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To Fix Sour Property Deals, Lenders 'Extend and Pretend' - (online.wsj.com) Some banks have a special technique for dealing with business borrowers who can't repay loans coming due: Give them more time, hoping things improve and they can repay later. Banks call it a wise strategy. Skeptics call it "extend and pretend." Banks are applying it, in particular, to commercial real-estate lending, where, during the boom, optimistic borrowers got in over their heads to the tune of tens of billions of dollars. A big push by banks in recent months to modify such loans—by stretching out maturities or allowing below-market interest rates—has slowed a spike in defaults. It also has helped preserve banks' capital, by keeping some dicey loans classified as "performing" and thus minimizing the amount of cash banks must set aside in reserves for future losses. Restructurings of nonresidential loans stood at $23.9 billion at the end of the first quarter, more than three times the level a year earlier and seven times the level two years earlier. While not all were for commercial real estate, the total makes clear that large numbers of commercial-property borrowers got some leeway.
SEC Probe Examines Bank-Loan Practices - (online.wsj.com) The Securities and Exchange Commission is scrutinizing U.S. banks that have restructured troubled loans in order to make them appear healthier than they really are, according to people familiar with the situation. Officials at the SEC are seeking information from an unknown number of regional and community banks with large concentrations of commercial real-estate loans, these people said. The agency is zeroing in on a variety of practices used by financial institutions as they work to clean up loan portfolios that were bruised by the financial crisis or recession. While the U.S. banking industry is in recovery mode, many banks still are weighed down by soured loans. Among the practices being examined by the SEC is one known as "extend and pretend" or "amend and pretend," in which a bank gives a borrower more time to repay a loan. Banks are permitted to modify loans to help troubled borrowers.
Libya’s Unrest Risks Major Economic Toll for Italy - (www.nytimes.com) In response to the murderous tactics of Col. Muammar el-Qaddafi’s militias against unarmed protesters, the United States and the European Union have announced steps to freeze the government’s assets, and the International Criminal Court has opened an investigation into possible crimes against humanity. But Italy — which gets nearly a quarter of its crude oil and 10 percent of its natural gas from Libya, has billions of dollars in lucrative contracts with the Libyan government and receives billions more in Libyan investments — has held back on freezing any assets. Officials say they are waiting for a “coordinated” response from the European Union about whether the measure applies to Libyan sovereign funds, a ruling that Italy said it hoped would come as soon as next week.
Mortgage Modification Overhaul Sought by States - (www.nytimes.com) State attorneys general have presented the nation’s five biggest banks with a list of demands that could drastically alter the foreclosure process and give the government sweeping authority over how mortgage servicers deal with millions of Americans in danger of losing their homes. Under the blueprint, banks would be prohibited from starting foreclosure proceedings while a borrower was actively trying to lower the interest rate or ease other terms of the home loan, a process known as a mortgage modification. Any borrower who successfully made three payments in a trial modification would be given a permanent modification. When a modification was denied, it would be automatically reviewed by an ombudsman or independent review panel. The proposed changes, which will be discussed by the attorneys general when they meet in Washington early next week, would compel the banks to treat each borrower in default individually. It was the banks’ attempt to process foreclosures on a large scale that led to robo-signing, in which lawyers and bank officials signed thousands of documents a month after only a cursory review.
Wis. governor begins process for layoffs - (www.washingtonpost.com) Wisconsin Gov. Scott Walker (R) Friday began the process for laying off 1,500 state employees, escalating the bitter standoff over his legislation to sharply curtail collective bargaining rights for public employees. Walker sent letters to state employee unions saying that layoff notices would go out to state employees in 15 days. The governor also said that actual layoffs would occur a month from now if legislators do not pass his "budget repair" proposal. Walker's bill, which experts say would eviscerate the state's public employee unions, has been at a standstill since 14 Senate Democrats left the state two weeks ago to block a vote. "While these notices start the process needed to [lay off] state employees, if the Senate Democrats come back to Wisconsin, these notices may be able to be rescinded and layoffs avoided," said a statement from Walker's office.
OTHER STORIES:
Banks Face More Loan Write-Downs - (online.wsj.com)
Officials Disagree on Penalties for Mortgage Mess - (www.nytimes.com)
Libyan rebels win battle in west, push on from east - (www.reuters.com)
China's Wen Targets Inflation as Top Priority to Cut Risk of Social Unrest - (www.bloomberg.com)
ECB Officials Signal Support for Higher Interest Rates as Inflation Climbs - (www.bloomberg.com)
Wen says China set for five more fat years of growth - (www.reuters.com)
China Reportedly Plans Strict Goals to Save Energy - (www.nytimes.com)
ECB Keeping Rates Low Is `Dangerous,' Deutsche Bank's Chief Economist Says - (www.bloomberg.com)
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