The Clark Hill law firm hockey team won the championship of the Lawyer's League of Hockey Detroit by defeating the Honigman team in a best-of-three playoff series. Clark Hill won the deciding third game 8-4 to claim their first title. Jeremy Motz, who plays for Clark Hill, was named Playoff MVP after contributing 11 goals and 18 assists during the regular season and 6 assists in the playoffs. The championship marked the fourth year of the lawyer's hockey league.

1. BY TOM KIRVAN
Legal News
While the winged wheel still reigns
supreme in Hockeytown, a tight-knit team
from a Detroit area legal giant made a suc-
cessful cup run of its own earlier this month at
Hazel Park’s Viking Arena.
Clark Hill, one of four teams in the
“Lawyer’s League of Hockey Detroit,” capped
a 26-week regular season by winning a pair of
playoff rounds to claim “The Supreme Cup,” a
trophy emblematic of supremacy in the league
that is sanctioned by Labatt’s.
Dickinson Wright fell in the opening round
to Clark Hill by a 6-2 score, setting the stage
for a best of three series with a team from
Honigman, according to Jordan Bolton, a liti-
gator with Clark Hill and founder of the
league that just concluded its fourth year. An
8-4 victory in the third game of the final
series lifted Clark Hill to the league title, the
first time that the firm has been the toast of
Metro Detroit’s legal hockey community.
Honigman opened the final round of the play-
offs with a 2-1 overtime win, while Clark Hill
knotted the series with a 5-3 victory in game
two.
“Special recognition goes to the Playoff
MVP, Jeremy Motz, who steered the team to a
first place regular season finish and the
(Supreme) Cup,” Bolton said in a firm-wide
e-mail to his colleagues at Clark Hill.
“Although I have yet to hear from the pow-
ers-that-be about the scheduled parade route
and time, you can rest assured that you will
have an opportunity to catch a photo with the
Cup sometime during its year with us,” Bolton
smiled. “Please make sure you congratulate
all of your Clark Hill players, not so much for
the victory, but for managing to muster the
energy to play three games in three nights.”
A defenseman, Motz tallied 11 goals and
recorded 18 assists during 17 games of the
regular season. The team’s third leading point-
producer during the season, Motz continued
to sparkle in the playoffs with six assists,
including three in the deciding game. Motz,
who specializes in education law at Clark
Hill, has played hockey since he was 4 years
old and honed his skills in college while a
member of the University of Michigan club
squad.
“The whole series was very competitive,
especially the second game that went back-
and-forth all night,” Motz said. “We scored an
empty net goal at the end to make the score
seem more comfortable than it really was.”
Matt Koziarz, an attorney with Carlson
Gaskey & Olds in Birmingham, was another
offensive standout who joined the hockey
ranks of Clark Hill this season, notching 19
goals with 17 assists. He also found the net in
the deciding contest.
The father-son combination of Joseph Sul-
livan Sr., an in-house attorney with Trinity
INSIDE
DAILY
BRIEFING
Official Newspaper: City of Detroit • Wayne Circuit Court • U.S. District Court • U.S. Bankruptcy Court
DETROIT (AP) — Northwest Airlines and
the Wayne County Airport Authority have
been accused of discriminating against physi-
cally disabled passengers.
A federal lawsuit filed in Detroit on behalf
of five plaintiffs alleges violations of federal
laws, including the Americans with Disabili-
ties Act.
It says Metro airport and Northwest
dropped disabled passengers to the floor,
failed to provide boarding assistance and
damaged wheelchairs. The suit seeks no mon-
etary damages.
The Detroit News and Detroit Free Press
reports Northwest spokeswoman Michelle
Aguayo Shannon says the airline was “disap-
pointed” in the filing of the lawsuit.
Airport spokesman Michael Conway says
providing service to disabled passengers is
something the airport authority takes seriously.
DETROIT (AP) — A federal judge in
Detroit has refused to dismiss a lawsuit
brought against a former federal prosecutor in
a 2003 terrorism trial.
The judge last Wednesday also denied
Karim Koubriti’s request to amend his initial
complaint.
Koubriti filed a $9 million suit in August
against Richard Convertino, who had won ter-
rorism conspiracy convictions against Koubri-
ti and another man. But government prosecu-
tors later argued that Convertino hid evidence
from defense attorneys in the trial.
