“Regulators Defend Bear Stearns Rescue to Congress”
by Kristopher Cartagena
According to Reuters, the Federal Reserve committed $29 billion in taxpayer money to back Bear Stearns's assets to facilitate JPMorgan Chase & Co's (“JP Morgan”) agreement to buy the stricken investment bank. At a congressional hearing on Thursday, April 3rd, senior federal officials, including Federal Reserve Chairman Ben Bernanke, rejected the notion that they had in effect bailed out Bear Stearns last month. They argued that Bear Stearns could not be allowed to collapse because it could have shattered confidence in the financial markets and caused lasting damage to the U.S. economy. JP Morgan CEO Jamie Dimon argued that without the deal, Bear Stearns would have filed for bankruptcy last month. That would have been far more costly to the U.S. economy because it would have led to higher borrowing costs for everything from mortgages to municipal loans. To read the full article, please click here!
“Senate Debates A $15 Billion Housing Stimulus Plan”
by Teresa Duong
Last Wednesday, April 2nd, the Senate began deliberating a $15 billion plan aimed at easing the home foreclosure dilemma. The plan is designed to provide a tax break for home builders, a tax credit and deduction for homeowners and buyers, and help for low credit buyers trying to obtain or refinance loans. The bill also includes provisions to aid geographic areas burdened with major foreclosure, provide consumer counseling, and require greater disclosure in the loan application process. Because the proposal allocates 40% of the funds to aiding home builders, critics state that the package will mostly benefit home builders while doing little for homeowners and buyers. The senate acknowledges the critiques but states that the proposal will be subject to numerous amendments during the deliberation process. To read the full article, please click here!
“$800 Billion Tobacco Suit Tossed Out on Appeal”
by Kristopher Cartagena
According to Reuters, a federal appeals court tossed out an $800 billion class-action lawsuit against tobacco companies on Thursday, April 3rd. The case was brought by smokers who said they were deceived into believing "light" cigarettes were healthier. The U.S. Court of Appeals for the Second Circuit said the smokers could not sue collectively. The decision means each individual smoker must prove that she or he had selected the product for perceived health benefits. The smokers had sued the tobacco companies under the Racketeer Influenced and Corrupt Organization Act, contending they were misled by the industry's marketing and branding efforts into believing "light" cigarettes were healthier than "full-flavored" versions. The appeals court decertified the class of plaintiffs, saying a "light" smoker might have "preferred the taste" or chosen light cigarettes as a matter of personal style, as opposed to perceived health benefits. To read the full article, please here!
“Microsoft Threatens a Hostile Takeover of Yahoo”
by Teresa Duong
In a letter emailed to Yahoo on Saturday, April 5th, Microsoft's CEO Steven Ballmer expressed his growing frustration over Yahoo's reluctance to negotiate, and gave Yahoo a three-week deadline to accept Microsoft's $40 billion offer. If an agreement is not reached by the deadline, Microsoft claims it will be forced to resort to a hostile takeover attempt by appealing directly to Yahoo's shareholders. Yahoo has declined to comment as it continues pursuing alternatives. To read the full article, please click here!
“Senate Banking Committee Wants to Examine JP Morgan-Bear Stearns Deal”
by Kristopher Cartagena
According to Reuters, U.S. Senate Banking Committee Chairman Christopher Dodd on Wednesday said JPMorgan Chase & Co.'s bid to acquire Bear Stearns Co. Inc raises regulatory and American taxpayer concerns. Dodd said he invited Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and Securities and Exchange Commission Chairman Christopher Cox to testify at an April 3 hearing to examine their roles in the transaction. He also invited JPMorgan Chase Chief Executive Jamie Dimon and Bear Stearns CEO Alan Schwartz to testify to explain the transaction which kept Bear Stearns from entering bankruptcy. JPMorgan raised its all-stock offer for Bear Stearns to about $10 a share, roughly five times its original bid, and struck a deal to buy nearly 40 percent of the investment bank. To read the full article, please click here!
