Bankrupt Banker

Spanish officials acknowledged that the country's banks and companies are having difficulty finding credit

Spanish officials acknowledged that the country's banks and companies are having difficulty finding credit, underscoring the pressure Madrid faces to pursue deep structural changes to win back investor confidence. Investors are particularly concerned that Spain would be unable to supply its banks with more capital, if needed, without emergency aid from the European Union and the International Monetary Fund. Union members march in Bilbao on Saturday, calling for a general strike in the Basque region over Spain's new labor law. Spain has been scrambling in recent weeks to convince markets that it can repair both its ballooning deficit and its troubled banking sector. Spain's Socialist government plans on Wednesday to begin pushing through a controversial labor-market overhaul that seeks to address a problem that many economists say is at the heart of Europe's economic malaise: rigid labor markets that dissuade companies from investing. One big worry has been the increasing difficulty Spanish banks have faced borrowing from other banks in the so-called interbank lending market, an important source of funding that banks rely on for short-term liquidity needs. Spanish banks—including its savings banks, or cajas—have suffered massive losses amid a steep downturn in the country's real-estate market. Spanish officials have largely been quiet on the issue but on Monday Treasury Secretary Carlos Ocaña, speaking at an economics conference, said tightness of credit for Spain "is a problem." "Obviously we do need for the markets to loosen," he added.

Spanish officials acknowledged that the country's banks and companies are having difficulty finding credit

Spanish officials acknowledged that the country's banks and companies are having difficulty finding credit, underscoring the pressure Ma...

BP Plc, whose potential liability for the Gulf of Mexico oil spill has lawmakers and analysts raising the specter of bankruptcy

