Lehman Brothers Holdings is suing JP Morgan Chase.
From the link:
Lehman claims JP Morgan “siphoned off” billions of dollars of assets in the days leading up to its bankruptcy.
JP Morgan was Lehman’s main short-term lender before its September 2008 collapse. It is accused of contributing to the failure by demanding $8.6bn of collateral as credit markets tightened.
JP Morgan has called the lawsuit “ill-conceived”.
Read this report on the shenanigans Lehman Brothers undertook to hide its precarious financial state. Recall the Lehman bankruptcy is what really freaked everyone out and even though it might not have been the actual cause of the bank bailouts, it was most likely the key trigger.
From the link:
It is the Wall Street equivalent of a coroner’s report — a 2,200-page document that lays out, in new and startling detail, how Lehman Brothers used accounting sleight of hand to conceal the bad investments that led to its undoing.
The report, compiled by an examiner for the bank, now bankrupt, hit Wall Street with a thud late Thursday. The 158-year-old company, it concluded, died from multiple causes. Among them were bad mortgage holdings and, less directly, demands by rivals like JPMorgan Chase and Citigroup, that the foundering bank post collateral against loans it desperately needed.
And:
According to the report, Lehman used what amounted to financial engineering to temporarily shuffle $50 billion of assets off its books in the months before its collapse in September 2008 to conceal its dependence on leverage, or borrowed money. Senior Lehman executives, as well as the bank’s accountants at Ernst & Young, were aware of the moves, according to Mr. Valukas, the chairman of the law firm Jenner & Block and a former federal prosecutor, who filed the report in connection with Lehman’s bankruptcy case.
Richard S. Fuld Jr., Lehman’s former chief executive, certified the misleading accounts, the report said.
Household debt is an issue in the United States, and in the current economic climate and level of unemployment it is crippling for many people.
Check out the trend line on this chart of household debt from the beginning of 1953 to the middle of this year:
US household credit market outstanding debt
Once you’re underwater it is very easy to lose control of the situation and if you’re unemployed, or you are using credit to cover bills and basic necessities, debt can take over your personal financial situation. Once you reach that point your options become somewhat limited. The most drastic step is personal bankruptcy, but there are drawbacks to that approach and personal bankruptcy underwent significant reform in 2005 making personal bankruptcy a much more difficult process. Other choices include credit counseling and debt settlement.
If personal debt gets beyond your control, of the three options listed above seeking professional debt settlement help is the best for most people. You don’t need to repair your credit. What you do need is to reduce your personal debt to a manageable amount, get that debt paid off as quickly as possible and move forward with your personal finances.
From the link:
Debt Settlement is process and approach to becoming free of unsecured debts. The goal of a debt settlement program is to find the best solution to lower your debts, help you deal with your creditors, and get you on the road to financial freedom.
And:
A debt settlement program can help you be free of unsecured debts in as little as 2-3 years for a fraction of your original owed amount. Even better than simply saving money is that once the settlement payment is made, your accounts will be satisfied – meaning you no longer have any of your original debt outstanding.
Hit the above link for the six steps to debt reduction.
Or was it nearsighted? Or maybe just plain blind as bats. At any rate this is a humorous, and sad, collection of quotes from erstwhile kings of Wall Street.
From the link:
Richard Fuld, Lehman Brothers: “Our core franchise and our culture are strong. Our capital and liquidity positions have never been stronger.”—June 16, 2008, on a conference call with analysts
What happened next: With clients pulling their money from Lehman accounts, the firm ran short of cash. Fuld reportedly turned down a financing offer from Warren Buffett, perhaps because he thought a government bailout—like that of Bear Stearns—would come with better terms. But no bailout materialized, and Lehman filed for bankruptcy on Sept. 15, 2008.
Even Reader’s Digest is driven to bankruptcy …
From the link:
Reader’s Digest Association, the 87-year-old publishing company, said Monday that it plans to file for Chapter 11 bankruptcy protection to carry out a restructuring that would give lenders control of the company.
