New Help for Homeowners

CNNMoney, Bloomberg, and the Wall Street Journal keep their eyes on Timothy Geithner with new and updated stories speculating what the treasury secretary has in mind for the remaining $350 billion of the bailout fund. CNNMoney and Bloomberg highlight Geithner's remarks yesterday at a Democratic retreat in Williamsburg, Va., where he said that banks receiving financial aid would be required to modify mortgages and help borrowers avoid foreclosure. Geithner is expected to unveil a formal plan on Monday, but the WSJ is reporting that the administration is considering bumping the speech to Tuesday to allow Geithner to focus on the stimulus package. "It is unclear if Geithner will unveil a specific plan for tackling foreclosures ... but the administration has said for weeks that it will devote more resources to helping homeowners than its predecessor," according to CNNMoney.

The Senate Friday approved an amendment as part of the recently agreed-upon stimulus package that would require the Treasury Department to spend at least $50 billion from the bank bailout on a loan modification program. "Stemming the tide of foreclosures, which are at the heart of this economic crisis, must be one of our top priorities," Sen. Chris Dodd, D-Conn., said in a statement late Friday night. CNNMoney points out that the Obama administration still faces the problem of what to do with the rising number of foreclosures stemming from unemployment. "Loan modifications don't work for these borrowers," it observers. On Friday, the Labor Department reported that the U.S. economy lost almost 600,000 jobs in November.

Both Bloomberg and the WSJ note that with the expected bailout plan, Geithner is distancing himself from former Treasury Secretary Henry Paulson, "who rejected policies requiring the industry to modify loans for troubled borrowers" and whose "stuttering approach to the financial rescue helped taint its reputation." Online, the WSJ tacked on several bullet points to its story about the bailout published yesterday, which outlines other potential measures Geithner could reveal in his speech.

The New York Times takes a look at how the stimulus bill, which was agreed upon Friday by Senate Democrats and (three) moderate Republicans, fundamentally differs from the bill the House approved earlier this month. "The House puts greater emphasis on helping states and localities avoid wide-scale cuts in services and layoffs of public employees. The Senate cut $40 billion of that aid from its bill," says the NYT. The package, which will likely be voted on Tuesday, underwent incisions that cut out "tens of billions of dollars in aid to states and local governments, tax provisions, and education, health, and renewable energy programs." CNNMoney provides a no-nonsense list of some of the jettisoned amendments during the negotiations, and the WSJ also highlights areas that fell victim to the scalpel. 

General Motors will be hosting a confidential meeting with advisers, bondholders, and UAW officials tomorrow and Tuesday in Detroit to hash out its plan to dramatically reduce its debt—a stipulation of the government's $13.4 billion loan, Bloomberg reports. "If GM can't convince the bondholders and UAW to agree to new terms, the government could force GM to return the loans or convert them into funding for a government-backed bankruptcy," Bloomberg says. If GM is forced into bankruptcy, it has said that it might have to be liquefied, as bankruptcy would further erode sales. Ron Gettelfinger, UAW president, has said he is willing to make concessions if other shareholders, including bondholders and GM executives, do the same. GM must turn in a report of its debt-reduction plans by Feb. 17, or a week from this Tuesday.

According to CNNMoney, the Obama administration is in talks with auto industry executives about more aid but will not agree to anything until both GM and Chrysler turn in their "turnaround" reports. Chrysler's plan is also due on Feb. 17. It has a $4 billion loan from the government.

The Detroit Free Press takes a look at the talks going on at Ford Motor Co., which has "positioned itself as the healthiest of the three and is attempting to make it through 2009 without asking for federal assistance." It has also stated (repeatedly, according to the article) that it will try to keep its labor costs competitive with GM and Chrysler, and is looking for concessions from the UAW. However, the paper points out, it might be tough for Ford to get the concessions it wants from the union because it has painted itself as the strongest of the Big Three.

Strong, though, is relative. Ford is facing $25.8 billion in debt, including about $17 billion in bond debt. According to the paper, Ford Motor Credit, its dealer and consumer-lending arm, has about another $28.2 billion in bond debt. What's more, the company just reported a $14.6 billion loss for 2008, the largest in its century-plus history. "If GM's concessions were accompanied by a debt restructuring, it's difficult to imagine that the UAW would give those same concessions to Ford without a similar debt restructuring on Ford's part," Bruce Clark, senior vice president of the corporate finance group for Moody's, told the paper.

However, Bond Analyst Shelly Lombard adds that she's not sure there's any incentive for Ford bondholders to do anything right now. "If Ford bondholders provide concessions now, and Ford falls into deeper financial distress later on this year, the government could come back to the bondholders and force a second round of concessions," the Press summarizes.