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The U.S. Senate Judiciary Committee discussed the Furthering Asbestos Claims Transparency (FACT) Act at a hearing yesterday titled “The Need for Transparency in the Asbestos Trusts,” Asbestos.com reported. The bill would require new, stiffer requirements for those seeking compensation from asbestos trusts. The Code established asbestos trusts to compensate victims of asbestos exposure. These trusts are worth an estimated $30 billion. Earlier this year, the FACT Act was folded into a larger proposal and renamed the Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act of 2016 (H.R. 1927). The U.S. House of Representatives recently passed that version. Click here to watch a replay of the hearing and to obtain prepared witness testimony. 

For further analysis of litigation trusts, be sure to pick up a copy of ABI’s A Practitioner's Guide to Liquidation and Litigation Trusts.

Atlantic City Mayor Don Guardian on Thursday called an emergency City Council meeting next week to discuss whether the distressed New Jersey gambling hub should file for municipal bankruptcy, Reuters reported yesterday. Governor Chris Christie's (R) veto on Tuesday of legislation that aimed to stabilize the city's tax base and boost its cash flow left the city with "no other option but to explore bankruptcy," Guardian said. State lawmakers have been pushing for a full takeover of city operations, saying local officials have not done enough to cut costs. Only city officials can file for bankruptcy, but the state, which already oversees the city's finances, must ultimately approve it.

Illinois' two top Republican legislators said on Wednesday they will introduce legislation soon to let the state take over the cash-strapped Chicago public school system, permit the district to file for municipal bankruptcy and eventually allow for city-wide school board elections, Reuters reported yesterday. The plan has the backing of Republican Governor Bruce Rauner, who has embraced allowing local governments facing financial turmoil to file for bankruptcy. But it is strongly opposed by Chicago Mayor Rahm Emanuel, who controls the city's schools, the Chicago Teachers Union, and by Democratic leaders, who control the legislature. Senate Minority Leader Christine Radogno and House Minority Leader Jim Durkin, both Republican allies of Rauner, said a new approach is needed to rescue the Chicago Public Schools (CPS) from financial mismanagement and near collapse. The nation's third-largest school system has a structural budget deficit topping $1 billion and credit ratings that have fallen deep into the "junk" level. The district's current budget has a $480 million gap that officials hope to fill with bigger pension funding support from the state. But the plan has become entangled in a state budget stalemate between Rauner and Democrats.

A congressional effort to put regulators under the microscope when they write new rules for Wall Street is gaining momentum, potentially creating new obstacles to the closer oversight of financial risk taking, the New York Times reported today. A bipartisan group of senators is working on a package of regulatory reform bills that most likely would include a measure to subject the Consumer Financial Protection Bureau, the Securities and Exchange Commission and other independent agencies to a heightened cost-benefit analysis and review process for major rules. Supporters say the legislation would bring rule-making standards for independent regulators closer in line with those for executive branch agencies, providing more consistency and transparency in the rule-making process. But critics, including top Democrats, warn that the legislation is instead intended to create additional burdens and delays, as well as make agency rules more vulnerable to legal challenges.

New Jersey Governor Chris Christie (R) yesterday rejected legislation intended to shore up the finances of Atlantic City, a move that could hasten the state’s takeover of the struggling casino hub, Bloomberg News reported yesterday. Christie vetoed a bill that would have established fixed payments from casinos instead of levies based on real-estate values, which would prevent tax appeals that strain the city’s finances. He declined to take action on bills that would have diverted some gambling funds to the city. Without those measures, the city will run out of cash in April, according to a report released Friday by Kevin Lavin, the emergency manager appointed by Christie. Atlantic City’s fiscal crisis was precipitated by the closure of a third of its casinos in 2014 as competition from neighboring states eroded its onetime dominance over gambling on the East Coast. The city’s gaming revenue last year was less than half its 2006 peak of $5.2 billion. Bankruptcy is now a possibility, said Mayor Don Guardian. "If the state is not able to come up with the funding we need within the next few weeks, we will have no choice but to declare bankruptcy," he said in a statement Tuesday. The state’s Local Finance Board must approve any filing.