BP Plc, whose potential liability for the Gulf of Mexico oil spill has lawmakers and analysts raising the specter of bankruptcy, would be unlikely to avoid paying claims by seeking court protection, restructuring experts said. The spill, the worst in U.S. history, threatens wetlands, wildlife, fishing and tourism in five states. BP has spent more than $1.43 billion to stop the leak and clean it up, and to compensate local businesses and residents since the April 20 explosion of the Deepwater Horizon oil rig. The U.K. energy company faces more than 200 lawsuits, and the U.S. is assessing the cost of restoring natural resources destroyed or fouled by the spill. BP’s liabilities include $37 billion in cleanup and potential litigation expenses, according to a June 2 Credit Suisse report. While a U.S. bankruptcy may halt many claims, it wouldn’t allow BP to avoid paying for most of the cleanup and damages, said New York bankruptcy lawyer Martin Bienenstock of Dewey & LeBoeuf LLP. “It’s highly unlikely the claims would be so large that BP would pay any valid claims less than in full,” said Bienenstock, who advised General Motors Co. and Chrysler Financial Corp. in their bankruptcies. “The environmental claims and other claims would all ride through bankruptcy and be paid in the normal course.” BP said it won’t seek court protection. “We categorically deny those rumors,” said David Nicholas, a company spokesman. Lowest Price BP fell today to its lowest price in 13 years, down 48 percent from the day the oil rig blew up, killing 11 workers. The cost to protect $10 million of BP debt for a year reached $695,000, according to CMA DataVision. It was $29,000 on April 30. The shares fell 13.45 pence to 342 pence in London trading, the lowest price since April 1997. “The bankruptcy option is clearly there,” said John Olson, managing partner of Houston Energy Partners, a hedge fund unit of Sanders Morris Harris Group Inc. “BP’s board and CEO can say they’ve ruled it out, but you can’t rule it out, realistically.” Olson doesn’t hold any BP shares. On June 13, White House Adviser David Axelrod called on BP to establish an escrow account for claims tied to the spill. U.S. Senate Majority Leader Harry Reid requested that the London-based company set up a $20 billion fund administered by an independent trustee, according to a letter from his office. The Obama administration should consider placing the company in receivership to preserve its assets because BP is likely to end up in bankruptcy, said Representative Steve Cohen, a Tennessee Democrat. Louisiana State Treasurer John Kennedy agreed, saying bankruptcy is a possibility and state and federal governments need to plan for it. The spill has sullied or threatened the coastlines of Louisiana, Alabama, Mississippi, Florida and Texas. ‘Ability to Pay’ The plan by state and federal governments to stop the gusher, clean it up and compensate victims “is all predicated on BP’s ability to pay for these objectives. And I say we need a plan in the event that it cannot pay for these objectives,” Kennedy said. “I don’t want us to miss a beat in the event that BP decides to seek protection of the U.S. bankruptcy laws.” Such a U.S. bankruptcy filing, restructuring experts said, wouldn’t protect BP from liability for damage and cleanup costs stemming from the disaster. It may simply provide the company with a single venue from which to pay claims quickly. Environmental Bankruptcy In last year’s settlement of the largest-ever U.S. environmental bankruptcy, all claims were paid in full by the debtor, mining company Asarco LLC, said Gregory Evans, a lawyer at Milbank Tweed Hadley & McCloy LLP in Los Angeles. Asarco paid $1.8 billion in restoration and cleanup costs for water, land and air pollution at 100 sites across the U.S. under the auspices of the U.S. Bankruptcy Court in Corpus Christi, Texas. The Asarco court employed a process called estimation, which lets injured parties and the company present evidence of claims directly to the judge on an expedited basis. Estimation removed trial lawyers from the process and skirted years of potential delays, said Evans, who helped lead Tucson, Arizona-based Asarco through the bankruptcy. “The perception is that a company runs to bankruptcy to avoid its environmental liabilities,” said Evans. “But if the assets are there to pay a claim, and the judge decides the amount is fair, then that is what is owed.” Every Dollar Asked After a federal judge discharged Asarco from bankruptcy in December, Associate U.S. Attorney General Tom Perrelli said taxpayers got more than a dollar back for every dollar asked. BP, the largest oil and gas producer in the Gulf of Mexico, may put all or part of the company into Chapter 11 bankruptcy, said Lynn Lopucki, a law professor at the University of California, Los Angeles. That would immediately halt spill litigation against it and place all claims under the control of the bankruptcy judge, he said. “All claims could be liquidated expeditiously using the bankruptcy code’s magical estimation power, and the company could set aside an amount of stock or cash flow to pay off the estimated claims over a period of years,” Bienenstock, the New York bankruptcy lawyer, said. The alternative to seeking court protection might be a “nightmare” lasting five or 10 years as BP dealt with claims while its stock remained under a cloud, he said. Houston Energy Partners’ Olson said that while bankruptcy is “a plausible tactic” to protect BP’s North American assets, “any whisper of bankruptcy is something the short sellers would be likely to encourage.” Public Sentiment While providing an organized, single venue for addressing spill-related claims, a Chapter 11 filing might also inflame public sentiment. President Barack Obama said in an interview with NBC News broadcast June 8 that he’s looking for “whose ass to kick” and that BP Chief Executive Officer Tony Hayward “wouldn’t be working for me.” “Political pressure can change what judges do. It would be very difficult for any judge to make a ruling in favor of BP right now,” said Lopucki. “It’s better right now for BP to avoid any court decisions.” A bankruptcy filing would carry risks for BP management, including Hayward and the board, Lopucki said. “The people in charge are generally forced out,” he said. “Bankruptcy seems to accelerate the process.” BP wouldn’t succeed in assigning liability to a subsidiary that is subsequently placed into bankruptcy because creditors may seek to reverse the move, said John Penn, an attorney at Haynes & Boone LLP in Fort Worth, Texas, and a former president of the American Bankruptcy Institute. Evans, the Asarco lawyer, cited the example of Exxon Mobil Corp. and the two decades of litigation it faced over the 1989 Exxon Valdez oil spill as a justification for letting judges, not juries, resolve the claims. “Everyone deserves representation, but not to the point of the company spending 10 years circling the drain,” Evans said. “Justice delayed is justice denied, even for the company.”

BP Plc, whose potential liability for the Gulf of Mexico oil spill has lawmakers and analysts raising the specter of bankruptcy

BP Plc, whose potential liability for the Gulf of Mexico oil spill has lawmakers and analysts raising the specter of bankruptcy, would be un...

