NEWS AND ANALYSIS
REPORT: MANY MAJOR U.S. CITIES STILL NOT RECOVERED FROM CRISIS
A report released yesterday by the Pew Charitable Trusts found that 30 major U.S. cities face a tough and uncertain road to financial recovery, the Wall Street Journal reported today. The revenues collected by a majority of the cities analyzed by Pew were still below their pre-crisis peaks, even as populations and costs have generally gone up. "For many of these large cities, the impact of the housing crisis on local revenue could have just been starting, several years after the worst of the nationwide collapse," according to the Pew research. The 30 cities analyzed by Pew and their metropolitan areas make up 49 percent of U.S. gross domestic product, the nonprofit says. Pew looked at cities such as New York City, Boston, Chicago, San Franciso, Phoenix and Los Angeles. The Pew study found that property-tax collections could continue to decline, straining cities. "Further projected declines of this key revenue source suggest that cities may face new challenges in coming years with property taxes," according to the report, which looked at financial filings from 2011, the most recent available for the 30 cities analyzed by Pew. Cities have less of a financial cushion to address such sluggish revenues: 29 of the 30 cities Pew examined tapped their reserve funds between 2007 and 2011. Read more. (Subscription required.)
CLINTON: BANK FINES SHOULD FUND U.S. INFRASTRUCTURE
Former President Bill Clinton told some of Wall Street's top executives that fines levied against banks in connection with the financial crisis should be used to fund infrastructure improvements in the U.S., Bloomberg News reported today. Clinton signed into law one of the biggest overhauls of the nation's banking regulations in six decades, undoing the Depression-era Glass-Steagall Act that separated commercial and investment banking. Wall Street critics and executives, including former Citigroup Inc. Chairman Sanford "Sandy" Weill, have called its elimination a mistake that contributed to financial firms being deemed too big to fail. The six biggest U.S. banks have piled up more than $100 billion in legal costs, including settlements and lawyer fees, since the crisis, data compiled by Bloomberg show. The largest, New York-based JPMorgan Chase & Co., has reached a tentative $13 billion agreement with the U.S. to resolve multiple mortgage-bond probes. An economic strategy that favored "trading as opposed to investment" contributed to the 2008 crisis, said Clinton. Too much capital "went into housing, which created the bubble with the subprime mortgages, and then the securities that were spun out of them," he said. Read more.
COMMENTARY: LITIGATION AGAINST BANK MORTGAGE PRACTICES TOPPING ASBESTOS SUIT COSTS
For the last few years, the cost of litigation in the wake of the financial crisis has far exceeded the estimates of the cost of asbestos litigation, making risky lending and the other practices that led to the financial crisis of 2008 more toxic financially than even asbestos, according to a commentary yesterday in the Huffington Post. A 2005 study by the RAND Corporation estimates the cost of roughly 30 years of asbestos litigation to have reached $70 billion. In comparison, a study by The Economist tallies the cost, to date, of financial litigation in the wake of the financial crisis to have reached nearly $100 billion. Although many expect the cost of asbestos litigation to continue to climb over the coming decades to reach an estimated $200 billion, pending mortgage litigation could outpace that figure next year, according to the commentary. Late last week, the federal government asked a judge to penalize Bank of America to the tune of $864 million following that verdict. But even if the judge does penalize the bank in that amount, it would be a drop in the bucket compared to the nearly $50 billion Bank of America alone has paid out over the last few years, mostly for the misconduct of Countrywide Financial and its affiliates, purchased by BofA during the peak of the subprime market. Last year, five of the biggest banks settled for up to $32 billion to resolve potential claims in the so-called "robo-signing" scandal in which low-level bank officials fabricated documents in the course of foreclosure litigation. Bank of America is likely to face a new round of litigation, as the Justice Department and several state attorneys general seem poised to bring new claims against it. Moreover, the nearly $100 billion in judgments, penalties and fees, with nearly $14 billion being obtained just last month, could be the mere tip of the iceberg. The FHFA has roughly 15 more suits pending against other banks, not just JP Morgan, for which they have sought nearly $200 billion in damages. A settlement that halved the claims would still double the payout from mortgage litigation. Read more.