“Credit Woes Put Student Loans in Jeopardy”
by Aimee Bateman
Nearly two dozen student loan lenders have announced they are restricting, suspending or terminating new loans to students through the Federal Family Education Loan Program, FFEL, the federally-guaranteed, low-cost initiative that provided college financing last year to 7 million students around the country. Mark Yudof, chancellor of the University of Texas System, said he was worried that the student loan market is "going to be deeply squeezed." FFEL is the biggest source of student financial aid in the country and roughly $3.2 billion in FFEL aid is distributed each year to Texans. To read the full article, please click here!
“Companies Work Toward Open Innovation”
by Teresa Duong
Recently, a new concept called "Open Innovation" has emerged in business, where companies have begun tapping into minds outside of their in-house talent pool. The reasoning behind this innovation is that the newest and brightest ideas can come from anywhere, even from competing businesses. For example, Sun Systems has created technologies using Java language or databases from MySQL. Companies are more willing now than ever to scour the globe for new technology and innovation or ask for help on a specific problem from others. The difficulty is, according to Ned Hooper, the senior vice president for corporate business development at Cisco Systems, picking the winners from the lines of people trying to sell you their ideas everyday. To read the full article, please click here!
“Hawaiian Airline Grounded Following Recent Bankruptcy”
by Eric Wolfe
Hawaiian airline, Aloha Air, is calling it quits after serving Hawaii for more than 60 years. The airline recently filed for Chapter 11 bankruptcy. The company points to “unfair business practices” and “rising fuel prices” as the main contributing factors to the company’s decision to shutdown its business. Aloha Air stated that the shutdown will affect 1,900 employees as well as passengers who purchased tickets for flights after Monday, March 31. To read the full article, please click here!
“Starbucks to Fight Tip-Sharing Ruling”
by Aimee Bateman
Starbucks CEO Howard Schultz says that shift supervisors have a right to receive the tips they earn for providing superior customer service. However, San Diego Superior Court Judge Patricia Cowett has ordered Starbucks to pay baristas more than $100 million in back tips and interest, saying state law prohibits managers and supervisors from taking a cut from the tip jar. Starbucks claims that customers do not differentiate between the supervisors and baristas when they tip and has announced that they will defy the ruling and will not pay back its California baristas for tips they shared with shift supervisors. The coffee giant is appealing the court's ruling. To read the full article, please click here!
“Top 100 Cities to Start a Business”
by Teresa Duong
Looking to start a business? CNN lists the best cities to start a business based on business advantages and lifestyle. Bellevue, Washington topped the list followed by Georgetown, Texas (a suburb of Austin) coming in second. Other Texas cities making the list include Fort Worth coming in 9th, San Antonio at 34th, and Stafford at 36th place. To read the full article, please click here!
"3 CEOs Made $460 Million - House Panel"
by Aimee Bateman
The House Committee on Oversight and Government Reform is set to examine CEO pay in light of huge losses in the financial sector stemming from the mortgage crisis. Citigroup Inc., Merrill Lynch & Co., and Countrywide Financial Corp. lost more than $20 billion in the last two quarters of 2007 and their stock prices have plummeted as investments related to sub prime lending have fallen apart. However, Charles Prince, former CEO of Citigroup Inc.; Stanley O'Neal, former CEO of Merrill Lynch & Co.; and Angelo Mozilo, chief executive of Countrywide Financial Corp., were paid $460 million over the last five years in compensation and severance benefits. The House panel will hear testimony from all three men, along with the chairmen of the three companies' compensation committees. To read the full article, please click here!
“Job Cuts Instigate Recession Fears”
by Kristopher Cartagena
Employers unexpectedly cut jobs in February at the steepest rate in nearly five years, a second straight month of employment losses that heightened fears the world's largest economy has skidded into recession. The Labor Department on Friday, March 7, 2008, said 63,000 non-farm jobs were eliminated on top of an upwardly revised loss of 22,000 in January, sharply contrary to Wall Street economists' forecasts that 25,000 positions would be added in February. The department also halved the number of jobs added in December to 41,000 from the 82,000 estimated a month ago, in a move that underlined the steady deterioration in the U.S. labor market. As a result of recession fears, economists are calling for the Federal Reserve to cut interest rates further on their March 18th policy meeting. The Fed is expected to cut rates at this meeting. To read the full article, please here!
