Digest

Thursday, November 5, 2009

TELECOMMUNICATIONS

Verizon to double its cancellation fees

With a whole new line of smart phones coming onto the market, Verizon Wireless said that starting November 15 it is doubling to $350 the penalty fees for subscribers who leave their contracts early.

James Gerace, a spokesman for Verizon Wireless, the nation's largest cell phone service, said the fees are for subscribers in one- and two-year contracts on an "advanced device" and that those fees will be pro-rated $10 a month. That means, if you've made it halfway through your two-year contract, the $350 penalty will be reduced $120 to $230.

Gerace said the company decided to raise fees because its highest-end phones and small wireless laptops are getting more expensive. The firm subsidizes the cost of its most tricked-out phones to make their prices more appealing to consumers. Verizon is set to release the Droid this Friday for $199 with a two-year contract. The phone is meant to take on Apple's iPhone, which runs exclusively on AT&T.

The move could revive debates about early termination fees, the penalties wireless service providers charge users for leaving contracts early. Consumer groups have pushed for legislation to end such fees or at least set rules for the practice. The issue died down as major wireless providers decided to pro-rate fees based on length of contract.

-- Cecilia Kang

REGULATORS

House panel votes to strengthen SEC

The House Financial Services Committee voted Wednesday to give U.S. government regulators more power and money to police major players in the stock market, four months after Bernard Madoff was sentenced for the biggest investment scam in history.

The 41-28 vote was the panel's latest move to try to rein in abuses on Wall Street. It would give the Securities and Exchange Commission new enforcement powers, including the ability to offer bounty money to tipsters on fraud cases and the power to bar violators of the law from employment in any securities-related industry.

The bill also would double the SEC's budget in the next five years.

Rep. Paul E. Kanjorski (D-Pa.) sponsored the legislation after leading the panel's investigation into the government's failure to uncover Madoff's massive fraud scheme for nearly two decades. Madoff was sentenced in June to 150 years in prison.

-- Associated Press

EARNINGS

GMAC narrows loss; ResCap still sagging

GMAC Financial Services, the main lender for General Motors and Chrysler customers and dealers, reported another quarterly loss -- though a narrower one than last year -- as bad loans continued to haunt its mortgage lending unit, Residential Capital.

"Until they remedy the ResCap area, stop the bleeding there, they are going to have challenges," said Steve Hagenbuckle, managing principal at TerraCap Partners, a private-equity fund specializing in distressed real estate.

GMAC said its net loss was $767 million during the third quarter, compared with a loss of $2.52 billion last year. Results were hurt by several one-time items and by a handful of business lines that it is discontinuing. Excluding these items, the company lost $77 million.

A bright spot in the latest report was the company's auto-financing unit, which earned $395 million compared with a loss of $379 million a year ago. However, ResCap lost $747 million during the third quarter, though that was down from $1.95 billion last year.

-- Associated Press

CREDIT

House seeks immediate enactment of card law

The House voted to accelerate the enactment date of tough new rules for credit card companies after voters complained of a rise in interest rates and steep new fees.

The bill, approved 331-92, would force lenders to comply with the new rules immediately unless they agree to freeze interest rates and fees.

The proposal's chances in the Senate were dim, where several lawmakers worried that a short deadline would hurt the industry and limit the availability of credit. But the House vote served as a warning shot to big banks that many lawmakers were fed up with reports of price gouging.

Under the new law Congress passed in the spring and due to take effect Feb. 22, 2010, lenders won't be able to suddenly increase rates on existing balances unless a cardholder is more than 60 days behind on a payment.

-- Associated Press

MERGERS & ACQUISITIONS

S&P says Burlington buy may hurt Berkshire rating

Standard & Poor's warned that Warren E. Buffett's bid for Burlington Northern Santa Fe could sap the liquidity and capital position of the investor's insurance operations at Berkshire Hathaway, jeopardizing the company's AAA rating.

Standard & Poor's Ratings Services placed its ratings on Berkshire Hathaway on its CreditWatch with negative implications following Berkshire's announcement Tuesday that it will buy Burlington Northern for $34 billion. It also placed its BBB corporate credit rating and other long-term ratings on railroad Burlington Northern on CreditWatch with positive implications.

Standard & Poor's said the capital adequacy of Berkshire Hathaway's insurance operations has declined over the past year, reflecting the drop in the market value of the company's portfolio of equity holdings of the insurance subsidiaries.

-- Associated Press