A Florida-based homebuilder has filed a plan of reorganization to emerge from bankruptcy. TOUSA builds homes in Houston under the names Newmark Homes and Trophy Homes. The plan includes a reduction in debt obligations and conversion of second lien debt to equity. There are separate Chapter 11 plans for each of the companies.
The former chief executive of Enron's broadband division pleaded guilty to one count of wire fraud. Joseph Hirko ad faced a second trial for allowing press releases to be distributed touting an operating system embedded in Enron's broadband network to allow users to pay only for bandwidth they used rather than a flat fee. The system was still under development, and that pay-as-you-use feature never materialized. The plea deal requires Hirko to serve a year to 16 months in prison and forfeit $7 million plus about $1.7 million in deferred compensation. Sentencing is set for March 3rd.
President Bush has announced a $250 billion plan by the government to directly buy shares in the nation's leading banks. He says the moves are "not intended to take over the free market but to preserve it." Banks include North Carolina-based Bank of America, San Francisco-based Wells Fargo, New York-based Citigroup and JPMorgan Chase. Bush says the federal government will use part of the $700 billion bailout law to inject money into banks "by purchasing equity shares." He says the Federal Deposit Insurance Corporation will "temporarily guarantee" most new debt issued by insured banks. The FDIC also will expand government insurance to cover all non-interest bearing accounts, aiding small businesses in covering their day to day operations. And the president says the Federal Reserve will "soon finalize work" on a new program to serve as a buyer of last resort for commercial paper.
Treasury Secretary Henry Paulson admits the Bush administration's banking industry stabilization plan was not something "we ever wanted to do." But in the current crisis, he says, it's what the U.S. "must do to restore confidence in our financial system." The plan would allow the government to directly buy shares in the nation's leading banks. Nine major banks are participating, and Paulson apparently had to pressure a few of them to take part. Paulson acknowledged that the idea of government owning part of private U.S. companies is objectionable to most Americans, himself included. But he says doing otherwise in the current crisis would be "totally unacceptable." The treasury chief emphasized that these financial institutions won't be hoarding the new capital, but using it to bolster lending--to each other and to customers.
The chairman of the Federal Reserve says the new Bush administration strategy will go a long toward shoring up the U.S. banking system. Ben Bernanke says the $250 billion plan will help ease problems plaguing financial markets and threatening the economy. However, he's also making clear that policymakers will need to take ongoing actions as necessary to battle the crisis. As any setbacks arise, Bernanke says the U.S. strategy will have to adapt to changing circumstance —"to evolve and be refined." He adds that the U.S. will "not stand down until we have achieved our goals of repairing and reforming our financial system." Also today, the Fed announced it will start buying massive amounts of short-term debt on October 27th. The effort is designed to break through a credit clog that can affect businesses and payrolls.
As leaders of European Union nations prepare for a two-day summit on economic issues, they're being urged to coordinate their actions. EU Commission President Jose Manuel Barroso says European governments can't afford to work alone on efforts to calm the financial crisis. He pointed out that stock markets didn't find their footing until the nations pulled together and agreed on a package to shore up the banking sector. Leaders are being asked to back a program agreed to Sunday by the 15 nations that use the euro. It could result in EU states buying shares in banks and guaranteeing savings and interbank loans. Barroso criticized what he calls "huge resistance" from some EU nations, like Britain, on coordinating more financial supervision.
Iceland's stock exchange has plummeted almost 50 per cent with the restart of trading on Tuesday. NASDAQ OMX Iceland had halted equities trading for three days in a bid to prevent large falls on the exchange after a turbulent week in the Nordic island nation, where the government has taken control of the country's three major banks. But the OMX Iceland 15 index still dropped 47 per cent in morning trade. Iceland has been hit particularly hard by the global credit squeeze because of its heavyweight banking sector. Its troubles also are having repercussions elsewhere in Europe where tens of thousands of private savers have accounts worth millions of pounds with branches or subsidiaries of those banks.
The federal budget deficit has soared to $454.8 billion in 2008. A housing collapse and efforts to combat the economic slowdown pushed the tide of government red ink to the highest level in history. The Bush administration said the deficit for the budget year that ended September 30th was more than double the $161.5 billion recorded in 2007. It surpasses the previous record of $413 billion set in 2004. Economists are predicting a far worse number next year as the costs of the government's rescue of the financial system and the economic hard times hit the government's balance sheet.
A federal judge in Texas has appointed a mediator for hearings between Asarco, a Tucson-based copper mining company, and a subsidiary of its former parent. U.S. District Judge Andrew Hanen named U.S. bankruptcy judge Marvin Isgur to serve as mediator. He ordered Asarco and Americas Mining Corporation to attend mediation sessions October 30th and 31st in Houston aimed at reaching a settlement on damages assessed against Americas Mining. Asarco had asked Hanen last month to award it more than $10 billion in damages and stock shares after the judge ruled that Americas, a subsidiary of Grupo Mexico, breached its fiduciary duties. Americas contends no stock should be returned and far less should be awarded.
J.C. Penney's launching a trendy moderate-priced apparel line created by Allen B. Schwartz. His A.B.S. line already is sold at upscale department stores such as Bloomingdale's. Now, his line exclusive to Penney will be called Allen B. It'll debut at J.C. Penney stores, online and via catalog next spring. The collection will range in price from $30 for a T-shirt to between $70 and $80 for a dress. Last week, Plano-based J.C. Penney announced it'll offer a clothing line by fashion designer Charlotte Ronson, starting next spring. And for this past back-to-school season, Penney introduced six new lines aimed at teens and young adults during the season, compared with last year when it introduced only one. Despite such fashion injections, Penney is facing a slowdown in sales amid challenging economic times as its consumer pulls back on discretionary items. Faced with higher gas and food prices, tightening credit and weakening job market, consumers have cut back even more as worries mount amid the financial meltdown.