Chrysler Financial Drops Industrial Bank Application

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July 09, 2009: 04:15 PM ET

DETROIT -(Dow Jones)- Chrysler Financial has dropped plans to convert into an industrial bank, raising further speculation about the future of what was the auto maker's primary lending arm.

Almost all of Chrysler's consumer and dealer lending has been transferred to the government-controlled GMAC Financial Services, but Chrysler Financial still oversees a $45 billion loan book.

Conversion to an industrial-loan bank, first sought almost four years ago, would have provided access to more liquidity and funding from the federal government.

The company didn't rule out a new application, but its move comes amid a planned crackdown by regulators on the lending arms of non-financial companies.

"Chrysler Financial continues to evaluate all options and may revise and file a new application for an industrial bank and deposit insurance at a future date, " the company said in a statement Thursday.

Chrysler's move to drop the application last month marks the first withdrawal since the U.S. proposed last month to overhaul regulation of the lending arms of non-financial companies. Chrysler Financial originally filed its application with the Federal Deposit Insurance Corp. in May 2005.

General Electric Co. (GE) and other companies have pledged to fight the regulatory proposals, which could force them to sell or spin-off consumer lending units or accede to tighter oversight and higher capital commitments.

Chrysler Financial, based in Farmington Hills, Mich., has been in disarray since Chrysler, the auto maker, announced in May that GMAC would be the primary lending source for Chrysler consumers. The change was part of Chrysler's bankruptcy process. GMAC was given industrial bank status earlier this year.

The change reduced Chrysler's Financial's portfolio, leading the company to announce a 9% reduction in its work force in June. To date, 110 of the 350 job cuts have been made. The remaining positions will be eliminated when Chrysler Financial closes its Kansas City, Mo., call center on Aug. 31.

Chrysler Financial continues to manage its portfolio of outstanding loans to dealers and consumers worth around $45 billion. The company still writes some consumer loans.

Earlier this month, Chrysler Financial sold a $1.26 billion consumer loan- backed deal under the Federal Reserve's Term Asset-Backed Securities Loan Facility, or TALF program.

It is also seeking to extend $24 billion in short-term financing, which was raised last summer through a group of 22 banks including Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Royal Bank of Scotland PLC (RBS). The financing matures on July 31.

Health Buzz: Transplant Drug May Extend Life Span and Other Health News

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Posted July 9, 2009

Transplant Drug Key to Longevity? Rapamycin Makes Mice Live Longer

Rapamycin, a medication prescribed for transplant patients, may help old mice live longer, the Associated Press reports.

A study published in the journal Nature showed that aged male and female mice who received the drug lived longer; some lived more than 50 percent longer than untreated mice. Treated female mice lived on average 14 percent longer while males lived on average 9 percent longer. In transplant patients, rapamycin suppresses the immune system, which helps prevent their bodies from rejecting the new organ. But it also reduces inflammation, so it could ward off age-related diseases like cancer, heart disease, and Alzheimer's, Reuters reports. "Rapamycin may extend life span by postponing death from cancer, by retarding mechanisms of aging, or both," the researchers wrote.

Check out these 5 common myths about aging, and learn how to avoid the 12 health risks of aging that include colon cancer, varicose veins, and muscle loss. Here are 3 wrinkle treatments that really work along with ways to prevent wrinkles from forming.

Can You Get Your Vitamins and Minerals Through Diet Alone?

With the jury still out on the benefits of vitamin and mineral supplements—including multivitamins—the mantra you'll most likely hear from doctors and nutritionists is to get your nutrients from food whenever possible. But that's not always easy, especially within a limited calorie budget, U.S. News's Katherine Hobson reports. Harvard Women's Health Watch consulted two nutrition experts to find out if a supplement-free, nutrient-rich, low-calorie diet is possible to achieve. Their conclusion: yes, with the exception of vitamin D, which is tough to obtain in sufficient quantities through diet and sun exposure alone (unless you live in the southern latitudes and spend a lot of time outside).

Do vitamins and supplements really work as weapons in fending off chronic and age-related diseases? The answer may depend on which supplements you're taking. Women may benefit from these 5 reasons to take vitamin D. Researchers reported in May that vitamin D may keep your brain healthy into old age.

