Student Loan Pause Is Ending, With Potential Consequences for Economy​​​

A bedrock component of pandemic-era relief for households is coming to an end: The debt-limit deal struck by the White House and congressional Republicans requires that the pause on student loan payments be lifted no later than Aug. 30, the New York Times reported. By then, after more than three years in force, the forbearance on student debt will amount to about $185 billion that otherwise would have been paid, according to calculations by Goldman Sachs. The effects on borrowers’ lives have been profound. More subtle is how the pause affected the broader economy. Emerging research has found that in addition to freeing up cash, the repayment pause coincided with a marked improvement in borrowers’ credit scores, most likely because of cash infusions from other pandemic relief programs and the removal of student loan delinquencies from credit reports. That allowed people to take on more debt to buy cars, homes and daily needs using credit cards — raising concerns that student debtors will now be hit by another monthly bill just when their budgets are already maxed out. The pause on payments, which under the CARES Act in March 2020 covered all borrowers with federally owned loans, is separate from the Biden administration’s proposal to forgive up to $20,000 in student debt. The Supreme Court is expected to rule on a challenge to that plan, which is subject to certain income limits, by the end of the month. The moratorium began as a way to relieve financial pressure on families when unemployment was soaring. To varying degrees, forbearance extended to housing, auto and consumer debt, with some private lenders taking part voluntarily. By May 2021, according to a paper from the Brookings Institution, 72 million borrowers had postponed $86.4 billion in loan payments, primarily on mortgages. The pause — generally utilized by households with greater financial distress — vastly diminished delinquencies and defaults of the sort that wreaked havoc during the recession a decade earlier. But while borrowers mostly started paying again on other debt, for about 42.3 million people the student debt hiatus — which took effect automatically for everyone with a federally owned loan, and stopped all interest from accruing — continued. The Biden administration issued nine extensions as it weighed options for permanent forgiveness, even as aid programs such as expanded unemployment insurance, the beefed-up child tax credit and extra nutrition assistance expired.​​​​​​ ​​​Read more.

Tomorrow at 3 p.m. ET: ABI's Subchapter V Task Force Virtual Public Hearing to Examine Eligibility Issues

The next virtual public hearing of ABI's Subchapter V Task Force will take place tomorrow, June 23, at 3 p.m. EDT, with witnesses providing testimony on subchapter V eligibility issues. For the registration link and full public hearing schedule, please click here.

Did you miss the kick-off hearing featuring witnesses discussing their general experiences with subchapter V? Click here to watch a replay of the hearing.

U.S. Bank Regulator Says Tougher Rules Coming for Banks over $100 Billion in Size​​​

The head of the Federal Deposit Insurance Corporation said Thursday that bank regulators are considering applying an upcoming set of stricter capital rules to banks with over $100 billion in assets, Reuters reported. FDIC Chairman Martin Gruenberg said in a speech the spring turmoil in the banking sector showed firms of that size pose a risk to the financial system and merit stricter oversight. Three banks failed during the spring, requiring regulators to step in and backstop deposits. "If we had any doubt that the failure of banks in this size category can have financial stability consequences, that has been answered by recent experience," he said. "The lesson to take away is that banks in this size category can pose genuine financial stability risks." He added that agencies will propose new capital rules to implement an international bank rule agreement in the near future, but will likely not complete the rules before the middle of 2024. The so-called Basel III "endgame" rules are already a focus of intense criticism by the banking industry, who are arguing to regulators and lawmakers that overly strict requirements could hinder banks and the broader economy. But Gruenberg argued it was critical, particularly in the wake of the spring bank failures, for regulators to get tougher rules in place. "A robust regulatory capital framework is the cornerstone of a resilient banking system," he said, adding that the upcoming proposal "offers us the opportunity to make important modifications to the risk-based regulatory capital framework with the ultimate goal of enhancing the financial resilience and stability of the banking system, better enabling it to serve the U.S. economy."​​​​​​ ​​​Read more.

