Daily Archives: November 18, 2012

‘Shadow Banking’ Still Thrives, System Hits $67 Trillion

The system of so-called “shadow banking,” blamed by some for aggravating the global financial crisis, grew to a new high of $67 trillion globally last year, a top regulatory group said, calling for tighter control of the sector.

A report by the Financial Stability Board (FSB) on Sunday appeared to confirm fears among policymakers that shadow banking is set to thrive, beyond the reach of a regulatory net tightening around traditional banks and banking activities.

The FSB, a task force from the world’s top 20 economies, also called for greater regulatory control of shadow banking.

“The FSB is of the view that the authorities’ approach to shadow banking has to be a targeted one,” the group wrote in a report, noting the current lax regulation of the sector.

Read on.

Hostess Blames Union For Bankruptcy After Tripling CEO’s Pay

Salary Increases at Hostess

Some creditors question Hostess pay raises approved in late July.

  • Brian Driscoll, CEO, around $750,000 to $2,550,000
  • Gary Wandschneider, EVP, $500,000 to $900,000
  • John Stewart, EVP, $400,000 to $700,000
  • David Loeser, EVP, $375,000 to $656,256
  • Kent Magill, EVP, $375,000 to $656,256
  • Richard Seban, EVP, $375,000 to $656,256
  • John Akeson, SVP, $300,000 to $480,000
  • Steven Birgfeld, SVP, $240,000 to $360,000
  • Martha Ross, SVP, $240,000 to $360,000
  • Rob Kissick, SVP, $182,000 to $273,008

NOTE: Some executives didn’t take full raise.Source: Creditors’ Committee court filings

Read more on the creditors questioning Hostess in court filings in April WSJ article. Click here.

KENSINGTON, Md., Nov. 13, 2012 –/PRNewswire-USNewswire/ — In a desperate attempt to break the solidarity and resolve of striking BCTGM members across the country, Hostess Brands is falsely claiming that its decision to close three of its bakeries — St. Louis, Cincinnati and Seattle — is the result of the nationwide strike against the company by BCTGM members.

In fact, according to the company’s 1113 filing with the bankruptcy court earlier this year as well as its last/best/final and non-negotiable proposal to its BCTGM-represented workers, the company was planning to close at least nine bakeries as part of its reorganization plan, although the company refused to disclose which bakeries it intended to close.  This is in addition to the three bakeries that were to be closed as a result of the company’s planned sale of its Merita division.

Moreover, St. Louis Mayor Francis Slay was quoted in a November 13 KMOX-CBS St. Louis article stating, “I was told months ago they were planning on closing the site in St. Louis… And there was no indication at that time it had anything to do with the strike the workers were waging.”

BCTGM International Union President Frank Hurt stated, “The recent claim by Hostess CEO Greg Rayburn that our strike is the reason for the closure of the three bakeries is simply not true.  That statement is a continuation of a disturbing pattern by the company of issuing public statements that are erroneous at best and disingenuous at worst.

“Our members rejected the company’s outrageous proposal by 92 percent in September. Rejection came from every corner of the country.  They were being asked to vote on a proposal with massive concessions, knowing that their plant could very well be one of those to be closed.

“Our members are on strike because they have had enough. They are not willing to take draconian wage and benefit cuts on top of the significant concessions they made in 2004 and give up their pension so that the Wall Street vulture capitalists in control of this company can walk away with millions of dollars.”

Over the past eight years since the first Hostess bankruptcy, BCTGM members have watched as money from previous concessions that was supposed to go towards capital investment, product development, plant improvement and new equipment, was squandered in executive bonuses, payouts to Wall Street investors and payments to high-priced attorneys and consultants.

On contrary, the downfall of Hostess was unions vs. hedge funds: Two hedge funds that control hundreds of millions of Hostess debt. More from CNBC John Carney:

The funds, Silver Point and Monarch, are what are known as distressed debt investors. They buy the debt of troubled companies—usually at steep discounts. Some consider them white knights who are willing to take make risky investments in companies on the verge of failure. Others say they are “vulture funds.”

Only Silver Point and Monarch could have kept Hostess out of liquidation and kept the Twinkie bakery ovens firing. But they were, ultimately, unable to reach a deal with the unions that represents the workers who make and deliver products like Twinkies, Wonderbread and Ding Dongs. Without large union concessions—what some would say, total union capitulation—the hedge funds decided Hostess would have to die.

Court systems wakes up to loan securitization

Four years ago, when the housing market bubble burst, and I became involved in securitized mortgage loan defense (not simply foreclosure defense), I learned our judicial system was like a sleeping giant – it was going to take courts time to wake up and understand the brand-new world of loan securitization, and how that world fit within long-standing principles of law. That waking-up process has seemed painfully slow at times. However, the story of Daniel presents clear evidence that judges are heading down the right path in enforcing rules of law when it comes to foreclosure cases.

Read on.

A local bank sues … itself in foreclosure action

At first glance, it appears to be a normal foreclosure case.

An Ephrata business pledged a mortgage on some real estate as security for debt owed. The borrower defaulted on the debt, and so the lender, Susquehanna Bank, filed a mortgage lawsuit.

Against itself.

In an odd and complicated case, Susquehanna Bank sued Susquehanna Bank in Lancaster County Court on Nov. 2, with the plaintiff — the bank — demanding $1.7 million, plus continuing interest, late charges, attorney’s fees and costs from the defendant — also the bank.

The case was settled Nov. 7. Bank spokesman Stephen Trapnell said no money actually changed hands, so the bank did not write a check to itself.

Trapnell said the case was not as unusual as it appeared. “It is really just a necessary procedural step to obtain clean title on this property.”

Read more: http://lancasteronline.com/article/local/780146_A-local-bank-sues—–itself-in-foreclosure-action.html#ixzz2Cbzu4cGC