How to Use Tylenol So It's Safe for Your Kids

The Food and Drug Administration is considering banning infant Tylenol as part of its efforts to reduce the risk of potentially fatal liver damage that can be caused by high doses of the ingredient acetaminophen. The popular painkiller also poses liver risks to adults. For advice on how to reduce the risk of using Tylenol, U.S. News enlisted Bernard Dreyer, a pediatrician who studies how parents use children's medications. Dreyer says the plastic dosing cups that come with Tylenol are very hard to use accurately, and as a result, 5 to 10 percent of parents give twice as much of the medicine as called for. Parents should pick the dose based on a child's weight, rather than age. That's a much more accurate dosing method, Dreyer says. Also beware of infant Tylenol, he advises. It is actually three times as strong as regular children's Tylenol, but many parents presume it's less strong. Dreyer and his colleagues have found that parents often get confused and give, say, a 2-year-old a teaspoon of the infant formula, which is three times as much as she should take.

In June, FDA advisers voted to lower the maximum dose of acetaminophen on over-the-counter drug labels. Consider 4 ways to avoid dangerous drug errors and 5 dangerous drug combinations you need to avoid.

Financial Watchdogs Say Mortgages a Greater Percentage of Fraud Reports

 

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Fraud connected to mortgage applications helped push overall filings of suspicious activity reports by financial institutions to a record level, according to the Financial Crime Enforcement Network.

FinCEN reported that mortgage fraud related SAR filings increased 23% in 2008, moving from 52,868 in 2007 to 64,816 in 2008.

FinCEN reported its analysis of the data suggests some possible reasons for the increases. Fraud may be reported in association with other suspected crimes, or a SAR may indicate several types of suspected fraud being perpetrated by the same suspect. For instance, of the total number of reported instances of identity theft SARs filed by depository institutions, approximately 35%  were listed in combination with credit card fraud and/or one or more other violations such as check fraud or consumer loan fraud.

“While increases in reporting of suspected fraudulent activity could mean that there is an increase in fraud, it also reflects an increase in awareness within financial institutions detecting such activity,” said FinCEN Director James H. Freis, Jr. “For example, institutions that file SARs are more aware today of the types of mortgage fraud being perpetrated, and are more likely to file a SAR. I hope our data and our outreach to the industry continues to facilitate that.”

Radical Reform Idea Is Based on Financial Incentives

 

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What if financial incentives for providers, insurers, employers and consumers were the starting point of reform? The healthcare consultant and health policy expert Bob Laszewski has thought deeply about the answer to that question and come up with a unique reform plan he calls the Health Care Affordability Model.

In a nutshell, Laszewski is proposing that if a health plan cannot keep its annual cost growth under a certain level, any employer choosing that plan will not be allowed to deduct the cost of that insurance from its taxes. Any employee who picks the same plan will have to pay tax on the value of his employer’s health benefit. Laszewski believes that this would cause insurance companies and providers to work together to reduce the cost of care, because neither would want to be placed at a competitive disadvantage to other plans and providers that kept their costs down instead of merely passing them on to employers and consumers.

The proposal has many strengths—not the least of which is that it does align the incentives of all the major stakeholders. It does not rely on global budgeting, across-the-board fee cutting, or government-imposed rationing. While every insurer would have to offer a standard benefit package, they would be free to sell other plans that had richer or leaner benefits. Self-insured employers, similarly, could offer whatever benefits they wanted. And providers would be free to join any networks they wished to. However, if they were in networks of plans that did not qualify as cost-effective, they would see far fewer patients. Laszewski suggests that in the third year of his program, the allowable cost growth of the standard plan be no more than 175 percent of GDP growth, phasing down to 100 percent by the seventh year.

Laszewski’s plan could slow spending growth, but it needs to be fleshed out some more. I’d add these caveats:

•    While the proposal mentions universal coverage, it doesn’t call for an individual or an employer mandate. Laszewski does note that his idea could be coupled with any of the reform plans now on the table, some of which do include mandates.
•    Even if providers had the incentives to reduce waste and deliver only appropriate care, the healthcare system remains too fragmented for them to carry out that program. So Laszewski’s proposal would have to be linked to something like the accountable care organization idea to be practical.
•    If health plans had to cut costs to compete, it’s possible that they might consolidate even further to drive harder bargains with providers.
•    Tying the cost growth limit to the GDP, rather than to general inflation, has some problems: for example, this year the GDP will contract.
•    He talks about insurers and providers reducing administrative costs, but doesn’t explain how that would happen in a system with many insurers and plan administrators.
•    Consumers would have an incentive, not only to choose cost-efficient plans, but also to take better care of themselves, Laszewski suggests. Well, maybe, but they’re not going to be happy when their doctor tells them they can’t have the test they want.

Bottom line: Bob Laszewski has made a very creative and potentially fruitful addition to the health reform discussion. We need more ideas like this that don’t keep crossing the same ground that we’ve fought over for years.

Lynn Niedermeier steps down from Invest Financial

 

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• Invest Financial Corp. said Lynn Niedermeier has decided to retire and will resign her position as president and chief executive of the firm.

