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Exclusive Video: Rep. Pierluisi Explains Urgent Need for Congressional Action on Puerto Rico Debt Crisis
Rep. Pedro Pierluisi recently spoke for an exclusive ABI video outlining why congressional action is needed to help reverse Puerto Rico's debt crisis, including his legislation to permit the territory's public companies to file under chapter 9. Watch the video here.
But not everyone agrees. A commentary today in The Hill advocated against the bill to make Puerto Rico government corporations eligible for chapter 9 bankruptcy retroactively. Because retroactive bankruptcy would violate past lending agreements, Puerto Rico's future borrowing costs would rise due to the obvious increase in perceived risks, both from the narrow threat of bankruptcy and from the larger increase in the likelihood that agreed contractual terms might not be treated as actual commitments, according to the commentary. However, the commentary said that Congress can do some things that will facilitate economic growth in Puerto Rico, examples of which are an elimination of Jones Act requirements for the use of U.S.-flagged vessels for transport services to the island, and an elimination (or reduction) of the minimum wage, the effect of which is to increase unemployment. Read more.
Free BloombergLaw "Eye on Bankruptcy" webinar on Dec. 17 will feature Rep. Pedro Pierluisi and Judge Steven Rhodes discussing the Puerto Rico debt crisis from ABI’s Winter Leadership Conference! To register, please click here.
Join experts in San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium Feb. 4-6, 2016. Click here to register!
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
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Law Professors Ask Congress to Delay Changes in Debt Law
Eighteen law professors sent a letter to leaders on Capitol Hill on Tuesday urging them to postpone proposed retroactive changes to a Depression-era law that they say could have "broad negative unintended consequences in the securities markets," the New York Times DealBook blog reported on Tuesday. The changes, added to omnibus spending legislation, would apply to pending cases and make it harder for some bondholders to challenge out-of-court debt-restructuring deals such as the one for casino operator Caesars Entertainment. Critics of the amendment to the Trust Indenture Act of 1939 say that it would hand a victory to big private equity firms at the expense of some bondholders. Senate Minority Leader Harry Reid (D-Nev.) defended the amendment at a news conference on Tuesday. "It doesn't [just] apply to Caesars; it applies to everyone," Reid said. The professors' letter was sent to Reid, Senate Majority Leader Mitch McConnell (R-Ky.), Speaker of the House Paul D. Ryan (R-Wis.) and House Minority Leader Nancy Pelosi (D-Calif.). Read more.
Click here to read the letter.
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Wall Street Lending Standards Remind Regulators of Crisis Run-Up
The biggest U.S. banks continue to weaken standards for some of the highest-risk lending in a trend similar to what their examiners saw before the 2008 financial crisis, according to a regulator's report, Bloomberg News reported yesterday. Competitive pressures have driven bankers to ease the standards for three years running, especially in leveraged lending, commercial real estate construction and credit cards, according to an annual survey of bank examiners who work for the Office of the Comptroller of the Currency (OCC). The report, released yesterday by the OCC, said that banks are also making more exceptions in their lending policies, a practice the examiners said has been adequately documented. The annual survey looked at 95 firms whose loans totaled $5.1 trillion -- 94 percent of lending in the federal banking system. The report noted that the examiners expect credit risk to keep increasing in 2016.
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Commentary: The Consumer Bureau Cover-Up
Congressman David Scott recently lambasted the Consumer Financial Protection Bureau for its "deceitful" auto-loan regulation based on "shamefully flawed" information, and that might be a kind assessment, according to a Wall Street Journal editorial today. Republican staff of the House Financial Services Committee recently released a trove of documents showing that bureau officials knew their information was flawed and even deliberated on ways to prevent people outside the bureau from learning how flawed it was, according to the editorial. The bureau has been guessing the race and ethnicity of car-loan borrowers based on their last names and addresses -- and then suing banks whenever it looks like the people the government guesses are white seem to be getting a better deal than the people it guesses are minorities. This largely fact-free prosecutorial method is the reason a bipartisan House supermajority recently voted to roll back the bureau's auto-loan rules, according to the commentary. The vote occurred before the release of the House committee report, which shows that the regulators were guessing and knew that they weren't even making good guesses. A May 2013 draft of a memo for bureau Director Richard Cordray prepared by bureau staff including Assistant Director Patrice Ficklin reported they had "reason to believe that our proxy is less accurate in identifying the race/ethnicity of particular individuals than some proprietary proxy methods that use nonpublic data." Read the full commentary. (Subscription required.)
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.
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Detroit Shows Improvement One Year Out of Bankruptcy
After exiting bankruptcy a year ago and paying down debt and other expenses, Detroit's budget is projected to have a $35 million surplus for the fiscal year that began July 1, the Associated Press reported yesterday. The city has met all the targets it agreed to under the bankruptcy, such as developing a four-year financial plan and reaching a collective bargaining agreement with a major union. As a result, a bond rating service upgraded Detroit one notch this year, citing income tax growth and other improvements.
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Commentary: Hillary Clinton Proposes to Rein In Wall Street
Hillary Clinton wrote an op-ed in Monday's New York Times saying that, as President, she would not only veto any legislation that would weaken financial reform, but she would also fight for tough new rules, stronger enforcement and more accountability that would go well beyond Dodd-Frank. Clinton's plan proposes legislation that would impose a new risk fee on dozens of the biggest banks -- those with more than $50 billion in assets -- and other systemically important financial institutions to discourage the kind of hazardous behavior that could induce another crisis. She would also ensure that the federal government has -- and is prepared to use -- the authority and tools necessary to reorganize, downsize and ultimately break up any financial institution that is too large and risky to be managed effectively. Clinton said that her plan would strengthen the Volcker Rule by closing the loopholes that still allow banks to make speculative gambles with taxpayer-backed deposits. She said that she would also fight to reinstate the rules governing credit swaps and derivatives at taxpayer-backed banks, which were repealed during last year's budget negotiations after lobbying by banks.
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Coming Soon: Bill Rochelle to Debut December 15 on ABI
ABI’s new editor-at-large, Bill Rochelle, will be publishing his exclusive analysis of important circuit court bankruptcy opinions handed down since September 1. He will highlight significant cases affecting both reorganization and consumer law. Watch for his first product on December 15!
Beginning January 4, ABI members will be able to subscribe to Rochelle’s Quick Takes, a unique daily commentary with his analysis of significant decisions immediately as they are published.
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USTP Announces Notice of Public Hearing and Reopened Comment Period for Proposed Procedures for Completing Uniform Periodic Reports in Non-Small Business Cases Filed Under Chapter 11 of Title 11
The U.S. Trustee Program (USTP) on Nov. 10 published in the Federal Register a notice of proposed rulemaking (NPRM) seeking public comment on the proposed rules requiring uniform periodic reports by debtors-in-possession or trustees in non-small business cases under chapter 11 and the proposed periodic report forms. After analyzing the comments to the NPRM and proposed forms, and because certain public commenters asked to meet with representatives of the USTP to discuss the NPRM and proposed forms, the USTP decided to hold a public hearing on Feb. 17, 2016, from 10:00 a.m. to 1:00 p.m. ET in the Executive Conference Center in the Executive Office for U.S. Trustees in Washington, DC. The hearing on the NPRM will provide an opportunity for interested parties to express their views directly to USTP officials. The USTP has also reopened the comment period and will accept new and supplemental comments from the public on or before Feb. 22, 2016, via www.regulations.gov. Those who register to attend and make a presentation at the public hearing must have either a written comment or statement on file by the registration deadline of Jan. 6, 2016. For more information, please click here.
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