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BARNEY FRANK RESPONDS TO GOP'S CRITICISM OF DODD-FRANK

Retired congressman Barney Frank, former chairman of the U.S. House Financial Services Committee, returned to Washington yesterday to defend 2010's regulatory overhaul, the Dodd-Frank Act that bears his name, following a report released this week by House Republicans criticizing the law, Bloomberg News reported yesterday. The hearing split along partisan lines in support of and in opposition to the wide-ranging law, which was passed in response to the 2008 financial crisis. Frank largely defended the law while endorsing some changes. He said that the Volcker Rule, which limits risky trading by banks, could be limited to larger institutions. Asset managers, he said, shouldn't be designated as systemically important, which would subject them to additional oversight by the Federal Reserve. Republicans on the panel countered that the law created a regulatory burden that has stunted lending and job growth. "Thanks to Dodd-Frank, it is now harder for low- and moderate-income Americans to buy a home," said current Committee Chairman Jeb Hensarling (R-Texas). Frank replied that Republicans' calls for more lending run counter to their past complaints of too much lending to lower-income borrowers. The hearing follows a report, released July 21 by House Republicans on the four-year anniversary of the Dodd-Frank Act, that concluded that the law actually strengthened the perception that some banks are too big to be allowed by the government to fail. Frank dismissed this notion, however, stating that "[t]he Dodd-Frank Act is clear: Not only is there no legal authority to use public money to keep a failing entity in business, the law forbids it." Click here to read the full article.

ANALYSIS: THE LINGERING, HIDDEN COSTS OF THE BANK BAILOUTS

The rescue of incumbent investors in the government bailout of the largest U.S. banks in the autumn of 2008 has been widely viewed as unfair for the way it applied different rules to different players. The use of the Troubled Asset Relief Program has been credited by the Federal Reserve and Treasury with preventing a financial collapse of the economy. The rescue, however, had a hidden cost for the economy that is difficult to quantify, but can be crippling, according to an analysis in yesterday's Wall Street Journal. New economic activity is hobbled if it is not freed from the burden of sharing its return with investors who bore risks that failed. The demand for new economic activity is enlarged when its return does not have to be shared with former claimants protected from the consequences of their risk-taking. This is the function of bankruptcy in an economic system organized on loss as well as profit principles of motivation, according to the analysis. Financial failure and the restructuring of assets and liabilities motivates new capital to flow directly into new enterprise activity at the cutting edge of technology — the source of new products, output and employment that in turn provide new growth and recovery. However, with only two balance-sheet crises in the U.S. in the past 80 years, 1929-33 and 2007-09, we have little experience against which to test alternative policies and economic responses. Click here to read the full analysis.

ANALYSIS: WILL DETROIT BE ABLE TO PAY ITS BILLS AFTER BANKRUPTCY?

Detroit is known by its most unwelcome attributes: Along with one of the highest murder and violent crime rates in the country, it currently is known as the most populous U.S. city to ever seek bankruptcy protection. But can it also enjoy the biggest recovery? According to an analysis in today's mlive.com, so much is still up in the air that it's not clear whether Detroit will be positioned to succeed a year from now. Does the city generate enough money to fix what ails Detroit if billions in debt are cut? Are the city's costs too high? Does it pay its workers too much? Are pensions too generous? Can the city endure a reduction in both spending and revenue and revive what is by most measures the most dysfunctional large city in America? At first blush, Detroit doesn't suffer from a revenue problem. It can count tax sources that most Michigan cities cannot (casino, utility and income taxes), and it gets the largest chunk of the state's revenue sharing. Its general fund (excluding money raised and spent by the water and sewerage department) generated nearly $1.7 billion in taxes and other revenues in 2011. At $2,346 generated per city resident, that's 42 percent higher than the median ($1,650) of the country's largest cities, according to a report last year by the Pew Charitable Trusts. Yet in documents filed with the bankruptcy court, Emergency Manager Kevyn Orr's experts have forecast that property tax revenues, which were $163.7 million in 2009, will fall below $100 million in 2017 and continue to fall until 2020. Utility taxes are also falling. Those (mostly downward) fluctuating revenue streams are what makes the city's fiscal future hard to predict. Click here to read the full analysis.

HISTORICALLY BLACK COLLEGES FACE UNCERTAIN FUTURE

For generations, historically black colleges and universities have played a key role in educating young African-Americans. However, facing often-steep declines in enrollment, these schools are struggling to survive, the Associated Press reported Tuesday. Over the last 20 years, five historically black colleges and universities — or HBCUs — have shut down, and about a dozen have dealt with accreditation issues. South Carolina State University, that state's only public historically black higher education institution, had its accreditation placed on probation last month after the school was cited for financial problems. Morris Brown College, a 133-year-old private institution in Atlanta, filed for bankruptcy in August 2012 and has received court approval to sell some of its property. Last year, North Carolina elected officials flirted with the idea of merging Elizabeth City State University, a public historically black college, with another institution after its enrollment had dropped by 900 students in three years. Historically black colleges were once the only option for most black students, who made up almost 100 percent of their enrollment in 1950. Now that black students have a much wider choice of schools, only 11 percent of African-American college students choose a historically black college or university. Click here to read the full analysis. (Free subscription required.)