Bankers’ bonuses should be capped at 50 percent of their pay

Bankers’ bonuses should be capped at 50 percent of their pay, lawmakers on a European Parliament committee said, as they voted on tougher capital and remuneration rules for banks. Directors at banks that received public funds would also have their salaries capped at 500,000 euros ($616,000), and at least 40 percent of any bonus would be deferred for five years, under the measures approved by the assembly’s Economic and Monetary Affairs Committee in Strasbourg, France yesterday. “If bankers and traders want to leave and go to other jurisdictions, it just shows that they do not have confidence in their own performance,” Sharon Bowles, chairwoman of the committee, said in an e-mailed statement today. “To those that would leave I say good riddance.” Lawmakers around the world have blamed bonuses for the excessive risk-taking that contributed to the worst financial crisis since World War II. Sweden proposed laws last year that would force bankers in Europe to defer part of their bonus for three years and receive at least 50 percent in shares. The plans for bankers’ pay will be voted on by the whole EU Parliament in July. The measures are proposed changes to draft rules on bank capital published last year by the European Commission, the 27-nation EU’s executive body. ‘Short-Sighted’ “I think it’s extremely short-sighted,” David Buik, a market analyst at inter-dealer broker BGC Partners in London, said in a telephone interview today. “I understand the political expediency, I’m quite happy with capital requirements, but don’t kill off invention and innovation.”

Bankers’ bonuses should be capped at 50 percent of their pay

Bankers’ bonuses should be capped at 50 percent of their pay, lawmakers on a European Parliament committee said, as they voted on tougher ca...

Santander makes offer to buy RBS branches: Dow Jones < Spanish news | Expatica Spain

<a href="http://www.expatica.com/es/news/local_news/santander-makes-offer-to-buy-rbs-branches-dow-jones.html">Santander makes offer to buy RBS branches: Dow Jones < Spanish news | Expatica Spain</a>: "Spanish banking group Santander has offered the Royal Bank of Scotland 1.8 billion pounds to buy 318 branches of the British financial giant, Dow Jones Newswires reported Monday. Santander may be the only group to have put its name forward to buy the RBS branches, for the equivalent of 2.2 billion euros or 2.7 billion dollars, when a deadline passes Monday evening, said Dow Jones. RBS declined to comment. The Spanish group already has 1,300 bank branches in Britain after its takeovers of Abbey in 2004, Bradford and Bingley in September 2008 and Alliance and Leicester in October 2008. Many have already changed their branding to Santander and the rest will do so by the end of the year. Dow Jones further reported that Santander initially offered two billion pounds but dropped its offer to 1.8 billion after going over the bank's books. RBS, which is 83-percent owned by the British government after being bailed out, has until 2013 to sell its branches in line with a demand made by the European Commission in exchange for aid received in the crisis."

Santander makes offer to buy RBS branches: Dow Jones < Spanish news | Expatica Spain

Santander makes offer to buy RBS branches: Dow Jones < Spanish news | Expatica Spain : "Spanish banking group Santander has offered ...

Private bank officials involved in the trading, who spoke on condition of anonymity because they weren't authorized to comment publicly

Venezuelan officials launched a new bond-trading system Wednesday that is meant to clamp down on speculation in the country's controlled currency, setting a range of prices that makes dollars far cheaper than they were before trading was halted last month. The Central Bank set a band of permitted prices for bond trades that private bank officials said translated into exchange rates of between 4.3 bolivars and 5.3 bolivars to the dollar. The rate had soared above 8 to the dollar under the old system last month. Most of the transactions were near 5.3 bolivars to the dollar, Central Bank president Nelson Merentes said. The first day of trading involved about $17 million in transactions and there were plenty of bonds available to meet demand, Merentes told Union Radio. Demand is likely to grow in coming days as Venezuelans and businesses become familiar with the system, he said. Economists projected a rush of demand because the three-week halt in trading left many businesses starved for dollars. President Hugo Chavez has accused speculative trading of undermining the currency's value under the earlier system, which was close to a free-market rate for the bolivar. Chavez's government maintains currency-exchange controls and sets official exchange rates. It makes available only a limited amount of dollars at the official rates of 2.6 bolivars per dollar for high-priority goods, and 4.3 to the greenback for nonessential goods — forcing many businesses to trade in dollar-denominated bonds to pay for imports. The Central Bank said its band of permitted prices for bond trades is to be updated daily and posted on its website. Private bank officials said the range of rates could vary in the coming days. Fourteen banks were involved in trading Wednesday, and 26 others are expected to join Thursday, said Jose Grasso, who heads the country's banking association. Banks received draft instructions laying out tentative limits for the monthly amounts that may be traded per individual or company, Grasso told TV station Globovision, without giving details. Private bank officials involved in the trading, who spoke on condition of anonymity because they weren't authorized to comment publicly, said the rules limit companies to $300,000 a month, and individuals to $5,000 a year — with some exceptions for students and payments for health care or professional services.