SEC Seeks More Disclosure From Smaller Banks in Wake of Failures​​​

The Securities and Exchange Commission has started questioning some regional and community banks about risks tied to recent bank failures, a move designed to ensure investors have details on any spillover effects, the Wall Street Journal reported. Many financial institutions and other companies have voluntarily updated their financial statements to address potential consequences from the failures this year of First Republic Bank, Silicon Valley Bank and Signature Bank. But the U.S. securities regulator has found that there are firms that haven’t gone far enough in providing clarity to investors when looking to raise capital or making other securities-related moves. Holding companies behind community and regional banks including Bank of Southern California, Colony Bank, Burke & Herbert Bank and BayVanguard Bank were among those that received letters the regulator made public in recent weeks. The agency’s corporate-finance division regularly sends letters to public companies to inquire about disclosures or accounting practices tied to filings such as registration statements or quarterly or annual reports. In most cases, the SEC asks companies to make changes to relevant or future filings. The Federal Reserve defines community banks as those holding under $10 billion in assets, whereas regional banks hold between $10 billion and $100 billion. (Subscription required.)​​​​​​ ​​​Read more.

Weekly U.S. Applications for Unemployment Aid Remain Relatively Elevate​​​

U.S. applications for jobless claims were 264,000 for the week ending June 17, the same as the previous week's revised number, the Labor Department reported today, the Associated Press reported. The claims numbers for the past two weeks are the highest since October of 2021. The four-week moving average of claims, which smooths out some of the week-to-week volatility, rose by 8,500 to 255,750. That’s the highest level since November of 2021. Jobless claims in the past three weeks have pushed closer to 300,000 after mostly being in the high 100,000 to low 200,000 range since the fall of 2021. Overall, 1.76 million people were collecting unemployment benefits the week that ended June 10, about 13,000 less than the previous week.​​​​​​ ​​​Read more.

Pandemic Retirees in U.S. Head Back to Work as Asset Boom Fades​​​

The so-called Great Retirement is looking a little less great lately, as stalled house prices and the rising cost of living push some older workers back into the labor force, new research shows, Bloomberg News reported. The disappearance of a few million people from the U.S. labor force has been a striking feature of the pandemic era, and economists attribute part of it to people retiring early, along with a drop in immigration and the effects of long COVID. Miguel Faria e Castro, an economist at the Federal Reserve Bank of St. Louis, and colleague Samuel Jordan-Wood estimate that the number of “excess retirements” — or older Americans quitting work at rates above historical trends — crested at about 3 million in December. For sure, some retired out of fear of catching COVID-19, which has killed some 1.1 million people in the US, most of them older Americans. But soaring housing and stock prices, especially earlier in the pandemic, probably pushed others to make the leap, Faria e Castro suggested in a Fed research paper released in May. At least some of them now appear to have had second thoughts, according to Faria e Castro’s latest estimates, which are based on US Census Bureau data. The number of excess retirees is down by around 600,000, or 20%, since the end of last year, the economist found.​​​​​​ ​​​Read more.

Fraudulent COVID Aid Drove Up U.S. House Prices, Report Says​​​

Fraud against the Paycheck Protection Program was widespread enough to bump up real-estate prices within certain U.S. ZIP Codes, researchers at the University of Texas concluded, blaming the abuse on some of the financial technology companies that provided the loans, the Wall Street Journal reported. House prices in ZIP Codes with high fraud were 5.7 percentage points higher than in low-fraud ZIP Codes in the same county, even when controlling for a range of other possible factors, researchers at the University of Texas at Austin’s McCombs School of Business said in a study released today. Academics, lawmakers and law enforcement have focused on high levels of fraud targeting the program, which was put in place in 2020 to help shore up the finances of businesses facing uncertainty because of the COVID-19 pandemic. But less attention has been paid to impacts fraud might have had on the wider economy beyond government coffers. The new research says people who received fraudulent loans were significantly more likely to purchase a home during the program than those who got the money legitimately, ultimately driving up home prices for everyone around them. (Subscription required.)​​​​​​ ​​​Read more.

ABI’s Inaugural “Party in Interest” Podcast Features ABI President Soneet Kapila​​​

Listen to ABI's inaugural "Party in Interest" podcast featuring a conversation between ABI Executive Director Amy Quackenboss and ABI President Soneet Kapila!​​​​​​ ​​​

USTP Looking for a Chapter 11 Trial Attorney​​​

The U.S. Trustee Program has a job opening for a chapter 11 trial attorney within the Executive Office for the U.S. Trustee. For the full job description, application guidelines and other information, please click here.​​​​​​ ​​​All applications must be received by July 13.

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