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A government lawyer acknowledged Monday that the Trump administration will miss its first court-imposed deadline to reunite about 100 immigrant children under age 5 with their parents. Department of Justice attorney Sarah Fabian said during a court hearing that federal authorities reunited two families and expect to reunite an additional 59 by Tuesday’s deadline. She said the other cases are more complicated, including parents who have been deported or are in prison facing criminal charges, and would require more time to complete reunions. U.S. District Judge Dana Sabraw, who ordered the administration to reunite families separated as part of President Donald Trump’s “zero tolerance” immigration policy, said he will hold another hearing Tuesday morning to get an update on the remaining cases. He said he was encouraged to see “real progress” in the complicated reunification process after a busy weekend when officials from multiple federal agencies tried to sync up parents and children who are spread across the country. STORY FROM LENDINGTREE Crush your mortgage interest with a 15 yr fixed “Tomorrow is the deadline. I do recognize that there are some groups of parents who are going to fall into a category where it’s impossible to reunite by tomorrow,” he said. “I am very encouraged by the progress. I’m optimistic.” Lee Gelernt, an American Civil Liberties Union attorney who leads a lawsuit against the federal government, sounded more skeptical. When asked by the judge if he believed the government was in full compliance of the court order, Gelernt said there was much more work to be done. “Let me put it this way: I think the government in the last 48 hours has taken significant steps,” he said. “We just don’t know how much effort the government has made to find released parents. I don’t think there’s been full compliance.” U.S. District Judge Dana Sabraw, based in San Diego. U.S. District Judge Dana Sabraw, based in San Diego. (Photo: U.S. District Court) The difficulty in reuniting the first 100 children shows the challenge that lies ahead as the Trump administration braces for another deadline in two weeks to reunite nearly 3,000 older children – up to age 17 – with their parents. The process is complicated because of all the different situations that emerged over the weekend. The government initially identified 102 children under age 5 who needed to be reunited but removed three children from that list because investigations into their cases revealed that those children came with adults who were not their parents, Fabian said. Twelve parents were found to be in federal and state custody on criminal charges, making a reunification impossible since the government can’t transfer minors to state and local prisons to protect the well-being of the child. Nine parents were deported, and the government established contact with only four of them, Fabian said. Four children had been scheduled to be released from government custody to relatives who weren’t their parents, leading the government to question whether to allow that process to be completed or to redirect the child back to a parent. Gelernt said he understood many of the hurdles but urged the judge to force the government to scrap its time-consuming investigation into every single case and start a 48-hour clock to reunify families that remain separated by Tuesday. Sabraw said he would decide that during Tuesday’s hearing. Fabian said one of the silver linings of the busy weekend is that her office worked closely with its challengers at the ACLU to share information on each child’s case, to ensure that representatives from immigration advocacy groups and volunteer organizations could be present during each reunification. Gelernt said they’re doing that to help the parents, who are often released from custody with no money and nowhere to go. Fabian said that coordination has led to a more formalized process between government agencies and with the immigrants’ lawyers that should make reunifications go more smoothly in the coming weeks. “I think this process over the weekend helped us see what information, and in what form, is the most useful to share,” she said. “I’d like to make that as efficient a process as possible.” -

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Insight: China’s steel traders expose banks’

By Ruby Lian and Kelvin Soh

SHANGHAI/HONG KONG | Sun Sep 2, 2012 6:00pm EDT

(Reuters) – China’s banks are coming after the country’s steel traders, hauling executives into court to chase down loans that some traders said they didn’t initially need and can’t now repay.

The heavy push to recover the loans is another sign of strain on China’s financial system at a time when the country’s leaders are contemplating another round of stimulus to boost the economy, and when banks are worried about bad debts piling up.

The battle between the banks and steel traders also exposes flaws in the 4 trillion ($629 billion) stimulus round in 2008, and offers a warning to those calling for pumping more money into the system. At that time, Chinese banks threw money at the steel trade – a crucial cog in supplying the country’s massive construction and infrastructure growth.

But those steel loans, after offering a quick fix, became excessive, poorly managed, or a combination of the two. Government officials insisted more money was needed to prop up the industry. Steel executives said the money flow was too heavy, and they had to put the money to work in real estate and the stock market.

“After the financial crisis, when the government released its stimulus, banks begged us to borrow money we didn’t need,” Li Huanhan, the owner of Shanghai Shunze Steel Trading, told a judge at a recent hearing. “We had nothing to do with the money, so we turned to other investments, like real estate.”

PLUSH APARTMENTS

While some loans did go towards equipment and expansion, executives admit money was also used for pet property projects, plush apartments and stock market bets.

By the end of last year, China’s steel industry had a total debt burden of $400 billion – around the size of South Africa’s economy. Some of China’s leading mills alone owe 200-300 billion yuan ($32-$47 billion), according to the China Iron and Steel Association.

The aggressive tack by China’s lenders, many of which are state-controlled, comes as pressure builds inside a stretched financial system. Results at China’s big banks show profit growth is at its weakest since the global financial crisis, while bad loans rose for a third straight quarter to 456.5 billion yuan ($71.8 billion) by June, the China Banking Regulatory Commission said this month.

Steel traders are unlikely to be helping the bad loan issue, with Shanghai steel futures having almost halved from their 2009 highs to below 3,400 yuan ($540) a metric ton (1.1023 ton).

As the steel market turned – a victim of crippling over-capacity, heavy debt and sliding prices – alarm bells sounded among banks and regulators about the risk of lending to the industry. In June, after months of cajoling, banks were ordered to clamp down on new lending to steel traders.

Steel industry executives complain the banks went overboard.

