Archive for December, 2008
admin on December 18th, 2008
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As the US economy continues to sour, many are concerned the $350 billion the government has forwarded to aid the nation’s banks has not filtered down to the businesses and consumers needing it. In October, Congress approved a financial bailout plan for $700 billion to increase lending and stimulate the economy, however, since then very little evidence has been uncovered to demonstrate the banks has increased lending activity. In fact, the economic statistics appear to have worsened across the nation since October.
Many critics of the congressional bailout plan complained banks had used the funds for shareholder dividend payouts and to offset bank losses rather than loaning to their perspective communities. A Congressional Oversight Panel was put into place to monitor the usage of the funds, but have been unable to unveil an effective use of the funds to date, as the mortgage meltdown and increasing unemployment continues.
admin on December 17th, 2008
The White House and Detroit automakers are still scrambling to build a bailout plan for the top 3 US automakers since a similar measure was defeated by Congress just days ago.
When confronted with the possibility of bankruptcy, US automakers have remained steady to point out that people will not buy a car from a bankrupt automaker. However, a recent survey found that 67 percent would buy a US made car regardless of whether bankruptcy was an issue of the automaker. The contention of automakers is its customers will be concerned that warranties and replacement parts production may suffer with bankrupt automakers.
Additionally, a majority of those surveyed feel that some form of government bailout should occur for three of the nation’s largest employers. The US auto industry currently employs roughly 2.5 million people, mainly in the Midwest and across the South states.
admin on December 17th, 2008
New Jersey lawmakers, with the support of NJ Governor Corzine, recently passed several economic stimulus bills to combat the state’s growing foreclosure crisis. In November, the state experienced its worst number of foreclosure filings in its history with 5000 homeowners receiving foreclosure notices. The state has allotted for nearly $50 million to address the many fronts of foreclosure.
New Jersey communities across the state are experiencing a tremendous hardship with the loss of homeowners, property tax revenue and community identity with the high rate of foreclosure. New Jersey is using $25 million to make small loans to homeowners and lenders willing to refinance homes threatened by foreclosure with more suitable loan terms. A $15 million allowance will be used to aid non profits groups purchase foreclosing homes. These homes will then be rented back to the foreclosed homeowners to prevent further deterioration of neighborhoods and increased displaced homeowners.
An additional $9 million will be used to provide legal aid to distressed homeowners facing foreclosure, renegotiating of loan terms or confronting debt collections. The new laws and financial aid are being applauded by many because the bills cover all aspects of foreclosure that a homeowner may have to face, from refinancing, to relocation and legal aspects. New Jersey homeowners also have the right to request for up to a 6 month delay of foreclosures to sort out financial affairs.
admin on December 16th, 2008
Companies considering bankruptcy are preemptively filing for Chapter 11 protection because of the difficulty of securing a debtor in possession (DIP) loan. The nation’s financial crisis has made once plentiful credit extensions a thing of the past.
Generally while a company is in bankruptcy, a DIP loan is made while reorganization of the company takes places. Financially strapped companies facing the lack of credit extensions and already over-collateralized assets are filing for bankruptcy before their cash reserves are completely exhausted. Many corporations in Chapter 11 bankruptcy are turning to hedge funds, pension plans and other less traditional money sources for DIP loans. The nation’s corporations have undergone a financing frenzy over the past few years and have reached an unprecedented level of debt. With no assets or cash, corporations could face liquidation in a bankruptcy proceeding. Companies are taking note to jump ahead of the rush and preemptively file bankruptcy as a strategy for the inevitable future, as financial experts predict another wave of financial stress for the nation next year.
admin on December 16th, 2008
The White House has been mulling over options of whether to come to the aid of the top 3 US automakers. Congress narrowly rejected a $14 billion plan to rescue the US automakers and thus prevent either company from filing bankruptcy and potentially going out of business.
General Motors and Chrysler have warned their operations are within weeks of declaring bankrupt. General Motors has begun temporarily closing 20 factories in North America and potentially laying off tens of thousands of employees. The White House is considering to use a portion the $700 billion TARP money for the auto industry rescue, but many critics remain steadfast on the principles that the TARP money was approved for the nation’s financial institutions.
In addition, government officials are concerned that if they make special concessions to bailout the automakers, other companies will operate in a more risky effort to bolster risk adverse profits while viewing the government as a financial safety net. If the White House isn’t able to create an action plan for rescuing the US auto industry soon, a new Democrat heavy congress and white house will be sure to take this issue up at the beginning of the new year. Many argue the auto industry’s approximately 2.5 million employees across the nation are a large enough issue to affect the entire nation and the white house must take action.
