Lehman Brothers: The final chapter

NEW YORK (CNNMoney) -- Defunct investment bank Lehman Brothers moved into its final chapter Tuesday, but it will take years before the 161-year-old financial firm will close the book on its storied history.
Three and a half years after it filed for bankruptcy in New York, Lehman Brothers Holdings emerged from court protection Tuesday with a plan to redistribute roughly $65 billion to creditors before closing its doors for good.

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Those doors are housed on a few floors of the Time & Life building in midtown Manhattan, not far from the gleaming Times Square skyscraper that once housed about 9,000 of Lehman Brothers' estimated 25,000 employees.
Now, under the supervision of seven new directors, Lehman Brothers' litany of advisers, lawyers and ex-employees will remain busy. There's $10 billion in real estate, $9 billion in private equity investments, $3 billion in corporate loans and $2 billion in derivatives left to sell, as well as several multi-billion legal battles left to fight.
"We've been liquidating since the date of filing," said Steven Cohn, Lehman's treasurer in bankruptcy. "Our job was to marshal assets and we've gone from very little cash to managing about $30 billion in cash."

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The $65 billion Lehman plans to redistribute is but a fraction of the estimated $613 billion in debts held by the bank in 2008.
Not included in the $65 billion recovery estimate is any payout that could come from ongoing litigation that Lehman's fighting against JPMorgan Chase (JPM, Fortune 500) over that investment bank's alleged role in the bankruptcy.
Immediately after Lehman declared bankruptcy, Barclays (BCS) paid $1.3 billion for most of the firm's North American operations, its Times Square headquarters, and about 9,000 employees. Nomura Holdings (NMR) paid roughly $200 million for Lehman's operations in Asia.
About $10 billion of Lehman's current cash balance will be repaid to creditors in mid April, the first payout since Lehman Brothers filed for Chapter 11 on Sept. 15, 2008.
The value of Lehman's estate could still change if real estate values recover or if the market continue to appreciate (or fall).
The Dow has jumped about 20% since Lehman filed. But it's been an expensive three and a half years in bankruptcy for the firm, with fees already topping $1.6 billion.
Although the real estate market has bounced back a bit, what Lehman paid for certain real estate investments still seems staggering. Lehman took a 50% stake in a $22 billion buyout of apartment operator Archstone-Smith in 2007 that's now valued at roughly $4 billion.

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Archstone is among Lehman's largest real estate holdings, and the firm's estate is embroiled in a battle for control with investor Sam Zell. Lehman also holds a stake in southern California land developer SunCal.
Among the hedge funds that have been active buyers and could stand to profit are Elliott Management, King Street, Fir Tree, Och-Ziff, Avenue Capital, Paulson & Co. and Baupost Capital, according to court filings.
Lehman's former executives have repeatedly called the defunct bank the scapegoat of the financial crisis after it failed, while its competitors were bailed out by the U.S. taxpayers.
Whatever Lehman is or was, the tumultuous, ultimately fatally troubled firm has only a finite time left with billions to sell and miles to go before it sleeps.

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Obama cuts refinance costs for some mortgages

NEW YORK (CNNMoney) -- Borrowers with some federally insured mortgages will be able to refinance into lower interest rate loans more easily and cheaply under a plan unveiled Tuesday by the Obama administration.
At a news conference, President Obama announced that the Federal Housing Administration will cut upfront fees for refinanced loans it already insures.
The new fees are for borrowers whose FHA loans were issued before June 1, 2009. An estimated 2 to 3 million borrowers could take advantage of the savings, which could reduce mortgage payments for the typical FHA borrower by about a thousand dollars a year, according to the administration.
"It's like another tax cut in people's pockets," said President Obama.
Borrowers who refinance their existing FHA loans will pay an upfront insurance premium equal to 0.1%, the lowest allowable rate, of the mortgage amount -- $100 for a $100,000 loan -- plus an annual fee of 0.55%.
The new refinancing fees contrast sharply with the cost of obtaining a FHA loan, according to Jaret Seiberg, an analyst with the Washington Research Group. A borrower making a 3.5% down payment on a home purchase as of April 1 will pay a 1.75% upfront fee and a 1.25% annual fee. Those purchase fees were raised barely a week ago to improve the FHA's capital reserve.