The convictions were overturned in 2004.
Convertino was indicted but later acquitted of
obstruction of justice.
The Detroit News reports Koubriti claims
Convertino and FBI Special Agent Michael
Thomas violated his constitutional rights.
Convertino and Thomas deny the claims.
Players from the
Clark Hill team
and the Honig-
man team skat-
ed their best in
the playoff
rounds earlier
this month.
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Monday
April 21, 2008
■ Credit Crisis
Investment firms pull back on
borrowing from emergency fund.
Page Two
■ CIA Videotapes
CIA claims destroyed videos
likely not covered in court order.
Page Three
■ Energy Plan
House passes wide-ranging
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The Wolverine Bar Foundation, charitable
arm of the Wolverine Bar Association, will
present the 12th Annual Damon J. Keith Com-
munity Spirit Award Luncheon, to benefit the
Damon J. Keith and Wolverine Bar Associa-
tion funds, on Tuesday, May 6, at noon at the
International Banquet & Conference Center
inside the Atheneum Suite Hotel.
The award recipient will be Harold D. Pope
III, partner with Jaffe, Raitt, Heuer, & Weiss
P.C. The cost is $40 per person or $370 for a
table of 10 seats. For reservations, please
contact the Wolverine Bar Foundation at (313)
962-0250 or mail reservations and
checks/money orders payable to the Wolverine
Bar Foundation c/o Wolverine Bar Associa-
tion, 645 Griswold, Suite 961, Detroit, 48226.
For questions or concerns, please contact
Traci L. Kemp Brocks at (248) 723-5818 or
David B. Cade at (313) 665-4743. Guests will
be able to check-in at the Luncheon based on
prior reservations.
www.legalnews.com
“Government implies the power of
making laws. It is essential to the idea
of a law, that it be attended with a sanc-
tion; or, in other words, a penalty or pun-
ishment for disobedience.”
ALEXANDER HAMILTON
Health, and Joseph Sullivan Jr. added more
punch to the Clark Hill lineup with 13 points
each during the regular season.
Also in the championship limelight were
Clark Hill attorneys Tony Agosta, Bill Asi-
makis, Jay Berger, Jim Crowley, Dave Ford,
Jeff Steele, and Bolton, a
goalie who was sidelined
for the season after under-
going shoulder surgery.
Other contributors to the
cup win were Chris Chekan,
Howard & Howard, and star
goalie Chris Frank, Holz-
man Ritter & Leduc in
Southfield, who led the
league with the lowest goals
against average.
For Honigman, Brian Moore, a Dykema
Gossett litigator, was the top scorer during the
regular season, netting 22 goals and dishing
off 15 assists. Dave Knoll, Weiner & Randall
Law Group, and Peter Schummer, Wayne
County Circuit Court referee, each tallied 32
points for the season.
Dickinson was led in scoring by new attor-
ney Francis Rodriguez with 40 points, finding
the net 34 times. Veteran Paul Zinn added
nine points.
The Independent team, which captured
the Supreme Cup last spring, was paced
during the 2007-08 season by Ryan Pawluk
with 48 points, including 35 goals. Ryan
Hill, Can-Am Legal Services, added 28
points.
The team from Clark Hill captured the Supreme Cup by winning two of three games in
the championship series against Honigman. Pictured: (kneeling) goalie Chris Frank;
(back row, left to right) Derek Nykiel, Jim Atto, Bill Asimakis, Matt Koziarz, Jeremy
Motz, Jeff Steele, Joe Sullivan, and Dave Ford. Photos by John Meiu
Cup runneth over for Clark Hill hockey team
The coveted
Supreme Cup
of the
Lawyer’s
League of
Hockey
Detroit.
(See LAWYER’S LEAGUE, Page Two)
The Dearborn Bar Association (DBA) con-
ducted its monthly meeting Tuesday,
March 25, at Dimitri’s on the Avenue in
Dearborn. At the meeting composite
photos were taken of the members and
past presidents. Topics discussed at the
gathering included length of terms for bar
officers, a Web site to serve members,
and a possible lawyer referral service.