Reader’s Digest is seeking to reduce its debt load, which swelled after it was taken private in 2007 by an investor group led by Ripplewood Holdings. Reader’s Digest said in a statement Monday it had reached an agreement in principle with the majority of its senior lenders to convert a “substantial portion” of its $1.6 billion in senior secured debt into equity.
“Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives,” Mary Berner, the company’s chief executive, said in a statement.
In addition to its flagship title, Reader’s Digest, the company publishes magazines such as Every Day With Rachael Ray and The Family Handyman and runs Web sites including Allrepices.com.
The company did not make a $27 million interest payment due Monday on its notes, and will use a 30-day grace period to continue talks with lenders about what it called a “pre-arranged” bankruptcy filing.
Looks like the Arena Football League is going belly-up and will declare bankruptcy. I’ve always liked the arenaball product. It was definitely a different animal than the NFL and the differences made it a very fun watch in terms of wild-ass offense and a quick pace.
Long ago I did some reporting on the AFL for the now defunct BootlegSports.com.
From the link:
The Arena Football League will soon announce that it is folding, multiple media outlets reported on Monday.
Arizona Rattlers owner Brett Bouchy said the league will also declare bankruptcy, according to the Orlando Sentinel.
“It’s just unfortunate we’re in this situation,” Bouchy said, according to the newspaper. “Everyone knows myself and Arizona fought hard to avoid this day. The league was divided into two groups and factions. You had one group of committed owners who contributed capital and willing to do whatever it took to bring the league back in 2010 I have been in that group the entire time. Then there was another group that just wasn’t willing to make the investment. We could never get a consensus.”
Tampa Bay Storm owner Jim Borghesi posted a message on his Facebook page saying: “The AFL will be having a press conference to announce that the league will not be returning,” according to the Albany Times-Union.
I did plenty of blogging on GM before it finally faced reality and declared bankruptcy. It’s only fitting to add one more post to the group on the automaker quickly exiting the legal process.
From the second link:
A new General Motors emerged from bankruptcy protection on Friday — far more quickly than most industry-watchers had expected — as a leaner automaker pledging to win back American consumers and pay back taxpayers.A whirlwind 40-day bankruptcy for GM concluded with the closing of a deal that sold key operations to a new company that is majority-owned by the U.S. Treasury.
The closing documents were signed early Friday by representatives of the government and GM executives at the law firm of Weil, Gotshal & Manges, GM’s bankruptcy counsel.
The company may be in bankruptcy court after filing Chapter 11 over the weekend, but it’s taking on new environmentally-friendly policies.
The release (smoke screen?) from today:
SIX FLAGS LAUNCHES GREEN INITIATIVE
World’s Largest Theme Park Company Committed to Protecting the Environment
NEW YORK, June 18 /PRNewswire-FirstCall/ — Six Flags, Inc., (OTC Bulletin Board: SIXF) announced today a company-wide green initiative to reduce electricity, fuel use and waste while helping to protect the watersheds and ecosystems across theme park and water park locations.
Already undertaking several innovative efforts to improve the energy performance of park operations, Six Flags is embarking on a groundbreaking pilot program at four parks. All vehicles and trains that operate on diesel fuel will instead be powered by used vegetable oil generated in Six Flags kitchens. Additional proactive savings in energy consumption will be achieved through the use of LED lamps and lights throughout each park resulting in reduced indirect green house gas emissions from electricity consumption.
“Six Flags is taking aggressive steps to help protect and preserve the environment for future generations,” said Mark Shapiro, Six Flags President and CEO. “These programs will help safeguard the planet and create lasting partnerships with the communities where we live and work.”
Six Flags is also committed to dramatic recycling and waste handling. Collaborating with corporate partner, Coca-Cola, over 3,000 recycle bins have already been placed in all Six Flags parks.
“We envision a world where our packaging is not seen as trash, but as a valuable resource that can be re-used to produce a number of products, from new beverage containers to shirts and bags,” said John Burgess, President and CEO, Coca-Cola Recycling. “This extensive recycling program is a great way for Six Flags guests and Team Members to help support the environment.”
