PBGC Says Pension Deficit Widened to Record 34 Billion
|
%1
Challenge to Feds AIG Bailout Rejected
A federal judge in Manhattan has dismissed a $25 billion lawsuit filed by Starr International, an insurance company run by former American International Group CEO Maurice "Hank" Greenberg, against the Federal Reserve Bank of New York over its 2008 bailout of AIG, the New York Law Journal reported today. U.S. District Judge Paul Engelmayer yesterday rejected Starr's arguments that the bailout was an illegal takeover of multinational insurance company AIG and a "backdoor bailout" for other financial firms that did business with it. The lawsuit, Starr International v. Federal Reserve, 1:11-cv-08422, was filed last November on behalf of AIG's shareholders. Starr, which owned about 12 percent of AIG, alleged that the Federal Reserve effectively took control of AIG and then breached its fiduciary duty to shareholders under Delaware law by taking a two-thirds stake in residual profits from AIG's credit default swaps and forcing AIG to pay its counter-parties in full even when they offered concessions, among other conditions.
Citi to Pay 360 Million to End 1 Billion Lehman Collateral Dispute
Citigroup Inc. has agreed to pay $360 million to the brokerage estate of Lehman Brothers to resolve a dispute over $1 billion in collateral that the investment bank was forced to post in the days leading up to its bankruptcy in 2008, Reuters reported yesterday. According to a settlement reached on Friday with the trustee liquidating Lehman Brothers's U.S. brokerage unit, Citigroup will also relinquish its claim to $75 million that was contingently paid to the estate at the beginning of the liquidation, court documents showed. The trustee, James Giddens, filed the claim against Citigroup and its subsidiaries early last year, arguing that the $1 billion was obtained under coercion and that the amount should be part of a general asset pool to be divided among creditors in accordance with bankruptcy law.
Bankrupt Alabama Countys Leaders Report Headway Toward Deal
Negotiators for Alabama's bankrupt Jefferson County and Wall Street creditors are making modest headway but still have a long way to go before reaching a deal to end America's biggest municipal bankruptcy, county leaders said on Friday, Reuters reported. After meeting creditors of the county's sewer system, Jefferson County Commission President David Carrington and Commissioner Jimmie Stephens gave no details but said that more negotiating sessions were expected in New York in early December. Home to Birmingham, Ala.'s biggest city, Jefferson County on Nov. 9, 2011, filed a $4.23 billion chapter 9 bankruptcy caused mainly by more than $3 billion of soured sewer system debt, political corruption and the loss of a local jobs tax worth about $60 million a year.
Battery Maker A123 Received U.S. Funds as It Sought Bankruptcy
The Obama administration provided struggling battery maker A123 Systems Inc. with nearly $1 million on the day it filed for bankruptcy, the company told lawmakers investigating its government grant, Reuters reported on Friday. The company, which makes lithium ion batteries for electric cars, filed for chapter 11 protection last month after a rescue deal with Chinese auto parts supplier Wanxiang Group fell apart. That same day, October 16, A123 received a $946,830 payment as part of its $249 million clean energy grant from the Energy Department, the company said in a letter, obtained by Reuters, to Republican Senators John Thune and Chuck Grassley. In the letter dated November 14, A123 said that the October payment was the most recent disbursement it had received from the government, with an additional $115.8 million still outstanding on the grant. Thune and Grassley have pressed the Energy Department for more details about its funding of A123 as the company has faltered.
JPMorgan Credit Suisse Settle SEC Mortgage Inquiries
JPMorgan Chase & Co. and Credit Suisse Group AG agreed to pay almost $417 million to settle U.S. regulatory claims they misled investors while selling billions of dollars of investments linked to home loans, Bloomberg News reported on Saturday. JPMorgan resolved claims that it made misstatements about delinquency data for loans packaged into securities and that Bear Stearns Cos., which the bank acquired in 2008, did not tell mortgage investors it kept reimbursements on soured loans, the Securities and Exchange Commission said. Credit Suisse was also faulted for disclosures on reimbursements.
Fed Orders Largest Banks to Test Against Deep U.S. Recession
The Federal Reserve told the 30 largest banks to test whether they could withstand a severe recession in the U.S. and other major economies with weakening housing markets, Bloomberg News reported yesterday. The most severe scenario outlined by the Fed includes a nearly 6.1 percent decline in U.S. gross domestic product in the first quarter of 2013 and an average unemployment rate of as much as 12.1 percent in the second quarter of 2014. Real disposable income contracts for five consecutive quarters, and house prices fall 21 percent from the third quarter of 2012 to the first quarter of 2015. The Fed will conduct its own tests on the 19 largest institutions, including Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp. The remaining 11 firms will test themselves and submit results to the Fed.
Goals Set for Detroit to Obtain Cash from Michigan
The state of Michigan and its biggest city, Detroit, announced a deal on several milestones the cash-strapped city must achieve in the next month to win $30 million, Reuters reported yesterday. The city, which has been criticized by state officials for slow progress on financial reforms, needs the money that was generated by a bond sale to avoid running out of cash by the end of the year. The deal between Michigan Treasurer Andy Dillon and Mayor Dave Bing's administration requires city council approval of contracts with legal and other advisers and the completion of a review of the city's cashiering by Tuesday. Meeting those milestones would result in the release of $10 million to the city. Another $20 million would be released on Dec. 14 if Detroit executes a series of contracts concerning audits, outsourcing and restructuring, among other matters.
Man Group Sells Lehman Exposure for 456 Million
Hedge fund manager Man Group has sold claims to the estate of defunct U.S. investment bank Lehman Brothers in a $456 million deal, Reuters reported today. Hutchinson Investors, managed by hedge fund firm Baupost Group, is buying the portfolio at a 32 percent premium to its June 30 valuation, Man Group said today. Man Group acquired the claims for $355 million in July 2011 from funds managed by its GLG Partners subsidiary. It has never disclosed the size of the original claims. GLG was one of hundreds of hedge fund and asset managers which had outstanding trades with Lehman that collapsed along with the bank in 2008.
CFTC to Appeal Ruling Rejecting Dodd-Frank Trading Limits
The U.S. Commodity Futures Trading Commission (CFTC) will appeal a judge's ruling that rejected efforts to curb speculative derivatives trading after the 2008 financial crisis, Bloomberg News reported yesterday. The CFTC filed a notice of appeal yesterday seeking to ask a three-judge panel to reverse a ruling by U.S. District Judge Robert Wilkins that said that the CFTC failed to assess whether limiting the number of contracts a trader can have in oil, natural gas or other commodities was necessary and appropriate. "The rule addresses Congress’s concern that that no single trader be permitted to obtain too large a share of the market, and that derivatives markets remain fair and competitive," CFTC Chairman Gary Gensler said. The decision, which blocked rules scheduled to take effect Oct. 12, was a victory for two Wall Street groups that challenged the constraints imposed under the 2010 Dodd-Frank Act.