"Apple’s Business Call"
by Aimee Bateman
Apple is signaling that it’s ready to do what it takes to attract businesses to the iPhone, as it attempts to break into the market that has been dominated by RIMM's Blackberry. Apple executives announced that the company is working on a method that would allow companies to load their own software into the iPhone. Apple is also working with Microsoft to bring “Exchange” contacts, calendar and e-mail in the iPhone. In another exciting development, Apple is also starting a program that will allow entrepreneurs to write their own software for the iPhone. To read the full article, please click here!
“Bankruptcy Judge Says Delphi Corp. Can Work With General Motors Corp. on an Exit Financing Deal”
by Kristopher Cartagena
A U.S. bankruptcy judge on Friday, March 7, 2008, said Delphi Corp can proceed with an exit financing deal that relies heavily on General Motors Corp, a crucial step for the bankrupt auto parts maker. Delphi had argued that the revised plan including up to $2.8 billion in loans from GM was key to its ability to secure needed financing and would not violate the terms of Delphi's court-approved plan to emerge from bankruptcy. Judge Robert Drain, after a hearing on the matter, said Delphi's emergence plan would allow a GM affiliate to provide the additional financing to Delphi. GM stated it was ready to provide additional loans to Delphi to help to complete a $6.1 billion financing package that would allow its exit from bankruptcy. GM had agreed to underwrite a $2 billion loan and up to $825 million in a second loan if it cannot be placed with investors. To read the full article, please here!
“Inflation on Fed’s Watch List”
by Kristopher Cartagena
After Fed Chairman Ben Bernanke fielded sharp questions from members of Congress worried about rising inflation last week, Fed presidents stressed on Friday, February 29th that they had not forgotten their responsibility for ensuring stable prices. The Fed has lowered interest rates by 2.25 percentage points since mid-September in a bid to avert a recession sparked by the slumping housing market and tightening credit conditions. Another rate cut is widely expected at the next policy-setting meeting on March 18th. The Fed's rate cuts should spur stronger growth in the second half of this year, but financial market problems won't fade until the housing market stabilizes, and it is unclear as to when that will happen. To read the full article, please click here!
"Buffett’s State of the World: There’s Folly in Wonderland"
by Aimee Bateman
Warren Buffett's annual letter to Berkshire Hathaway shareholders was released on Friday. This year's letter criticized, among others, lenders who financed the housing boom. He notes that our country is experiencing wide spread pain because of the erroneous belief that housing price appreciation would cure all the problems associated with lenders ignoring borrower's income or cash equity. He wrote, "As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out — and what we are witnessing at some of our largest financial institutions is an ugly sight.” When speaking of the money managers who promise double-digit returns on pension funds, a return Buffett deems unlikely given the low level of interest rates, he compares them to the queen in “Alice in Wonderland” who proclaimed, “Why, sometimes I’ve believed as many as six impossible things before breakfast.” Mr. Buffett added, “Beware the glib helper who fills your head with fantasies while he fills his pockets with fees.” To read the full article, please click here!
To read this year's Shareholder Letter, or those from past years, please click here!
“40,000 at Risk for HIV and Hepatitis Due to Clinic's Unsafe Practices”
by Teresa Duong
The 40,000 people who received anesthesia at the Endoscopy Center of Southern Nevada between March 2004 and January 2008 are at risk and have been urged to be tested for HIV and hepatitis. Health officials believe that the clinic reused syringes and medication vials, which exposed patients to the blood of others. The Southern Nevada Health District stated that six reported cases of Hepatitis C, "a potentially fatal blood-borne virus," have been reported as a result of these practices. A former patient has initiated a class action suit alleging gross negligence against the clinic, its chief administrator, and those at the clinic who" directly provided and/or supervised unsafe medical procedures." Many more are expected to join the class action. To read the full article, please click here!