Dismantling the Dodd-Frank Act will be a major target this year for Republicans in both chambers of Congress, according to a Morning Consult commentary. This year, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) will lean more toward idealistic, big-idea policymaking than incremental change. Up until now, he has focused on tweaking Dodd-Frank through small bills that could survive a trip to President Obama’s desk. His committee had success; 22 of its bills were signed into law, including six minor changes to Dodd-Frank. This year, when Hensarling showcases his idealized vision for financial services laws, it is unlikely to meet with much approval from Democrats, according to the commentary. “To answer [House] Speaker [Paul] Ryan’s call, you will see a visionary piece of legislation laying out the Republican vision for banking and capital markets, and as part of that, it will necessarily include repealing large swaths of Dodd-Frank,” Hensarling said.

A provision stuck in the recently approved spending bill last week exempts the U.S. Department of Education from a 1991 law that prevents harassing, automated phone calls, the Enid (Okla.) News & Eagle reported yesterday. The Telephone Consumer Protection Act barred pre-recorded messages or auto-dialing, known as “robocalls,” made to cellphones without the consent of the person called. The budget grants an exemption to government debt-collectors, allowing them to auto-dial and make twice as many calls as they can by hand. In a letter sent Monday, four senators urged Education Secretary Arne Duncan not to allow robocalls until the Federal Communications Commission creates rules for the exemption. Congress gave the FCC nine months to act.

The House of Representatives approved legislation yesterday including provisions that would remove the tax advantages of spinning off corporate real estate into a separate, publicly traded real estate investment trust, the New York Times reported today. The end of such tax-free spinoffs will generate $1.9 billion in additional tax revenue in the coming years, the Joint Committee on Taxation has estimated. These spinoffs have been a popular tactic of activist investors who have pushed companies to unlock cash by separating themselves from their real estate holdings. Publicly traded REITs own property or mortgages and are not taxed so long as they pass most of their income on to shareholders. Companies that own a lot of real estate — mall operators, restaurant chains and even casinos — have looked at a spinoff to a real estate investment trust as a way of getting a higher value for those properties and using the cash to pay off debt. There have been 15 tax-free REIT spinoffs since 2010, including five last year and three this year, for a total of $21.6 billion, according to FactSet.

Former Speaker Newt Gingrich (R-Ga.) testified yesterday at a House Financial Services subcommittee hearing that the Consumer Financial Protection Bureau's (CFPB) expansive data collection was a flawed bureaucracy that can't be trusted with personal information, The Hill reported today. The Government Accountability Office (GAO) found last year that the CFPB ran 12 data collection projects tapping into information from 75 million credit card accounts, 173 million mortgages, 10.7 million consumer credit reports, 5.5 million student loans and between 15 million and 40 million storefront payday loans. Republicans, long critical of the agency, said that its structure and a slew of recent data breaches put American consumers at risk. "It is absolutely shocking to me the level of regulatory power these agencies have over the American people," added Rep. Mia Love (R-Utah), panning the "casualness" with which lawmakers talk about collecting data. Democrats quickly pointed to Gingrich's affiliation with the U.S. Consumer Coalition, an anti-CFPB group, and his 2012 presidential campaign's collection and sale of voter data. Deepak Gupta, a former CFPB official, said most of the data the agency collected was aggregated. He also criticized the committee for not investigating breaches of financial information. Read more.

If you're in the business of consumer credit, finance, debt collection, etc., learn why the Consumer Financial Protection Bureau is considered the most powerful consumer debt industry-related agency in the government. Click here to watch ABI's Sam Gerdano interview Alane Becket of Becket & Lee LLP (Malvern, Pa.) and Joann Needleman of Clark Hill PLC (Philadelphia) about the CFPB. 

Becket is also a co-author of the lead article of the December ABI Journal, titled "What Is the CFPB, and Why Should You Care?" Click here to read the article.