Other initiatives include:
— The installation of low-flow, high efficiency water fixtures
throughout the parks
— The purchase of fuel efficient vehicles to replace older models
— The use of water saving plants and groundcover at all parks
— Paper recycling programs at all parksIn addition, Six Flags is launching a comprehensive review of a new solar energy strategy. By using existing available land surrounding a number of parks, Six Flags would be able to create solar panel farms to supply the parks with clean energy and reduce the amount of electricity purchased.
About Six Flags:
Six Flags, Inc. is a publicly-traded corporation (BULLETIN BOARD: SIXF) headquartered in New York City and is the world’s largest regional theme park company with 20 parks across the United States, Mexico and Canada.
SIX FLAGS and all related indicia are trademarks of Six Flags Theme Parks Inc. (R), TM and (C) 2009.
Source: Six Flags, Inc.
Web Site: http://www.sixflags.com/
To anyone who’s been paying attention General Motors’ bankruptcy comes as no no surprise, but the repercussions are still a mystery. Cato’s Daniel Ikenson brings up a very salient point — now that the government is the de facto owner of GM what’s going to happen to Ford.
Of the big three Ford has remained in a fairly strong position in a very weak industry. Most importantly it hasn’t been forced to take federal bailout money. Ikenson wonders if the fed may not put a thumb on the scales a little to help its latest property, namely GM, out a bit.
From Cato Today:
BANKRUPTCY FOR GM – FORD NEXT?
General Motors on Monday filed for bankruptcy protection, even after $19.4 billion in federal bailout money. Cato scholar Daniel Ikenson has long suggested bankruptcy as the best course for GM, and now worriesabout Ford’s future: “The government has a 60 percent stake in GM. Who’s going to want to own Ford stock—and therefore, will Ford be able to raise capital—when the U.S. government has an incentive to tip the balance in GM’s favor wherever it can?”
– Full statement from Ikenson
– “An Overdue Reckoning in the Auto Sector,” by Daniel Ikenson
– “Don’t Bail Out the Big Three,” by Daniel Ikenson
– “GM’s Last Capitalist Act: Filing for Bankruptcy Protection,” by Daniel Ikenson
… is immanent.
From the link:
General Motors Corp has failed to persuade enough bondholders to accept a debt-for-equity swap, setting the stage for the largest-ever U.S. industrial bankruptcy within days.The event marks a critical disappointment for GM, the largest U.S. automaker and once considered the bellwether of U.S. manufacturing. A popular ad for the automaker once stated that “What’s good for General Motors, is good for the USA.”
“I would say this is a sound rejection of an unsuitable offer,” said Pete Hastings, a credit analyst at Morgan Keegan who has followed GM. “I have been saying for some time that this thing was dead on arrival and we were just waiting for the doctor to pronounce it dead. Now that’s happened.”
The largest U.S. automaker had so far failed to gain anywhere near the 90 percent of bondholder support desired to stave off bankruptcy, two sources familiar with the discussions told Reuters on Tuesday. Bondholders have until midnight to make their final decision on the tender.
In a very necessary move from both General Motors and Chrysler — they each have many, many more dealerships than the Japanese manufacturers — the number of dealerships out there is being cut. The exact numbers differ depending on the source, but in the near future there will be fewer GM and Chrysler lots out there.
From the link:
The next auto businesses on the chopping block will be 2,600 General Motors dealerships.GM Chief Executive Fritz Henderson said Monday that the company would by the end of the week start notifying dealerships it wants to eliminate over the course of the next year. The company said last month that it planned to eventually eliminate 42% of its 6,250 dealer locations, which employ more than 300,000 workers among them.
On Thursday, Chrysler LLC’s announced that it is dropping nearly 800 Chrysler, Dodge and Jeep dealers, or about a quarter of its network, as part of its bankruptcy restructuring.