"Sprint's World of Pain"
by Aimee Bateman
Daniel Hesse's first quarterly earnings report and analyst call was a pretty painful experience for the new chief executive. Hesse's message was blunt and depressing: "I now have had two full months at the helm, and to be perfectly frank, the issues we face are more difficult than what I had expected to find." The bad news was overwhelming and was reflected swiftly in analyst downgrades and a plummeting market price. Due to horrible customer service, Sprint reported a loss of 683,000 premium subscribers, and Hesse expects to lose another 1.2 million premium subscribers in the first quarter of 2008. The company also confirmed a staggering $29.7 billion write-down, and dividend payments were suspended "for the foreseeable future." To read the full article, please click here!
“Former Bankers Sentenced to 37 Months in Enron Case”
by Aimee Bateman
Three former British bankers were sentenced last week to more than three years in prison for their role in a scheme with former Enron finance chief Andrew Fastow to bilk their London employer out of millions of dollars. United States District Judge Ewing Werlein imposed a 37 months sentence, which was apparently agreed to by both the defendants and the justice department, although federal sentencing guidelines recommended 41 months to 53 months. The defendants, David Bermingham, Giles Darby and Gary Mulgrew, each pleaded guilty to a count of wire fraud. They have been free on bail and restricted to the Houston area since being transported to the United States in June 2006 after losing a lengthy extradition fight. To read the full article, please click here!
“Bad Elmo”
by Teresa Duong
Remember those Tickle-Me Elmo’s that parents were fighting to get their kids during the holiday season? Well for one family, it may have been anything but laughs and giggles. A family in Florida claims that after they bought an Elmo that can be programmed to say your child's name and changed the batteries, it started saying "Kill James." James is the name of their two-year-old toddler. The manufacture has since offered the family a voucher for a replacement toy.
Incidents such as this, coupled with the recent scare over lead paint in toys, have led the Consumer Product Safety Commission (CPSC) to implement stricter safety rules for both toy manufacturers and retailers. The rules require the testing of each batch of imported toys for defects and dangerous chemicals, a significant curtailment in the use of lead-based paints, and a complete prohibition of phthalates, a chemical which has been linked to birth defects. For more information concerning this story, please click here!
“Microsoft Opens Software Details to Rivals Amid European Antitrust Concerns”
by Kristopher Cartagena
Microsoft Corp has stated it would publish key software blueprints to let rival programs work better with its products and address some European antitrust concerns. Microsoft has been criticized for shutting out competitors by incorporating programs such as its media player closely into its Windows operating system, and by keeping secret product details that rival developers need to ensure smooth operation with Windows and other Microsoft products. This move would open up to competitors some of the secret codes behind key products like Windows Vista. The European Union has stated that these actions by Microsoft do not relate to the question of whether or not Microsoft has been complying with EU antitrust rules since the European Union court’s ruling against Microsoft for antitrust violations. To read the full article, please click here!
“Countrywide Treats Bankers to Ski-Resort Trip”
by Aimee Bateman
While many companies are in the practice of entertaining business partners in luxurious setting, one might have thought that Countrywide would not be in the position to do so this year. However, despite the ongoing mortgage crisis, Countrywide's recent sale of itself to Bank of America for one fifth of its market value, and Countrywide lay-offs of 19 percent of its workforce since July, mortgage bankers are still being wined and dined by nation's largest mortgage lender. Countrywide Financial Corp. will host about 30 representatives of smaller mortgage banks for three nights next week at the Ritz-Carlton Bachelor Gulch ski resort in Avon, Colorado, one of the country's most-glamorous skiing sites. Room rates run upwards of $750 and a steak and potatoes at the Spago there will cost you $105. Not to worry for these bankers, who originate loans and then sell them to Countrywide. Countrywide is paying for hotel rooms, meals, skiing and tips. To read the full article, please click here!