GENERATION GAP HITTING GOLF INDUSTRY HARD

A drop in participation rates and disinterest among young people, particularly millennials, has sent both the retail and sporting ends of the golfing industry scrambling for a new business strategy, the Wall Street Journal reported yesterday. For the fifth year, overall participation in golf fell in 2014 as measured by the number of U.S. individuals who reported playing on a course at least once, according to Sports & Fitness Industry Association data. "It's slow, takes a long time to play; it's expensive," said Matt Powell, a SportsOneSource analyst. "As a sport, it doesn't reflect the kind of values millennials like — diversity, inclusion. Golf tends to not be those things." The drop-off in tee times has been taking a toll. On Wednesday, a bankruptcy judge approved the liquidation of Edwin Watts Golf Shops, a chain founded 46 years ago in Fort Walton Beach, Fla., that filed for chapter 11 bankruptcy protection in November. It blamed a decline in golf's popularity leading to slowing sales in the $5 billion U.S. golf-retail industry, as well as several "lackluster" product launches. Click here to read the full article.

NEW HOME SALES DECLINE IN JUNE

Sales of newly constructed homes fell by 8.1 percent (seasonally adjusted) in June compared to the prior month, and May's reported massive sales jump disintegrated due to revised numbers, Forbes reported today. Compared to June of last year, new home sales were down 11.5 percent, according to today's U.S. Commerce Department report. May's downwardly revised numbers — to an annualized rate of 442,000 from the initial 504,000 — mean that the reported 18.6 percent surge in new home sales was an overstatement. The housing recovery continues to be mixed: Prices continue to rise, helping underwater homeowners, but the pace of gains is slowing. Inventory is up, but we are still not back to the six-month supply that is considered a healthy market. Earlier this week, the National Association of Realtors released data showing that sales of existing (or previously owned) homes rose 2.6 percent in June. However, housing starts dropped by 9.3 percent that month. Housing economists point out that underlying economic factors — below-average growth in median household income, labor force participation, bank lending and household formation — may be stalling the housing recovery. Click here to read the full article.

NEW CASE SUMMARY ON VOLO: STUART V. MENDENHALL (IN RE MENDENHALL, 6TH CIR.)

Summarized by Kathleen DiSanto of Jennis & Bowen, P.L.

The Eleventh Circuit held that (1) the bankruptcy court did not abuse its discretion in interpreting its order granting a 60-day extension of the Rule 4007(c) deadline to file a complaint to determine the dischargeability of debt to mean that the extension ran from the date of the original deadline under Rule 4007(c); (2) the bankruptcy court properly denied Stan Stuart's untimely motion for extension of the Rule 4007(c) deadline because the bankruptcy court had no discretion to retroactively extend the deadline to file a complaint under § 523 of the Bankruptcy Code after it expired, as a bankruptcy court may only enlarge the time for filing a complaint to determine dischargeability if a motion for extension is filed before the time expires; and (3) the bankruptcy court's interpretation of its order did not violate Stan Stuart's constitutional rights.

There are more than 1,300 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: BANKS MIGHT NOT BE PREPARED FOR THE NEXT RECESSION

A recent blog post posits that the next downturn might pose different problems that the Federal Reserve's stress tests might not be designed to detect.

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

Credit-bidding should not be allowed in a bankruptcy sale.

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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2014

July
- Mid-Atlantic Bankruptcy Workshop
    July 31-August 2, 2014 | Cambridge, Md.

August
- ABI Endowment Baseball Event
    Aug. 13, 2014 | Baltimore, Md.

- Fourth Hawai'i Bankruptcy Workshop
    Aug. 13-16, 2014 | Maui, Hawai'i

September
- Southwest Bankruptcy Conference
    Sept. 4-6, 2014 | Las Vegas, Nev.

- abiLIVE Webinar: Understanding Make-Whole and No Call Provisions
    Sept. 9, 2014 |

- Golf & Tennis Outing
    Sept. 9, 2014 | Maplewood, N.J.

- CARE Financial Literacy Conference
    Sept. 11-13, 2014 | Dallas, Texas

- ABI Workshop: Lending to Distressed Companies
    Sept. 15, 2014 | Alexandria, Va.

- Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization
    Sept. 17-18, 2014 | New York, N.Y.

October
- abiWorkshop: Government Contracting and Bankruptcy
    Oct. 6, 2014 | Alexandria, Va.

- Midwestern Bankruptcy Institute
    Oct. 16-17, 2014 | Kansas City, Mo.

- Views from the Bench
    Oct. 24, 2014 | Washington, D.C.