Niedermeier has served as Invest’s president and CEO since 2001.

Jim Livingston, president of the National Planning Holdings Inc. broker-dealer network, which includes Invest Financial, will assume Niedermeier’s responsibilities on an interim basis.

Livingston, who is based in Denver, will spend time at Invest Financial’s Tampa headquarters, where he will work with the firm’s management team, including Niedermeier, to ensure a smooth transition.

Invest Financial is a full-service broker-dealer.

BFC Financial, Woodbridge to merge

 

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BFC Financial Corp. and Woodbridge Holdings have announced a merger agreement that could simplify the corporate structure of the network of companies controlled by Alan B. Levan and John E. Abdo.

In a joint press release Monday, the Fort Lauderdale-based companies said they entered into a merger agreement wherein Woodbridge (Pink Sheets: WDGH) would become a wholly-owned subsidiary of BFC (Pink Sheets: BFCF). BFC currently controls majority voting stakes in both Woodbridge and BankAtlantic Bancorp (NYSE: BBX). BFC lost $58.9 million on revenue of $487.5 million in 2008.

Woodbridge owns Core Communities, which is building Tradition Florida in Port St. Lucie, and has investments in various companies including Bluegreen Corp. and Office Depot. Woodbridge lost $140.3 million on revenue of $25.5 million in 2008.

In its first quarter earnings report, Woodbridge warned that Core Communities could default on the loans for Tradition Florida if its lenders demand that it put more equity capital down.

Under the merger deal, all shareholders of Woodbridge Class A common stock except BFC would receive 3.47 shares of BFC’s Class A common stock per share.

With shares of BFC opening at 40 cents Monday, it equals nearly $1.39 a share for each share of Woodbridge, which opened at $1.10 Monday.

Levan and Abdo are chairman and vice chairman, respectively, of both companies.

The agreement would include all current board members of Woodbridge on BFC’s new board and add Woodbridge President Seth Wise and BankAtlantic Bancorp President Jarett Levan to BFC’s board, as well. Wise would also become executive vice president of BFC.

The deal is expected to close before the end of 2009.

BFC shares were up 3 cents in late morning trading. The 52-week high was 95 cents on Sept. 2. The 52-week low was 6 cents on Feb. 5.

Woodbridge shares were down 15 cents to 95 cents in late morning trading. The 52-week high was $6.60 on Aug. 21. The 52-week low was 2 cents on Oct. 24.

Financial Woes Have Coyotes Signing Discount Players

 

 

The National Hockey League’s free-agent signing frenzy began this week, and the big-market Chicago Blackhawks and New York Rangers are throwing eight-figure contracts at superstars Marian Hossa and Marian Gaborik.

Meanwhile, the Phoenix Coyotes, who are operating under Chapter 11 bankruptcy protection, are shopping in the discount section.

Among the Coyotes’ significant signings is goalie Jason LaBarbera, who won just eight of 24 games last season for the Los Angeles Kings and Vancouver Canucks. The team also netted aging journeyman

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defenseman Adrian Aucoin.

Although terms were not disclosed, neither signing is expected to stretch the Coyotes’ budget too much. Last year, the money-losing team spent about $43 million on its roster, more than $10 million below the maximum NHL teams are allowed to spend.

Finances this year may be even more closely scrutinized as a battle over who will own the team, and where the Coyotes will play, happens in bankruptcy court.

Coyotes General Manager Don Maloney conceded he’d like to have the same money to spend as the league’s more prosperous team, but at this point, he’s limited.

“We’re not going to be able to go out and grab that scorer who is an All-Star,” Maloney told The Associated Press this week.  But, “there’s enough room in this budget to put a good team on the ice, and to continue to get better.”

The Coyotes, who have never turned a profit since moving to Arizona from Winnipeg, filed for bankruptcy in May after majority owner Jerry Moyes refused to backstop the team’s losses.

Moyes sought to sell the team to BlackBerry mogul Jim Balsillie, who would move the Coyotes to Canada, but the NHL is backing a rival bid that would keep the team in suburban Phoenix.

Financial repairs must continue: central banks

 

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Jaime Caruana, general manager of the Bank for International Settlements, right, and Stephen Cecchetti, the group's chief economist at a news conference in Basel on Monday

Bank for International Settlements sees only ‘limited progress' so far, urges perseverance in fixing system despite possible backlash

 

Heather Scoffield

Ottawa — Globe and Mail Update Last updated on Monday, Jun. 29, 2009 02:25PM EDT

Governments and central banks must not let up in their efforts to revive the global banking system, even if public opinion turns against them, says the institution representing major central banks.

