Archive for May, 2009

NEW YORK: The price of gas, rising for the 33rd straight day, has reached 2.50 a gallon, motorist group AAA reported Sunday.The spike of more than 20% in a month is hitting Americans in their wallets and causing concern among some experts. The jump in one of consumers’ staple purchases comes at a fragile time for the economy. Recently some measures of housing, spending and credit have hinted that the most severe parts of the recession may be easing.At the same time, gas has jumped in price as the American auto industry is on the verge of a dramatic reshaping amid plummeting vehicle sales.According to AAA, the national average price for a gallon of regular unleaded gas has edged up to 2.502, from 2.488 the day before.Late spring is typically a time of year when people drive more. But rising gas prices could cause people to stay home. That would mean less spending, which could dampen governments efforts to stimulate the economy.0:00
/2:24Summer pump jump”There’s way too much optimism about a driving season lift,” said Tom Kloza, chief oil analyst for the Oil Price Information Service. Kloza said the impact will be especially painful in economic “sore spots” like California, Florida, Arizona and the rural South. Currently, the highest gas prices are in Hawaii, where prices average 2.789 per gallon, and Alaska, where the average is 2.751. In the lower 48, the highest prices are in two of the states hardest hit by the recession: California (2.746) and Michigan (2.745). Michigan suffers the highest unemployment rate in the nation — 12.9%. California is close behind at 11%. The next most expensive states for filling up are:Illinois, 2.692 Washington, 2.677 Wisconsin, 2.647 New York, 2.634 Indiana, 2.618 Ohio, 2.618 Connecticut, 2.615 The cheapest gas can be found in South Carolina, where the average is 2.309 a gallon.Despite the recent surge, the average price of a gallon of gas remains well below its all-time peak of 4.114 on July 17, 2008. But the repercussions of the 2008 gas spike are still being felt.Last year’s gas price spike severely hampered demand for SUVs and trucks, hastening the downward spiral for the Big Three automakers. Chrysler filed for bankruptcy on April 30 and is awaiting a ruling from a federal judge as to whether it may sell its assets and form a new company. General Motors (GM, Fortune 500) is expected to file for bankruptcy next week and its stock price is trading below 1 a share for the first time since the Great Depression.

GM bosses discuss bankruptcy plan
Senior executives at General Motors are expected to meet later to discuss proceedings for a widely expected filing for bankruptcy protection.They are likely to firm up the details of how to completely restructure what was once the world’s largest car company, under judicial supervision. GM’s sales have been hit hard by the financial crisis and the firm has received 20bn (12bn) in state aid. President Barack Obama will give full details of the restructuring on Monday. He is scheduled to hold a press conference on the plan at around 1400 GMT (1500 BST) on Monday. The Obama administration had given GM a 1 June deadline to submit a viable revival plan or file for bankruptcy. A Chapter 11 bankruptcy filing by GM would rank as one of the largest bankruptcies in US history. GM’s European arm, which makes the Vauxhall and Opel brands, will likely be spared bankruptcy following a deal by Canadian car parts maker Magna to buy GM Europe. However, unions fear that jobs may be lost at Vauxhall plants in Luton and Ellesmere Port, which employ 5,500 people. Jobs may also go in Belgium, Poland and Spain. Creditors keyThe support of GM’s creditors will be key to orderly bankruptcy proceedings.
Investors turned down an earlier deal to swap their 27bn worth of GM corporate bonds – IOUs issued by big companies – for a 10% stake in GM. This made bankruptcy all but inevitable. However, bondholders with slightly more than 50% of GM’s bond debt agreed to support a new restructuring plan although this is not seen as enough to prevent bankruptcy, the New York Times reported. That plan would split General Motors in two – “Old GM”, with all the “bad” assets like defunct car plants – and “New GM”, which will own the “good” assets, such as viable factories and brands like Chevrolet and Cadillac. The bondholders were offered up to 25% of “New GM” if they would come on board. But it is still possible that dissident bondholders may mount legal challenges in the bankruptcy court. Meanwhile, a US bankruptcy court judge in New York is expected to approve a deal between US carmaker Chrysler and Italy’s Fiat on Monday. The third biggest US automaker has declared bankruptcy and is seeking a tie-up with Fiat to save the company from liquidation.
Source:BBC

