Small Banks Are Losing to Big Banks. Their Customers Are About to Feel It​​​

The collapse of a pair of lenders in rapid succession is testing Americans’ faith in the regional and community banks that supply credit to a big chunk of the nation’s entrepreneurs and businesses, the Wall Street Journal reported. Bankers across the country fielded panicky calls and texts after Silicon Valley Bank and Signature Bank collapsed earlier this month. Their social media feeds were jammed with stories of people moving their money — or at least talking about doing so. Deposits flooded into megabanks, whose failure the U.S. government would almost certainly prevent. The 25 biggest U.S. banks gained $120 billion in deposits in the days after SVB collapsed, according to Federal Reserve data. All the U.S. banks below that level lost $108 billion over the same period. It was the largest weekly decline in smaller banks’ deposits in dollar terms on record. Meanwhile, more than $220 billion has flowed into money-market funds over the past two weeks, according to data from Refinitiv Lipper. (Subscription required.)​​​ ​​​Read more.

Farm Bankruptcies Fall Again in 2022​​​

The latest American Farm Bureau Market Intel Report shows that the number of farm bankruptcies fell again in 2022, WKKG.com reported. Farm Bureau Senior Economist Veronica Nigh says that the lower number of bankruptcy filings is good news. “2022 data from the U.S. courts show that Chapter 12 bankruptcy filings were down nearly 29 percent in 2022 compared to 2021,” she said. “They came in at 169 filings, which is the first time that we had fewer than 200 filings since Chapter 12 became permanent in 2005.” Nigh says that farm bankruptcy trends tend to follow net farm income. “We certainly tend to see more Chapter 12 filings when net farm income is down, so just three years ago in 2019, we had 599 farm bankruptcies. Last year, with net farm income of $163 billion, that number of Chapter 12 filings should have been down, and we’re glad to see it,” she said. Read more.

453,000 Borrowers Approved for Student Loan Forgiveness Under Waiver as Processing Continues​​​

Nearly half a million people have been approved for federal student loan forgiveness under a one-time waiver program geared toward borrowers working in public service jobs, Forbes reported. Processing is continuing as many more borrowers may ultimately qualify, even while another Biden administration initiative — the one-time mass student debt-relief plan — remains blocked by federal courts. Public Service Loan Forgiveness (PSLF) is a federal student loan forgiveness program that can eliminate the federal student loan debt for borrowers who commit to public service careers. After 120 “qualifying payments” (equivalent to 10 years) while working for approved nonprofit or government employers, borrowers can receive a complete discharge of their federal student debt. Historically, PSLF has been a troubled program since its creation in 2007. PSLF has had complicated eligibility requirements and tricky rules about what counts as a “qualifying payment” toward loan forgiveness. Simple errors, either by the borrower or a loan servicer, could cause lasting problems. The Biden administration enacted the Limited PSLF Waiver in 2021 to remedy these issues. Under the waiver, the Education Department issued emergency regulations relaxing the original PSLF rules and expanding the definition of “qualifying payments” for past loan periods. This allowed many borrowers to accelerate their progress, or even reach the threshold for complete federal student loan forgiveness. ​​​Read more.

Exodus from America’s Big Cities Slowed Last Year as Pandemic Receded​​​

Big cities lost fewer residents last year as more immigrants moved in, fewer people died and more babies were born there, according to new census data that shows that the urban exodus that gained steam early in the pandemic is cooling, the Wall Street Journal reported. The suburbs of big cities and small and medium-sized metropolitan areas continued to claim most of the country’s growth, according to a Wall Street Journal analysis of population estimates released Thursday for the year that ended June 30. Rural areas and small towns collectively remained nearly flat. The core counties of large metro areas had an estimated net loss of more than 800,000 movers to the rest of the country, but that was an improvement from a 1.2 million drop in the preceding year, the Journal analysis shows. After a sharp falloff in immigration at the peak of the pandemic, the latest data shows a revival that has helped bolster large urban counties, with about 500,000 net arrivals from abroad last year. A rise in births and fewer deaths also helped offset moves out of urban counties, leaving their collective population little changed for the year. (Subscription required.) Read more.

U.S. Revises Down Last Quarter’s Economic Growth to 2.6% Rate​​​

The U.S. economy maintained its resilience from October through December despite rising interest rates, growing at a 2.6% annual pace, the government said Thursday in a slight downgrade from its previous estimate, the Associated Press reported. But consumer spending, which drives most of the economy’s growth, was revised sharply down. The government had previously estimated that the economy had expanded at a 2.7% annual rate last quarter. The rise in the gross domestic product — the economy’s total output of goods and services — for the October-December quarter was down from the 3.2% growth rate from July through September. For all of 2022, the U.S. economy expanded 2.1%, down significantly from a robust 5.9% in 2021. The report suggests that the economy was losing momentum at the end of 2022. Consumer spending rose at a 1% annual rate last quarter, downgraded from a 1.4% increase in the government’s previous estimate. It was the weakest quarterly gain in consumer spending since COVID-19 slammed the economy in the spring of 2020. Most economists say they think growth is slowing sharply in the current January-March quarter, in part because the Federal Reserve has steadily raised interest rates in its drive to curb inflation. The resulting surge in borrowing costs has walloped the housing industry and made it more expensive for consumers and businesses to spend and invest in major purchases. As a consequence, the economy is widely expected to slide into a recession later this year. ​​​Read more.