- Claims-Trading Program
    Oct. 30, 2014 | New York, N.Y.


- International Insolvency & Restructuring Symposium
    Oct. 30-31, 2014 | London

November
- Complex Financial Restructuring Program
    Nov. 6, 2014 | Philadelphia

- Corporate Restructuring Competition
    Nov. 6-7, 2014 | Philadelphia

- Chicago Consumer Bankruptcy Conference
    Nov. 11, 2014 | Chicago, Ill.

- Detroit Consumer Bankruptcy Conference
    Nov. 11, 2014 | Troy, Mich.

DODD-FRANK

REPUBLICANS RELEASE REPORT ASSESSING DODD-FRANK

On yesterday's four-year anniversary of the Dodd-Frank Act, congressional Republicans fired out at the controversial legislation in a 100-page report, saying that the Act's purported purpose to end the government's "too big to fail" policy has itself failed, DSnews reported yesterday. The House Financial Services Committee yesterday released "Failing to End 'Too Big to Fail:' An Assessment of the Dodd-Frank Act Four Years Later," which asserts that the Act perpetuates a dangerous policy of bailing out lenders that fleece American taxpayers, under the presumption that not bailing them out would make matters far worse. GOP leaders say that Dodd-Frank was supposed to put an end to this policy, but instead makes sure that it continues. "In no way, shape or form does the Dodd-Frank Act end 'too big to fail,'" said Committee Chairman Jeb Hensarling (R-Texas). "Instead, Dodd-Frank actually enshrines 'too big to fail' into law." Moreover, Republicans charge, regulatory requirements imposed under Dodd-Frank create compliance burdens that distort the free market by making it harder for small-to-medium-sized financial institutions to compete with larger firms, further entrenching "too big to fail." While Republicans on the Financial Services Committee plan to introduce legislation "to repeal Dodd-Frank's bailout fund and take other steps to end 'too big to fail' once and for all," according to Hensarling, one of Dodd-Frank's architects, former Massachusetts Representative and FSC Chairman Barney Frank, will testify at a congressional hearing on Wednesday to assess the impact of the Dodd-Frank Act four years later. Click here to read the full article.

Click here to access the report.

COMMENTARY: DOES DODD-FRANK WORK?

Ralph Nader has written a new book entitled, Unstoppable: The Emerging Left-Right Alliance to Dismantle the Corporate State. If one spends any time looking into the current state of affairs with the Dodd-Frank Act, one would have to say that he has a point, according to an Op-Ed in today's New York Times. There are many aspects of the law on which Democrats and Republicans disagree, but there is one area in which the two sides are largely in agreement: "Too Big to Fail" is still with us. Dodd-Frank was supposed to end "Too Big to Fail," the catchphrase for a financial institution whose collapse has the potential to bring down the entire financial system. That prospect is why, less than a month after the bankruptcy of Lehman Brothers, the government handed billions of dollars to the big banks to help stabilize them. In some ways, eliminating the possibility of future bank bailouts was the whole point of Dodd-Frank. Partly this was for populist reasons: Americans were outraged that the banks were bailed out, while the country got the worst of the Great Recession. But it was also just good public policy, according to the commentary. The Treasury Department insists that the days of "Too Big to Fail" are over. But the markets don't believe it, and neither do most people who pay attention to Dodd-Frank, according to the commentary. Click here to read the full commentary.

COMMENTARY: THE BENEFITS OF FAILURE

Four years ago, Dodd-Frank was enacted on the theory that some banks are too big to fail and that regulators have the wisdom to identify those that are. Today, the company that disproved that theory is back in the news, according to a commentary in today's Wall Street Journal. For most of the big banks that were bailed out during the crisis of 2008, the arguments can never be completely resolved over whether federal assistance was necessary, because taxpayers were not allowed to run the counter-experiment in which the big banks and their regulators were allowed to suffer the consequences of their decisions. However, in late 2008 commercial lender CIT Group Inc. received $2.3 billion in aid from the Treasury's Troubled Asset Relief Program (TARP), although it wasn't enough to save the firm from the risky bets it had made during the credit bubble. The company had more than $50 billion in assets, which under Dodd-Frank meant that its failure could be catastrophic. CIT was allowed to fail, however, and filed for chapter 11 bankruptcy protection in late 2009. The parent company soon emerged from bankruptcy and has been operating ever since. CIT today posted a 34 percent increase in its second-quarter profits and announced a deal to buy OneWest Bank, which operates 73 retail branches in Southern California that have $23 billion in assets. Unfortunately, this happy ending brings a new threat to taxpayers, thanks to Dodd-Frank, according to the commentary. The law says that a bank holding company with over $50 billion in assets is automatically considered "systemically important" and that the new acquisition will once again push CIT Group above that threshold — the same threshold that CIT proved to be bogus as a measurement of systemic risk. Click here to read the full commentary.