Ugly choice for GM creditors
By Greg Wood
BBC News, New York
When investors lend money to a company, they expect to get it back.But those who lent 27bn to General Motors when they bought its corporate bonds – the IOUs issued by big companies – risk losing the lot. Their only alternative is to accept a shareholding in a new company with a very uncertain future. It is an ugly choice. The bondholders turned down an earlier deal to swap their 27bn for a 10% stake in General Motors. They thought that was too little for the amount of money they were owed. But the deal was a vital part of GM’s plan to reduce its debts and avoid bankruptcy. Without an agreement, bankruptcy became inevitable. New offerShortly after that deal collapsed, the US government’s motor industry task force, which has been handling all the talks, approached the bondholders with a new offer.
It wanted to make sure that they would support its bankruptcy plan. That plan will split General Motors in two – “Old GM”, with all the “bad” assets like defunct car plants – and “New GM”, which will own the “good” assets, such as viable factories and brands like Chevrolet and Cadillac. The bondholders were offered up to 25% of “New GM” if they would come on board. After a few hours deliberation, a committee representing a fifth of the bondholders accepted on Saturday. “It’s enough for me to have moved from rejecting the deal and trying our luck in bankruptcy court to the side of recommending the deal,” one leading investor said.
So, what are the bondholders really getting out of this? Well, they will only receive their full 25% stake in “New GM” if it achieves a market value of 30bn. In other words, “New GM” has to survive and thrive in a cut throat car market, or at least do well enough to support a strong share price. This is sensible. Bondholders do not want to end up owning extra shares which have little or no value. But it is a tough challenge for General Motors, and one which goes to the heart of the company’s problems – its failure to compete. The 27bn of bondholder debt will stay with “Old GM”. As senior creditors they may get some money back when unwanted assets, such as shuttered car plants, are eventually sold off to property developers or the like. But it will only be a tiny fraction of what they are owed. Disparate bunchWill bondholders support the bankruptcy process? Most of them have pledged to do so. But they are a disparate bunch, ranging from large hedge funds to “mom-and-pop” investors. Their interests do not necessarily coincide. It is possible that dissident bondholders will mount legal challenges in the bankruptcy court. Many of them have bought “credit default swaps” – insurance policies which will pay out if General Motors defaults on its debts. They may view the certainty of that payout as preferable to the uncertainty of a punt on the future of “New GM”. It is a cautionary tale. Investors have been inclined to view corporate bonds as a relatively safe investment. But companies do go bust – even those with a history as glorious as General Motors.
Source:BBC