GM (GM, Fortune 500) is not yet in bankruptcy court, although Henderson has said such a filing is “probable.” The company has until the end of the month to win agreement from creditors, unions and dealerships on a turnaround plan or the Treasury Department, which has been bankrolling GM’s ongoing losses, has said it will force the company to file for bankruptcy.
Looks like General Motors will be declaring bankruptcy at some point. Despite all the noise to the contrary, this is — and has been for a while — the only real solution to what is going on in the Rust Belt. If done correctly GM will reemerge much leaner and ready to do business in today’s world. It’s been playing by its own unsustainable rules since the 80s.
From the link:
To remake itself outside of court, GM must persuade bondholders to swap $27 billion in debt for 10 percent of its risky stock. On top of that, the automaker must work out deals with its union, announce factory closures, cut or sell brands and force hundreds of dealers out of business — all in three weeks.
“I just don’t see how it’s possible, given all of the pieces,” said Stephen J. Lubben, a professor at Seton Hall University School of Law who specializes in bankruptcy.
GM, which is living on $15.4 billion in federal aid, faces a June 1 government deadline to complete its restructuring plan. If it can’t finish in time, the company will follow Detroit competitor Chrysler LLC into bankruptcy protection.
Although company executives said last week they would still prefer to restructure out of court, experts say all GM is doing now is lining up majorities of stakeholders to make its court-supervised reorganization move more quickly.
“If we need to pursue bankruptcy, we will make sure that we do it in an expeditious fashion. The exact strategies I’m not getting into today, but we’ll be ready to go if that’s required,” CEO Fritz Henderson said last week.
It’s not totally done, but looks immanent. So Chrysler wins the dubious distinction of being the first of the big three to declare bankruptcy.
From the link:
Last-minute efforts by the Treasury Department to win over recalcitrant Chrysler debtholders failed Wednesday night, setting up a near-certain bankruptcy filing by the American automaker, according to people briefed on the talks.
Barring an agreement, which looked increasingly difficult, Chrysler was expected to seek Chapter 11 protection on Thursday, most likely in New York, these people said.
Update 4/30/09 — It’s done. More on the filing here and here.
GM is officially swirling the drain at this point.
From the link:
The manager of General Motors’ employee stock fund has sold off all remaining shares of the troubled auto maker, which is closing plants and slashing costs in a bid to avoid bankruptcy.
General Motors revealed in a regulatory filing late Friday that its employee stock-purchase plan has unloaded all shares of the company in favor of short-term and money market investments. The plan’s financial manager, State Street Bank and Trust Co., said it began selling off shares of the Detroit automaker in late March “due to the economic climate and the circumstances surrounding GM’s business.” GM disclosed the development in a filing with the Securities and Exchange Commission.
The announcement to close 15 of 21 plants for over two months has to represent the beginning of the end. What do you bet some, if not all, of those 15 never reopen as General Motors manufacturing facilities?
from the link:
In what appears to be a record voluntary shutdown, General Motors (GM) plans to essentially quit making cars and trucks in the U.S. for nine weeks from mid-May through July.
Looks like the brick-and-mortars are going regardless.
From the link:
Once Goliath to Netlflix’s David, Blockbuster appears on the defensive in an effort to stay relevant to movie fans and viable as a business. In a filing with the U.S. Securities and Exchange Committee Monday, Blockbuster stated it may have to permanently close its retail stores. The company recently took out a US$250 million loan—on top of its $780.9 million debt—and does not know if it can meet the conditions of the loan.
Blockbuster said it has “substantial doubt” about continuing as a “going concern.” A going concern is business jargon for the ability to continue as a functioning business that is not forced to liquidate its assets. The company operates 7400 stores globally, which spells bad news for Blockbuster employees and brick-and-mortar movie rental mavens.
Unless the public is being seriously misled bankruptcy is the only option for General Motors. And clearly the only option to stay in business in any fashion without being completely funded by taxpayers.
So far the bailout money received by GM? Used to just keep the lights burning. Nothing more.