Gathering before the meeting were (left to
right) Mike Jafaar, Law Day chair;Wayne
County 19th District Court Judge Mark
Somers; Elizabeth DiSanto, DBA presi-
dent; David Camaj, DBA secretary;Wayne
County 24th District Court Judge John
Courtright;Wayne County 19th District
Court Judge William Hultgren;William
DeBiasi, DBA vice president; Helal Farhat,
DBA treasurer; and Charlotte Steffen-
Ramirez, Easter Basket chair.
Photo by John Meiu
Dearborn Bar members gather for meeting
Sampling worldwide cuisine and opportunities for learning
and networking are planned for Thursday and Friday, May 1-2,
by the Legal Assistants Section of the State Bar of Michigan.
The section will be hosting, for the first time, a TasteFest in
Plymouth at the Inn of St. John’s on Thursday, May 1, from
6:30 to 8:30 p.m. The following day, the section’s Annual Day
of Education, which this year focuses on Alternative Dispute
Resolution, runs from at 8:30 a.m. to 4:15 p.m.
The education program will kick off with a continental
breakfast and visits with the vendors, followed by the keynote
address by attorney Rebecca Simkins Seslar. Seslar focuses her
practice on labor and employment law. A former paralegal, she
will highlight her talk with a unique perspective on the role
paralegals can play in Alternative Dispute Resolution. Other
speakers are:
• Janice M. Holdinski will lead a program titled “ADR 101.”
Holdinski is a vice president at the American Arbitration Asso-
ciation.
• Paula K. Manis will teach “How to Become a Mediator, and
ADR Opportunities for Non-Lawyers." Manis practices oil and
gas law and is a lead trainer for mediation at Thomas M. Cooley
Law School and at the MSU-Detroit College of Law. She is also
an arbitrator for the American Arbitration Association.
• Geoff Seidlein will present “Labor and Employment
ADR.” Seidlein specializes in drain, construction, municipal,
and environmental law. He currently serves as a labor and
employment law professor at Thomas M. Cooley Law School.
• Attorney John V. Tocco of Tocco Construction Consulting
will focus on Construction Law and ADR. He is a member of
the American Arbitration Association Panel of Construction
Arbitrators and Mediators for large, complex cases. He is also
an adjunct professor at MSU-Detroit College of Law, Eastern
Michigan University, and Lawrence Technological University.
• Michael Turco, a shareholder at Butzel Long will cover
Commercial Arbitration. His practice focuses on litigating sig-
nificant commercial disputes and serving as lead counsel in
business transaction and acquisition matters.
A number of breakout sessions will offer participants fur-
ther opportunity to network and meet with the vendors. For
reservations at the Inn of St. John’s located at 44045 Five Mile
Road call (734) 414-0600. Mention the Section to receive a
discount.
The cost of the Annual Day of Education is $80 for mem-
bers, $100 for non-members and $60 for students.
Legal Assistants Section plans TasteFest and Day of Education
(See LEGAL ASSISTANTS, Page Two)
Annual Damon J. Keith
Community SpiritAward
lunch scheduled for May 6
Judge refuses to dismiss
lawsuit against former
federal prosecutor
Five disabled travelers
sue Wayne County
Airport Authority
DLN front page Apr21-4 4/18/08 2:17 PM Page 1

2. Dear Mr. Berko:
Last year I sold about
$144,000 of our $196,000 in
stocks to put in a safe money mar-
ket account for two reasons: at
ages 78 and 82 we needed more
income and our portfolio was
yielding 1.2 percent and I wasn’t
happy with the way our growth
stocks seemed to be performing. I
put all the proceeds in a bank
money market fund, which was
paying 4.6 percent and now it’s
only paying 1.7 percent. I checked
with several brokerage firms and
their money market funds were
paying 2.3 percent. Certificate of
deposit yields for one year are 3.2
percent and as you know trea-
suries are paying a lot less. I
know the Federal Reserve is low-
ering rates to help the economy.
But while the Fed continues to
lower rates it hurts retired folks
who have less to spend who are a
very large factor in the consumer
economy. Low markets and CD
rates are forcing my husband and
me to cut back on our spending
(even goldfish food) and really
making it difficult for us to pay
the rising costs for food, utilities,
medicines, gasoline and repair
bills. My husband and I would
appreciate any suggestions you
can give us to increase our spend-
able income.
S.W., Elgin, Ill.
Dear S.W.:
Yep, rates are low and probably
headed lower while prices contin-
ue to rise. Many observers are
certain the Fed will lower the dis-
count rate several more times
until the yields on six-month CDs
fall below 2.5 percent and the
yield on money market accounts
drops below 2 percent.