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Still, lowering refinancing fees "should be broadly positive for housing and the economy by reducing foreclosures and freeing up income for consumers to spend on other goods and services," Seiberg said.
The new policy will also make it easier for the banks to refinance loans because it directs the FHA not to count the loans toward the lender's "compare ratio." That calculates the performance of loans issued by the lenders and compares it to the performance of other lenders.
Some lenders have not wanted to refinance FHA loans because many of them were made during years of high default rates, according to Seiberg.
Knowing that the FHA will not hold refinanced loans against them should they fail to perform could make lenders more willing to refinance loans for borrowers at a higher credit risk, according to Jay Brinkmann, chief economist for the Mortgage Bankers Association.

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"They have not been accepting credit scores below a certain point," he said. "Now, they may."
The fee reduction is the latest in a long line of administration initiatives intended to jump-start the housing market and, by extension, the economy.
The latest move can be thought of as an extension of the Home Affordable Refinance Program, or HARP. That program enables borrowers with mortgages backed by Fannie Mae (FNMA, Fortune 500) or Freddie Mac (FRE) to refinance even when they owe far more than their homes are worth. By reducing mortgage payments, both HARP and the new FHA fees free up money that could now be spent on other things like consumer goods.

Help for service members

In addition to the new refinancing fees, President Obama also announced steps to provide relief to service members who were wrongfully foreclosed on or suffered financial during the housing meltdown. As part of the plan, mortgage lenders and servicers will be required to review the case of every service member who was foreclosed on since 2006.
Any member of the military who wrongfully lost their home to foreclosure during that period will be repaid for their lost equity, plus interest. They will also receive a flat fee of $116,785.
Arrived at in negotiations with the five major servicers, that payout represents compensation for economic loss and emotional distress, said Tom Perez, U.S. assistant attorney general in the civil rights division. "I want to emphasize that it's a floor, not a ceiling and that overall compensation may be higher," he said.
According to Shaun Donovan, the Secretary of the Department of Housing and Urban Development, there's no way to accurately forecast how many service members would be eligible for relief under this part of the settlement. However, he said a similar agreement with just one of the servicers, Bank of America (BAC, Fortune 500), yielded 157 cases in which compensation was paid out.
"I'm anticipating that there could be thousands of potential victims," he said
Service members who were denied the opportunity to refinance at the 6% interest rate required under the Relief Act will also be refunded anything they were charged over the 6% rate, plus interest.
In addition, military members who bought their homes between July 1, 2006 and December 31, 2008 and were forced to sell them at a loss due to a permanent change in station may be compensated for the loss in their home's value.

Reported by: cnn.com

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The Super Tuesday Ohio economy

Unemployment rate: 7.9%

2010 GDP: $426 billion

Median household income: $46,093

Of the 10 Super Tuesday states, Ohio accounts for the most electoral votes.

Who wins them in the general election could rely heavily on candidates' views on manufacturing -- the cornerstone of the state's economy.

After slumping in the recession, the sector has recently seen some improvement.

But unemployment remains high across the state. Even manufacturing jobs aren't likely to get back to pre-recession levels. New technology and productivity increases have diminished the need for workers.

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Obama, CEOs to talk about jobs

 
By Jennifer Liberto@CNNMoney


WASHINGTON (CNNMoney) -- Job creation was expected to be the topic at a closed-door meeting Tuesday night between President Obama and a lobbying group made up of CEOs whose ideas often clash with the administration's.
The Business Roundtable is a group made up of the top leaders of the largest U.S. companies. Chaired by W. James McNerney, Jr., of the Boeing Company (BA, Fortune 500), the group has opposed Obama initiatives ranging from clean air rules to health care reform to Wall Street reform.
Over the past year, Obama has increasingly turned to Big Business to talk about jobs. He regularly meets with a jobs panel chaired by Jeffrey Immelt, CEO of General Electric Co (GE, Fortune 500)., that includes leaders from the manufacturing and tech industries.
Tuesday's meeting will be Obama's third with the Business Roundtable and comes on the eve of the group's release of list of ideas to spur more job growth and a healthier economy.
"The meeting should produce a valuable and vigorous discussion about the U.S. economy and jobs," said Business Roundtable President John Engler in a statement.
A review of a year's worth of the group's reports on job creation reveals a glimpse of possible topic matter.
The group will likely press the president to reconsider regulations it considers unnecessary or costly. In the past, it has asked the administration to analyze the costs and benefits of major rules from all agencies, and to toss those believed to be too costly.