From the link:
General Motors Corp is in “intense” and “earnest” preparations for a possible bankruptcy filing, a source familiar with the company’s plans told Reuters on Tuesday.
A plan to split the corporation into a “new” company made up of the most successful units, and an “old” one of its less-profitable units, is gaining momentum and is seen as the most sensible configuration, said another source familiar with the talks.
If the plan goes through, the new GM would be expected to assume some previous creditor debt from bankruptcy proceedings, such as secured debt, said the second source, adding that GM bondholders were likely to lose substantial value in bankruptcy.
Certain GM dealer and litigation claims would also be hurt if the new company structure is used as part of a company bankruptcy, said the second source.
The sources requested anonymity because they were not authorized to speak on the record.
GM declined to comment.
I really don’t see how General Motors can be considered a viable company right now. The bailout money that is basically already gone went solely toward paying bills and keeping the doors open. The very definition of a company running in the red.
From the link:
General Motors Corp. led the slide with a 45 percent U.S. sales plunge compared with a year earlier, while Ford Motor Co. reported a 41 percent drop. Sales at Toyota Motor Co. and Chrysler LLC both dropped 39 percent, while Honda Motor Co. reported a 36 percent decline.
Detroit-based GM sold a total of 155,334 light vehicles, while Ford sold a total of 131,102. Ford’s total came in slightly below that of Toyota, which reported U.S. sales of 132,802 units.
It ain’t over ’til it’s over, but it looks more and more likely that Genernal Motors and Chrysler will both do some flavor of bankruptcy protection in the coming months. Particularly since it seems that’s the preferred outcome at the White House.
Here’s some tea leaf reading on the GM version:
A possible bankruptcy plan being discussed for General Motors (GM.N) includes quickly forming a new company of the automaker’s most profitable parts, while a group of other units would remain under bankruptcy protection for a longer period, a source familiar with the plans told Reuters on Tuesday.
GM also would seek to have a new deal in place with the United Auto Workers union prior to any bankruptcy filing, the source said.
GM warned earlier on Tuesday that there is a rising chance it could file for bankruptcy by June, as the company has 60 days to reach deeper concessions with bondholders and unions after its previous restructuring plan was rejected by the U.S. government as insufficient.
While the automakers would still prefer to avoid bankruptcy, advisers to both GM and Chrysler LLC have been working to prepare for potential bankruptcy filings that would aim to preserve, or sell off, the best parts of the companies.
Under the plans being considered, GM would seek to quickly move its most profitable units into a new company separate from its other units in the early days of the bankruptcy filing, said the source who asked to remain anonymous because the person was not authorized to speak to the media.
The aim would be to show consumers, taxpayers, and the government that the new GM can survive and compete in the autos sector as a viable company, the source said.
… and accept the inevitable bankruptcy. Embracing Chapter 11 right now is much better than Chapter 7 down the road. No amount of taxpayer’s money will save your ass right now.
From the link:
Well, since the first government loan was written, car sales have dropped faster than just about anybody predicted. GM sales plunged 53% in February from a year ago. And the share price has continued to fall — down 41% since New Year’s and 93% over the past 12 months.
Shrinking sales and market cap put massive pressure on GM, whose survival now hinges quite literally on checks from Uncle Sam.
Wagoner has repeatedly raised the specter of bankruptcy, arguing potential customers would shun the company for fear it might no longer back warrantees or provide replacement parts.
But some of that fear is mitigated by the fact that people are buying fewer cars from all auto manufacturers, even those seen as financially healthy.
This means that no matter how much effort GM puts into restructuring, demand for new cars is now too weak to sustain a recovery. So, if Chapter 11 is inevitable, this might be the most opportune time to undertake the kind of top-to-bottom overhaul it needs. At least the company won’t be sitting out a booming market. And it could fend off Chapter 7 liquidation.
Very bad according to its auditors. General Motors may fail after all. I can’t see any argument for propping up a firm weaker than wet tissue. Too big to fail? Maybe more like too screwed up to save.