Analysis: Opel’s survival still at stake
By Tim Weber
Business editor, BBC News website
So this is it, the end of General Motors as we know it.Once the world’s largest carmaker, the one auto company whose operations truly spanned the globe, it is now officially falling apart, with its pieces either being sold off or about to go into bankruptcy protection, which is expected to happen on Monday. Yes, GM will remain, a mere shadow of a former giant. But the deal struck in Berlin will not be the end of the wrangling over Opel. Weeks of detailed negotiations are ahead, which means prolonged uncertainty for Opel’s and Vauxhall’s workers, customers, dealers and suppliers. And it still may fall apart. Some analysts believe the merger has at best a 30% chance of going through.
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If it happens, Opel management will have its work cut out to balance the interests of its four main shareholder: GM, which could end up with a 35% minority stake, Russia’s Sberbank with a similar share, Magna with a mere 20% holding, and 10% in the hand of Opel workers and pensioners. Looming in the background will be GM creditors in the United States, the US Treasury, and most importantly various European governments, not least that of Germany. It is the perfect recipe for corporate dithering and avoiding tough choices. Expensive mergerNot that the alternative would have been any better. Fiat – the Lazarus of European car-making – will have its hands full with Chrysler. It may succeed where previous owners Daimler and Cerberus Capital Management failed. It is doubtful whether it would have been able to solve all of Opel’s problems on top of that. So is the threat of an Opel insolvency gone for good? The short answer is no. Even one of the politicians that hammered out the deal is not too sure. German Economics Minister Karl-Theodor zu Guttenberg argues that it might have been better to let Opel go into bankruptcy protection, restructure the company, and relaunch it in the market. It certainly might have been cheaper for the German taxpayer. A study compiled by his ministry seems to suggest the 1.5bn euro bridging loan and other help might come more expensive than an Opel insolvency – even including the cost of job losses and all the still generous welfare payments. Five big hurdlesApart from finalising the merger deal, Magna and friends now have to tackle five big issues: Has the separation of GM and GM Europe worked, or will next week’s bankruptcy proceedings at General Motors have a knock-on effect on its former European operations? After all, GM has said clearly that it wants to keep its Opel connection alive. Will buyers take fright? Until very recently, Opel and Vauxhall cars were buyers’ favourites across Europe. Opel is no Rover. But if any confidence issues sneak in – about the validity of warranties, the supply of spare parts etc – there are plenty of rivals to supply competing products. Can suppliers still afford to trade with Opel? With credit insurance hard to come by, Opel might have trouble getting all the parts it needs (although German government backing should help). Magna knows a lot about the car industry, but as parts maker, not car manufacturer. Does it have the expertise to turn around an operation that reportedly made a loss in nine out of the past 10 years? And most importantly, how can it staunch these losses? Which costs can be cut, which factories need to be closed, how much political pain can Magna and its partners inflict on the governments that are bankrolling the merger? Who is safe?As Germany put the most money on the table, it managed to negotiate that all four Opel factories in the country will survive, (with just 2,600 jobs set to disappear). This leaves Opel’s other European operations badly exposed. In the UK, it could mean the closure of one plant, probably Luton. In Belgium, Poland and Spain workers will also be fearful for their jobs. Safest are probably Opel’s Russian operations. After all, the involvement of Sberbank hints at big plans for the Russian market. Left behind are the workers of Saab, GM’s Swedish subsidiary. They are not part of the deal, and General Motors still hopes to find a buyer. The problem: Much of what makes a Saab these days is actually based on Opel engineering. Any buyer would have to start from scratch to return Saab to its old engineering glory. Opel has been given a breathing space, and a perspective. The corporate all-clear, though, is still years away, not least because Europe’s car industry has far too much capacity. Had Opel failed, supply and demand across Europe’s car market might have been more in sync. Its survival may be good news for its workers. For the rest of the industry it will prove to be a millstone.
Source:BBC