“Banks should consider the greater good and not just focus on protecting their own interests,” said Xiao Zhicheng, head of the Zhouning Chamber of Commerce that overlooks Shanghai’s steel trading industry’s interests. “Instead of pumping in more blood to save the patient, it’s choosing to draw more blood.”

TAKEN TO COURT

In one Shanghai courtroom, steel trading firm boss Li tries to fend off a fed-up lender. China Minsheng Bank, the country’s eighth-biggest lender, is trying to recover 3 million yuan ($472,100) of loans it made to the trading firm.

When the bank recalled the loan in June, Li tried to sell two Shanghai apartments she had used as collateral. In a flat property market, she came up empty-handed.

Her plea for more time to repay is one of more than 20 court cases Chinese banks have taken against steel traders. The targets tend to be mainly smaller trading firms with fewer than 50 employees, as the larger state-backed steel firms have more cash reserves.

These traders are mainly based in and around Shanghai, a tight-knit community drawn from Zhouning in the southern province of Fujian. At its peak in 2009, some 12,000 steel trading companies were scattered across the city, accounting for close to 3 percent of Shanghai’s GDP, according to the local business chamber.

By some estimates, the number of steel traders has fallen by half, as steel prices crumpled in the third quarter of 2011.

“The court cases you see are usually when things get desperate,” said a loans official at a Shanghai branch of Bank of Communications, who asked not to be named because of the sensitivity of the subject. “We’ve had people go missing. Some have fled overseas, while others just take on a new identity and move somewhere else.”

The owner of one of China’s biggest steel trading firms, Yizhou Group, skipped the country with his wife and children after piling up about 1 billion yuan ($157 million) in loans to banks including Bank of Communications, the official said.

Calls to Yizhou were not answered.

In the Shanghai courtroom, lawyers for Minsheng Bank told Li after the hearing that banks were desperate to recall loans as they had heard of some borrowers going missing with tens of millions of yuan still owed.

“One trader fled to Australia after borrowing 23 million yuan, while others used their property as collateral to several banks at the same time ” Li said, recounting what she’d heard from a lawyer. “So banks are very cautious and taking immediate action against borrowers if they don’t repay.”

Another steel trader said banks promised fresh loans once existing loans had been repaid, but then withdrew credit lines.

“Some banks lied to us that they will give out new loans immediately after we repay the old ones, but they never really did. They just shut down the credit lines after they got the money back,” said a Fujian trader surnamed Xiao from a small Shanghai trading firm with just eight employees.

Some traders resorted to finding private lending at a much higher cost so they could pay back bank loans, in the hope of getting new loans from the banks – leaving them mired in expensive debt when the banks pulled the plug.

“The banks have taken a tougher stance this year and not only required company assets to be used as collateral but also required the borrowers to use their own property as collateral,” said Xiao.

HIGH RISK, HIGH RATES

For the banks, lending to steel traders was highly profitable while it lasted.

China Minsheng charged interest rates of up to 24 percent a year to small- and medium-sized trading firms, according to some in the industry – four times the government-set lending rate.

Bankers say the higher rates they charge are a direct response to the higher risk profile the steel traders carry, and not a single Minsheng loan to steel traders can be called a non-performing loan under China’s four-tier classification system, said Shi Jie, assistant to Minsheng Bank’s president.

“The steel trading sector is a particularly high-risk sector,” Shi said. “We’ve been very carefully controlling our risks there, and working with borrowers to come to a reasonable agreement if there are problems.”

In China, a loan is only classified as non-performing if it is overdue for more than 90 days and the borrower has missed interest payments. Otherwise, troubled loans can be classified under a different category known as “special mention” loans, or they can be called “overdue”.

Domestic steel prices rose by 25 percent in April-September 2009 before prices slumped. While the industry rode the price spike, bank loans offered a route to investing outside the industry.

The most common loan method was through a letter of credit, where banks paid for a trader’s purchase and then gave the trader 3-12 months to repay. That allowed traders a window where they could sell the goods and use the proceeds to invest.

Executives say they couldn’t refuse the money coming in, and the cash did sometimes go into real estate or even ‘shadow banking’, where they would take the loan and lend it to another party at a higher rate.

FLIGHT, SUICIDES

Bank of China said loans to industries at risk of overcapcity, such as steel and shipbuilding, made up less than 4 percent of its total loans and had a bad debt ratio lower than its overall loan book.

“We’re looking to cut our exposure to industries at risk of overcapacity,” the bank’s president Li Lihui said. “Internally, we are raising our own risk control measures and working with clients to cut our risk exposure.”

Shanghai Gangmin Metals, which borrowed from banks including China Construction Bank, said most of the money was used to pay for steel supplies, though it did have other investments.

“Money obviously needs to be put to work … you can’t let it sit in a bank account,” said the company’s general manager Su Cheng. “Ultimately, we think we’ll be able to reach a reasonable agreement with the banks. We just need more time.”

Many of Su’s peers aren’t so confident.

Reports of steel traders fleeing China are becoming more widespread, as are local media articles of indebted executives committing suicide.

Ratings agency Fitch said last week that China’s steel sector continued to suffer from oversupply and weak prices could persist through the first quarter of 2013. China’s biggest steelmaker Baoshan Iron and Steel has predicted a “most difficult” third-quarter.

“There’s good reason for the banks’ lack of confidence in steel traders,” said Arthur Kwong, head of Asia Pacific Equities at BNP Paribas Investment Partners in Hong Kong, which has total assets under management of $640 billion globally. “When you have an industry where people run away after falling behind on their loans, that doesn’t inspire a lot of people.”

(Reporting by Ruby Lian in SHANGHAI and Kelvin Soh in HONG KONG; Editing by Michael Flaherty and Ian Geoghegan)

CHINA

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