From the link:
General Motors Corp.’s auditors have raised “substantial doubt” about the troubled automaker’s ability to continue operations.
The company revealed the concerns, raised by the accounting firm Deloitte & Touche LLP, in its annual report filed on Thursday.
GM has received $13.4 billion in federal loans as it tries to survive the worst auto sales climate in 27 years. It is seeking a total of $30 billion from the government. During the past three years it has piled up $82 billion in losses, including $30.9 billion in 2008.
GM says in its report that its auditors cited recurring losses from operations, stockholders’ deficit and an inability to generate enough cash to meet its obligations in raising substantial doubts about its ability to continue as a going concern.
The company said in its filing that its future depends on successfully executing the viability plan submitted to the government in February to justify the loans.
“If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code,” GM said in the annual report, filed with the U.S. Securities and Exchange Commission.
Nutsack Stewart Parnell’s company, Peanut Corp. of America, filed for Chapter 7 bankruptcy protection. In case you don’t know your bankruptcy chapters, seven is total liquidation. Peanut Corp. of America is shut down and will poison no more.
I referred to Parnell as a nutsack for episodes like this:
In his hometown in central Virginia, Parnell is known as a respected businessman. But the image of a benevolent peanut tycoon contrasts markedly with what investigators said occurred inside the processing plants of Peanut Corp. of America, which filed for bankruptcy Friday. Worried about profits, they said, Parnell fired off jaw-dropping e-mails to employees amid reports that salmonella had been detected in his products: “Turn them loose.”
And from the same link, this:
For nearly five minutes before being dismissed, Parnell listened Wednesday as U.S. lawmakers described him as greedy and uncaring, indifferent to the impact his beleaguered business has had on the lives of so many. He repeatedly invoked his constitutional right not to say anything that could be used against him.
Parnell isn’t talking now, not to reporters or congressmen who pelted him with questions about whether his Georgia plant was responsible for 600 illnesses and nine deaths across the country. Nearly 200 food makers who used or sold Parnell’s products are listed on a recall of more than 1,900 items, making this one of the nation’s largest recalls.
And here’s more details on the bankruptcy filing:
The peanut processing company at the heart of a national salmonella outbreak is going out of business. The Lynchburg, Va.-based Peanut Corp. of America filed for Chapter 7 bankruptcy in U.S. Bankruptcy Court in Virginia Friday, the latest bad news for the company that has been accused of producing tainted peanut products that may have reached everyone from poor school children to disaster victims.
“It’s regrettable, but it’s inevitable with the events of last month,” said Andrew S. Goldstein, a bankruptcy lawyer in Roanoke, Va., who filed the petition.
The salmonella outbreak was traced to the company’s plant in Blakely, Ga., where inspectors found roaches, mold and a leaking roof. A second plant in Plainview, Texas was shuttered this week after preliminary tests came back positive for possible salmonella contamination. So far, the outbreak has been suspected of sickening more than 630 people and may have caused nine deaths. It also has led to more than 2,000 product recalls, one of the largest recalls in U.S. history.
Companies file Chapter 7 to liquidate their assets and distribute the proceeds to creditors. A trustee is automatically appointed to oversee the wind down, as opposed to a Chapter 11 filing that gives a company breathing room while it tries to reduce its debts and continue in business. The company said in the filing that its debt and assets both ranged between $1 million and $10 million.
The board had considered a Chapter 11 bankruptcy but decided on an outright liquidation. It said in a court filing that the recalls had been “extremely devastating” to the company’s financial condition.
After the shenanigans of the last couple of years, I think the banking industry needs government oversight to stand on its neck for a year or two. Clearly bankers are incapable of taking charge of themselves.
Bankruptcy is a powerful tool that never should have been altered for individuals. It shouldn’t be abused, but sometimes it is necessary.
From the link:
There’s no shortage of blame for the mortgage crisis that drove the economy into the ditch.
But here’s a fresh culprit: the 2005 bankruptcy reform act, which was strongly pushed by the credit card industry.