BERLIN (CNN) — A Canadian auto parts supplier has come to the rescue of German carmaker Opel, negotiating a deal with the German government that will save the company from insolvency.Officials from all sides announced the agreement after talks lasting into the early hours of Saturday.German Foreign Minister Frank-Walter Steinmeier called it a “responsible solution” that would preserve the highest number of jobs.Under the terms of the deal, supplier Magna will have a 20% stake in GM Europe, an arm of General Motors, which owns the Opel brand.Russia’s Sberbank will own a 35% share, Opel employees will have 10%, and General Motors will retain a 35% stake, according to GM spokesman Joerg Schrott.The German government will provide a bridge loan to keep GM Europe operating in the short term.The deal ensures that General Motors’ European assets — which also include the Vauxhall car brand in Britain — will be unaffected by GM’s expected bankruptcy filing.Magna warned during negotiations that it would have to cut about 10,000 jobs. General Motors has around 55,000 employees in Europe.About 2,000 of the job cuts would be in Germany, Magna has said, but a top company official tried to reassure the Germans that it would try to protect the company as much as possible.”We will, and I want to stress that again, preserve all the German Opel locations,” said Magna co-Chief Executive Siegfried Wolf. “We’re keen to have talks with all the states where Opel has factories in the next few weeks and are confident to be able to find solutions to preserve jobs, because every job that is lost is one too many. We will work with Opel management to try to avoid those job losses.”Steinmeier told reporters that such risks can’t be avoided.”But,” he said. “I think we have found a responsible solution with private investors and interim funding from the state. It is a solution which preserves Opel’s location in Germany and also preserves the highest possible number of jobs.”German Finance Minister Peer Steinbrueck said early Saturday that the country has guaranteed transitional credit for Opel of 2.1 billion. In addition, a trust will be created where Opel’s stock will be parked prior to the division of shares.Along with Sberbank, Russia’s biggest bank, Russian automaker GAZ Group will provide some financing, said Andrzej Kasperek, director of corporate business development with GAZ.”I think the whole arrangement with Magna and the Russian partners made this a very attractive deal for GM,” Kasperek said. “Opel is very well regarded as a brand. But we think we can increase sales in the next five years.”Financially strapped General Motors (GM, Fortune 500) is expected to announce as soon as Monday that it is filing for bankruptcy.”Opel has received a perspective for the future,” said German Chancellor Angela Merkel after the agreement was reached. “That is a chance for the employees, who have earned it, as I find, because they are not to blame for the situation but instead big mismanagement in the United States of America at GM.”Merkel said the German government did “what it had to do” in rescuing Opel.”I had an open exchange in a phone call with the American president, and we agreed that we do everything to bring this complex task to a good conclusion. And this clearly set the tone for the negotiations,” Merkel said.

Source:CNN

(CNNMoney.com) — Chrysler and GM employees are on the edge of their seats, waiting to find out what will be left standing after the dust settles. Meanwhile, a vast network of companies outside Detroit are bracing for impact.Ready or not, the thousands of dealerships and suppliers to the auto goliaths are going to feel the aftershocks of the industry’s titanic shift. But the owners have mixed feelings about what the future holds for their companies.Caught between the bankruptcy of Chrysler and the anticipated bankruptcy of General Motors (GM, Fortune 500) is Patrick Berrang of Waynesboro, Va., one of the nearly 800 dealers who received a note from Chrysler saying that his dealer agreement had been severed. Before he received the letter, 70% of Berrang’s business was Chrysler vehicles and the remainder was GM brands such as Pontiac, GMC and Cadillac.”I hope the judge is sympathetic,” Berrang says of his petition to remain a Chrysler dealer. “I didn’t see this coming at all. Now, they’ve only given me three weeks to shut down, but if I had sent in an application to become a Chrysler dealer, it would take more than three weeks for them to get back to me!”GM has said it plans to pare its network of 6,000 dealerships to as few as 3,600 by next year, and Chrysler is seeking to terminate nearly 800 dealers. The jobs of tens of thousands of employees are at stake.Berrang has 30 employees, but anticipates scaling that down to eight or fewer, depending on the outcome of his Chrysler petition and GM’s bankruptcy ultimatums. He says that if GM cuts him loose, he’ll be forced to sell only used cars to keep his business alive. “The worst case scenario is losing both franchises. If that happened, it would take a miracle to seek and sign up with another franchise,” Berrang says.Suppliers are also in limbo at the moment, awaiting news of which vehicle lines will live to see another day. But while some suppliers are struggling to stay alive, others are well positioned to take advantage of the auto manufacturers’ new business models. Robert Adams, vice president of manufacturing at Camaco LLC, is excited to see that GM is focusing on cutting costs by direct sourcing from tier two suppliers like his company. Camaco makes seat frames, headrests and armrests and traditionally passes those parts to tier one suppliers who assemble them and pass the completed car seat to the OEM. Several years ago, Camaco, based in Novi, Mich., started working directly with Ford, alongside Ford’s tier one suppliers, to create seats for its new lines of cars. “It didn’t make us a tier one supplier, but it sort of made us a tier one-and-a-half supplier,” Adams explains. “And the result was that we could get more direct access to the OEM, better take care of the engineering requirements and generally be more efficient.”Adams says that in his 40 years working in the automotive industry, this downturn is the most insidious yet. He has had to shrink overhead and reduce staff in areas of Camaco that make products for large vehicles. But he’s optimistic that if GM emerges to follow in the footsteps of Ford (F, Fortune 500), his company will be poised to increase business with them.Berrang hopes for his dealership’s sake that GM, regardless of its new business model, will treat him better than Chrysler did if the company chooses to close his doors.”I hope they will at least honor the current dealer agreements through October 2010,” he says. “I hope they give us 60 to 90 days notice if they don’t renew it, followed by a chance to appeal it.”