AMR, US AIRWAYS REACH SETTLEMENT WITH DOJ ON MERGER
AMR Corp. and US Airways Group Inc. agreed to concessions at key airports across the U.S. to settle the Justice Department's antitrust suit, ending a months-long standoff and paving the way for a roughly $16 billion merger that will create the world's largest airline, the Wall Street Journal reported today. US Airways and AMR, parent of American Airlines, agreed to divest slots at Reagan National Airport near Washington, D.C., that will reduce their combined daily departures there by about 15 percent, and to give up slots at LaGuardia Airport in New York that will cut their service there by about 7 percent. They also agreed to give up two gates at each major airport in Chicago, Los Angeles, Dallas, Boston and Miami. The airlines also agreed to retain virtually all of their hubs for at least three years and, for at least five years, maintain service to cities in six states that also joined the Justice Department's suit: Virginia, Michigan, Florida, Arizona, Pennsylvania and Tennessee. Despite the concessions, the airlines say that the new American is still expected to generate more than $1 billion in total annual cost savings and revenue improvements, the same amount they estimated before the deal. Read more. (Subscription required.)
COMMENTARY: CARD ACT CLEARED UP CREDIT CARDS' HIDDEN COSTS
Four years ago, Congress decided to force down the hidden fees that credit card companies collect from their customers as it passed a law called the 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act. According to a commentary in Friday's New York Times, the law is working as intended. When Neale Mahoney, an economist at the University of Chicago's Booth School of Business, and a few colleagues set out to evaluate the effect of that law, they were surprised to find that the regulation cut down the costs of credit cards, and the researchers concluded, "We find no evidence of an increase in interest charges or a reduction to access to credit." The study estimates that the law is saving American consumers $20.8 billion a year. The study also shows how credit card fees added up before the Card Act took effect: Those with the worst credit -- the subprime borrowers -- were paying an effective interest rate of 20.6 percent, plus an additional 23.3 percent in fees. Most of those fees are now gone. Read more.
FRIDAY: EXPERTS TO EXAMINE STUDENT LENDING AND BANKRUPTCY AT ABI WORKSHOP PROGRAM
Experts will tackle the hot topic of student lending issues in bankruptcy on the abiWorkshops series' new program, "You Can't Discharge Student Loans in Bankruptcy - Or Can You?" The program will be held on Nov. 15 from 9 a.m. to 3 p.m. ET in the ABI Headquarters Conference Center in Alexandria, Va. The abiWorkshops series provides attendees two great ways of participating: You can register to attend in person at the ABI Conference Center, or you can participate via a live webstream! Topics that will be covered on the Nov. 15 program include:
- Student Lending Today: Who Borrows, How Much, Delinquency & Default Trends
- Repayment Options: Income Based Repayment and New Lender/Servicer Programs
- Litigation under Sect. 523(a)(8): What Proofs Are Needed? Evidence Demonstration
For more information or to register for the "You Can't Discharge Student Loans in Bankruptcy - Or Can You?" abiWorkshop on Nov. 15, please click here.
BLOOMBERG'S BANKRUPTCY & RESTRUCTURING Q3 2013 REVIEW AVAILABLE FOR ABI MEMBERS!
Bloomberg Brief has provided ABI members with a complimentary copy of its "Bankruptcy & Restructuring 3Q 2013 Review" to download! The report contains statistics, analysis and charts on corporate chapter 11, chapter 9 and chapter 15 filing trends from 3Q 2013. To download your complimentary copy, please click here.
ABI GOLF TOUR UNDERWAY; LAST STOP FOR 2013 IS WINTER LEADERSHIP CONFERENCE IN DECEMBER
The 7th and final stop for the 2013 ABI Golf Tour is on Dec. 5 at the Trump National Golf Club, held in conjunction with ABI’s Winter Leadership Conference. Final scoring to win the Great American Cup sponsored by Great American Group is based on your top three scores from the seven ABI events. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! A 22-handicapper won the tour event at July’s Southeast Bankruptcy Workshop. There's no charge to register or participate in the Tour.
