Detroit Marks Bankruptcy Anniversary by Borrowing Big to Tackle Blight​​​

Detroit is poised to mark the 10th anniversary of its historic bankruptcy by tapping the municipal bond market for $100 million of financing, most of which will go toward its program of reviving blighted neighborhoods, Bloomberg News reported. The debt is scheduled to price on Tuesday, 10 years to the day after Michigan’s biggest city, groaning under debt and pension obligations and hobbled by decades of population loss, filed what was at the time the nation’s largest municipal bankruptcy. Today, the city of about 620,000 is on the cusp of investment grade. S&P Global Ratings and Moody’s Investors Service both raised its credit rating in April to the highest level since 2009, with the latter citing “robust revenue growth” and an influx of federal pandemic aid. Mayor Mike Duggan said that the city’s rebirth is well under way. He pointed to falling joblessness, surging home prices, downtown office buildings that are solidly occupied and an entertainment district that’s luring new residents and suburbanites, with more developments on the way.​​​​​​ ​​​Read more.

Analysts Predict Resumption of Student Loan Payments May Pinch Renters, Dash Dreams of Homeownership​​​

Student loan borrowers could face housing hurdles in an already tight and expensive market once payments kick in later this year after a three-year pause, The Hill reported. The money saved by not paying on loans during this period helped some borrowers build savings or handle the rising costs of household goods and other necessities, including rent. Some analysts predict that the added costs of loan repayments could slash savings and force borrowers into difficult housing situations. “While the income needed for monthly rent payments remains the same with the resumption of loan payments, renters especially from the lower- and middle-income group will be forced to make difficult housing decisions and sacrifice some aspects to the quality of life,” Moody’s Analytics senior economist Lu Chen and economist Mary Le told The Hill. Borrowers who immediately resume payments in October will owe roughly $275 per month, Moody’s projected in a recent report. That could lead those in debt, especially low income borrowers, to look for alternatives, such as moving in with friends or family or finding a less expensive home. Payments could also take a toll on younger borrowers, whose student loans make up a larger share of their individual debt compared to older generations. Student loans make up about 30 percent of the total debt for borrowers between the ages of 18 and 29, Moody’s found.​​​​​​ ​​​Read more.

Don't Miss Tomorrow's Virtual Public Hearing by ABI's Subchapter V Task Force Looking at the Role of the Subchapter V Trustee!​​​

ABI's Subchapter V Task Force will be holding a virtual public hearing tomorrow at 3 p.m. ET with witnesses providing testimony on the role of the subchapter V trustee. To register to attend the virtual public hearing, please click here.

Please click here to watch previous Task Force virtual public hearings. ​​​​

How Did ABI Subchapter V Task Force Chairs Become Passionate About Small Business Bankruptcy Issues? Listen to ABI's Latest "Party in Interest" Podcast!​​​

ABI's latest "Party in Interest" podcast features a conversation between ABI Executive Director Amy Quackenboss and the co-chairs of ABI's Subchapter V Task Force, Bankruptcy Judge Michelle Harner (D. Md.; Baltimore) and Megan Murray of Underwood Murray (Tampa, Fla.). Learn more about how Judge Harner and Murray became passionate about small business matters, their overall impressions of how subchapter V helps small business debtors, and what the task force’s work will entail. Listen to the podcast by clicking here.

U.S. Weekly Jobless Claims Decline Slightly​​​

Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 237,000 for the week ended July 8, the Labor Department said today, according to a Reuters report. The data included last Tuesday's Independence Day holiday, which could have caused some distortions. Automakers also normally idle plants in July to retool for new models. But these temporary plant closures do not always happen around the same time, which could throw off the model that the government uses to strip out seasonal fluctuations from the data. The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 11,000 to a still-low 1.729 million during the week ending July 1, the claims report showed. The historically low level of claims suggests that some laid off workers are experiencing shorter spells of unemployment.​​​​​​ ​​​Read more.