Private bank officials involved in the trading, who spoke on condition of anonymity because they weren't authorized to comment publicly

Venezuelan officials launched a new bond-trading system Wednesday that is meant to clamp down on speculation in the country's controlled...

Kenneth Ira Starr, the New York investment adviser who represented actors including Sylvester Stallone and Wesley Snipes, was indicted

Kenneth Ira Starr, the New York investment adviser who represented actors including Sylvester Stallone and Wesley Snipes, was indicted on Thursday on charges of stealing at least $59 million from clients, almost double the amount previously thought. Untangling a Ponzi Scheme With a Hollywood Twist (June 7, 2010) The indictment by a grand jury in New York alleges 20 counts of wire fraud, a count of securities fraud, money laundering and fraud by an investment adviser against Mr. Starr, 66, of Manhattan.The indictment replaces a May 27 criminal complaint filed by federal prosecutors in the office of the United States attorney, Preet Bharara. That complaint claimed that Mr. Starr stole at least $30 million from seven clients. The new indictment expands the number of victims to 11.“In the less than two weeks since Kenneth Starr’s arrest, this investigation has maintained its velocity,” Mr. Bharara said in a statement. “The scope of the alleged fraud has doubled and is now up to $59 million and counting.”If convicted of wire fraud, Mr. Starr faces as long as 20 years in prison. Abbe Lowell, a lawyer representing Mr. Starr in a civil lawsuit brought by the Securities and Exchange Commission, could not immediately be reached for comment. Peggy Cross, a public defender appointed to represent Mr. Starr, did not immediately return a voice mail message left at her office after regular business hours. Mr. Starr was arrested May 27 and accused of defrauding clients, including the heiress Rachel Mellon, known as Bunny, in a scheme to buy a $7.5 million Manhattan apartment. He has been held in jail since his arrest. The government said earlier that Mr. Starr used his access to famous and powerful clients “to burnish an image of trustworthiness, leading his clients to entrust him with management and control of their financial affairs,” sometimes assuming “total control” over their financial lives.

Kenneth Ira Starr, the New York investment adviser who represented actors including Sylvester Stallone and Wesley Snipes, was indicted

Kenneth Ira Starr, the New York investment adviser who represented actors including Sylvester Stallone and Wesley Snipes, was indicted on Th...

Former Dynus CEO Carter sentenced to 15 years

Orlando Carter, former owner and president of the now-defunct Dynus Corp., was sentenced to 15 years in prison on Wednesday in a scandal tha...

BP's stock has been gushing red ink

BP's stock has been gushing red ink as investors view the fallout from a leaking oil well through a barrel-half-empty prism. With BP's stock down more than 40% since the April 20 rig disaster in the Gulf of Mexico, is it screaming, "Buy me, I'm on sale," or warning, "Sell me, more risk ahead"? BP rebounded 12% Thursday and another 3% on Friday after a 16% drop Wednesday. Analysts attributed the rally to a report from an Asian firm, Standard Chartered, which said it makes sense for PetroChina, the Chinese oil company, to buy BP. But BP still presents a dilemma for investors: Buy or sell a stock in crisis? •The bearish case. Given that there are still so many unknowable, unquantifiable facts surrounding BP and the oil spill, now isn't the time to dive headlong into the stock, despite its steep drop, says Philip Weiss, senior energy analyst at Argus Research. BP still hasn't plugged the leak, so the full extent of the environmental damage is unknown. There is no way to know how much BP will have to spend to clean up the mess and other related costs. As a result, "Taking a short-term position in BP amounts to speculation, not investing," Weiss says.

BP's stock has been gushing red ink

BP's stock has been gushing red ink as investors view the fallout from a leaking oil well through a barrel-half-empty prism. With BP...

BP on Thursday dismissed talk that it might seek Chapter 11 bankruptcy protection

BP on Thursday dismissed talk that it might seek Chapter 11 bankruptcy protection in the face of falling stock prices and threats from gover...

