Credit Card Delinquency Rates Were Worst on Record in Fed Study​​​

A Federal Reserve Bank of Philadelphia report found that U.S. credit card delinquency rates were the highest on record in the fourth quarter, Reuters reported. Almost 3.5% of card balances were at least 30 days past due as of the end of December, the Philadelphia Fed said. That’s the highest figure in the data series going back to 2012, and up by about 30 basis points from the previous quarter. The share of debts that are 60 and 90 days late also climbed. "Stress among cardholders was further underscored in payment behavior, as the share of accounts making minimum payments rose 34 basis points to a series high,” according to the report. Nominal credit card balances set a new series high and card utilization also rose, as consumers stretched credit lines further. Inflation-adjusted credit card balances remained below fourth-quarter 2019 levels. The numbers signal added pressure on U.S. household finances amid higher costs of living. About 10% of credit card borrowers now have an account balance that exceeds $5,200, according to the Philadelphia Fed. One-quarter of active accounts have a balance of over $2,000 for the first time. Read more.
 

Commentary: The U.S. Scourge of Venue Shopping*​​​

Millions of Americans and the national economy are affected each year by the bankruptcy system. Debtors receive a “fresh start,” and creditors have a relatively efficient method for repayment. The system isn’t perfect, but it works. Unfortunately, there is a growing abuse that threatens its integrity and efficiency, according to a commentary by Cliff White, the former director of the Executive Office of U.S. Trustees, in a Financial Times article. In large bankruptcy cases, there are often thousands of stakeholders, ranging from small business creditors to huge financial institutions. Each is entitled to a fair shake and an unbiased adjudication of their claim. That right is threatened when bankruptcy insiders and big corporate debtors manipulate the rules and get to freely choose the venue where the case is filed and dealt with. Smaller creditors and employees especially are disenfranchised when their claims are heard by a court far away, selected by the debtor company whose lawyers are expert at picking debtor-friendly judges. Click here to read the full commentary.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
 

Next Week at ABI's Annual Spring Meeting in D.C.: Don't Miss Panels on Commercial Real Estate, AI in Practice, the Final Report of ABI's Subchapter V Task Force and More!​​​

ABI's Annual Spring Meeting returns to the Marriott Marquis next week in Washington, D.C.! Don't miss ABI’s largest annual conference, featuring timely concurrent sessions tailored for commercial and consumer practitioners. NBC journalist Chuck Todd will be providing his perspectives on the upcoming November elections during the conference’s keynote address. In addition, a special plenary session on April 19 will be examining the final report and recommendations of ABI's Subchapter V Task Force. The conference will conclude with a special interview with Tara Twomey, the director of the Executive Office for U.S. Trustees. There’s still time to register for all of the great content and networking!
 

FDIC Chief Says U.S. Ready if Big Wall Street Bank Ever Failed​​​

The head of the Federal Deposit Insurance Corp. says the U.S. would be prepared to handle any collapse of a major Wall Street bank, Bloomberg News reported. FDIC Chairman Martin Gruenberg on Wednesday laid out a blueprint for how regulators would deal with such a failure and seek to minimize costs. He discussed preparations for a hypothetical scenario rather than any immediate threat. U.S. regulators, including the FDIC, have faced pressure to bolster their preparedness since the sudden demise of Silicon Valley Bank in March 2023. Meanwhile, the plight last year of Credit Suisse Group AG highlighted the tough decisions that officials would have to make if a U.S. global systemically important bank ever faltered. Such a “failure will be extraordinarily challenging under any circumstances,” Gruenberg said in remarks prepared for a speech at the Washington, D.C.-based Peterson Institute for International Economics. “We believe we have the authorities, resources and capabilities to do the job if it becomes necessary.” Gruenberg and other U.S. officials have consistently said that the banking industry is sound, and he didn’t discuss any concerns in that area in his remarks. Instead, Gruenberg focused his attention on how regulators would exercise the authority they received after the financial crisis to resolve a bank in an orderly manner without the bankruptcy process. Gruenberg said the process hadn’t yet been tested and did have risks. “However, an orderly resolution is far more preferable to the alternatives, particularly the alternative of resorting to taxpayer support to prop up a failed institution or to bail out investors and creditors,” he said. Read more.
 

Mortgage Rates in the U.S. Climb for a Second Week, Reaching 6.88%​​​

The average for a 30-year fixed loan was 6.88%, up from 6.82% last week and matching the level reached in early March, Freddie Mac said today, Bloomberg News reported. Higher borrowing costs are weighing on would-be homebuyers in what’s typically the busiest season for purchases. The Federal Reserve has maintained that it’s in no rush to cut benchmark interest rates. Now, economic reports for March — including hotter-than-expected inflation data and the biggest gain in jobs in nearly a year — have made chances of a June reduction even more remote. The housing market recently has shown signs of resilience. Sales of previously owned homes picked up in February, and more owners have been listing their properties. But purchases remain prohibitively expensive in many areas of the country, and climbing mortgage costs threaten to further erode affordability for buyers. Read more.
 