So say three researchers at the Federal Reserve Bank of New York, who argue that the legislation shifted risk from credit card lenders to mortgage lenders, helping trigger the surge in home foreclosures.
Before Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, households could erase their unsecured debts by filing for Chapter 7 liquidation. That freed up income that distressed homeowners could use to make mortgage payments.
The new law, however, forced better-off households seeking bankruptcy protection to file under Chapter 13. That chapter requires homeowners to continue paying their unsecured lenders.
In other words, say the Fed researchers, cash-strapped homeowners who might have saved their homes by filing Chapter 7 are now much more likely to face foreclosure.
“Is it just coincidence that the surge in subprime foreclosures that has rocked financial markets came right after the bankruptcy reform in 2005?” they asked. “Is that surge just about falling home prices, bad mortgage decisions and weak economic conditions?
“No and no.”
The US auto industry has a lot of problems and the UAW is right up there.
A line in the sand? More like an unemployment line.
From the link:
If General Motors (GM) and Chrysler executives want federal loans beyond the initial $17.4 billion provided by President Bush and the Treasury Dept. on Dec. 19, they will need to wring concessions from the United Auto Workers. And that means dealing with Ron Gettelfinger.
As became clear in mid-December, Gettelfinger, the 64-year-old union president, is no pushover. With the fate of an industry hanging in the balance, he refused to back down when Senator Bob Corker (R-Tenn.) demanded that the UAW commit to cutting wages to secure a bailout of Detroit’s Big Three. Gettelfinger’s stance—critics call it intransigence—pushed a government rescue to the brink until the Bush Administration stepped in.
But even after the Administration released funds for GM and Chrysler, Gettelfinger bristled at the labor concessions that Treasury is insisting on. In response to the Administration’s demands for wage and benefits cuts, he said: “We are disappointed that he [Bush] has added unfair conditions singling out workers.” Gettlefinger even said he would go to the Obama Administration—which promises to be more labor-friendly—to work out a deal.
I’d guess it’s a pretty scattered and frightening place at the moment. BusinessWeek interviewed him, and his main points were an “orderly” bankruptcy for troubled automakers might be the best outcome and he now favors oversight of hedge funds and “any institution whose failure could jeopardize the financial system.”
From the link:
Paulson was interviewed by BusinessWeekEditor-in-Chief Stephen Adler as part of the 10-year-old Captains of Industry series, which features leading newsmakers.
Among other points, Paulson said:
• An economic downturn remains much more of a risk than inflation from the money that’s now flooding the system. “That’ll be a high-class problem when we can start worrying about growth and inflation again,” Paulson said, adding: “The real cost would be to not do enough and then have the economy go into a free fall.”
• Banks that took U.S. funding should lend more, but he defended the Treasury’s emphasis on getting them money right away without strings. “Our first priority was always, and we were clear from the day we went to Congress, to prevent the collapse of the financial system.” He said, “There was literally a wave, just a string of financial institution failures or near-failures.” Paulson added: “They need to lend more. We don’t want them hoarding, we want them lending.” However, he also said, “It is not in my judgment practical or prudent to have government…saying ‘Make this loan, don’t make this loan.'”
• He defended the amount of disclosure by Treasury on the Troubled Asset Relief Program, or TARP. Paulson said, “We have been moving with lightning speed,” and added, “We’re building this organization as we’re going.”
• “The No. 1 thing we need to do is stem the housing correction.”
• The government lacked the authority to prevent the failure of Lehman Brothers, the investment bank that went under in September. But he said that Lehman’s failure was “in my judgment a symptom, not a cause” of the financial turmoil.
• President Bush “is very current and he’s on top of everything we’ve done.” He said, “I know that’s not conventional wisdom among some people but it’s absolutely true.”
• China and the U.S. should be good partners. “We won’t always have the same view, but engagement in my view is exceptionally important.”
Adler’s final question to Paulson was what advice he would give his successor, Timothy Geithner, who is now president of the Federal Reserve Bank of New York. Paulson said Geithner doesn’t need his advice, but added, “It’s important when you’re going through a time like this to define your job expansively.”