Caja Madrid and Bancaja said Thursday that they had reached an initial agreement that would create the largest savings bank in Spain

Caja Madrid and Bancaja said Thursday that they had reached an initial agreement that would create the largest savings bank in Spain as the country’s financial sector continues to consolidate under burgeoning debt worries. The two banks — along with five smaller cajas — may combine under a deal called a “fusión fría,” or “cold merger,” which allows them to maintain some independence while pooling liquidity as a buffer against any one lender’s woes. The news came the same day that labor unions and employers broke down, forcing the government to draw up its own labor law overhaul, which is set to be presented next week. The announcement of a possible merger of Caja Madrid and Bancaja had marked, yet opposite, effects on the cost of insuring against default at the two lenders. According to Markit data, the cost of credit-default swaps for Bancaja debt fell 122 basis points to stand at 534 basis points on Friday morning, while for Caja Madrid it rose 35 basis points to 459 — a clear indication of which bank is seeking refuge in the deal, and which is offering it.

Caja Madrid and Bancaja said Thursday that they had reached an initial agreement that would create the largest savings bank in Spain

Caja Madrid and Bancaja said Thursday that they had reached an initial agreement that would create the largest savings bank in Spain as the ...

Hedge Funds Struggle Amid Manager Scandals | Commentary | Financial Articles & Investing News | TheStreet.com

<a href="http://www.thestreet.com/story/10775197/1/hedge-funds-struggle-amid-manager-scandals.html?cm_ven=GOOGLEFI">Hedge Funds Struggle Amid Manager Scandals | Commentary | Financial Articles & Investing News | TheStreet.com</a>: "Some of the biggest victims of the Madoff scandals were investors who relied on vehicles known as funds of hedge funds. Hundreds of millions of dollars vanished from funds of funds run by Maxam Capital Management and Tremont Group Holdings. More from Stan Luxenberg Mutual Funds That Make Best of Weak MarketsValue Mutual Funds Pile Into Growth StocksHow Index Funds Distort MarketsShaken by the losses, investors fled funds of funds. Withdrawals totaled $158 billion in 2008 and 2009, according to industry tracker Hedge Fund Research. Part of what unnerved investors was that funds of funds had long been seen as relatively safe choices. The funds typically collect money from investors and put it into a pool that includes 20 or more hedge funds. The aim is to provide broad diversification. Funds of funds claim to offer security because professional managers pick the hedge funds that go into the portfolios."

Hedge Funds Struggle Amid Manager Scandals | Commentary | Financial Articles & Investing News | TheStreet.com

Hedge Funds Struggle Amid Manager Scandals | Commentary | Financial Articles & Investing News | TheStreet.com : "Some of the bigges...

2nd UPDATE: Hedge Funds Post Biggest Drops Since 2008 In May - WSJ.com

2nd UPDATE: Hedge Funds Post Biggest Drops Since 2008 In May - WSJ.com : "Nearly every hedge fund strategy lost money in May, although ...

David Carradine's widow seeks damages from film company | Film | guardian.co.uk

David Carradine's widow seeks damages from film company | Film | guardian.co.uk : "widow of David Carradine, the Kill Bill actor wh...

UK would have to double scale of cuts to match Canada's public sector bonfire - Telegraph

<a href="http://www.telegraph.co.uk/finance/economics/7809460/UK-would-have-to-double-scale-of-cuts-to-match-Canadas-public-sector-bonfire.html">UK would have to double scale of cuts to match Canada's public sector bonfire - Telegraph</a>: "20pc cut in public spending which Canada implemented in the 1990s would be equivalent today to some £140bn worth of public spending cuts, according to the Institute of Economic Affairs. This is dramatically higher than the £71bn the Conservatives signalled they would aim for ahead of the election, and would necessitate the biggest reduction in public spending on record. The warning came after David Cameron said that the imminent spending cuts, which will be spelt out by the coalition Government over the coming days, with George Osborne due to provide more detail of the mechanism for the cuts on Tuesday, would affect every Briton's life. He cited Canada as a country which successfully cut its national debt while maintaining stability and escaping recession."

UK would have to double scale of cuts to match Canada's public sector bonfire - Telegraph

UK would have to double scale of cuts to match Canada's public sector bonfire - Telegraph : "20pc cut in public spending which Cana...

The gamblers betting on Britain going bust - Telegraph

The gamblers betting on Britain going bust - Telegraph : "A small band of hedge funds is now building up a series of sizeable bets on B...