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One example is the so-called Volcker rule, a part of the Wall Street reform measure. Named for former Federal Reserve chairman Paul Volcker, the rule aims to crack down on so-called proprietary trading, bets that big banks can make for their own accounts.
The Business Roundtable is among several business groups that oppose the Volcker rule, saying it has "far-reaching negative consequences that will impede our ability to raise capital and manage risk."
The lobbying group could also tell the president he can fast-track jobs by approving more leases for offshore oil and natural gas drilling.
And the CEOs might ask the president to get out of the way of Keystone XL pipeline project that would boost the flow of crude from the oil sands of Canada to the U.S. Gulf Coast. The Business Roundtable has called that project "key to U.S. job creation, economic growth and energy security," and opposes the administration's move to halt progress while the proposal is reviewed.
The CEOs also could talk to the president about the administration's plan to guide the debate on corporate income tax reform. While the group wants a lower rate for corporate income taxes, it doesn't like efforts to capture more tax dollars from companies' overseas operations.
"The White House calculation took into account only a small portion of taxes paid by worldwide American companies, and made other unstated assumptions that minimized the true tax burden faced by these companies," according to the group.
There are a few instances when the Business Roundtable has agreed with the Obama administration. Both the group and the president have been pushing for expanded trade opportunities for U.S. businesses.
Last September, the group also applauded the administration's controversial decision to back off a draft rule to toughen rules on air polluters.

Reported by: cnn.com

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Fiat is 'winning' with Charlie Sheen ad

CNNMoney (New York) -- Hollywood actor and warlock Charlie Sheen is getting a second chance, this time from Fiat.
The Italian car company's latest commercial for its tiny Fiat 500 Abarth prominently features Sheen, whose career took a nosedive last year amid several public breakdowns. The ad, released this week, acknowledges the crazed-bad boy persona Sheen has developed -- and exploits it.

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In it, Sheen is under house arrest. His response? Host a wild party at his mansion with attractive models dancing and screaming as he races his tiny car around inside his home.
Sheen, wearing a fitted suit and ankle bracelet, exits the car and smirks as he faces the cheering crowd on the balcony above him.
"I love being under house arrest," he says confidently, clinging to a brunette model in red. "What do I get for bad behavior?"
The better question is what Fiat (FIATY), which is a major stakeholder in Chrysler, will get for hiring Sheen. He is, after all, an actor whose self-destructive and reckless actions were until recently seen as radioactive.

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Chrysler executives were not immediately available to comment. But in a statement released Thursday, the head of Fiat branding explained why the company chose to go with last year's largest public relations disaster.
"The Fiat 500 Abarth is the bad boy of the Fiat vehicle lineup, and Charlie Sheen personifies the edgy and fun attributes of the Fiat 500 Abarth," said Olivier Francois, who also serves as Chrysler's chief marketing officer.
The ad tries to drive that point home with the slogan, "Not all bad boys are created equal." Presumably, the 160-horsepower, five-speed transmission car with a 1.4-liter engine instantly gains Sheen's street cred.

0:00 / 0:56 Fiat's tiny 500 can take a beating

But using a controversial star is a risky move reserved for companies that aren't household names, according to Lee Garfinkel, chief creative officer of global brands at marketing firm Euro RSCG Worldwide.
"It's got be about talk value," said Garfinkel, who supervises beer company Dos Equis' "The Most Interesting Man in the World" advertising campaign. He said a company like Fiat, which is well known in Europe and just starting to grow in the U.S., has less to lose than a brand like Coca-Cola (C, Fortune 500).
Garfinkel adds that Fiat's latest commercial is much more believable than the spot it did last year with Jennifer Lopez. That ad showed her driving a Fiat 500 in the Bronx, but viewers were skeptical that Lopez would drive a Fiat - much less in the Bronx. It was later discovered that the ad wasn't even filmed in New York.
"Those just didn't work at all. I was thinking, 'There's no way Jennifer Lopez is driving a Fiat, and no way in the Bronx,'" Garfinkel said. "For comedy that works, there's got to be some essence of truth. It reeked of advertising baloney."
"If he is a joke at this point, some people will ignore the commercial or find it interesting. I don't think there will be a downside to it. And if it's successful, then maybe five or six months from now we'll see Charlie Sheen Part Two," Garfinkel joked.
Fiat better hope not.


Reported by money.cnn.com

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Michael Jordan selling home for $29 million

NBA star Michael Jordan put his Highland Park home up for sale on Wednesday. The listing price: $29 million.
The 56,000 square-foot contemporary home, which is located in a suburb of Chicago, has three levels, including 9 bedrooms and 5 fireplaces on more than 7 acres of property.

