Monday April 27 Housing and Economic stories

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TOP STORIES:

'Car czar' named in kickback probe: report - (www.marketwatch.com) Steven Rattner, the leader of the Obama administration's auto task force, was one of the executives involved with payments under scrutiny in a probe of an alleged kickback scheme at New York state's pension fund, The Wall Street Journal reported late Thursday, citing a person familiar with the matter. A Securities and Exchange Commission complaint says a "senior executive" of Rattner's investment firm met with a politically connected consultant about a finder's fee, the report said. The firm subsequently received an investment from the state pension fund, then paid a $1.1 million fee, it cited the complaint as saying. The "senior executive," not named in the complaint, is actually Rattner himself, according to the Journal report's unnamed source. Rattner is co-founder of the investment firm, Quadrangle Group, which he left to join the Treasury Department to oversee the auto task force earlier this year. The report quoted a U.S. Treasury spokeswoman as saying that "during the transition, Rattner made us aware of the pending investigation." Read full WSJ.com article on Rattner's ties to the investigation. In the long-running pay-to-play case, authorities allege that about 20 investment firms made payments in exchange for investments from the $122 billion New York State Common Retirement Fund. The case, being investigated by New York Attorney General Andrew Cuomo and the SEC, has led to three criminal indictments and a guilty plea.

GM CEO Warns That Bankruptcy Is More Probable - (www.cnbc.com) General Motors Chief Executive Fritz Henderson said on Friday the automaker could still restructure out of court, but warned it was more probable GM may need to seek bankruptcy protection to complete that process. Henderson said the automaker faced no pressure from the U.S. autos task force to make a decision on that front. GM still prefers to restructure outside bankruptcy, but would be ready to file for court protection if necessary, he said. Henderson also said the automaker still planned to stick to its four core brands that include Chevrolet, Cadillac, Pontiac and GMC, but was examining all elements of its brand strategy. He called reports that GM would be dropping one of the core brands "speculation." In the first of what he said would be regular conference calls, Henderson said GM's work with the U.S. Treasury has been like a private equity due diligence process.

CDS blamed for role in bankruptcy filings - (www.ft.com) Credit default swaps, the derivatives instruments that have figured prominently in the global financial crisis, are now being blamed for playing a role in two bankruptcy filings this week. Bankers and lawyers involved in restructuring efforts say they are concerned some lenders to troubled companies, such as newsprint producer AbitibiBowater and mall owner General Growth Properties, stand to benefit from a default because they also hold default swaps, which entitle them to payments in such events. “We have seen CDS becoming a significant factor” when negotiations on out-of-court restructurings fail, said Alan Kornberg, the partner in charge of the bankruptcy practice at Paul, Weiss, Rifkind, Wharton & Rice, speaking generally. “We used to talk about the practice theoretically but now we see cases where it is hard to get lenders to agree to tender or to compromise and then you find out that these holdouts had significant CDS protection.” Abitibi , which filed for bankruptcy protection on Thursday, ran into trouble as the dire state of the newspaper industry eroded its cash flow and left it unable to service its debt load. It sought to persuade debt holders to exchange bonds due in August for new debt with longer dated maturity and higher yields, but failed to do so as creditors squabbled. Such exchange offers require the support of a significant number of lenders, 97 per cent in the case of bondholders in this case. But those who withhold support often have powerful incentives to do so, either because they hope to be made whole or because they are seeking to force a filing that would trigger payments under their credit protection agreements, bankers and lawyers say. Some creditors, including Citigroup, which held a small exposure to AbitibiBowater, hedged themselves in the CDS market, meaning their economic interest in the deal was different to lenders who had not bought credit insurance, according to people familiar with the matter. Citigroup declined to comment.

Mall Bankruptcy Is New Domino In Commercial Property - (www.cnbc.com) No doubt General Growth Properties' bankruptcy filing will have far-reaching implications for the commercial real estate market. The bankruptcy, which is said to be the largest real-estate failure in U.S. history, will further pressure already stressed property values for U.S. malls and mall mortgages. It's also likely to lead to speed up consolidation in the mall industry, with companies such as Simon Property, Westfield Group and Taubman Centers emerging as potential winners, that is, if they can come up with the cash to pick-up prime pieces of General Growth's portfolio. The company does have some choice pieces of real estate among its holdings, including the Ala Moana Center in Honolulu, Water Tower Place in Chicago, and the Grand Canal Shoppes at the Venetian in Las Vegas. But if you listen to General Growth, the proposition of raising money for these deals might not be easy. The company claims it is the latest victim of the credit crunch, and it sees looming problems for other commercial real estate because of constraints in the credit markets. That also means, the mall operator could have a tough time using asset sales to pay off its creditors. And so the domino effect begins with effects for other commercial property owners as well as for banks who loaned money to these property owners such as Citigroup , Deutsche Bank and Goldman Sachs, which are among General Growth's creditors.

GM seeks provision for its suppliers - (www.ft.com) General Motors is prepared to argue that hundreds of its suppliers are “critical vendors” who require timely payments if it seeks bankruptcy protection, setting the stage for what would be the most sweeping attempt ever to win special treatment for such contractors, people close to the matter say. Companies often request special treatment for a limited number of suppliers as part of bankruptcy petitions. Bankruptcy experts say GM would stand a good chance of winning protection for more suppliers than is usual because of the large number that provide “just-in-time” car parts to the company. “On its face, the justification for critical trade appears very strong here, as strong if not stronger than in most other cases,” said James Sprayregen, a bankruptcy partner at Kirkland & Ellis. “It’s hard to see how it’s going to be in anybody’s interest to shut the supply chain down.”