This is scary for many retired
folks who must dig into their sav-
ings to meet living costs. And
every time you spend principal it’s
like losing blood and sometimes a
body part. You’re saying bye-bye
to money you’ve saved over a life-
time of working years and you’ll
never see those hard saved dollars
again. But you can increase your
spendable income by giving away
your goldfish, partake of more
church dinners, take a part time
job at Wal-Mart and consider a
reverse annuity mortgage.
Consider an immediate annuity
with a 12.2 percent guaranteed
lifetime payout or rent a room to
an Elgin Community College stu-
dent — your home is just a couple
blocks from campus. There are
other options that can increase
your income nicely.
Meanwhile, I believe that
small, carefully selected equities
with very low risks are worth
their potentially attracted rewards.
I’m going to list 11 retirement
investments (which will add some
comfortable “oomph” to your
income) that are trading at com-
pelling values even in today’s
market.
Citigroup 8.125 percent Pre-
ferred (C-P) trading at $23.50.
This single-A-rated issue has a
$25 par, pays a $2.03 dividend of
which 15 percent is taxable and
yields 8.60 percent. While Citi-
group may reduce its common
dividend, I’m confident that C-P
will maintain its current value
(give or take a point) and its divi-
dend is sure as silver.
Bristol-Myers Squibb Co.
(BMY-$21.75) is an $18 billion
worldwide pharmaceutical and
health-care company and its
shares haven’t traded this low in
30 years. The $1.24 dividend
yields 5.6 percent, only 15 per-
cent of which is taxable. While
earnings were only $1.09 last
year, management expects to
report $1.67 in 2008 and $1.98 in
2009. I believe there’s minimal
risk at this price with good
opportunity for dividend and
principal growth. I believe BMY
is a compelling long-term invest-
ment.
Pfizer Inc. (PFE-$20.90) is a
$50 billion worldwide pharma-
ceutical and health-care company
and its shares haven’t traded this
low in 20 years. The $1.28 divi-
dend yields 6.1 percent, 15 per-
cent of which is taxable. Earnings
in 2007 were $1.21 and manage-
ment expects earnings of $2.37
this year and $2.57 in 2009. I
believe PFE is undervalued long-
term growth and income stock.
Look at the AXA or MetLife
variable annuities both with a
guaranteed 6.5 percent income
and a very modest to aggressive
10-year growth potential. The
sales charge and annual fees like a
mutual fund are included in the
costs. However, unlike a mutual,
they provide a life income guaran-
tee, principal guarantees and myr-
iad other options that make this
investment a cornerstone addition
to your investment folio.
T. Rowe Price Tax-Free High-
Yield (PRFHX-$11.11) is a no-
load fund with a 4.95 percent cur-
rent return. There is an anomaly
in the tax-free market now and the
last time PRFHX traded below
$11 a share was in 1987. The 4.95
percent yield is equivalent to a 6.6
percent taxable return.
Now consider Plains All Amer-
ican Pipeline LP (PAA-$47.20)
with a 7 percent yield, TEPPCO
Partners LP (TPP-$34.75) with a
7.9 percent yield and Enbridge
Energy Partners LP (EEP-$49.01)
also with a 7.6 percent yield.
These pipeline issues all trade at
their 12-month lows and are con-
sidered compelling income and
growth issues. The dividends are
between 70 percent and 80 per-
cent tax-favored. There appears to
be very limited downside risks to
these three issues and each should
make a comfortable addition to
your portfolio.
Finally, consider the following
electric utilities. CH Energy
Group Inc. (CHG-$36.88) in New
York state yielding 5.8 percent,
Pinnacle West Capital Corp.
(PNW-$36.55) in Arizona yield-
ing 6 percent and Ameren Corp.
(AEE-$44) in Missouri and Illi-
nois yielding 5.7 percent.
This is a nicely balanced, low-
risk portfolio that has a very mod-
est to fair opportunity for income
and principal growth. And I think
you should be very comfortable
adding some issues to your
account, which will provide you
with substantially better current
income most of which is tax-
favored.
––––––––––
Please address your financial
questions to Malcolm Berko, P.O.
Box 1416, Boca Raton, FL 33429
or e-mail him at malber@adel-
phia.net. Visit Copley News Ser-
vice at www.copleynews.com.