"The Best Corporate Citizens"
by Aimee Bateman
Social responsibility is now going mainstream: the bottom line is no longer the bottom line. Many shareholders are now pushing some of the world's biggest corporations to be more socially responsible, and it seems to be paying off when it comes to building the image of these companies worldwide. Although critics have accused Wal-Mart of destroying neighborhoods, exploiting its workers and discriminating against female employees, American consumers, when asked to name a U.S. company that was socially responsible, named Wal-Mart above all others. Also making the top ten of North America's most popular corporate citizens were McDonalds (Canada), Microsoft, Tim Horton's, Bell Canada, Canadian Tire, Petro Canada, Target, McDonald's (USA), and Home Depot. To read the full article, please click here!
To see the slide show of North America's Most Popular Corporate Citizens, please click here!
“Oil Hits $100 a Barrel”
by Kristopher Cartagena
U.S. crude settled up $4.51 at $100.01 a barrel on Tuesday, after hitting $100.10 a barrel during the day, a penny higher than the previous high struck on January 3. The market is concerned that OPEC will not increase oil production next month despite the high oil prices that are plaguing the global economy, and in particular, the U.S. economy. The price of oil has also been affected by the political showdown between Exxon and Venezuela, and the false statements concerning the alleged death of Nigerian oil delta rebel leader Henry Okah. A Reuters poll of analysts forecast U.S. government data due out on Thursday would show a 2.3 million barrel build in U.S. crude stocks, a 2 million barrel draw in distillate inventories, and a 600,000 barrel rise in gasoline stocks. To read the full article, please click here!
"Law Makes Debt Relief Harder for Homeowners"
by Eric Wolfe
A recent article by the NY Times discusses some of the effects of the new bankruptcy laws. The difference between Chapter 13 and Chapter 7 bankruptcy is described, and the article notes the recent increase in Chapter 13 filings. The article also discusses proposed bankruptcy legislation that "could spur more people to choose Chapter 13." Examples of consumers' experiences are included to give an idea as to what considerations must be taken into account when considering bankruptcy—the "means test," costs, and goals to be achieved. To read the full article, please click here!
"Banks Tighten Lending Standards for Business Loans”
by Aimee Bateman
United States banks are now tightening their lending standards for commercial and industrial loans as the mortgage credit crunch has spilled over into business lending. Banks are especially shying away from business loans for any company associated with the real estate industry. The director of the Small Business Administration's Southern Florida district notes the number of SBA-backed loans from banks has trended down in his district as local banks are less risk-inclined. Banks are toughening their standards and small businesses are also becoming more cautious about expansion. To read the full article, please click here!
“Judge Allows Hacker to Keep the Profits of His Fraud”
by Teresa Duong
A person, such as a corporate official or investment banker, who has legal access to insider information (before it is made available to the public) and trades upon it would be violating security laws. But a hacker, Oleksandr Dorozhko, who illegally obtained insider information and earned $296,456 in one day of trading may be allowed to keep the profits of his fraud. Although the Securities and Exchange Commission (SEC) tried to prevent him from collecting his earnings, a federal judge has ruled that Dorozhko can keep his cash. Why? Because Dorozhko, despite "hacking and trading”, owed no fiduciary duty to the victims of the theft and therefore did not violate any laws dealing with the "purchase or sale of a security." The SEC has asked for an emergency hearing from the Court of Appeals to freeze those funds. But even if the SEC wins, the chances of collecting on a judgment against Dorozhko, an Ukranian resident, would be minimal. To read the full article, please here!
“Retail Sales Higher for the Month of January”
by Kristopher Cartagena
Retail Sales figure for the month of January showed a rise over the dismal sales figure for the month of December. The Commerce Department reported Wednesday that retail sales rose by 0.3 percent last month. Sales had fallen by 0.4 percent in December as retailers suffered through their worst Christmas shopping season in five years. The increase was led by strong demand for new cars and a big jump in sales at gasoline service stations, which reflected higher pump prices. To read the full article, please click here!
