FINANCE

Wednesday, August 1, 2007

FINANCE

Mortgage Firm Out of Cash

American Home Mortgage said it has run out of cash, raising the possibility of a bankruptcy filing and sending its shares down 90 percent. The struggling mortgage lender said its financial backers have essentially pulled the plug. The Wall Street banks that lend American Home Mortgage money for home loans, including UBS, Bear Stearns and J.P. Morgan Chase, would not extend the company any more money, and some have demanded back they money they have lent.

American Home Mortgage specializes in adjustable-rate mortgages and also lends to "Alt-A borrowers," or borrowers between the prime and subprime levels.

REGULATION

Student-Loan Firm Settles Case

Nelnet, a student-loan company, agreed to pay $2 million in a settlement with the New York state attorney general's office. Nelnet agreed to abide by a code of conduct developed by New York Attorney General Andrew Cuomo. The code is similar to one Nelnet announced in April, but it adds prohibitions of two Nelnet services: loan consolidation service agreements with alumni associations and answering financial aid questions on behalf of universities.

INVESTING

Bear Stearns Stopped Investors From Cashing Out of Hedge Fund

Bear Stearns, manager of two hedge funds that collapsed last month, halted redemptions from a third fund after a slump in credit markets prompted investors to demand their money back. The Bear Stearns Asset-Backed Securities Fund had about $900 million invested in asset-backed securities, including mortgage bonds, spokesman Russell Sherman said. The fund was overwhelmed by redemption requests, Sherman said.

The fund had less than 0.5 percent of its assets in securities linked to loans to subprime borrowers, Sherman said. Bear Stearns has no plans to close the fund.

CONTRACTING

3 Firms Chosen for TSA Job

The Transportation Security Administration said it awarded contracts worth a total of $2.3 million to American Science & Engineering, L-3 Communications Holdings and OSI Systems' Rapsican Systems unit to test its passenger screening at airport security checkpoints in Phoenix, Los Angeles and New York. The technologies screen passengers without contact.

LEGISLATION

House Passes Plan on Pay Bias

The House voted to reverse the Supreme Court's decision limiting the time that workers have to sue their employers for pay discrimination. The Bush administration has threatened to veto the legislation. The House voted 225 to 199 to allow employees to sue within 180 days of their last affected paychecks.

Under the justices' May decision an employee must sue within 180 days of a decision involving pay if the employee thinks it involved race, sex, religion or national origin.

HEATLH CARE

J&J to Cut Jobs, Shut Facilities

Johnson & Johnson said that it will cut as much as 4 percent of its workforce to save $1.3 billion to $1.6 billion next year when two of the company's top-selling drugs may face generic competition. J&J, the world's largest health-products company, said that some facilities will close and that the staff reductions will result in charges of about $750 million this year. As many as 4,820 positions may be eliminated.

AIRLINES

Midwest to Consider Offer

Midwest Airlines announced that a committee of its board of directors will start discussions with AirTran Airways over AirTran's $389 million hostile buyout offer. Midwest had fought the bid for months.

EARNINGS

IndyMac Bancorp said second-quarter profit fell 57 percent from the comparable period a year earlier, to $44.6 million, as more borrowers fell behind on payments and it made less from selling loans to investors. Revenue at the second-largest independent U.S. mortgage lender, fell 21 percent, to $297.8 million.

Loans and other assets that have stopped paying interest more than quadrupled to $516 million, IndyMac said. The company was forced to repurchase $219 million of loans from investors because borrowers missed payments, up from $48 million.

Whole Foods Market said its profit slipped in the most recent quarter despite higher sales, as the natural and organic retailer doubled spending on new stores. The company said it earned $49.1 million, down from $53.9 million. Revenue rose 13 percent, to $1.51 billion.

Sales at stores open at least a year -- a key measure in retailing -- rose 7 percent.

Meanwhile, a federal district judge in Washington began hearing evidence in the Federal Trade Commission's request for an injunction to block Whole Foods from buying Wild Oats. The hearing was scheduled to end todaywed, and a decision is expected by mid-August.

Marathon Oil said second-quarter profit fell 11 percent, to $1.55 billion. Revenue fell 7.7 percent, to $16.9 billion. Results were affected by a year-earlier gain on an asset sale and a 2.3 percent decline in oil and natural-gas production.

Marathon Oil also said it has agreed to buy Western Oil Sands for $6.2 billion in cash, stock and assumed debt, giving it entry to the growing Canadian oil-sands market.

Compiled from reports by Washington Post staff writers, the Associated Press and Bloomberg News.