© Copley News Service
Page 2, The Detroit Legal News MONDAY,APRIL 21, 2008
The league began season play last September, scheduling a pair of
Tuesday evening contests each week throughout the fall and winter.
The puck will drop again next September when Bolton hopes that a
few more teams will join the hockey fray, all intending to wrestle
away the Supreme Cup from the champs at Clark Hill.
“Let’s just say that we’ve enjoyed the taste of victory,” said Bolton
of his team’s plans to defend its hockey honor.
(Continued from page 1)
LAWYER’S LEAGUE:
Clark Hill wins Supreme Cup
The fee includes lunch and
breakout snacks. For participants
attending the Annual Day of Edu-
cation, the cost of the TasteFest is
$15. It’s $25 for all others. There
will be a cash bar at the TasteFest.
For additional information,
contact Nicole M. Cook at
ncook@lsaservices.com or (517)
203-7590 or go to www.mich-
bar.org/legalassistants/events/cfm
for details. Online registration is
at www.michbar.org/sections/reg-
istration.cfm.
(Continued from page 1)
LEGAL
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Attorney Matt
Koziarz dis-
played his
speed and stick-
handling abili-
ties in Clark
Hill’s 8-4 series
clinching win
over Honigman.
THIRD CIRCUIT COURT NOTICE – DETROIT, MI
Effective January 1, 2007, any voucher submitted for any services
rendered more than sixty (60) days from the case disposition on
criminal matters will be denied in accordance with the Local Admin-
istrative Order 2006-08, Plan for Assignment of Counsel in the Third
Judicial Circuit. This includes payment requests for either regular or
extraordinary services.
Bernard J. Kost
Executive Court Administrator
Third Judicial Circuit
NOTICE OF PROPOSED
AMENDMENTS TO LOCAL RULES
The Court has approved for publication and comment proposed
amendments to LR 83.20(d), Attorney Admission; Procedure for
Admission.
The Court intends to enter an administrative order which will
govern the attorney admission procedure during the local rule
amendment process. The administrative order will contain the text of
the proposed local rule amendments.
In order to be assured consideration, comments in writing, which
may include recommended changes to the proposed amendments,
should be received by the Court not later than Friday, May 16, 2008.
Comments may be sent to Local_Rules@mied.uscourts.gov or Local
Rules, 814 Theodore Levin United States Courthouse, 231 W.
Lafayette Boulevard, Detroit, Michigan 48226.
LR 83.20 Attorney Admission
* * *
(d) Procedure for Admission.
(1) An applicant for admission to the bar of this court must
pay the fee established by the court and complete the application
provided by the clerk. The following information must be included
in the application:
(A) applicant’s name, firm/agency name (if applicable),
office address, email address, and office telephone and fax numbers;
(B) the date of admission and for each jurisdiction where
the applicant has been admitted to practice and appropriate I.D.
number; and
(C) whether the applicant has ever been held in con-
tempt, or the subject of an order of discipline as defined in LR
83.22(a)(1). If so, the applicant must state the facts and the final dis-
position of each such instance.;
(D) whether the applicant is not in compliance with an
order of a court or been convicted of a crime, If so, the applicant
must state the facts and the final disposition of each instance; and
(E) any other name under which the applicant has
received legal education or has practiced or been licensed and the
periods during which the names were used.
Taking
Stock
by Malcolm Berko
Low-risk shares may counter
lowered interest rates
Announcement
The Third Judicial Circuit of Michigan announces the Civil and
Family Division – Domestic web site for ordering appellate tran-
scripts. Attorneys can log onto the court’s web site at www.3rdcc.org
and select the Attorney Transcript Application to order transcripts
for appeal purposes. The user-friendly system will prompt you
through the ordering process in a secure environment. Once the
order is received by the Court Reporting Services Department, an e-
mail confirmation will be sent to the attorney. The attorney must
then bring the required deposit to Court Reporting Services, Cole-
man A. Young Municipal Center, 2 Woodward Avenue, Room 770,
Detroit, Michigan 48226. The time allowed to produce the tran-
scripts will commence upon receipt of the deposit.
BY RACHEL BECK
AP Business Writer
NEW YORK (AP) — Reality hit after a few min-
utes into State Street Corp.’s initially upbeat earnings
conference call: The financial services giant had a
$3.2 billion skeleton hidden in its closet.