ANALYSIS: AT THREE YEARS OLD, CFPB HITS ITS STRIDE

Lawyers who practice before the Consumer Financial Protection Bureau, which turned three years old yesterday, agree on one thing: "It's been good for law firms," said Ballard Spahr partner Alan Kaplinsky. Lawyers say that the CFPB, the agency created by the Dodd-Frank Act, has hit its stride since the confirmation of director Richard Cordray last July, bringing a series of big-ticket enforcement actions, according to an analysis in The National Law Journal today. "The bureau is starting to mature a bit as an organization, to get its sense of identity and purpose," said David Bizar, who co-chairs the consumer financial services litigation practice group at Seyfarth Shaw. Agency lawyers have filed at least 20 enforcement actions in the past year (compared with two in the CFPB's first year), racking up a series of major settlements. In all, the CFPB in its first three years has helped refund more than $3.8 billion to consumers, Cordray told the Senate Committee on Banking, Housing and Urban Affairs last month. Still, some lawyers complain that the CFPB has been overzealous when it comes to enforcement. Another criticism is that the CFPB has put enforcement ahead of regulation. "They have been picking their targets and hitting them hard, trying to get the rest of the industry to take notice and make changes," Bizar said. "They're often getting out front on enforcement first, and then trying to follow up with regulation." In recent months, the CFPB has moved against payday lenders, debt collectors and auto financers — businesses that were not previously subject to federal oversight and where the rules of the road are less clear. On the rulemaking front, the CFPB has moved more cautiously. Click here to read the full analysis. (Subscription required.)

U.S. ECONOMY IS LUMBERING, NOT SOARING

The overriding market thesis is that the economy is getting better, the jobs market is getting better, corporate earnings are getting better, the proverbial morning in America is just around the corner, and even with stocks around record levels, even with chaos overseas, now is still the time to buy. There's only one problem with that thesis: It's starting to look like 2014 is going to be another disappointing year for the U.S. economy, according to the Wall Street Journal's MoneyBeat blog yesterday. The latest reading of the Chicago Fed's National Activity Index, which slipped in June, is the latest evidence of that. Even though it's a second-tier, or maybe even third-tier, data series, it's one that provides a good indication of the economic state of affairs, and it shows that despite fits and starts, despite grand predictions, the U.S. economy is still struggling to shake off the aftereffects of the recession. The index's June reading slipped to 0.12 from 0.16 in May. The three-month moving average fell to 0.13 from 0.28. While that is the moving average's fourth consecutive reading above zero, it remains below the critical threshold of 0.70, a level that indicates a sustained period of increasing inflation. At no point in the past two years, in fact, has the index moved into that range. Click here to read the full article.

NEW CASE SUMMARY ON VOLO: SPRADLIN V. RICHARD(6TH CIR.)

Summarized by Jason Stitt of Keating Muething & Klekamp PLL

The Sixth Circuit affirmed the district court's affirmation of the bankruptcy court's award of sanctions, and vacated the district court's reversal of the bankruptcy court's motion to extend time and deny the plaintiff's motion to dismiss the defendant's cross-appeal. The Sixth Circuit concluded that the defendant's motion to extend time to designate record for appeal, and the plaintiffs' motion to dismiss the defendant's cross-appeal, were moot by virtue of the bankruptcy court's lack of subject-matter jurisdiction over the defendant's cross-claims, and therefore the district court lacked, and the Sixth Circuit also lacked, jurisdiction over those issues.

There are more than 1,300 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: CONGRESS CAN FIX DODD-FRANK

A recent blog post proposes that Congress can fix Dodd-Frank's pursuit of financial stability at the expense of economic growth by amending the law so that regulators are required to balance both goals.

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

Credit bidding should not be allowed in a bankruptcy sale.

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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2014

July
- Southeast Bankruptcy Workshop
    July 24-27, 2014 | Amelia Island, Fla.

- Mid-Atlantic Bankruptcy Workshop
    July 31-August 2, 2014 | Cambridge, Md.

August
- ABI Endowment Baseball Event
    Aug. 13, 2014 | Baltimore, Md.

- Fourth Hawai'i Bankruptcy Workshop
    Aug. 13-16, 2014 | Maui, Hawai'i

September
- Southwest Bankruptcy Conference
    Sept. 4-6, 2014 | Las Vegas, Nev.

- abiLIVE Webinar: Understanding Make-Whole and No Call Provisions
    Sept. 9, 2014 |

- Golf & Tennis Outing
    Sept. 9, 2014 | Maplewood, N.J.

- CARE Financial Literacy Conference
    Sept. 11-13, 2014 | Dallas, Texas

- ABI Workshop: Lending to Distressed Companies
    Sept. 15, 2014 | Alexandria, Va.

- Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization
    Sept. 17-18, 2014 | New York, N.Y.

October
- abiWorkshop: Government Contracting and Bankruptcy
    Oct. 6, 2014 | Alexandria, Va.