“Buffet: Bank Woes are 'Poetic Justice'”
by Aimee Bateman
Warren Buffet appeared to see irony in the fact that many of the banks who marketed complex investments which have now crashed are bearing much of the fallout. "It's sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end," he said. Buffet also played down the significance of the credit crunch. He said "Money is available, and it's really quite cheap because of the lowering of rates that has taken place." To read the full article, please here!
“Yahoo Rejects Microsoft’s Bid”
by Teresa Duong
As reported below, Microsoft previously offered $44.6 billion, or $31 per share, to take over Yahoo. As of this week, Yahoo formally rejected Microsoft's Bid. According to a source familiar with the proposed transaction, Yahoo feels that Microsoft's $31 per share offer "massively undervalues" the company and will probably take nothing under $40 per share (which increases the offer by $12 billion). Furthermore, companies such as Google have complained that this merger would present "significant competitiveness issues." Therefore, there is a concern that the government may step in and block this merger even if an agreement is reached. If Yahoo continues to reject Microsoft's offer, the next question will be whether Microsoft will be bold enough to plan a hostile take over. To read the full article, please here!
"Microsoft’s Original Bid for Yahoo!”
by Teresa Duong
In an effort to compete more effectively against Google, Microsoft has put up a $44.6 billion dollar bid in cash and stock to buy Yahoo. If this deal goes through, it would be Microsoft's largest acquisition to date. Although Microsoft and Yahoo had previously discussed the possibility of merger in 2006, Yahoo ended negotiations because it was optimistic at that point about a possible turnaround in business. But after failing to attain expected profits, Yahoo announced it would cut 1,000 jobs in an effort to cut costs. Microsoft's proposed acquisition would be another attempt for both companies to "redraw the competitive landscape in internet consumer services." To read the full article, please click here!
“Michigan Sues Tyco to Protect State Funds”
by Aimee Bateman
More than five years after the SEC filed civil charges against the top executives of Tyco, lawsuits are still being filed against the manufacturing conglomerate. The state of Michigan filed a suit on Friday alleging that the company, its auditors and former executives participated in a massive corporate fraud that depleted state pension funds. The funds, which invest on behalf of state and public school employees, police and judges, lost more than $50 million after the accounting scheme unraveled. The state had been a plaintiff in a class action lawsuit along with other Tyco shareholders but opted out of a settlement to pursue its own claims. To read the full article, please click here!
“Massachusetts Charges Merrill With Fraud”
by Aimee Bateman
Merrill Lynch and Co., Inc. has been charged with fraud and misrepresentation related to about $14 million worth of sub-prime securities it sold to the city of Springfield.
The complaint, filed by the Enforcement Section of the Massachusetts Securities Division of the Office of the Secretary of the Commonwealth, alleges that Merrill Lynch agents Carl Kipper and Manuel Choy sold the City of Springfield collateralized debt obligations (CDOs) that became illiquid and lost almost all of their market value even though "[i]t was understood that Merrill was supposed to invest only in safe money-market-like investments authorized by city personnel that would protect the city's investment." This complaint comes one day after Merrill Lynch reimbursed the city for its investment, and related legal fees, and said it had determined that the securities were bought without explicit permission from the city.
To read the actual Administrative Complaint, please click here!
To read the full article, please click here!
“FBI and SEC Cracking Down of Sub-Prime Mortgage Mess”
by Kristopher Cartagena
The FBI has opened criminal investigations into 14 corporations as part of a crackdown on improper sub-prime lending. The alleged violations include accounting fraud and insider trading. The probes reached across the industry to include developers, sub-prime lenders, companies that securitized loans and investment banks that held them. The FBI is investigating the corporate cases in parallel with the Securities and Exchange Commission, which has opened about three dozen civil investigations into the sub-prime market collapse. To read the full article, please click here!