Winning over investor confidence these days
doesn’t come by burying news. Amid today’s punish-
ing financial crisis and economic downturn, share-
holders want — and deserve — to know straight up
about anything that could potentially hurt business
or profits.
State Street sent out a news release topping 3,000
words — the length of a magazine article — at
around 7 a.m last Tuesday morning. The release
hyped its better-than-expected 45 percent gain in
first-quarter earnings per share and its record rev-
enues.
“I am extremely pleased with this record revenue
performance, particularly in today’s challenging
environment,” CEO Ronald Logue said in a state-
ment. “The momentum we have achieved over the
past 12 months continues, despite the negative equi-
ty markets.”
There were the obligatory statements about
“important factors” that could affect future results.
But mostly, the Boston-based company, which pro-
vides investment services and management to the
likes of mutual and pension funds, seemed to give
investors a lot of reasons to cheer.
In the first minutes of trading last Tuesday morn-
ing, the stock rose from its last Monday close of
$76.86 a share to $77, then $78 and topped $79. Had
it stuck there, State Street would have turned in a
decent 2 percent price gain for the day.
Then investors began to chew on the vague “chal-
lenges” that Logue talked about five minutes into his
prepared comments during the company’s call with
analysts — more than two hours after the initial
earnings news release had gone out.
Minutes later, CFO Ed Resch told of how the
company’s $73.3 billion investment portfolio lost
$3.2 billion in value during the quarter, from $1.1
billion at the end of last year. The value of the port-
folio, of which 40 percent is in mortgage-backed
securities including some that are subprime, had
been hurt by illiquidity in the marketplace.
The bank has yet to recognize those losses —
which is why they didn’t show up in their trumped-
up earnings release. It won’t have to, either, under
accounting rules unless the change in market value
is considered other than temporary. But if those
declining values stick, it could haunt State Street
down the road, forcing it to realize those losses in
coming quarters.
Resch went on to talk about the value of some
asset-backed commercial paper conduits to which it
provides liquidity. The company during the quarter
purchased $850 million in commercial paper from
the conduits, which cost it $12 million before taxes.
The conduits, which typically issue short-term debt
like commercial paper and then use the proceeds to
invest in longer-dated, higher-yielding assets, have
struggled in recent months as investors have shunned
risky debt.
Those off-balance-sheet investment pools hold
$28.3 billion in assets, which State Street company
manages and has agreed to provide backup financing
for. Last Tuesday’s disclosure raised concerns that
State Street could face bigger losses if it has to bring
more conduit assets onto its balance sheet.
State Street didn’t a return a request for comment
on the way it announced the news — which techni-
cally didn’t break any securities laws because the
information was publicly disclosed. But that’s not
the point.
“The subprime and mortgage issues (in the mar-
ketplace) aren’t new, but companies should be laying
their cards out on the table ... You shouldn’t slip stuff
in the back door,” said George Gutowski, a former
corporate investor relations executive who runs the
“Financial Skeptic” blog that analyzes how compa-
nies announce news.
All this put investors on edge, knocking the stock
down nearly 10 percent last Tuesday to $69.23 and
the selling trickled over into last Wednesday. Wall
Street analysts noted that there was more risk to the
company’s capital given the potential losses.
Analysts at Fitch Ratings also announced that the
company’s credit rating could be cut. They warned
that State Street might have to take a “significant
portion” of its losses in the next few quarters.
“The potential for future impairment could be
significant as the length of time that the securities
have depreciated increases,” Fitch said. “The magni-
tude of the potential charges is large when compared
with the overall size of the company.”
There’s a lesson in this: Nobody in today’s mar-
kets responds well to surprises.
––––––––––
Rachel Beck is the national business columnist
for The Associated Press. Write to her at
rbeck@ap.org
Investor confidence slumps
when companies bury news
BY JEANNINE AVERSA
AP Economics Writer
WASHINGTON (AP) — Big
Wall Street investment companies
are reducing their borrowing from
the Federal Reserve’s emergency
lending program, a sign that cred-
it problems may be easing.
A Federal Reserve report last
Thursday said those firms aver-
aged $24.8 billion in daily bor-
rowing over the past week. That
compares with $32.6 billion in the
previous week. It marked the sec-
ond straight week where invest-
ment firmed borrowed less from
the central bank.
