.
New Dems Fight for
“Open and Balanced” Rule on Financial Overhaul
Bill
Members of the New Democrat Coalition yesterday warned
House leaders that they will consider voting against a rule for debate
on an overhaul of the nation's financial regulatory system if Democratic
leaders do not allow floor votes on amendments they are backing,
size='3'>CongressDaily reported. One of those
commitments is a promise they say House Financial Services Chairman
Barney Frank (D-Mass.) made to allow a vote on an amendment by Rep.
Melissa Bean (D-Ill.) that would broaden the scope of state pre-emption
under a proposed Consumer Financial Protection Agency. Bean held off
offering it in the committee, where its adoption could have derailed the
bill. The Bean language would prohibit states from enacting higher
standards for national banks when the Office of the Comptroller of the
Currency determines that CFPA policies already provide consumers a high
level of protection. Consumer groups contend the Bean language would
take away state powers to patrol abusive mortgages, credit cards and
auto lending, a crucial step given that local regulators are typically
the first to spot problems and stop unfair acts. In addition, some
moderates are pushing for consideration of an amendment by Rep. Walt
Minnick (D-Idaho) to create a council of regulators to have
responsibility for consumer protection -- instead of CFPA -- as well as
safety and soundness concerns. But that measure is even more politically
unpalatable to Frank and is given less of a chance of
consideration.
Lyondell Reaches Deal in
Suit over Basell Buyout
Lyondell Chemical Co. has reached a settlement in a
suit that its unsecured creditors’ committee brought against a
group of banks over the leveraged buyout of the bankrupt company by
Basell AF SCA,
size='3'>Bankruptcy Law360 reported yesterday.
The company announced the proposed settlement — which will give
unsecured creditors a cash payment of $300 million when Lyondell exits
chapter 11 — in the U.S. Bankruptcy Court for the Southern
District of New York on Friday. In addition to securing $300 million for
the creditors, the settlement also sets up a litigation trust that will
allow unsecured creditors to obtain funds from parties other than the
defendants in the suit over the deal. The defendants in the suit include
Citibank NA, Goldman Sachs Credit Partners LP, Merrill Lynch Capital
Corp. and UBS Securities LLC.
href='http://bankruptcy.law360.com/print_article/138165'>Read
more. (Subscription required.)
SIPC Chief Struggles with
Madoff Claims
After decades largely spent shutting down no-name
firms with a few hundred customers, Stephen P. Harbeck, the president
and CEO of the Securities Investors Protection Corp. has spent the last
year overseeing the largest bankruptcy on record, the failure of Lehman
Brothers and the Ponzi scheme run by Bernard L. Madoff, the
face='Times New Roman'>New York
Times reported today. Harbeck is scheduled to
appear today before the House Financial Services subcommittee to explain
why thousands of Madoff’s investors are not eligible for cash
advances from his organization. Harbeck said he understood their
outrage, but added that he had a statute to uphold and a finite amount
of money to help eligible customers. Besides a reserve fund of $1.2
billion, down from $1.7 billion pre-Madoff, SIPC can borrow up to $1
billion from the government. However, thousands of people who invested
with Madoff indirectly through pension plans or feeder funds do not meet
the SIPC definition of a customer that has evolved from the statute and
subsequent court decisions, Harbeck said. In those cases, the eligible
customer is the pension plan or feeder fund itself, not its
beneficiaries.
href='http://www.nytimes.com/2009/12/09/business/09madoff.html?ref=business&pagewanted=print'>Read
more.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/CMHR_120909.shtml'>Click
here for more details on today’s House Financial Services
Subcommittee on Capital Markets, Insurance, and Government Sponsored
Enterprises hearing titled “Additional Reforms to the Securities
Investor Protection Act.”
GM Considers Lump Sum
Payment to U.S.
General Motors, which is to begin making payments this
month on its loans from the federal government, is considering paying
off the entire balance at once, the
face='Times








New


Roman'
size='3'>New York Times reported today. GM has
more than enough cash on hand — about $42.6 billion at the end of
the third quarter — to pay off the $6.7 billion it owed the United
States government. It owes $1.4 billion to Canada. Last month, GM agreed
to make quarterly payments of $1 billion to the U.S. and $200
million to Canada. GM chairman and CEO Edward E. Whitacre Jr. also added
that there were no plans to cut more factory or salaried jobs, even
though the company still had more employees than its recovery plan
called for at the end of the year. Whitacre said that GM was also close
to selecting a chief financial officer and could make an announcement in
href='http://www.nytimes.com/2009/12/09/business/09auto.html?ref=business&pagewanted=print'>Read
more.
U.S. Airlines Rebound as
Industry Appears Ready for Recovery
After a difficult year battling the recession, the
airline industry appears to be headed toward a recovery as fuller
planes, fewer discounted fares, lower fuel prices and revenue from a
variety of formerly free services start to pay off, Dow Jones
size='3'>Daily Bankruptcy Review reported
today. The signs of improvement are most advanced at low-fare carriers
that focus on domestic flights. Passenger miles and unit revenue - the
money taken in for each seat flown one mile - at discount king Southwest
Airlines Co. soared 12 percent last month from a year ago. However,
other large carriers with higher embedded costs and more exposure to
troubled international routes also reported improvements as traffic
aboard U.S. carriers rebounded more sharply than expected in November.
Risks remain, of course, especially if the economic recovery stalls. The
H1N1 flu, if it becomes a bigger problem, could deter travel. And a
rebound in the broader economy could spark another run-up in fuel
prices, raising airlines' expenses and erasing potential
profits.
Commentary: Proposal Would
Add Costly Regulations to Small Businesses
Rep. Paul Kanjorski (D-Pa.) plans to introduce an
amendment this week that would apply the corporate accountability
regulations of the Sarbanes-Oxley Act to the smallest public companies,
according to a
size='3'>Wall Street Journal editorial today.
Supported by House Financial Services Chairman Barney Frank (D-Mass.),
this amendment to the financial re-regulation bill now moving through
the House would inflict millions of dollars in compliance costs upon
thousands of companies, according to the editorial. Mr. Kanjorski aims
to eliminate a bipartisan provision crafted by Reps. Scott Garrett
(R-N.J.) and John Adler (D-N.J.). Last month, Garrett and Adler won a
vote in the House Financial Services Committee to exempt small public
companies from Sarbox's infamous Section 404(b) internal controls
audits. An SEC exemption for companies with less than $75 million in
market value will expire in June unless Congress votes for relief. Those
companies will still be audited, but Sarbox regulations would subject
them to the double whammy that big companies have had to live with at
enormous expense, according to the editorial, and with no noticeable
decline in business fraud.
href='http://online.wsj.com/article/SB10001424052748703558004574584241362784198.html'>Read
more. (Subscription required.)
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