“It is essential that authorities persevere in repairing the financial system until the job is done, because as long as financial institutions are hesitant to finance economic activity, the prospects for growth are at risk,” Jaime Caruana, general manager of the Bank for International Settlements, told reporters on Monday after the bank's annual general meeting in Basel, Switzerland.

A solid and lasting fix of the system means forcing the banking system to: take losses; dispose of non-performing assets; eliminate excess capacity and rebuild the capital base.

While some authorities and financial institutions around the world have taken numerous steps to nurse banks back to health, the BIS sees only “limited progress.”

Instead of implementing policies designed to clean up banks' balance sheets, some rescue plans have pushed banks to maintain their lending practices of the past, or even increase domestic credit where it's not warranted, the BIS pointed out.

“Progress on problem assets has been slowed by the complexity of the securities affected, legal constraints and, above all, the limited political will to commit public funds to the clean-up effort,” the institution's annual report says.

“The lack of progress threatens to prolong the crisis and delay the recovery because a dysfunctional financial system reduces the ability of monetary and fiscal actions to stimulate the economy.”

That's because without a solid banking system underpinning financial markets, stimulus measures won't be able to gain traction, and may only lead to a temporary pickup in growth, the report says.

A fleeting recovery could well make matters worse, the BIS warns, since further government support for banks is absolutely necessary, but will become unpopular if the public sees a recovery in hand. And authorities may get distracted with sustaining credit, asset prices and demand rather than focusing on fixing bank balance sheets, the report said.

The BIS analyzed the causes of the financial and economic crisis, quantified the rescue attempts and assessed the chances of success going forward. It warned that despite the unprecedented measures in the form of fiscal stimulus, interest rate cuts, bank bailouts and quantitative easing, there is an “open question” whether the policies will be able to stabilize the global economy.

And as governments bulk up their deficits to spend their way out of the crisis, they need to be careful that their lack of restraint doesn't come back to bite them, the central bankers said. If governments don't communicate a credible exit strategy, they will find it harder to place debt, and could face rising funding costs – leading to spending cuts or significantly higher taxes.

“Getting public finances in order will therefore be the main task of policy makers for years to come,” the annual report said.

In the future, developed countries that previously relied on leverage to propel growth need to change their borrowing patterns, Mr. Caruana added. And developing countries that were dependent on exports need to shift production so that it is partly based on domestic demand.

“Not everyone can export their way out of the crisis,” said Stephen Cecchetti, chief economist for the BIS.

The crisis has shown that central bankers will need to pay far more attention to credit flows and asset prices, the BIS said, although it stopped short of recommending that central banks actually target asset prices with their monetary policies. Rather, central banks should analyze credit and asset prices, and sound warnings if bubbles are forming.

What Would Obama’s Planned Consumer Financial Protection Agency Do?

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The Treasury Department sent 152 pages of legislation to Capitol Hill on Tuesday that spells out in detail its plan for the creation of a new Consumer Financial Protection Agency. The banking industry is already mobilizing to fight the proposal but Democrats are pushing for it aggressively.

According to the draft legislation, Treasury’s plan would:

• 1) Give the agency broad authority to write rules about services or products including:
  a. Deposit-taking activities
  b. Extending credit and servicing loans (this could include mortgages, credit cards, etc.)
  c. Check-guaranty services
  d. Collecting, providing, or analyzing consumer report information
  e. Providing real estate settlement services, including title insurance
  f. Leasing personal or real property
  g. Investment advisers that aren’t already regulated by the CFTC or SEC
  h. Processing financial data
  i. Sale or issuance of stored value cards
  j. Acting as a money service business
  k. And any other activity the agency defines as a rule, except for most types of insurance, which are exempt.
• 2) Give the agency five board members, four of whom would be appointed by the President and confirmed by the Senate and the fifth would be the head of the regulator overseeing national banks.
• 3) Appropriate money to run the agency while also allowing the agency to collect annual fees or assessments from companies it supervises. The bill would also establish a victim’s relief fund for penalties collected by the agency.
• 4) The agency’s objectives would be to make sure consumers can make informed decisions about financial products and services, protect them from abuse, make sure markets operate fairly and efficiently, and ensure that all consumers have access to financial services.
• 5) Permit the new agency to prohibit or place conditions on mandatory pre-dispute arbitration agreements between consumers and firms such as credit card companies “if doing so is in the public interest and for the protection of consumers.”
• 6) Ensure that any rule adopted by the new agency would new preempt state law “if State law provides greater protection for consumers.”
• 7) Allow state attorneys general would be allowed to bring law suits for violations of new federal rules.
• 8) Allow the new agency to file subpoenas to collect information for the companies they oversee.