The program, which began
March 17, is one of several extra-
ordinary actions the Fed has taken
recently to limit damage from a
trio of crises — housing, credit
and financial.
After the sudden crash of Bear
Stearns, the nation’s fifth-largest
investment bank, fears grew that
others might be in jeopardy, given
major stresses in credit and finan-
cial markets.
Scrambling to avert a market
meltdown, Fed Chairman Ben
Bernanke and his colleagues — in
the broadest use of the central
bank’s lending authority since the
1930s — agreed last month to
temporarily let investment firms
obtain emergency financing from
the Fed, a privilege previously
granted only to commercial
banks.
The program, similar to the
one the Fed has long had for com-
mercial banks, will continue for at
least six months. It gives invest-
ment firms a place to go for
overnight loans. Commercial
banks and investment companies
pay 2.5 percent in interest for the
loans.
Banks averaged $7.8 billion in
daily borrowing for the week end-
ing April 16. That compares with
$10.2 billion for the previous
week. The identities of commer-
cial banks and investment houses
are not released.
Some analysts viewed the
reduced borrowing from invest-
ment firms and banks as a posi-
tive sign that credit stresses may
have let up somewhat.
“It’s an encouraging sign that
maybe the worst of the credit cri-
sis is indeed behind us — that the
crisis is lessening,” said Richard
Yamarone, economist at Argus
Research.
Still, analysts were quick to
point out that credit problems are
far from disappearing and that
financial markets remain fragile.
“Now we’re finding less stress
on all points of the system
because the Fed has thrown out a
diverse, broad-reaching safety
net,” T.J. Marta, a fixed-income
strategist at RBC Capital Markets,
said of the lower borrowing fig-
ures.
The Fed’s No. 2 official, Don-
ald Kohn, said in a speech last
Thursday that Wall Street invest-
ment firms should be subject to
greater regulatory oversight
because any severe problems they
might encounter can endanger the
entire financial system.
“We must worry about exces-
sive leverage and susceptibility to
runs not only at banks but also at
securities firms,” Kohn, vice
chairman of the central bank, said
in remarks to a credit forum in
Charlotte, N.C.
The Fed’s decision to step in
and act as a lender of last resort to
investment firms — something it
has been doing for commercial
banks for years — has generated a
debate about whether investment
firms should be subject to the
type of supervision applied to
banks. It also has spurred debate
over whether the emergency lend-
ing program for investment banks
should be made permanent.
“Whatever type of backstop is
put in place, in my view greater
regulatory attention will need to
be devoted to the liquidity risk-
management policies and prac-
tices of major investment banks,”
Kohn said. “In particular, these
firms will need to have robust
contingency plans for situations in
which their access to short-term
secured funding also becomes
impaired.”
Treasury Secretary Henry
Paulson last month said invest-
ment firms should face stepped-
up regulation if they use the Fed’s
emergency lending facility. How-
ever, he said it was too soon to
determine whether the program
should be made permanent.
Investment houses have key
roles in the financial system. If
one fails or is having difficulty, it
could put the whole financial sys-
tem in jeopardy. That’s because
they have complex relationships
with many players in the system,
including hedge funds, commer-
cial banks and others.
Turmoil in financial markets,
which erupted last August, has
threatened to plunge the United
States into a deep recession.
As part of the effort to relieve
credit strains, the Fed auctioned
nearly $25 billion in super-safe
Treasury securities to investment
firms last Thursday.
At the auction — the fourth of
its kind — the Fed made another
$24.999 billion worth of the secu-
rities available. The Fed received
bids requesting $35.1 billion of
the securities.
In exchange for the 28-day
loan of Treasury securities, bid-
ding firms can put up more risky
investments, including certain
shunned mortgage-backed securi-
ties, as collateral.
In the four auctions held so far,
the Fed has provided close to
$158.95 billion worth of the Trea-
sury securities to financial firms.
The program is intended to
help financial institutions and the
troubled mortgage market. The
Fed said it would make as much
as $200 billion worth of Trea-
suries available through weekly
auctions.
The goal is to make investment
houses more inclined to lend to
each other. It also is aimed at pro-
viding relief to the distressed mar-
ket for mortgage-linked securi-
ties.
Investment firms pull back on borrowing
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