Commentary: A Path Forward for Regulating Crypto Markets*​​​

Six months ago, former SEC chair Jay Clayton and CFTC chair Timothy Massad proposed a path for the regulation of crypto markets. "A lot has happened since then, but the end goal — strong investor protection and market integrity — may still be several years away," they wrote in a commentary in the Wall Street Journal. Specifically, Clayton and Massad point to the Securities and Exchange Commission suing Binance, Coinbase and other platforms — with widely varying businesses and operations — for failing to register as securities exchanges; the Commodity Futures Trading Commission has sued Binance for failing to register as a derivatives exchange; and U.S. regulators have taken steps to make it impracticable for banks, brokers and other traditional intermediaries to facilitate investments in digital assets. (The companies say the lawsuits are misguided.) As two former market regulators — one under President Obama and one under President Trump — they continue to support the "rigorous enforcement of our time-tested securities and derivatives laws." But Clayton and Massad wrote that they also believe that these enforcement actions, in themselves, are unlikely to bring about a significant improvement in investor protection and market integrity quickly. They propose that the SEC and CFTC should jointly develop basic investor and market protection standards for trading platforms as they exist today. The agencies could act directly or through a self-regulatory organization, shifting funding responsibility to the industry. Having Congress mandate this approach would be even better. Click here to read the full commentary. (Subscription required.)​​​​​​ ​​​Read more.

*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.
 

U.S. Small Business Lending Holding Up Despite Higher Cost of Credit​​​

U.S. small businesses are paying the most for loans in 16 years as borrowing costs have skyrocketed under the Federal Reserve's aggressive interest rate hikes, but new data shows they have yet to face a widely predicted credit crunch, Reuters reported. The average rate paid on short-term loans for small businesses shot up to 9.2% in June, up 1.4 percentage points from May's reading — marking the largest increase in short-term borrowing costs since December 2006, according to data this week from the National Federation of Independent Business (NFIB). The surging cost of borrowing is by design: In the ongoing effort to reduce demand and curb inflation, the U.S. central bank has tried to tighten credit conditions with 500 basis points worth of rate hikes since March 2022. But the recent improvement in the inflation outlook has meant that the highly anticipated clampdown on credit for the small business sector has yet to materialize in earnest. Twenty-eight percent of firms surveyed by the NFIB borrowed on a regular basis in June — down from a three-year high in April but broadly in the same range of borrowing activity that prevailed in the years leading up to the coronavirus pandemic.​​​​​​ ​​​Read more.
 

Analysis: Is the Banking Crisis Over? We Are About to Find Out​​​

Lenders will sort through the damage from this year’s banking crisis when they report their financial results starting tomorrow, the Wall Street Journal reported. Earnings for the second quarter will show whether the recent failures of three lenders and a slowing economy are eroding what has been a long period of strength for the industry. Earnings are expected to fall 7% in the quarter from a year earlier, according to Keefe, Bruyette & Woods. The biggest banks are expected to have fared well, or in some cases thrived. JPMorgan, the largest U.S. bank, bought First Republic Bank when it failed in May. Smaller banks may face more pressure. Banks of all sizes are expected to have paid more interest to customers to keep them from moving money to higher-yielding money-market funds. That could weigh on net interest income. Some banks have turned to higher-cost deposits, such as those that are “brokered” through third parties. All of the four largest banks had more brokered deposits at the end of March than a year earlier, though they represent a small share of all deposits, according to financial filings. (Subscription required.)​​​​​​ ​​​Read more.

Nominations Being Accepted for ABI's International Matter of the Year Award!​​​

ABI’s International Committee accepting nominations for its Second Annual ABI International Matter of the Year Award. For criteria, eligibility and other information on the award, please click here.​​​​​​ ​​

All nominations must be received by August 31.

Deadline Approaching for Norton Judicial Excellence Award

All nominations for the annual Judge William L. Norton, Jr. Judicial Excellence Award must be received no later than July 17, 2023. This award, co-sponsored by the American Bankruptcy Institute (ABI) and Thomson Reuters, honors a distinguished bankruptcy judge whose career has embodied the same dedication to the insolvency community as did that of the award’s namesake. You can view a list of the past honorees here. The award will be presented at the annual meeting of the National Conference of Bankruptcy Judges (NCBJ) in October. To nominate a candidate for the award, please download the nomination form here, and email it to Kathryn Copeland at kathryn.copeland@thomsonreuters.com.

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