Countrywide bending the rules: You're a senior executive at the big mortgage lender and you're sitting on all these options. There's no point in exercising them now, what with the stock in the toilet. They'd just be worthless. So Countrywide is doing you a favor. It's providing a one- or two-year extension on options to buy stock (CEO Angelo Mozilo and COO David Sabol aren't included). It's an unusual move all right – wonder if they’ll offer a similar deal to investors. "That's the kind of thing that gets you in trouble with shareholders," Alan Johnson, director of an executive pay consultancy, told the WSJ.
More bad news at IndyMac: The Pasadena mortgage lender isn't an industry bellwether quite like Countrywide, but it still gets lots of attention - and this morning the company reported a $202.7 million quarterly loss - five times bigger than what had been forecast in September. As usual, foreclosures and late payments are the culprits. The company has cut its dividend in half, eliminated more than 1,500 jobs and increased reserves for bad loans by 47 percent. "We are in the midst of the most severe downturn our industry has experienced in modern times," CEO Michael Perry said in a statement. (Bloomberg)
Shady foreclosure practices: What if you didn't have to lose your house? Lenders are engaging in some not-so-savory maneuvers that could be taking advantage of struggling borrowers. And because there's little oversight in the foreclosure world, the lenders seem to be getting away with it. They're often not complying with basic stuff, like correctly computing the actual amount a borrower owes! From the NYT:
“Regulators need to look beyond their current, myopic focus on loan origination and consider how servicers’ calculation and collection practices leave families vulnerable to foreclosure,” said Katherine M. Porter, associate professor of law at the University of Iowa. In an analysis of foreclosures in Chapter 13 bankruptcy, the program intended to help troubled borrowers save their homes, Ms. Porter found that questionable fees had been added to almost half of the loans she examined, and many of the charges were identified only vaguely. Most of the fees were less than $200 each, but collectively they could raise millions of dollars for loan servicers at a time when the other side of the business, mortgage origination, has faltered. In one example, Ms. Porter found that a lender had filed a claim stating that the borrower owed more than $1 million. But after the loan history was scrutinized, the balance turned out to be $60,000.
Why did WGA talks collapse?: A great question - good luck getting an answer. Both the writers and producers are blaming each other for contract talks falling apart Sunday night, and it remains unclear who said or did what and when. Whatever happened, it’s now Day 2 and most everyone is saying that the two sides need to get together in the next couple of days to avoid turning this into a long-running stalemate. It's not exactly hopeless, though there are no signs that formal bargaining is anywhere close to being resumed. From Variety:
"I think both sides want to continue negotiations," WGA West exec director David Young said Monday. "We are not getting a divorce." But with a full-fledged strike started and lingering acrimony between the WGA and the Alliance of Motion Picture & Television Producers, prospects for resuming talks are dimming. Many already believe that the Directors Guild of America will end up riding in like the cavalry to make a deal that could lead to labor peace -- even though WGA leaders have asserted that they won't look favorably at such an outcome.
Sources close to talks said that five key sticking points were on the table at the start of talks Sunday, and those had been whittled down to just two by the dinner break. Many in both camps feel that they could have made serious progress if the talks continued. But AMPTP president Nick Counter said the talks collapsed when the companies were in caucus shortly after 9 p.m. and discovered that the WGA East website was declaring the strike had started. The AMPTP reps then asked WGA East topper Mona Mangan if that was indeed the case, and she said it was. "We asked the WGA if they'd be willing to put a pin in the strike so we could continue negotiations, and Mona and David Young said no," Counter said. "We were having dialogue and making some progress, and then we hit a brick wall. I'm shocked and chagrined over what happened." But Young said the companies had ample warning, noting that he had told the AMPTP at noon Sunday that the WGA was willing to talk all night but that it would not call off the strike.
Arnold orders cuts: The governor called on state departments to draft plans for deep spending cuts - and it's all due to the lousy housing market (that, along with a revenue system relying too much on income taxes). With next year's budget deficit possibly hitting $10 billion, everything becomes more difficult, especially borrowing. From the LAT:
The administration had been relying on increased property tax payments for an additional $1.3 billion in revenue. Experts warn that, at a time when home prices are dropping and homeowners are demanding reassessments of their property taxes, most of that money is unlikely to materialize. The state is also being forced to confront the consequences of not saving money when times were better. When the economy improved nationwide several years ago, most states erased chronic deficits and began building rainy day funds. California did not. It continued to spend more money than it brought in. "We never fixed the problem," said Chris Thornberg, a principal with Beacon Economics. "It's been Scotch tape and glue and staples and just praying we will never have to face the reality that state government is on a path that is not sustainable."
Dole loses case: An L.A. jury has awarded six Central American workers $2.8 million in damages after finding that the big vegetable and produce company concealed the dangers posed by a pesticide used in the Nicaragua banana fields. This is the first time an American jury has been allowed to decide on the dangers to farm workers in another country. The pesticide, Fumazone, has been banned in most places in the world (the U.S. banned it in 1977). The chemical fights pests which attack the roots of fruit trees, but also stops rabbits from procreating, and rendered workers, who produced it, sterile. From the LAT:
The case was widely seen as a test of how well the American legal system responds to injuries inflicted as the result of globalization. Because the harm occurred in Central America, the defendants had argued for years that the trials should take place there, rather than in Los Angeles. Jurors deliberated weeks before deciding that six of the workers were harmed by Dole, and six were not. For those workers hurt, jurors found that Fumazone was defective and its risks outweighed its benefits, and that Dole actively concealed its dangers from its own workers.
Buzzing over recusals: The California Supreme Court dismissed a major toxic tort case involving Lockheed instead of proceeding with four pro tem justices - and folks who follow this stuff are wondering why. The big rumor was that the four justices who recused themselves might have realized at the last moment that they held stock in Chevron, which merged with Unocal Corp., one of the defendants in the Lockheed case. The case involves claims by former Lockheed Martin employees, who claim they were injured by toxic exposure at the "Skunk Works" facility in Burbank. Lockheed settled for about $33 million in 1992, while six years later, ExxonMobil and Unocal were hit with $785 million in damages. (The Recorder)
LB ratifies port proposal: As expected, Harbor commissioners approved a plan to phase out dirty diesel trucks within five years (the same plan was approved last week by port authorities in L.A.). By banning older, more polluting rigs, the plan would cut diesel emissions by 80 percent. Truck turnover will take place in four phases, beginning with Oct. 1, 2008, when all pre-1989 trucks will be barred. But the phase-out does not address how fleet turnover will be funded; an earlier version called for taxicab-style concessions for trucking companies with the greenest fleets operated by employee drivers. Trucking companies oppose the concession model. (Press-Telegram)
Airfares going up: Well, what do you expect when the price of oil is approaching the century mark? Typical is American, which is raising domestic fares by $20 (round-trip). Of the 10 broad fare increases made so far this year, six have occurred in the past two months. There's always the chance that travelers will balk at the higher prices, but so far it hasn’t happened. From the WSJ:
Lacter on radio: This morning's business chat with KPCC's Steve Julian covers Wall Street reaction to the writers strike, how higher gas prices will affect the economy, and yet another effort to bring back pro football. Yesterday, I was on Larry Mantle's "Airtalk" to discuss the writers strike.