T H E E X A M I N ER16 SU N DAY, NOV E M BER 1, 2009
ECONOMY
COMPENSATION
NEWS IN BRIEFRECESSIONLENDING
Rep. Issa demands AIG
`backdoor bailout' docs
American International Group
Inc.'s payments to banks face closer
congressional scrutiny after a House
Republican requested records to
review whether the Federal Reserve
Bank of New York quashed the
insurer's effort to pay less than 100
percent on derivative contracts.
The New York Fed and AIG
were asked by Rep. Darrell Issa,
R-Calif., to provide documents tied
to the decision to settle $62 billion
in credit-default swaps without
imposing a "haircut" on the banks.
Issa, the ranking member of the
House Oversight and Government
Reform Committee, requested e-
mails, phone logs and term sheets
in letters today. � Bloomberg
SEC: Insider trading
at San Francisco fund
NEW YORK - The Securities and
Exchange Commission filed a civil
lawsuit alleging insider trading
Friday against the former chief
financial officer of a San Francisco
private equity fund and six others.
The suit claims that Chen Tang,
of Fremont, Calif., gleaned nonpub-
lic information through his job at an
unidentified private equity fund and
from his brother-in-law at a hedge
fund that he and others used to reap
illegal trading profits of more than
$8 million.
"As the CFO of a private equity
firm, Tang was entrusted with
highly confidential and material
information, and he violated that
trust by misusing the information to
generate enormous illegal profits,"
Rose Romero, who heads the SEC's
Forth Worth, Texas, office, said in a
statement.
The suit passed insider infor-
mation to his brother and four
others, who used the tips to make
bets through a variety of personal
accounts and investment funds on
shares of Tempur-pedic Interna-
tional Inc. and Acxiom Corp. � AP
Fannie Mae: Serious home
mortgage delinquencies
rise to record in August
FannieMae,themortgage-finance
company under government control,
said that "serious" delinquen-
cies rates increased to a record in
August. Mortgages at least 90 days
late or in foreclosure among the
single-family loans that Fannie Mae
owns or guarantees climbed to 4.45
percent in August, from 4.17 percent
in July and 1.57 percent a year ear-
lier, the Washington-based company
said. � Bloomberg
Va. furniture company
bought by Markel Corp.
Markel Corp., the Richmond, Vir-
ginia- based insurer, said it bought
closely held Panel Specialists Inc., a
maker of furniture and countertops.
Terms of the transaction weren't
disclosed in a Markel statement
distributed today. � Bloomberg
CIT Group Inc., the 101-year old
commercial lender seeking to avoid
collapse, may file for a prepackaged
bankruptcy as soon as this weekend
after striking deals with billionaire
Carl Icahn and Goldman Sachs
Group Inc. A prepackaged bank-
ruptcy "is probably going to go
through," Icahn said Friday.
He will supply a $1 billion loan for
"supplemental liquidity" that can be
used as bankruptcy financing, the
New York-based company said. CIT
also said it reached an agreement
with Goldman Sachs to keep a credit
line open should the lender file for
court protection.
The accords were disclosed the
day after a deadline passed for CIT
to solicit votes in support of either
a $30 billion out- of-court debt
exchange or a prepackaged bank-
ruptcy. CIT is seeking to reduce
debt by at least $5.7 billion after
being locked out of credit markets
it relies on for funding and posting
nine quarters of losses totaling more
than $5 billion.
"CIT has gotten its ducks in a
row for filing," Adam Steer, an ana-
lyst with CreditSights Inc. in New
York, said in a telephone interview.
"They can hopefully get out of the
bankruptcy court faster, which
may be better for debt recoveries."
� Bloomberg
CIT group
approaches
bankruptcy
Barney Frank, chairman
of the U.S. House Financial
Services Committee, reversed
course on paying to unwind
failed financial firms, splitting
with the White House and set-
ting up a possible fight with the
biggest companies.
Legislation Frank crafted
with the Treasury Department
and unveiled this week will be
amended to impose a fee on
financial institutions with more
than $10 billion of assets before
any firms fail, he said Friday on
Bloomberg Television's "Politi-
cal Capital with Al Hunt."
The Obama administration
wants to collect fees after a
company fails. "If you wait
until after the fact, you would
then have to go to the taxpayer
first and get the assessment to
repay it and some people are
afraid that would never hap-
pen," said Frank, a Democratic
representative from Massachu-
setts. Frank in the interview
also said the U.S. House will
vote in December on his com-
mittee's regulatory-overhaul
package. � Bloomberg
Frank splits
with Obama on
unwind fund
FINANCIAL FIRMS
By Marcy Gordon and Tim Paradis
The Associated Press
NEWYORK�Regulators have shut Cali-
fornia National Bank of Los Angeles
and eight smaller related banks as
the weak economy continues to pro-
duce a stream of loan defaults.