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Ohio has recovered

NEW YORK (CNNMoney) -- It's boom times once again for Ohio's manufacturing industry.
Manufacturing, the largest sector in the Buckeye State's economy, is revving up production and employment after being hit hard by the Great Recession.

Before Obama even took office, America had lost 4.4 million jobs. Track his progress since then.

The health of Ohio's economy will be on the minds of many residents as they head to the polls on Super Tuesday to pick a Republican nominee for president. The future of American manufacturing is likely to play an even bigger role in November's general election, since President Obama has been championing the sector as a vital element of the nation's recovery.
The revival in Ohio is being fueled by the return of the American auto industry, the growth of energy production in the U.S. and the skyrocketing demand for steel and other building materials overseas.
"Ohio's recovery has been driven by manufacturing," said Eric Burkland, president of the Ohio Manufacturers Association. "There is enormous investment in new technology and new plants."
But the news is not all good.
While manufacturers have been adding workers, the sector's employment is not expected to ever return to pre-recession levels. That's because new technology and productivity increases have diminished the need for workers on the factory floor.

Factory rebirth

Manufacturing has long been a cornerstone of Ohio, accounting for about a sixth of the state's economy. And it ranks third in the nation in manufacturing employment and output.

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After taking a good hit during the recession, the Ohio manufacturing industry has rebounded strongly in the past year or so, said Kristi Tanner, general manager for manufacturing at JobsOhio, the state's privatized economic development organization.
The sector accounts for about a quarter of the state's job growth over the past two years, while it has increased output by $8 billion, or 12%.

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Companies are rebuilding their inventories, increasing capacity and relocating jobs back to the U.S. from India, Mexico and Asia, she said. Many employers are finding it cheaper and easier to produce products for North America in the U.S.
Ohio has the logistical advantage that it's within 600 miles of 70% of North America's manufacturers and 61% of the continent's population, Tanner said. She is focused on enticing companies that service the automotive, aerospace, shale oil, green technology and biotechnology industries to expand or relocate to the state.
"Ohio is well poised to be a leader in bringing back manufacturing jobs to the U.S.," she said.
Republic Steel, for instance, chose to create 450 jobs in Ohio, rather than in Mexico or elsewhere. And Whirlpool moved 65 production jobs from Asia to the state and is looking to bring back production from Europe.
The Timken Company is one of the companies contributing to the revival of the state's economy. The Canton-based industrial manufacturer had a record year in 2011.
Its steel division, which operates entirely in Stark County, is once again functioning at full capacity and on an around-the-clock schedule as it did before the Great Recession, said Sal Miraglia, who heads Timken's steel group. It now employs 2,000 people, about 200 more than it did before the economic downturn.
This is a major change from only three years ago, when it cut its schedule by one-third and had only about 400 workers on any given week.

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Miraglia credits the infrastructure boom in China and India, as well as the worldwide demand for mining and energy products, especially oil and gas, for restoring his division's health. His company just agreed to invest a nearly quarter-billion dollars in its Faircrest Steel Plant in Stark County to improve productivity, expand its product range and increase capacity.
"We view this demand for the kind of manufacturing products that help build infrastructure as real and solid," he said. "It's not a momentary or temporary situation."

Jobs not all coming back

While the outlook for Ohio's manufacturing sector looks rosy, the picture is not so bright for many workers who have been laid off.
Just under 640,000 people are employed in Ohio's manufacturing industry, about 12% of the state's workforce. While that's up from a low of 609,000 in late 2009, it's still a far cry from the 780,000 jobs that existed at the start of 2007. Over the past decade, the state has lost one-third of its manufacturing positions.
Going forward, companies will likely boost their payrolls somewhat as they ramp up production, said Zachary Sears, economist for Moody's Analytics. He predicts employment will peak at 668,500 in 2016.

0:00 / 3:05 U.S. manufacturing jobs: Gone for good

But companies don't need as many workers as they did in the past, thanks in part to technology.
"You have a lot of people with specific skills and there's just not a lot of demand for them," said Hank Robison, chief economist with Economic Modeling Specialists Inc, known as EMSI.
So while output will reach pre-recession levels by 2015 and continue growing from there, employees won't see all those gains. In fact, he expects there will be fewer manufacturing workers in 2022 than there are today.
"There have been significant productivity gains achieved in recent years, allowing employers to do more with fewer employees," Sears said.

First Published: March 2, 2012: 5:13 AM ET

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