Yellen Eyes Nonbank Mortgage Lenders, Warns of Potential Failure​​​

Treasury Secretary Janet Yellen said U.S. regulators are monitoring risks stemming from nonbank mortgage lenders, and cautioned that a failure of one of them is possible in the case of market strains, Bloomberg News reported. “FSOC is very focused on that because nonbank mortgage companies lack access to deposits, which banks have,” Yellen said at the Senate Banking Committee Thursday, referring to the Financial Stability Oversight Council. The FSOC groups the main U.S. financial regulators. Nonbanks have become a major presence in the mortgage market, but they rely on short-term funding instruments to fund their operations. They also aren’t allowed to access the Federal Reserve’s emergency lending facility, known as the discount window. “They’re reliant on short-term financing that may be a lot less stable than deposits, and in stressful times, their credit lines can be pulled,” said Yellen, responding to questions from Democratic Senator Catherine Cortez Masto of Nevada. “There is concern that in stressful market conditions we could see the failure of one of these.” Regulators have been warning that nonbanks’ footprints across finance have significantly expanded, though oversight hasn’t kept pace. Officials have said that unforeseen risks may be lurking as the firms have grabbed more market share, while their ties to traditional lenders have become more complex. In November, the FSOC laid out a pathway for placing firms other than banks under strict Federal Reserve oversight, a major regulatory threat to nonbank mortgage lenders, hedge funds and investment companies. Read more.

Why One Shaky Bank Is Stirring Fears of a Wider Financial Mess​​​

As the one-year anniversary approaches of a crisis that brought down several midsize banks, trouble at another lender is putting unwelcome attention on the industry again, the New York Times reported. New York Community Bancorp has been trying to bat down concerns about its financial health. The bank’s stock has nose-dived since it released an ugly earnings report last week that included unexpected losses on real estate loans tied to both office and apartment buildings. Its shares have lost about two-thirds of their value over the past week, after a series of relentless declines. “We have obviously been dealing with a very serious situation since our fourth quarter earnings release,” Alessandro DiNello, the bank’s newly named executive chairman, told investors at the start of the bank’s call on Wednesday. The lender’s leaders wanted to “instill some confidence that this bank remains strong and will get itself back on the right track,” he said. The bank, which operates 420 branches nationwide under such brands as Flagstar Bank and Ohio Savings Bank, ballooned in size over the past year to more than $100 billion in assets after taking over fallen Signature Bank last spring in an auction that federal regulators organized. Shares of other lenders with portfolios of commercial real estate have dropped, although not by nearly as much — a reminder that what afflicts one lender can affect others, as what happened when fears about concentrated customer bases and low-rate bond portfolios took down a group of lenders last spring. Read more.  
 

Supreme Court in UBS Case Makes It Easier for Whistleblowers to Win Lawsuits​​​

The U.S. Supreme Court today made it easier for financial sector whistleblowers to win lawsuits accusing companies of unlawfully firing them as retaliation for disclosing wrongdoing, rejecting a bid by Switzerland's UBS Group to impose a higher bar, Reuters reported. The unanimous decision by the justices reinstated a $1.7 million jury verdict for former UBS bond strategist Trevor Murray, who has accused the company of firing him in retaliation for refusing to publish misleading research reports and complaining about being pressured to do so. A lower court had thrown out the jury verdict. UBS had wanted the Supreme Court to require plaintiffs in whistleblower lawsuits to prove a company's retaliatory motives, a difficult task. UBS has said that Murray was fired as part of a cost-cutting campaign that eliminated thousands of jobs, not because of his complaints. A jury in federal court in Manhattan sided with Murray in 2020, and U.S. District Judge Katherine Polk Failla, who presided over the trial, rejected a bid by UBS to set aside the verdict. But the New York-based U.S. Court of Appeals for the Second Circuit, in overturning the verdict in 2022, ruled that the jury should have been instructed by the trial judge that in order to hold UBS liable under a 2002 federal law called the Sarbanes-Oxley Act, Murray had to prove that the company had acted with retaliatory intent. The Second Circuit ruling had created a split with at least two other federal appeals courts that decided that the lack of intent can be raised as a defense in a Sarbanes-Oxley case, but must be proven by the defendant. Read more.