Source:CNN

NEW YORK (Reuters) — Bank of America Corp lead director O. Temple Sloan resigned from the largest U.S. bank’s board of directors Friday.Sloan, who was on the bank’s board for 13 years, was chairman of the executive committee and the compensation and benefits committee. He also served as a member of the bank’s corporate governance committee.Bank of America’s Chief Executive Kenneth Lewis stepped down as chairman of the board last month, after shareholders at the bank’s annual meeting voted against re-electing him to this role.At that meeting, Sloan survived a vote against his re-election as lead director.0:00
/1:56Banks face good, bad and uglyShareholders in the Charlotte, North Carolina bank have been angered by Bank of America’s Jan 1 purchase of Merrill Lynch & Co, and the directors’ failure to quickly disclose huge losses that Merrill was amassing even as it was paying out 3.62 billion in bonuses to employees.The bank said in a statement Sloan’s resignation is effective from May 26.Bank of America (BAC, Fortune 500) shares finished narrowly lower in Friday trading.

Source:CNN

NEW YORK: Once the bankruptcy process at General Motors plays itself out, what will the company be worth?It’s more than an academic question only of interest to Wall Street traders. It will determine how much money taxpayers can expect to recoup from multiple bailouts of GM. When all is said and done, the Treasury Department is likely to pump more than 50 billion into GM (GM, Fortune 500) — including loans made to the automaker last year.It is also key to determining the level of future health insurance benefits for hundreds of thousands of GM retirees and how much money holders of 27 billion on GM bonds, including pension funds and individual investors, will be able to recover.GM is widely expected to file for Chapter 11 bankruptcy protection on Monday. As a result, the government, bondholders and a trust fund controlled by the United Auto Workers union will wind up owning virtually all the stock in a reorganized GM. (Current GM shareholders will essentially have their holdings wiped out through bankruptcy.)So taxpayers, retirees and bondholders need for shares of a new, leaner GM (GM, Fortune 500) to start trading for them to stand any chance of benefiting from the company’s emergence from bankruptcy. Unfortunately, these new owners probably won’t know until at least 2010 just how much money, if any, they will recover.GM’s most efficient plants, dealerships, brands and other assets could exit bankruptcy within two to three months. 0:00
/02:46Coming to U.S.: GM’s Chinese carsHowever, it will take at least 6 to 18 months for the bankruptcy court to wade through the company’s unprofitable plants, most of its debts and other liabilities, according to a senior Obama administration official. During that time GM stock is unlikely to be publicly traded.But even once shares of GM do begin trading again, it’s highly uncertain what the company could be worth. 25 billion: too high or unreasonably low?According to a filing by General Motors late last month, the company estimated the equity value of its common stock would be about 25 billion once it completed a reorganization.That’s substantially higher than the market value of about 450 million that GM was worth based on Friday’s closing stock price of just 75 cents a share. But that last time GM was worth as much as 25 billion was late 2007.A new company, with a greatly reduced debt burden, fewer plants and lower labor costs, could end up being an attractive investment. But auto analysts and other experts are reluctant to speculate on exactly what GM’s value could be following bankruptcy. Len Blum, managing director of Westwood Capital, an investment bank, said he thinks there’s a better chance for taxpayers to recover money from their investment in GM than with insurer AIG. Taxpayers also have a majority stake in that company, and the government has kicked in more than 180 billion so far to keep AIG afloat.Blum said that given the reduction in GM’s debt level and operating costs that are being planned, there could be “some real value” in a new GM, but that there was still great risk for all shareholders.”If it was a slam dunk, the union would have wanted more common equity,” he said. The UAW wound up agreeing to a 17.5% stake.Other experts question whether cost cutting