“Effects of the Busted Bubble”
by Eric Wolfe
2007 has proved to be costly nationwide in terms of the real estate market. USA Today reported that home foreclosures rose a whopping 79% in 2007. Moreover, 1% of all U.S. households were in some phase of foreclosure last year; up from 0.5% in 2006. USA Today has been conducting an ongoing analysis of various cities throughout the nation in its "Close to Home" feature which portrays the effects of the sub-prime lending crisis. San Bernardino County, CA was the object of last week's feature. In San Bernardino County, foreclosures were up 720% over 2006, and sales were down 56.7%. Included on the site is a list of foreclosure percentages for each of the 50 states. Texas had a somewhat atypical year as filings actually fell by 5%. However, other states recorded increases as high as 450% over 2006. For more information, please click here, and then here!
“The Unintended Consequences of Interest Rate Cuts”
by Teresa Duong
In an attempt to boost the slowing economy and the housing market, the Federal Reserve cut its fed funds short-term interest rate to 3.5%. Economists expect interest rates to continue dropping, possibly to as low as 1%. While the rate cuts appear to provide a major break for consumers, particularly those looking to buy homes, they do come with certain undesirable effects. Lower interest rates mean less profit for major banks and lenders. Consequently, they will be less willing to make new loans. Furthermore, lower interest rates also serve as a dis-incentive for overseas investors, causing a drop in the dollar and a rise in inflation. To read the full article, please click here!
“Weak Dollar Helping Some Web Businesses”
by Aimee Bateman
The economy has slowed and the dollar is weakening, but this isn't all bad news for some American businesses. Exchange rates are working in the advantage of foreign buyers, which is helping attract buyers from all over the world to American-based web businesses. For instance, one business from Vermont that re-sells items for a profit on eBay has seen their international sales as a percentage of total sales rise from about 1.5 percent last year to about 5 percent this year. To read this article, please here!
“Stimulus Plan May Have Negative Affect on Mortgage Rates”
by Kristopher Cartagena
According to Reuters, a key element of the stimulus package aimed at jump-starting the ailing U.S. housing market may have the unintended consequence of raising mortgage rates. Portions of the plan call for increasing the size limit on loans eligible for purchase by Fannie Mae and Freddie Mac from $417,000 to $729,750. This would change the characteristics of mortgage-backed securities, leading traders to exact a premium for increased interest-rate risk. Higher mortgage rates would make it even harder to unload already high housing inventories and existing homes on the market, delaying any housing recovery and potentially extending the U.S. economic slowdown. To read the full article, please click here!
“The Toughest Holiday Returns”
by Aimee Bateman
If you are still planning on making some holiday returns, you may be in for a fight if you plan on returning items to some of the nation's biggest retailers. It may very well be possible to still return some holiday purchases, but some stores are making it cumbersome and expensive to do so. Examples of the expenses and hassles you might incur include a 15% "restocking fee" for most opened electronic items at Best Buy; insurance and tracking on jewelry returns to Amazon.com; and no in-store returns allowed for items bought through company websites.
Check out the policies of Home Depot, Target, Sears, Best Buy, Office Depot, Car Phone Warehouse, Marks & Spencer, La Senza, Amazon, and Circuit City by clicking here.
To read the article, please click here!
“Delphi Emerges from Bankruptcy Protection”
by Chauncey Lane
After filing for bankruptcy in October, 2005, Delphi received the support of its creditors on January 17, 2008 for its plan to emerge from bankruptcy. Delphi announced its voting results for Delphi's First Amended Joint Plan of Reorganization. According to the Company, voting by classes of creditors and holders of interests (including shareholders) entitled to vote on the Plan illustrates broad-based support for the Plan. Of the more than 4,000 ballots cast by general unsecured creditors voting on the Plan, 3,329 or 81% of all voting creditors aggregated across classes voted to accept the Plan (excluding ballots cast by GM, plaintiffs in the multi-district litigation (MDL) and holders of interests). Of the total amount voted by all general unsecured creditor classes, 78% or $2,083,647,859.13 voted to accept the Plan. 100% of the ballots cast in the GM and MDL classes voted to accept the Plan in the respective amounts of $2.57 billion and $57.2 million. Of the approximately 217,000,000 shares voted by shareholders, 78% or 170,297,851 shares voted to accept the Plan. Support expressed by creditors and shareholders of Delphi and its principal subsidiaries holding its US and global businesses were reflected in the votes of each of the principal segments of the general unsecured creditor class of the Delphi-DAS Debtors (Class 1C).