Analysis: The Hidden Costs of Homeownership Are Skyrocketing​​​

Homeownership affordability fell to its lowest level since the 1980s last year as mortgage rates reached a 23-year high and home prices set new records. Borrowing costs have eased somewhat this year, with the average rate for a 30-year home loan down about a percentage point since October. But other prices related to homeownership keep rising and show little sign of abating, according to a Wall Street Journal report. Property taxes and home-maintenance costs are climbing in much of the country. Non-mortgage costs, including property taxes, maintenance, utilities and insurance, make up more than half of homeowners’ overall costs, according to a 2022 analysis by Fannie Mae economists. Worst of all, home insurance premiums are soaring. Rates rose by more than 10% on average in 19 states in 2023 following a series of big payouts related to floods, storms, wildfires and other natural disasters across the U.S., according to an Insurance Information Institute analysis of data from S&P Global Market Intelligence. More Americans also moved to disaster-prone areas in recent years, increasing the exposure to these events. Escalating costs on multiple fronts mean that many first-time buyers will continue to find homeownership a financial stretch. The tens of millions of American homeowners who have locked in mortgage rates below 4% still have to contend with these other costs. And since insurance premiums, tax bills and maintenance costs can change each year, it’s hard for homeowners to budget how much more they will be paying even a few years from now. (Subscription required.) Read more.
 

Challenges in the Digital Media Industry the Focus of ABI's Latest "Unordinary Course" Podcast​​​

The latest episode of ABI’s "Unordinary Course" podcast, brought to you by ABI's Business Reorganization Committee, features Lee Pacchia of ICR Inc. (New York) talking with Frank Pometti of AlixPartners, LLP (New York) about the ongoing turmoil and challenges in the digital media space, and where the industry might be headed in the future. Be sure to take a look at AlixPartners’ "2024 Media & Entertainment Industry Predictions Report," which is referenced during the discussion. Listen to the podcast by clicking here.
 

Analysis: Banks Strike Back Against Private Credit​​​

A big narrative in recent years has been that America’s biggest deposit-taking investment banks are losing ground to their nonbank rivals, the likes of Blackstone and Apollo Global. One worry for banks was that private credit — meaning, in this context, lending directly to businesses by alternative-asset-fund managers, insurers and others — was going to eat into investment banks’ business-originating loans and distribute them to investors. But so far this year, a lot of financing deals are actually coming back to banks from private credit, according to a Wall Street Journal analysis. In the first quarter, almost $12 billion of debt previously from direct lenders was refinanced via the so-called broadly syndicated loan market, according to PitchBook LCD, a channel dominated by banks. This was a sharp reversal of the opposite pattern in the prior two quarters. Moody’s Investors Service in a recent report wrote that “banks are fully aware of the substantial capital that direct lenders have, and are fighting back.” Some borrowers were saving up to 2 to 3 percentage points via broadly syndicated loans, according to the report. “Not only have [banks] returned to underwriting deals, they have substantially lowered pricing,” Moody’s said. (Subscription required.) Read more.
 

Get Your Copy of The Purdue Papers to access Amicus Briefs and Commentaries Related to Purdue Pharma Case!​​​

A petition by the U.S. Trustee regarding the case of Purdue Pharma L.P. is currently being considered by the U.S. Supreme Court. Regardless of how the Court rules, the case has already generated a mountain of commentary in the form of amicus briefs, petitions and other related background material. ABI, guided by editor David R. Kuney (who represented one group of amicus filers), has gathered together all of this material in a fully searchable form — more than 3,000 pages worth! This collection will be updated with the final Supreme Court decision — expected later in 2024 — as well as a final commentary by ABI Editor-at-Large Bill Rochelle, who writes Rochelle’s Daily Wire. This collection is an invaluable resource for anyone working in the area of third-party releases, either as a practitioner, an academic or just an interested party. Get your digital copy for only $25!

Application and Nomination Period for ABI’s 2024 “40 Under 40” Class Open Through June 30 ​​​

The ABI "40 Under 40" annual program continues to highlight the best up-and-comers in the industry. If you are, or know of, a dynamic insolvency professional who is committed to growth and excellence both professionally and in your community, this is one opportunity not to be missed! Nominations and applications are due June 30. Click here for more information and to submit a nomination or application. 

Have an Idea for a Topic for an ABI Conference Session? Submit Your Proposal via ABI’s “Call for Abstracts” Page!​​​

ABI has launched an online portal for professionals to submit proposals for educational sessions at future ABI conferences. Submitters can describe their proposed topic, outline the session’s focus and learning goals, suggest speakers, and provide contact information via the portal’s detailed form. The portal can be accessed here.

All submissions will be reviewed by an internal Education Committee, which will contact the submitter to ask questions as needed and to discuss the status of the proposal. Submissions will be reviewed on a rolling basis.

Sign up Today to Receive Rochelle’s Daily Wire by E-mail!
Have you signed up for Rochelle’s Daily Wire in the ABI Newsroom? Receive Bill Rochelle’s exclusive perspectives and analyses of important case decisions via e-mail!

Tap into Rochelle’s Daily Wire via the ABI Newsroom and 'X' (Formerly known as Twitter)!