NEW ABILIVE WEBINAR LOOKS AT HOW TO HIRE THE RIGHT FINANCIAL ADVISORS
ABI's Financial Advisors & Investment Banking Committee
is proud to present the next abiLIVE webinar, "How to Hire the Right Financial Advisors," on Dec. 11 from 1-2:15 p.m. ET. The program will provide attendees with an overview and basic understanding of the different types of financial advisors that may be relevant for in- and out-of-court cases. Topics include:
- The different types of financial advisors available;
- The benefits and limitations for each category of advisor; and
- How to select the right advisor for the job.
Speakers on the webinar include:
-Daniel F. Dooley of MorrisAnderson (Chicago)
-Gregory S. Hays of Hays Financial Consulting LLC (Atlanta)
-Ivan Lehon of Ernst & Young (New York)
-Allen Soong of Deloitte CRG (Los Angeles)
-Teri Stratton of Piper Jaffray & Co. (El Segundo, Calif.)
Registration is $75 for ABI members/$175 for non-members. Have a number of colleagues that would like to participate? Take advantage of group pricing for ABI members: register 5 or more and the registration cost drops to $60 per person!
Click here for more information and to register.
ABI IN-DEPTH
RENEW YOUR ABI MEMBERSHIP BY DEC. 31 AND SAVE!
Beginning in January 2014, ABI will institute its first dues increase to the regular dues rate in six years. The $20 increase will ensure that ABI can continue to provide you with the latest and most effective tools available in insolvency information and education. You can lock in 2013 rates, and additional discounts, for up to three years by using a multi-year renewal option (save $75!). You can also save 10 percent on future dues by opting into the automated dues program. To renew your membership and save, please go to renew.abi.org.
ETHICS CLE AVAILABLE! NEW "BANKRUPTCY IN DEPTH" VIDEO PREVIEWS UPCOMING SUPREME COURT BANKRUPTCY CASES
Available now for purchase from ABI's eLearning Center (http://cle.abi.org) is a new "Bankruptcy In Depth" video featuring ABI Resident Scholar Kara Bruce and Eric Brunstad of Dechert LLP (Hartford, Conn.) previewing the bankruptcy cases that the Supreme Court will consider during its 2013 term. Brunstad, who has argued many cases before the Court and is an expert in bankruptcy appellate practice, discusses in depth Law v. Siegel, which questions whether the court may use its general equitable authority under §105 of the Bankruptcy Code to surcharge a debtor's exempt assets, and Executive Benefits Insurance Agency v. Arkison (In re Bellingham), which will address the bankruptcy court's authority to adjudicate Article III matters. He also provides a candid view of what it is like to argue a case before the Court and an in-depth analysis of the issues involved with the upcoming cases. Available for the member price of $75, ABI will also seek 1.25 hours of ethics CLE credit in 60-minute-hour states and 1.5 hours of credit in 50-minute-hour states for this program. This online CLE program is presumptively approved in CA, DE, FL, GA, HI, IL, NV, NJ, NY (Approved Jurisdiction Policy), RI and SC. Credit hours granted are subject to approval from each state, which has not been determined. To purchase the new "Bankruptcy In Depth" video, please click here.
ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS
Law school students are invited to submit a paper between now and March 4, 2014 for ABI's Sixth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings. The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.
NEW CASE SUMMARY ON VOLO: RUSHTON V. SMC ELECTRICAL PRODUCTS INC. (IN RE C.W. MINING COMPANY; 10TH CIR.)
Summarized by Brandon Bickle of GableGotwals
The Tenth Circuit BAP affirmed the bankruptcy court's ruling, on summary judgment, that the debt between the debtor and creditor-defendant was incurred in the ordinary course of the parties' businesses, and that the alleged preferential payment was made in the ordinary course of the parties' businesses, and therefore the preferential payment was covered by the ordinary course of business defense of § 547(c)(2) and could not be avoided.
There are more than 1,000 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.
NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: FOUR THINGS CONSUMER DEBTORS SHOULD NOT DO BEFORE FILING FOR BANKRUPTCY
The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent post reviews four actions that consumer debtors should not take before filing for bankruptcy so that administration of their case is not hindered in court.
Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.
ABI Quick Poll
Can litigant consent enable the bankruptcy court to enter final judgment in a matter which, after Stern, falls outside the court's constitutional authority?
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
INSOL INTERNATIONAL
INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 43 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.
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