Court Asks CFPB to Justify Governance Structure

An appeals court in Washington, D.C., has asked the Consumer Financial Protection Bureau (CFPB) to justify at a hearing next week its structure of being led by a powerful single director, in a case that has emerged as a constitutional challenge to the agency, the Wall Street Journal reported yesterday. The questions stem from a lawsuit filed by a New Jersey mortgage lender challenging an enhanced penalty imposed by CFPB Director Richard Cordray for accepting what the agency called kickbacks from mortgage insurers. The mortgage lender, PHH Corp., said Cordray overstepped his authority by overturning a $6.5 million fine imposed by an administrative law judge at his agency and deciding instead to impose a $109 million fine. The company said in its suit that the payments were a common practice at the time and it ended the practice two years before the CFPB was in existence, so the agency has no legal standing in the case. Cordray has said his decision was justified because the administrative law judge was mistaken in his approach. The case will be heard by a panel of judges on April 12.

Learn more about the CFPB and why it is important to your practice to pay attention to this powerful new agency. Don't miss the "What Is the CFPB, and Why Do I Care?" session at next week's ABI Annual Spring Meeting! Register here.

Survey: Majority of Millennials Have "No Idea" When Student Loans Will Be Paid Off

A new survey conducted online in February by research agency TNS on behalf of Citizens Bank found 59 percent of those polled have "no idea" when they will be able to pay back their student debt, Bloomberg News reported today. The survey found that millennials, defined as those between the ages of 18 and 35, have an average student debt of $41,286.60. That's significantly higher than the national average amount of debt for college graduates, which the Department of Education determined is $29,400. Not every millennial knew how much debt he or she carries: 15 percent of those polled by TNS said they weren't sure what their student loan balance was, and more than a third didn't know the interest rate on their debt. Those polled also had a limited understanding of the intricacies of their student debt. Almost half said they "don't understand" how privatized student loans work, and 44 percent said they don't entirely grasp the difference between federal and private student loans. About a third had never even heard of student debt refinancing.

Research Examines Effects of Federal Reserve's "Operation Twist" on the Corporate Bond Market

At issue in a new Federal Reserve working paper by a trio of economists is whether a particular Fed program ended up increasing the supply of credit for U.S. companies at a time when Corporate America was still struggling to recover from the aftermath of the financial crisis, while simultaneously encouraging big investors to assume more risk in the form of higher-yielding debt securities, Bloomberg News reported today. "Operation Twist," as the program was known, saw the central bank seeking to cheapen long-term corporate borrowing by flattening the U.S. yield curve from late 2011 to late 2012. The exact mechanics involved selling a slug of shorter-term U.S. government bonds and then using the proceeds to buy up longer-term U.S. Treasuries, thereby reducing supply and driving up demand for longer-dated debt. "Under the plan, lower borrowing costs and increased credit availability would relieve possibly binding financial constraints on firms and households," write Economists Nathan Foley-Fisher, Rodney Ramcharan and Edison Yu. "But unconventional policies such as [Operation Twist] can also affect the demand for debt and the risk premia that borrowers might face."

Analysis: Treasury Has Outsize Legal Leverage on Inversions

Pfizer Inc.'s quick abandonment of its merger with Dublin-based Allergan PLC this week shows just how tough it is to challenge a Treasury Department determined to clamp down on corporate inversions with increasingly ambitious regulations, according to a Wall Street Journal analysis today. Pfizer's alternative -- plow ahead and challenge the Treasury's new rules in federal court -- would have required a gamble and a long wait. The consequences of trying and losing could have been enormous, because the rules released Monday might have unraveled Pfizer's attempt to put the combined company's tax address in Ireland -- and subjected it to many years of back taxes. "Presumably this is intended to have a chilling effect," said John Harrington, a former Treasury international tax lawyer who now advises corporate clients in Washington, D.C. "A lot of companies wouldn't want to discover three, four years later that they were a U.S. company the whole time." And it could have taken even longer than that. Just last year, tech companies scored a major victory when the U.S. Tax Court struck down a 2003 regulation -- and that case is still under appeal. The government's advantage is the product of a 149-year-old law known as the Tax Anti-Injunction Act, which says taxpayers can't sue to stop tax laws and regulations until the government has tried to assess the tax.

Latest ABI Podcast Looks at the Clash Between Asset-Forfeiture Actions and Bankruptcy

In a new ABI Podcast, ABI Resident Scholar Prof. Melissa Jacoby speaks with Prof. Karen M. Gebbia of the Golden Gate University School of Law about clashes between asset-forfeiture actions and bankruptcy. Prof. Gebbia, who currently chairs the American Bar Association's (ABA) Working Group on White Collar Crime, Asset Forfeiture and Business Bankruptcy, discusses her research on the topic and the ABA's resolution on asset forfeiture and bankruptcy law.

Circuit Judge Richard A. Posner: The Poet as Jurist

by Bill Rochelle
ABI Editor-at-Large

A college major in English is seen these days as preparation for few vocations aside from teaching, but Seventh Circuit Judge Richard A. Posner shows that studying literature as an undergraduate is superb grounding for a federal judge. On the appeals court bench for almost 35 years, Judge Posner is the country's most accomplished writer among federal judges. It's not surprising, given that Judge Posner was an English major at
Yale College. As exemplified by the bankruptcy opinion he penned this week, Judge Posner's decisions are as much poetry as they are prose. They read like poetry because his few words pack enormous meaning. His decisions call on the reader to interpret and read between the lines. He does not pause to explicate every nuance.

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