Credit-Card Securities Worsen, But Bank Still Bullish - (www.cnbc.com) The performance of credit-card asset-backed securities deteriorated further in March as debt-burdened consumers suffered increased job losses and defaulted on payments, but JPMorgan Securities remains bullish on the segment. Consumers, whose spending accounts for two-thirds of economic activity, have come under increasing financial stress as the economy remains in its 16th month of recession and unemployment hit a 25-year high in March. The write-down of uncollectable credit card debt or charge-offs, climbed to 8.82 percent from 8.40 percent in February, according to JPMorgan's Bankcard Index, in line with an increase in unemployment to 8.5 percent from 8.1 percent. Still, despite the deteriorating performance, JPMorgan said it remains "very bullish" on consumer ABS, including credit cards, given the strong demand for deals sold under the Federal Reserve's new program aimed at reviving consumer lending and reopening securitization markets. "The success of the WFN and Cabela new issues, that were upsized and oversubscribed, bodes very well for the sector, expanding potential spread tightening to beyond benchmark bank cards," said Christopher Flanagan, JPMorgan analyst. World Financial Network and Cabela, were among the credit card issuers to sell securities in April under the Federal Reserve's Term Asset-Backed Loan Facility, known as TALF. Since the Fed announced its program in November, consumer ABS spreads, including credit cards, have narrowed by a substantial 200 to 300 basis points, followed by another round of tightening since the program's launch in March. The analyst said it expects to see further narrowing in spreads as demand increases.

Foreclosure Filings Jump as Moratoriums End - (www.cnbc.com) U.S. foreclosure activity leaped 46 percent in March from a year earlier, hitting a record high as programs stunting the torrid pace of failing mortgages expired, RealtyTrac reported on Thursday. A temporary freeze on foreclosures by major banks and government-controlled home finance companies Fannie Mae and Freddie Mac ended before President Barack Obama's massive housing stimulus, unveiled on March 6, could take root. Filings, which include notice of default, auction sale or bank repossession, jumped 17 percent in March from February. Filings for the quarter also marked a record high, jumping 24 percent from the same period a year ago. The March and first-quarter totals were the highest since RealtyTrac began tracking them in January 2005, even as bank repossessions declined. One in every 159 U.S. households with mortgages got a foreclosure filing in the first three months of this year, RealtyTrac said. Filings were reported on more than 803,000 properties in the quarter.




OTHER STORIES:

Bank Stress Tests to Start Emerging Next Week - (www.cnbc.com)
How Much Longer Can Banks Wow The Street? - (www.cnbc.com)
Starwood Sues Hilton Over New Luxury Brand - (www.cnbc.com)
Thirty-Year Mortgage Rate Falls to 4.82%: Freddie Mac - (www.cnbc.com)
GM Preparing to Make Official Bond Exchange Offer - (www.cnbc.com)

Treasuries Fall as Supply, Economy Overshadow Fed Debt Purchase - (www.bloomberg.com)
Crude Oil Rises After Unexpected Decline in U.S. Jobless Claims - (www.bloomberg.com)
Gold, Silver Fall to 1-Week Lows as Slow Inflation Cuts Demand - (www.bloomberg.com)
U.S. Stocks Rise, Led by Tech Shares, as Hewlett-Packard Gains - (www.bloomberg.com)
Bank Test Results May Strain Limits Of Bailout Funding - (www.washingtonpost.com)
Lending By Bailout Recipients Falls Again - (www.washingtonpost.com)
China buys less U.S. debt as reserve growth slows - (www.usatoday.com)
China bank lending may slow, but not dramatically - (www.marketwatch.com)
China’s GDP Grows at Slowest Pace in Almost a Decade - (www.bloomberg.com)
Europe Industrial Production Plunges 18.4%, the Most on Record - (www.bloomberg.com)

Deals Help China Expand Its Sway in Latin America - (www.nytimes.com)
Turkish unemployment reaches historic high - (www.ft.com)
U.S. Home Starts Fell in March; Permits Dropped to Record Low - (www.bloomberg.com)
No End Yet for Housing Downturn, Data Suggest - (www.nytimes.com)
New jobless claims fall unexpectedly to 610K - (finance.yahoo.com)
US foreclosures up 24 percent in 1st quarter - (finance.yahoo.com)
Manufacturing Slips, but Fed Finds Stability in Some Parts of U.S - (www.washingtonpost.com)
Bernanke Frets as Variable Notes Strip Taxpayers in N.Y., Texas - (www.bloomberg.com)
8 states seek stimulus money for high-speed rail - (finance.yahoo.com)
GM Said to Plan All-Stock Offer for Bondholders by April 27 - (www.bloomberg.com)
JPMorgan Profit Beats Estimates as Trading Revenue Increases - (www.bloomberg.com)
General Growth Seeks Chapter 11 Bankruptcy Protection - (www.bloomberg.com)
No Easy Workout - (www.nytimes.com)
Unsure of Saturn’s Fate, Dealerships Are Closing - (www.nytimes.com)
Magazine Ad Pages Decline Almost 26% in First Quarter - (www.nytimes.com)
Pipe Made in India Incenses Illinois Town - (www.nytimes.com)