Low Jobless Claims Show Labor Market Shrugging Off Economy’s Clouds​​​

Worker filings for unemployment benefits rose last week but were still historically low, showing that the broader labor market remains robust despite large companies announcing layoffs, the Wall Street Journal reported. Initial jobless claims, a proxy for layoffs, increased by 7,000 to a seasonally adjusted 198,000 last week, the Labor Department said Thursday. The level of claims fluctuated earlier this month, but broadly remains low. The four-week average of weekly claims, which smooths out volatility in the weekly numbers, ticked up by 2,000 to 198,250. Weekly claims have remained near the 2019 pre-pandemic average of about 220,000 for several months. The latest data signal “continued strong demand for jobs in March despite concerns about the banking sector during the month,” said Sam Millette, a fixed-income strategist for Commonwealth Financial Network. He said recent reports suggest next week’s jobs report will show continued employment gains in March. The trend has held even as large employers in industries such as technology, finance and entertainment cut jobs. But even with the announcements, there hasn’t been an uptick in filings for unemployment benefits. Hiring has been strong this year, especially at restaurants and retailers, and the unemployment rate is trending near a half-century low. Some laid-off workers may be forgoing applying for jobless assistance because they are quickly finding new work or are receiving generous severance packages. ​Read more.

Commentary: Latest Crisis to Hit U.S. Economy Illustrates the Costs of Complacency*​​​
Each of the last four U.S. presidents has confronted an economic crisis serious enough to warrant extraordinary government intervention in the workings of the free market. Once rare, such dramatic rescues have become the norm, according to a Washington Post commentary. The authorities’ swift response this month to the collapse of Silicon Valley Bank, which until the day it failed had been regarded as of little importance beyond the technology sector, revealed a brittle system addicted to infusions of official support, according to some economists. Now, fresh economic dangers loom, including in the largely unregulated private markets that provide more than half of all U.S. consumer and business credit. Economic calamities in recent years have erupted in rapid succession. The SVB episode came three years after the pandemic sparked job losses and supply chain disruptions, which occurred little more than a decade after the 2008 financial crisis. The three episodes that rocked Americans had little in common. Two originated in errors by captains of finance; one resulted from a once-in-a-century outbreak of disease. But they all emerged after periods of success had lulled investors and executives into assuming that favorable conditions would endure. Years of ultralow interest rates preceded both the 2008 crash and the SVB affair, encouraging bankers to engage in riskier ventures. It is no accident that the United States has been buffeted by larger and more frequent economic storms in recent decades, some economists said. For decades after World War II, restrictions on global capital flows and strict regulation of domestic finance kept instability risks in check. But those rules were eventually weakened, and as barriers between nations fell with the end of the Cold War, cross-border financial and production links flourished, according to the commentary. 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.​​​​​

Just Added to the Annual Spring Meeting Schedule: Don’t Miss “The SVB Collapse: What Went Wrong, and What Happens Next?”​​​
Silicon Valley Bank (SVB) failed on March 10 following a run on its deposits, representing the second-largest bank failure in U.S. history behind the 2008 failure of Washington Mutual. Prior to its collapse, the Santa Clara, Calif.-based SVB was the 16th-largest bank in the U.S. and was the largest bank by deposits in Silicon Valley. This panel of experts will break down the failure and future of SVB, the FDIC’s role in the banking crisis, and the impact its collapse may have on other financial institutions. Are you registered?

Latest ABI Podcast Features Academics Discussing Supreme Court’s Opinion in Bartenwerfer and What It Means for Consumer Debtors​​​
This edition of ABI Podcast features experts examining the Supreme Court’s Feb. 22 opinion in Bartenwerfer v. Buckley. ABI Editor-at-Large Bill Rochelle talks to Profs. Lawrence Ponoroff and David Kuney about the Court’s unanimous holding that § 523(a)(2)(A) precludes a debtor from discharging in bankruptcy a debt obtained by fraud, regardless of her own culpability. Listen here.

Veterans Service Award: Nominations Due Tomorrow!

Each year, ABI's Task Force on Veterans and Servicemembers Affairs bestows its Veterans Service Award to individuals or organizations who have provided the greatest help to veterans facing financial and legal challenges.

We invite you to nominate worthy recipients for this year’s award, which will be presented during ABI's Annual Spring Meeting, taking place April 20-22 in Washington, D.C.

Please submit your nominations no later than March 31, 2023, to Ted Gavin at ted.gavin@gavinsolmonese.com. Nominations should include the following information:

- Name of individuals or organizations being nominated​​​​​​.
- Title and firm name (if individual).
- Contact information for nominee.
- Practice area.
- Reasons why nominee should be honored with the Veterans Service Award.
- Your name and contact information.

Thank you for your help in identifying and honoring these deserving candidates!

Upcoming abiLIVE Webinars Look at the Implications of SVB's Collapse and Examine Bankruptcy Filing Trends in 1Q 2023​​​

To help you prep for conversations at ABI's Annual Spring Meeting April 20-22, be sure to enjoy these two upcoming FREE abiLIVE webinars looking at key bankruptcy topics:

- TOMORROW: "Implications of SVB's Collapse and the Current Banking Crisis" will feature top experts examining SVB's collapse, the financial fallout from its failure, and the path going forward for creditors. Register here.

- April 11: "Bankruptcy Filing Growth: Will Increases Continue Beyond 1Q 2023?," sponsored by Epiq Bankruptcy, will look at the bankruptcy filing growth seen in the first three months of the year, and what might lie ahead. Register here.

Tomorrow Is the Nomination Deadline for the Fifth Annual ABI Asset Sale of the Year Award​​​

ABI's Asset Sales Committee (ASC) is welcoming nominations for its Fifth Annual Asset Sale of the Year Award! The winning Sale and Team will be recognized in a future ASC newsletter and on the committee’s webpage. Depending on publication dates, the winners may also be recognized in (1) one or more of ABI’s weekly or monthly email publications, and (2) the ABI Journal (in the Inside ABI section). For criteria, eligibility and the nomination form, please click here. All submissions are due by Friday, March 31!

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