and a lower debt load are enough to make the company attractive to investors, even if it they enable GM to earn its first profit on its auto operations since 2004.”Back in 2007 GM was being valued on its future prospects and its assets, not its profitability,” said Chris Jadro, an equity strategist focusing on distressed companies for Jefferies & Co. “But it’s just hard to imagine that GM will be worth what it was a year ago coming out of this down cycle.”The two biggest shareholders of the new company also expressed doubts about how quickly the stock will recover. A senior Obama administration official speaking to reporters Thursday conceded it is unlikely that the government can get back its entire investment in GM. The official said the government hopes “to recover as many taxpayer dollars as we can,” and that it expects to sell the shares as soon as possible.UAW President Ron Gettelfinger, who also said he would like to sell the union’s stake in GM as soon as possible to have money available in the trust fund, downplayed expectations about the company’s value going forward. Although he said Friday that the union believes “the stock should be worth a lot more a lot quicker,” he added that “right now, we realize the value is zero.”Some auto industry experts believe that the changes made by GM could position it for a level of profit it hasn’t earned in decades. David Cole, chairman of the Center for Automotive Research, said GM is well-positioned for even a modest rebound in industrywide sales. Carr said the 25 billion market value estimate “is pretty reasonable and it could even be conservative.” He said that profits for GM and the rest of the industry could be robust in the next few years due to reductions in capacity and pent up demand for autos. But a number of experts doubt that GM’s market value will get anywhere near the 25 billion figure in the next few years. They point out that GM will face a difficult competitive position compared to cash-rich Toyota Motor (TM) and even U.S. rival Ford Motor (F, Fortune 500), both of which could pass it in terms of U.S. sales in the coming years as GM sheds brands and dealers.Sean Egan, managing director of rating agency Egan-Jones Group, said he’s not sure GM can generate a profit even with all the cost concessions they’ve received from the union. “In almost every competitive front, GM is being beaten. People who see strong profits for GM are being delusional,” Egan said.But Susan Helper, an economics professor at Case Western Reserve University in Cleveland and expert on the auto industry, worries that even if GM does return to profitability following bankruptcy, investors could penalize the stock due to the company’s previous problems and doubts about its future.”It’s tough to see there being a line of investors looking to get into the stock,” Helper said.

Cobra Beer bought by Molson Coors
Cobra Beer has been bought by a joint venture between Molson Coors and Cobra founder Lord Karan Bilimora after entering a pre-packaged administration.Administrators PricewaterhouseCoopers said the company had run into financial difficulties in the economic downturn. A pre-pack is when a sale is agreed before the administrator is appointed and is carried out without the business being offered on the open market. Reports suggest Cobra Beer racked up losses of about 16m last year. PwC said they had explored different options and this was the “best outcome” for Cobra Beer. Pre-packs often involve the sale of the business to the existing owners or management. It will now be jointly owned by Molson Coors UK and a new company controlled by Lord Bilimoria. Molson Coors’ beers include Carling, Coors Light, Grolsch, and Sol. Expansion plansLord Bilimoria, an Indian-born British peer, put the company up for sale in November. He planned to expand the brand in India and hoped a sale or partnership would help it take 10% of the Indian market by 2012. Cobra, which markets itself as a “less gassy” lager, is popular in Indian restaurants. It is sold in 6,000 restaurants in the UK. It has spent 40m on marketing since it was founded in 1989 as it has tried to break into the pub trade. However, beer sales in pubs have been falling in the last couple of years and some analysts believe Cobra has been a victim of the decline in sales and the drop in demand for premium lagers.
Source:BBC