The banks closed on Friday by the
Federal Deposit Insurance Corpora-
tion were in California, Illinois, Texas
and Arizona. They were divisions of
privately held FBOP Corp., a bank
holding company based in Oak Park.,
Illinois.
U.S. Bank in Minneapolis, a
division of US Bancorp, agreed to
assume the deposits and most of the
assets of the banks. The banks had
combined assets of $19.4 billion and
deposits of $15.4 billion at the end of
September, the FDIC said.
The nine banks had 153 offices,
which will reopen as U.S. Bank
branches Saturday.
FBOP Corp., which itself wasn't
closed under the deal, grew from one
bank with assets of $125 million in
1990. From 1990 to 2007 the com-
pany acquired 28 banks, according
to its Web site.
The closing of nine banks in one
day was the most the FDIC has
shut since the financial crisis began
taking down banks last year. The
closings boost the number of failed
U.S. banks this year to 115. In 1989,
during the savings-and-loan crisis,
the FDIC closed 534 banks, or about
10 a week.
California National Bank had
68 branches. About 100 FDIC
employees arrived at the CalNa-
tional headquarters in downtown
Los Angeles at around 6:15 p.m on
Friday. They were seen fanning
out into various offices around the
building, a squat concrete structure
that prominently displays the failed
bank's name.
The FDIC simultaneously arrived
at the bank's other branches, spokes-
woman Roberta Valdez said. She
said the FDIC would spend the
weekend transferring the bank to
U.S. Bank.
Rick Hartnack, vice chairman
of consumer banking for U.S. Ban-
corp, said the move complements its
operations in California, Illinois and
Arizona. The deal doubled the com-
pany's branches in California so that
more than 20 percent of U.S. Bank's
branch network will be in the state.
The company will have nearly 3,000
branches in two dozen states.
"California and Chicago turned
out to be two of the most attractive
markets in the country where we
just didn't have the branch density
that we wanted," he said.
Federal regulators close 9 banks
AP PHOTO/MARK J. TERRILL
California National Bank headquarters on Friday in Los Angeles. Regulators on Friday
shut California National Bank of Los Angeles and eight smaller related banks as the
weak economy continues to produce a stream of loan defaults.
AUTOMAKERS
ByDee-AnnDurbinandTomKrisher
The Associated Press
DETROIT � Ford Motor Co. work-
ers have overwhelmingly rejected
contract changes that would have
allowed the automaker to cut labor
costs.
The United Auto Workers union
had given local unions until Monday
to complete voting. But a person
briefed on the voting said Saturday
that the contract changes have been
rejected by large margins. The per-
son asked not to be named because
the UAW hasn't announced the
results yet.
The UAW and Ford agreed to the
contract changes several weeks ago,
but Ford workers needed to ratify
them. Ford has 41,000 UAW-repre-
sented workers.
Two large union locals in Ken-
tucky and Ford's home city of
Dearborn rejected the contract
Friday, sealing its fate. Those
unions together represent 13,000
Ford workers. Exact tallies weren't
available, but at least 12 UAW locals
representing about 27,500 workers
vetoed the deal, many overwhelm-
ingly. Only about four locals with a
total of 7,000 members favored the
pact.
Ford sought the deal to bring
its labor costs in line with Detroit
rivals Chrysler Group LLC and Gen-
eral Motors Co., both of which won
concessions from the union as they
headed into bankruptcy protection
earlier this year. Under pattern
bargaining, the three automakers
usually match pay, benefits and
other contract provisions.
But workers weren't con-
vinced they should make more
concessions, since Ford avoided
bankruptcy and is considered
healthier than its rivals.
Ford workers reject contract changes
AP PHOTO/CARLOS OSORIO
Autoworkers in Missouri and Michigan
overwhelmingly rejected a new contract
with Ford Motor Co.
Executives of the nation's 28 larg-
est banks will meet with Federal
Reserve supervisors on Monday
to discuss the Fed's plan to police
banks' pay policies, officials said
Friday.
Under a plan recently put forward
by the Fed, the central bank would
review - and could veto - pay policies
that could cause too much risk-tak-
ing by bank executives, traders or
loan officers. It would not actually
set the compensation.
"Federal Reserve officials will be
meeting with bank executives Mon-
day to discuss the process for the
reviews of incentive compensation
arrangements" at the largest banks,
a Fed spokesman said.
Citigroup Inc., Bank of America
Corp. and Well Fargo & Co. are
among the top 28 banks.
The Fed's goal is to make sure
banks' pay policies don't encourage
top managers or other employees to
take gambles that could endanger
the company, the broader financial
system or the economy. � AP
Big bank execs
to meet with Fed

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