I’ve blogged on the new troubles facing the newspaper industry (and post itself is on the ailing NYT) here, and left this bit of news out of the post — Tribune Co., publisher of the Chicago Tribune and the Los Angeles Times has filed for bankruptcy protection.
Blame this problem on Sam Zell being a real estate guy (read: asshole until proven otherwise) and not a media guy. He was buying assets and not intellect. That might be the key to old media’s malaise right there.
That problem can even be traced back to the failed AOL/Time Warner merger. Everyone wanted to get into assets and not intellect. Time Warner lost its way and AOL brought hot air to the table.
Zell bought what he thought was an asset to leverage, but the reality was he bought brands and smarts. Real estate investors getting into new fields almost always blow the deal and lose money. Just look at Virgin Entertainment right now and REIT Richard Branson sold out to. That whole process is a slow-moving train wreck.
Big names in trouble here: Tribune in Chapter 11 and the New York Times has mortgaged its building for cash. I’m a huge fan of business and no fan of regulation, but something is quite rotten in Denmark, so to speak.
You’ll get no argument from me that this financial crisis is the result of something being majorly broken in our system. My money’s on high finance being a delicately balanced house of cards that became too tall and too greedy. Something of a modern-day tower of Babel in numbers.
From the second link:
Tribune Co, which owns eight major daily newspapers and several television stations, filed for Chapter 11 bankruptcy protection after collapsing under a heavy debt load just a year after real estate mogul Sam Zell took it private.
Like other big U.S. newspapers, Tribune is under pressure from declining advertising revenue and circulation as more people get news online and as companies cut their marketing budgets because of the economy.
“The Tribune Co‘s financial condition is symptomatic of the ills that plague the newspaper industry,” said Jerome Reisman, a bankruptcy attorney with Reisman, Pierez & Reisman.
Tribune’s bankruptcy filing is the latest chapter in the unraveling of the leveraged buyout boom which saw many companies bought by private equity firms and other investors ending up with massive debt loads.
Zell loaded up the privately held publisher with about $8 billion in additional debt when he took the company private in a transaction largely financed by company contributions to an employee stock option plan.
… after four years of bankruptcy. Interstate Bakeries Corp., should be out from under protection here in the next few weeks. This means Twinkies, Wonder Bread, and Dolly Madison products are safe.
God bless us, everyone.
From the link:
Interstate Bakeries Corp., the maker of Twinkies, said a federal Bankruptcy Court approved its amended reorganization and it plans to emerge from Chapter 11 within the next few weeks.
Interstate filed for bankruptcy in September 2004. It is best known for its Wonder, Hostess, Drake’s, and Dolly Madison brands.
Silver Point Finance, LLC, Monarch Alternative Capital L.P. and McDonnell Investment Management LLC, which hold 53 percent of Interstate’s pre-petition secured debt, committed $339 million to a new secured term loan.
In addition, Ripplewood Holdings will invest $130 million.
Under the terms of the revised plan, holders of unsecured claims and holders of existing common stock would receive no distribution.
The company also said labor unions agreed to modifications to existing labor contracts that will lower the cost structure.
… is actually a pretty good idea.
From the Obsidian Wings link:
Mortgages And Bankruptcy
by hilzoy
A bankruptcy judge in the Washington Post:
“Homeowners are the only ones who cannot modify the terms of their secured debts in bankruptcy. Corporate America flocks to bankruptcy courts to do precisely this — to restructure and reamortize loans whose conditions they find onerous or can no longer meet. Airlines are still flying and auto parts makers still operating because they have used this powerful tool of the bankruptcy process.
And from later in the post:
Perhaps it once made sense to think that mortgages should not be restructured in bankruptcy. I don’t think it makes sense now. It would be great if a repeal of this provision of the bankruptcy laws were one of the bills that will be waiting for President Obama to sign when he takes office.
David Kirkpatrick 