WASHINGTON: Meet Washington’s new power brokers on the economy: Consumer advocates.They are rubbing shoulders with the president at bill-signing ceremonies and getting face time with economic chief Larry Summers. A few are even returning calls from lawmakers whose offices they used to hound.After eight years of getting the cold shoulder, consumer groups are relishing their new role in the policy-shaping spotlight. Consumer advocates celebrated their biggest legislative victory in years when President Obama signed the credit card bill. Now they’re gearing up for the next big battle: regulatory reform.”I assure you that when you see our whole vision of our regulatory reform going forward, consumer protection is not a side issue,” said Treasury Secretary counselor Gene Sperling on Thursday during a speech at a conference at the Federal Reserve.On May 7, Summers invited 15 to 20 advocates to the White House to solicit ideas about reshaping the nation’s patchwork regulatory system to prevent future financial collapses, according to four participants. One group, the New America Foundation, a left-leaning think tank sensitive to consumer causes, has had at least a dozen conversations with top White House officials in person and over the phone, according to policy director Ellen Seidman.Pam Banks, policy counsel for Consumers Union, has seen the inside of both the White House and the Treasury Department in the last several weeks.”I can say for a long time, there were few consumer groups that had seen the inside of the White House or the Treasury,” said Banks. “Now sometimes you go to these meetings, and they say: Tell us what’s on your mind. And then they start taking notes.”President reaches outPolitical experts say the ascendancy of consumer activists should come as no surprise; President Obama, during his campaign, pledged to tap them. In addition, he spent his early years working as a community organizer on Chicago’s South Side and worked with advocacy groups as an attorney.But the swift consumer victory on credit cards caused the financial sector lobby — and even a few consumer advocates — to do a double take.Several tough provisions attacking credit card practices, such as allowing consumers to fall two months behind on a bill before seeing a rate hike, made it into the final bill. And that happened despite heavy lobbying by the banking industry to block such provisions. Consumer advocates say the Senate, in particular, is a tough sell for them, even though the Democrats currently have control of 59 seats. But having President Obama on board “gave us the extra push,” said Ed Mierzwinski, a 20-year veteran consumer advocate for National Association of State Public Interest Research Groups.0:00
/1:05′Consumer-friendly’ creditOf course, the financial sector has hardly lost its grip in Washington. In the same weeks that credit card legislation was advancing, financial sector lobbyists fended off a provision in the Senate that would have allowed bankruptcy judges to modify underwater mortgages. And they, too, have been visiting with top White House officials.The financial sector is not intimidated by consumer advocates, said Scott Talbott of the Financial Services Roundtable, which represents the largest financial services companies. But companies recognize that the stars have aligned to give consumer advocates a bigger, more visible stage.”With Democrats in control and the wave of populism that has swept through, consumer protections are on everybody’s tongue,” Talbott said.Next up: Regulatory reformOne area of regulatory reform that consumer advocates are particularly keen on is a new panel that would regulate mortgages and credit cards. The White House supports the idea of creating a so-called Financial Safety Products Commission, say consumer advocates and legislative aides.”These are ideas that are not new to us, but haven’t been vogue in Washington and they’re getting more credence,” said Caleb Gibson of the liberal think tank Demos, which has been working on the blueprint for such a commission.Consumer groups want a strong and independent agency that publicly monitors mortgages and credit cards in a transparent way. But they don’t want it to preempt strong consumer laws already in place in some states and localities.The idea was one that caught the president’s attention months ago. While appearing on Jay Leno’s “The Tonight Show” in March, Obama used one of the arguments used by proponents.”When you buy a toaster, if it explodes in your face, there’s a law that says, you know, your toasters need to be safe,” he said. “When you get a credit card or you get a mortgage, there’s no law on the books that says, if that explodes in your face, financially, somehow you’re going to be protected.”Consumer advocates say the president embraces consumer protection issues, often far ahead of his own advisers and lawmakers.”This president gets it on our issues,” Mierzwinski said. “And that’s great for us.”

Source:CNN