- Midwestern Bankruptcy Institute
    Oct. 16-17, 2014 | Kansas City, Mo.

- Views from the Bench
    Oct. 24, 2014 | Washington, D.C.

- Claims-Trading Program
    Oct. 30, 2014 | New York, N.Y.


- International Insolvency & Restructuring Symposium
    Oct. 30-31, 2014 | London

November
- Chicago Consumer Bankruptcy Conference
    Nov. 11, 2014 | Chicago, Ill.

- Detroit Consumer Bankruptcy Conference
    Nov. 11, 2014 | Troy, Mich.

REPUBLICAN SENATORS PROPOSE BILL TO BRING LARGE BANKS THROUGH BANKRUPTCY

Two Republican Senators proposed changes to the Bankruptcy Code to help unwind a large, failing financial institution, the latest salvo in an ongoing policy debate over how to avoid future taxpayer bailouts, the Wall Street Journal reported today. Sens. John Cornyn (R-Tex.) and Pat Toomey (R-Pa.) introduced a bill today that provides a new bankruptcy process for large firms, including the creation of a new "bridge" company to keep a failing firm operating and prevent a destabilizing run by all its creditors. Many experts and U.S. officials have said changes to the Bankruptcy Code are needed to allow it to accommodate a large firm's failure without market chaos, and the bill's "bridge" framework resembles a plan the Federal Deposit Insurance Corp. is developing to deal with failing firms. But the Senators' bill also would repeal a section of the 2010 Dodd-Frank financial overhaul: Title II, the part that allows the FDIC to take over a failing firm and unwind it, potentially with temporary taxpayer backing to keep its subsidiaries operating if no other options are available. Title II is only supposed to be used in cases where the firm can't be brought through bankruptcy. That piece of the bill is likely to draw opposition from Democrats who oppose changing the Dodd-Frank law, as well as the White House, which has said it's opposed to changing Dodd-Frank until its rules are largely written and implemented. Read more. (Subscription required.)

Click here to read the press release from Sen. Cornyn's office explaining the bill.

COMMENTARY: BIG BANKS AND THE FAILURE OF BANKRUPTCY

At a meeting of the Federal Deposit Insurance Corp. on Dec. 11, there was a complete and public collapse of the notion that today's large complex financial institutions could actually go bankrupt without causing a great deal of collateral damage, according to an editorial by Prof. Simon Johnson of the M.I.T. Sloan School of Management in the New York Times Economix blog today. In a free and fair discussion before the FDIC's Systemic Resolution Advisory Committee, proponents of bankruptcy as a viable option acknowledged that this would require substantial new legislation, implying a significant component of government support -- or what would reasonably be regarded as a form of "bailout" to a failing company and its stakeholders. As matters currently stand, bankruptcy for a big financial company would imply chaotic disaster for world markets (as happened after Lehman Brothers failed), according to Johnson. It is completely unrealistic to propose "fixing" this problem with legislation that would create a new genre of bailouts. Under current law -- and as a matter of common sense -- the Federal Reserve should take the lead in forcing megabanks to become smaller and simpler, according to the commentary. Under Section 165 of the 2010 Dodd-Frank financial reform legislation, large nonbank financial companies and big banks are required to create and update "the plan of such company for rapid and orderly resolution in the event of material financial distress or failure." The design is that this plan -- known as a "living will" -- should explain how the company could go through bankruptcy. Read the full commentary.

SEN. WARREN INTRODUCES BILL TO PROHIBIT COMPANIES FROM RUNNING CREDIT CHECKS ON JOB CANDIDATES

Sen. Elizabeth Warren (D-Mass.) introduced legislation on Tuesday that would prohibit employers from requiring job applicants to disclose their credit history, MassLive.com reported yesterday. Warren said that a person's poor credit history is often the result of medical bills, job loss or divorce and does not reflect his ability to perform a job. "Let people compete for jobs on the merits, not on whether they already have enough money to pay all their bills," Warren said. "Research has shown an individual's credit rating has little to no correlation with his or her ability to succeed in the workplace." But business organizations argue that credit checks are used in a targeted way to guard against things like theft by employees who have financial responsibilities at a company. Jon Hurst, president of the Retailers Association of Massachusetts, said that the association does not want to see tools taken away from an employer during the hiring process. Hurst said that credit reports are a good indicator of risk and of how responsible a person is. A 2012 report by the Society for Human Resource Management found that around half (47 percent) of companies conduct credit checks on some or all prospective employees. The bill, titled the "Equal Employment for All Act," would amend the Fair Credit Reporting Act to prohibit employers from procuring a job applicant's credit report and would forbid employers from denying a person a job based on poor credit history. (The bill includes an exception for jobs requiring national security clearance.) The bill is co-sponsored by Democratic U.S. Sens. Edward Markey of Massachusetts, Richard Blumenthal of Connecticut, Sherrod Brown of Ohio, Patrick Leahy of Vermont, Jeanne Shaheen of New Hampshire and Sheldon Whitehouse of Rhode Island. A similar bill was introduced by Rep. Steve Cohen (D-Tenn.) in 2011, although it did not go anywhere. Sen. Warren, although she is a freshman senator, has significant political clout because of her strong following among progressive activists nationwide. The bill has not gotten any Republican support. Read more.