U.S. Weekly Jobless Claims Fall in Latest Report​​​

The number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to underlying labor market strength despite a recent spike in layoffs, Reuters reported. Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 218,000 for the week ended Feb. 3, the Labor Department said on Thursday. Claims are little changed compared to the same period last year, in spite of the recent high-profile layoffs, many of them in the technology and media industries. The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 23,000 to 1.871 million during the week ending Jan. 27, the claims report showed. Read more.  
 

Volunteer Today to Become a Preliminary-Round Judge for the Duberstein National Bankruptcy Moot Court Competition!

The Duberstein National Bankruptcy Moot Court Competition, now in its 32nd year and widely recognized as one of the nation’s preeminent moot court competitions, will be held in New York on March 2-4, 2024. Fifty-three teams from law schools across the country will compete through written briefing and oral argument. Please find the fact pattern by clicking here. Volunteers are needed for judges for the preliminary rounds (please sign up by Feb. 10) of the Competition. Click here for more information and to volunteer!

Don't Miss the Second Episode of the "Directors' Duties Across Borders in the Insolvency Zone" Webinar Series on Feb. 14

ABI's International Committee will be hosting the second in a series of webinars covering key jurisdictions around the globe, focusing on developments you and your clients need to consider when thinking about bankruptcy-type proceedings in foreign jurisdictions. In this next installment on Feb. 14 at 12:00 noon EST, the panelists will be examining the situation in Brazil, Canada, the Caymans and Mexico. Register here for FREE!

Bankruptcy Judge Presents His Key Judicial Insights in Complimentary ABI eBook

Hon. Scott C. Clarkson, a U.S. Bankruptcy Judge for the Central District of California in Santa Ana, provides an invaluable insider’s look at what he’s learned in his years on the bench in a new ABI ebook titled 27 Articles for Bankruptcy Judges: A Bankruptcy Judge's Insights on Trying to Get It Right. Judge Clarkson’s musings are divided into 27 essays in 27 Articles, a nod to author T.E. Lawrence’s writings of the same name during World War I. Available for free, the ebook serves as a useful guide for both new and seasoned judges, practitioners thinking of becoming judges, judicial staff, and anyone who conducts business in and around the courts. “This is really a book about the reemergence of civility both in and out of court, and how both judges and the legal profession may strive to promote civility, honesty and integrity throughout the legal system,” Judge Clarkson said. “Judge Clarkson’s book is a delight,” said ABI Editor-at-Large Bill Rochelle. “It’s chock full of hints for newly minted judges.” To obtain your copy of 27 Articles for Bankruptcy Judges: A Bankruptcy Judge's Insights on Trying to Get It Right, please click here.

Asset Sale of the Year Award Application Now Available!

ABI’s Asset Sales Committee is seeking nominations for its Annual ABI Asset Sale of the Year award. Any bankruptcy sale that closed between January 1 and December 31, 2023, and involved at least one professional who is a member of ABI’s Asset Sales Committee is eligible. Nominations are due February 16; please send your nominations to Matt LoCascio and Leyza Blanco. For more information, please click here.

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, who 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, although please note that abstracts to be considered for the upcoming Annual Spring Meeting, being held April 18-20, 2024, at the Marriott Marquis in Washington, D.C., were due on December 31, 2023. 

Bankruptcy Judgeship Vacancy Announcement for the District of New Jersey

Chief Judge Michael A. Chagares of the U.S. Court of Appeals for the Third Circuit on Monday announced the application process for a bankruptcy judgeship in the District of New Jersey, seated in Trenton. For eligibility and qualifications, please click here to access the full announcement. Applications must be submitted electronically by noon on March 6, 2024.
 

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