More than 70% of the ballots cast and 70% of the total dollar amount voted by Delphi's senior note claims, TOPrS claims, and all other claims (including trade claims) segments each voted separately to accept the Plan. The Company noted that one of the classes in one of the subsidiary debtors (Delphi Diesel Systems Corp. - Class 6C) rejected the Plan because less than two-thirds in amount of the ballots cast supported the Plan. In addition, depending on whether the Court allows certain other contested ballots to be counted, one additional class in each of two additional subsidiary debtors (Connection System Debtors - Class 3C and Delco Electronics Overseas Corporation - Class 5C) will have rejected the Plan based on a reduction in the percentage of dollar amounts voted in favor of the Plan below the statutory threshold. To learn more about this article, please click here!
“Despite the Possibility of a Recession, Consumer Sentiment Still Up”
by Kristopher Cartagena
According to Reuters, consumer sentiments in early January were still relatively positive, despite signs of a falling stock market, a weak job market, and the possibility of a recession looming ahead. The Reuters/University of Michigan consumer confidence reading for January was 80.5, well above the Wall Street consensus of 74.5, and higher than the 75.5 reading for the month of December. The index may reflect general consumer sentiment toward the possibility of rate cuts by the Federal Reserve Bank, as well as the introduction of the economic stimulus plan from the Whitehouse. However, considering the recent downfall of the housing market, the fall in equity prices, and the loss of jobs, one must question how much longer consumer sentiment will remain positive. To read the full article, please click here!
“Wal-Mart is Good for You”
by Aimee Bateman
"Adam Smith was probably right: An exchange of goods at low prices benefits everyone." The Federal Reserve Bank of Minneapolis just released a report of their study of the "Wal-Mart effect" for 89 counties in its region over the past two decades. Their conclusion: Wal-Mart benefits rather than harms the American economy. The study shows that between 1985 and 2003, personal income, overall employment and retail employment grew faster in counties with a Wal-Mart than in those without one. Wal-Mart is one of the greatest success stories in American business history, and 81% of those surveyed in a Pew study said it was a good place to shop. However, 24% of Americans think the company is bad for the economy, and 31% had an unfavorable view of it. This negative sentiment may be attributed to the pervasive myths about Wal-Mart and its effect on the economy. To read this article, please click here!
To see "In Picture: Ten Wal-Mart Myths," please click here!
“Did She Copy or Not”
by Teresa Duong
Although we may never know whether Avril Lavigne admitted to copying The Rubinoos' song "I Wanna Be Your Boyfriend" in her song "Girlfriend," she has agreed to settle this lawsuit in exchange for a confidentiality agreement. To read the full article, please click here!
“Axium’s Bankruptcy May Affect Northwest and UnitedHealth’s Employees”
by Eric Wolfe
Approximately 3,000 contract workers in Minneapolis are fearful that a recent bankruptcy may affect their chances of being paid for work already performed. Northwest Airlines and UnitedHealth used payroll services provided by Axium International Inc. The payroll service company filed for Chapter 7 bankruptcy earlier this month after its largest creditor filed suit against Axium based on allegations of fraud and theft. The bankruptcy had the effect of locking up wages that had been paid by Northwest Airlines and UnitedHealth to Axium but had not yet been paid to the contract workers. The bankruptcy will require Axium to divide and sell its assets in order to pay its debts. As a result, the contract workers affected may be unable to recover the portion of their wages that had been paid to Axium. For a related article, please click here!
“Email Carries the Same Power as Paper”
by Teresa Duong
A Massachusetts Appeals Court has ruled that settlements reached via email carry the same weight as those on paper. To read the full article, please click here!