Click here for the bill text.

NEW MORTGAGES TO GET PRICIER NEXT YEAR

Fannie and Freddie, which currently back about two-thirds of new mortgages, are set to charge higher fees, a move that will affect rates for many new borrowers, the Wall Street Journal reported yesterday. The mortgage giants said on Monday that, at the direction of their regulator, they will charge higher fees on loans to borrowers who don't make large down payments or don't have high credit scores -- a group that represents a large share of home buyers. Such fees are typically passed along to borrowers, resulting in higher mortgage rates. Fannie and Freddie, which currently back about two-thirds of new mortgages, don't directly make mortgages but instead buy them from lenders. The changes are aimed at leveling the playing field between the government-owned companies and private providers of capital, who are mostly out of the mortgage market now. Fannie and Freddie were bailed out by the government during the financial crisis but are now highly profitable. The Federal Housing Finance Agency last week signaled the fee increases but didn't provide details. The agency's move came one day before the Senate voted to confirm Rep. Mel Watt (D-N.C.) as its director. Read more. (Subscription required.)

WATCH KEVIN D. WILLIAMSON DELIVER HIS KEYNOTE AT WLC!

Now available in ABI's Newsroom is the keynote address from Kevin D. Williamson, a roving correspondent for National Review and the author of The End Is Near and It's Going to Be Awesome: How Going Broke Will Leave America Richer, Happier and More Secure. To watch the keynote, please click here: http://news.abi.org/videos

MISS THE ABILIVE WEBINAR LOOKING AT HOW TO HIRE THE RIGHT FINANCIAL ADVISORS? VIDEO NOW AVAILABLE!

Did you miss the abiLIVE webinar, "How to Hire the Right Financial Advisors" sponsored by ABI's Financial Advisors & Investment Banking Committee? In need of CLE before the end of the year? Then visit cle.abi.org to watch a video of the webinar and earn CLE! The program provides 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.)

Click here for more information and to purchase the video.

NOW AVAILABLE FOR PRE-ORDER: BEST OF ABI 2013: THE YEAR IN CONSUMER BANKRUPTCY

Now available for pre-order in the ABI Bookstore is Best of ABI 2013: The Year in Consumer Bankruptcy. This must-have reference contains the best ABI Journal articles and papers from ABI's top-rated educational seminars selected by ABI Board Member Alane Becket of Becket & Lee LLP (Malvern, Pa.) to cover the most important developments in consumer bankruptcy for 2013. The book delves into such timely topics as the foreclosure crisis, tax issues, the latest on chapter 13, student loans and much more, and it also features relevant case summaries drawn from ABI's Volo site (volo.abi.org). Make sure to log into www.abi.org to get your discounted ABI member pricing. The book will ship in late December. Click here to order.

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.

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.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: BAKER V. TRUSTEE CAGE (IN THE MATTER OF WHITLEY; 5TH CIR.)

Summarized by John Jones of JRJONESLAW PLLC

The Fifth Circuit reversed and remanded an order disgorging two properties transferred from debtor to debtor's counsel and held that while the Bankruptcy Code seeks to protect debtors and their estates from excessive or unnecessary legal fees, §329(b) limits the court to attorney compensation that exceeds the reasonable value of any services.

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: THE SENATE, CHAPTER 14, AND A GENERAL LACK OF SERIOUSNESS

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent blog post examines a proposal to add "chapter 14" to the Bankruptcy Code for systemically important financial institutions.

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

Electricity qualifies as a "good" entitled to administrative expense status under § 503(b)(9).

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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2014

January

- Western Consumer Bankruptcy Conference

    Jan. 20, 2014 | Las Vegas, Nev.

- Rocky Mountain Bankruptcy Conference

    Jan. 23-24, 2014 | Denver, Colo.

February

- Caribbean Insolvency Symposium

    Feb. 6-8, 2014 | San Juan, P.R.

- VALCON14

    Feb. 26-28, 2014 | Las Vegas, Nev.

March

- Bankruptcy Battleground West

    March 11, 2014 | Los Angeles, Calif.

- Alexander L. Paskay Memorial

Bankruptcy Seminar

    March 13-15, 2014 | Tampa, Fla.

April

- Annual Spring Meeting

    April 24-27, 2014 | Washington, D.C.

ABI MEDIA TELECONFERENCE EXAMINES LESSONS LEARNED FROM LEHMAN’S CHAPTER 11

ABI held a media teleconference today looking at the Lehman chapter 11 filing, the lessons learned from it five years later and what the future holds for distressed large financial institutions. An audio archive of the teleconference will be posted soon on ABI.org, and its availability will be announced via social media (Twitter: twitter.abi.org; Facebook: facebook.abi.org). Key figures in the case who spoke on today's teleconference included:

- Bankruptcy Judge James Peck (S.D.N.Y.; New York) presided over the Lehman Brothers chapter 11 case.

- Harvey Miller of Weil, Gotshal & Manges LLP (New York) was the lead debtor attorney for Lehman Brothers.

- Dennis Dunne of Milbank, Tweed, Hadley & McCloy (New York) represented unsecured creditors in the Lehman case.

- Bryan Marsal of Alvarez and Marsal (New York) served as Lehman's Chief Executive Officer after it filed for chapter 11 until 2012.

- Chris Kiplock of Hughes Hubbard & Reed LLP (New York) worked with the team of attorneys representing trustee James W. Giddens in liquidating Lehman Brothers.

The moderator for the program was ABI Fall Resident Scholar Kara Bruce of Toledo University School of Law. Be sure to check ABI's feeds on Twitter or Facebook for the availability of the teleconference audio archive!

ANALYSIS: VOLCKER RULE TO CURB BANK TRADING PROVES HARD TO WRITE

Three years after first proposing that banks be prevented from making market bets with their own money, Paul Volcker's rule remains unfinished, the Wall Street Journal reported yesterday. The Volcker rule, a centerpiece of the sweeping overhaul of financial regulation known as Dodd-Frank, is an attempt to protect the financial system from risk. The rule looks to prohibit banks from making investment bets with their own money, but it has proved difficult to apply. Five years after cratering financial firms ignited a global crisis, and three years after Dodd-Frank outlined the Volcker rule as a central part of the government response, the rule languishes unfinished and unenforced, mired in policy tangles and infighting among five separate agencies whose job is to produce the fine print. Read more. (Subscription required.)

COMMENTARY: FIVE YEARS LATER, FINANCIAL LESSONS NOT LEARNED

Sunday marks the fifth anniversary of the fateful day that investment bank Lehman Brothers filed for bankruptcy, signaling the start of a frightening financial meltdown, but we are still missing some of the lessons drawn out by the crisis, according to a commentary in yesterday's Wall Street Journal by Prof. Alan Blinder of Princeton University. Years of disgraceful financial shenanigans in the 2000s, some illegal but many just immoral, brought on the Great Recession with virtually no help from any co-conspirators, according to Blinder. Congress and President Obama reacted comparatively weakly with the Dodd-Frank Act of 2010, which Blinder said certainly did not seek to remake the U.S. financial system. A supporter of Dodd-Frank, Blinder has found that the law now seems to be withering on the regulatory vine. Far from being tamed, the financial beast has gotten its mojo back, according to Blinder. Read the full commentary. (Subscription required.)

ANALYSIS: SEC TRIES TO REBUILD ITS REPUTATION

The Securities and Exchange Commission is ending its push to punish financial-crisis misconduct in the same way it started -- with a new chairman vowing that Wall Street's top cop will be tougher in the future, according to a Wall Street Journal analysis today. In 2009, at the depths of the recession, Mary Schapiro took the reins at the SEC, promising to "move aggressively to reinvigorate enforcement" at the agency. She created teams to target various types of alleged misconduct, including one focused on the complicated mortgage bonds that helped set off a global financial panic. The agency has filed civil charges against 138 firms and individuals for alleged misconduct just before or during the crisis, according to the analysis, and it received $2.7 billion in fines, repayment of ill-gotten gains and other penalties. But some of the SEC's highest-profile probes of top Wall Street executives have stalled and are being dropped. In April, former federal prosecutor Mary Jo White took the reins as SEC chairman with a simple enforcement motto: "You have to be tough." She tossed out the SEC enforcement policy that allowed almost all defendants to settle cases without admitting wrongdoing. In August, hedge-fund manager Philip Falcone became the first example of this new approach when he and his firm, Harbinger Capital Partners LLC, admitted to manipulating bond prices and improperly borrowing money from a fund. The policy shift comes as the SEC turns the page on its financial crisis work. New investigations into misconduct linked to the meltdown have slowed to a trickle, and a statute-of-limitations deadline is looming for many cases, which will generally restrict the sanctions that the SEC can enforce for misconduct that is more than five years old. Read more. (Subscription required.)

U.S. FORECLOSURE FILINGS DROP 34 PERCENT AS PROPERTY PRICES RISE

RealtyTrac issued a report showing that foreclosure filings fell 34 percent in the U.S. last month as first-time defaults dropped to the lowest level in almost eight years and rising home prices made it easier for distressed owners to sell, Bloomberg News reported today. Default, auction and repossession filings totaled 128,560 in August, with one in 1,019 U.S. households receiving a notice, the Irvine, Calif.-based data seller said today in a report. It was the 35th consecutive month in which total notices declined on an annual basis, with foreclosure starts plunging 44 percent, RealtyTrac said. Increasing buyer demand and climbing property values are helping some troubled borrowers refinance or sell rather than lose their homes to foreclosure. The S&P/Case-Shiller index of property values in 20 cities rose 12.1 percent in June from a year earlier. Last month, foreclosure starts totaled 55,775, the lowest level since December 2005, and fell on a year-over-year basis in 38 states, RealtyTrac said. Read more.

LATEST ABI PODCAST EXPLORES BANKRUPTCY'S CORPORATE TAX IMPLICATIONS

ABI Resident Scholar Prof. Kara Bruce speaks with Prof. Diane Lourdes Dick of Seattle University School of Law about how companies in chapter 11, such as Solyndra and WaMu, preserve valuable tax attributes through holding companies. Prof. Dick discusses her current research looking into how stakeholders of financially distressed firms exploit various loopholes in chapter 11 to transfer value outside of bankruptcy's distributional norms. Click here to listen to the podcast.

NEW ABILIVE WEBINAR OCT. 3: THE INTERSECTION OF INTELLECTUAL PROPERTY AND BANKRUPTCY: KODAK, NORTEL AND OTHER CASES

IP experts will shed light on the mysteries of understanding IP law and navigating the often puzzling sales processes, drawing from their experiences in Nortel, Kodak and other important cases, in an abiLIVE webinar on Oct. 3 from 1:00-2:15 p.m. ET. Speakers will include David Berten (Global IP Law Group, LLC; Chicago), Pauline K. Morgan (Young Conaway Stargatt & Taylor, LLP; Wilmington, Del.), Cassandra M. Porter (Lowenstein Sandler LLP; Roseland, N.J.), Kelly Beaudin Stapleton (Alvarez & Marsal; New York) and Christopher Burton Wick (Hahn Loeser & Parks LLP; Cleveland). To register, click here.

RECORDING AVAILABLE OF THE ABILIVE WEBINAR EXAMINING THE NEW U.S. TRUSTEE FEE GUIDELINES!

If you were not able to join ABI's recent well-attended abiLIVE webinar examining the U.S. Trustee Fee Guidelines for chapter 11 cases filed on or after Nov. 1, a recording of the program is now available for downloading! A panel of experts, including Clifford J. White, the director of the U.S. Trustee Program, discussed some of the ways the new guidelines could change day-to-day operations in firms, issues relating to the new market rate benchmarks, and how these changes might alter insolvency practice. The 90-minute recording is available for the special ABI member price of $75 and can be purchased 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.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: MORRIS AVIATION LLC V. DIAMOND AIRCRAFT INDUSTRIES INC. (6TH CIR.)

Summarized by Mike Debbeler of Graydon Head & Ritchey LLP

The Sixth Circuit ruled that the airplane manufacturer's opinion of the "quality and reliability" of components was not a fraudulent or negligent misrepresentation where the component manufacturer filed bankruptcy and voided warranties on components shortly after plaintiff purchased the airplane from the manufacturer. The airplane manufacturer's mere opinion as to component manufacturer's financial health did not form the basis of a misrepresentation claim.

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: HOW HAS THE FINANCIAL SECTOR CHANGED SINCE THE LEHMAN FILING?

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent blog post explores how the financial sector has changed since the Lehman Brothers chapter 11 filing on Sept. 15, 2008.

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

Success fees for financial advisors should be prohibited.

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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2013

September

- Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization

    Sept. 18-19, 2013 | New York

- abiLIVE Webinar: Complex Requirements and Ethical Duties of Representing Consumer Debtors

     Sept. 24, 2013

- Bankruptcy 2013: Views from the Bench

    Sept. 27, 2013 | Washington, D.C.

October

- abiLIVE Webinar: The Intersection of Intellectual Property and Bankruptcy: Kodak, Nortel and Other Cases

     Oct. 3, 2013

- Midwestern Bankruptcy Institute Program and Midwestern Consumer Forum

    Oct. 4, 2013 | Kansas City, Mo.

- Professional Development Program

    Oct. 11, 2013 | New York, N.Y.

- Chicago Consumer Bankruptcy Conference

    Oct. 14, 2013 | Chicago, Ill.

- International Insolvency & Restructuring Symposium

    Oct. 25, 2013 | Berlin, Germany

November

- Complex Financial Restructuring Program

   Nov. 7, 2013 | Philadelphia, Pa.

- Corporate Restructuring Competition

   Nov. 7-8, 2013 | Philadelphia, Pa.

- Austin Advanced Consumer Bankruptcy Practice Institute

   Nov. 10-12, 2013 | Austin, Texas

- Detroit Consumer Bankruptcy Conference

   Nov. 11, 2013 | Detroit, Mich.

- Delaware Views from the Bench

   Nov. 25, 2013 | Wilmington, Del.

December

- Winter Leadership Conference

    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.

- ABI/St. John’s Bankruptcy Mediation Training

    Dec. 8-12, 2013 | New York