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FED GOVERNOR: PUT CAP ON BIG FINANCIAL FIRMS



A top Federal Reserve official yesterday called on Congress to consider capping the size of the nation's financial firms, marking one of the most high-profile challenges to the way Wall Street does business, The Wall Street Journal reported yesterday. In a Philadelphia speech, Fed governor Daniel Tarullo recommended curbing banks' growth by putting a limit on their nondeposit liabilities, which are sources of funding for operations that go beyond consumer deposits. The idea takes direct aim at the biggest U.S. banks, including J.P. Morgan Chase & Co., Bank of America Corp., Goldman Sachs and Citigroup Inc., all of which rely heavily on such funding. Firms outside of this tier make much greater use of regular deposits. Tarullo, who drives much of bank policy-making at the Fed, is the highest-ranking regulatory official to call for limiting the size of banks. Even though the chance of congressional action depends in part on the outcome of November's election, the concept also fits into a growing chorus from across the political spectrum. Critics have voiced concern that the nation's largest financial institutions are too big to fail and pose too great a risk to the U.S. financial system. Tarullo's suggestion would cap banks' nondeposit liabilities—which are usually some form of debt, such as short-term borrowings—at a fixed percentage of the U.S. economy, a number he didn't specify. He also warned that the Fed should block any merger or acquisition this group of big banks attempts to make. If larger banks continue to expand, Tarullo said in Wednesday's speech, the market perception will increase that certain of them are "too big to fail," meaning that the federal government would rescue them rather than risk rocking the financial system. Click here to read the full article.

U.S. MORTGAGE FRAUD INITIATIVE DATA INCLUDED OLDER CASES



The Obama administration announced that a yearlong crackdown on mortgage fraud netted charges against 530 suspects in the year ending Sept. 30. However, the list included cases filed as many as two years before U.S. Attorney General Eric Holder said the initiative began, Bloomberg News reported today. Holder said at a news conference in Washington, D.C., on Tuesday that the initiative ran from Oct. 1, 2011 to Sept. 30, 2012, and resulted in "285 federal criminal indictments and informations against 530 defendants for allegedly victimizing more than 73,000 American homeowners—and inflicting losses in excess of $1 billion." A sampling of cases incorporated in the data Holder cited shows those numbers includes cases filed as early as 2009. Cases filed before the start of the initiative were included because some type of "law enforcement action" occurred during the yearlong period, according to William Carter, a spokesman for the Federal Bureau of Investigation. Those actions could include indictments, convictions and sentencings, he said. The "Distressed Homeowner Initiative" was spearheaded by the FBI, which began to recognize a sharp increase in fraud aimed at struggling homeowners in the years following the 2008 housing crisis. The information used to compile the results from the initiative came from an FBI survey of the agencies involved in the Mortgage Fraud Working Group. Click here to read the full article.

WHAT TO DO WITH AMERICA'S 14 MILLION VACANT HOMES?



With all the numbers hinting at a housing market recovery, it's a good time to take a look at the challenge of what to do with the millions of homes in America that nobody seems to want, The Wall Street Journal reported on Tuesday. As of the end of June, there are just over 132.7 million housing units in America, and 10.6 percent of them—more than 14 million—are vacant year-round. That number includes everything from holiday homes to places in the temporary purgatory between being rented or sold and new occupants moving in. But at one end of that spectrum are nearly 4 million homes that aren't just sitting unsold or unrented—they're not even on the market. While vacant properties are broadly decreasing in number as more are sold or rented, that final "other" number—places simply not on the market and not being used for anything—has actually increased in the last year. These vacant homes are bad news for all involved, depressing property values around them, falling into disrepair, and often attracting higher crime rates and other social problems. Places where private investors will likely do much of the heavy lifting include areas like Phoenix, where a boom-era oversupply of new homes is gradually being bought up at low prices and turned into rental units. But other towns prone to longer-term decline will need to simply tear buildings down. And for that, land banks—government or nonprofit entities that own, manage and dispose of vacant land—have a role to play. Click here to read the full article.

JOBLESS CLAIMS IN U.S. FALL TO FOUR-YEAR LOW



Fewer Americans than forecast filed first-time claims for unemployment benefits last week, which may reflect difficulty adjusting the data for seasonal swings at the start of a new quarter, Bloomberg News reported today. Applications for jobless benefits dropped 30,000 to 339,000 in the week ended Oct. 6, the fewest since February 2008, Labor Department figures showed today. Economists had forecast 370,000 claims, according to the median estimate in a Bloomberg survey. At the same time, the cooling of the global economy and a lack of clarity on U.S. fiscal policy are acting as hurdles for faster gains in employment. The report "is consistent with a labor market that is gradually getting better," said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Conn., who had predicted a decline in claims. "Layoffs are at a low level and don't seem to be going anywhere. Hiring is still very muted." Click here to read the full article.

U.S. GROWTH EXPECTED TO BE SLOW INTO 2013



The unemployment rate registered a dramatic 0.5 percentage-point drop over the past two months, but economists don't expect that pace of decline to continue, the Wall Street Journal reported today, citing its latest forecasting survey. "The general trend in the unemployment rate is lower, and this should continue to be true as long as the economy grows along the profile we project," said Joseph LaVorgna at Deutsche Bank. "However, the cumulative five-tenths decline over the past two months appears to be overdone." It is expected that the jobless rate will still be at 7.8 percent by June of next year, matching the September figure released last week. The reason for the stagnation in the job market is expectations for lackluster economic growth during the rest of 2012 and into 2013. Economists say they don't see the U.S. falling back into recession and for the most part believe that the economy will grow above 3 percent in 2013. But about two-thirds of the respondents say the risks remain more to the downside than upside. Click here to read the full article.

WATCH COMMISSION HEARING LIVE NEXT WEEK!



ABI's Commission to Study the Reform of Chapter 11 will hold a public hearing on Wednesday, October 17, at the LSTA Annual Conference in New York. The event will be live webcast beginning at 3:15 p.m. ET at the Commission's website (commission.abi.org).

ABI MEMBERS CAN RECEIVE A DISCOUNT ON THEIR PURCHASE OF A DEBTOR WORLD



A Debtor World, published by Oxford University Press, contains a collection of contributions about the societal implications of private debt from top scholars at the 2008 Debt Symposium sponsored by ABI and hosted by the University of Illinois College of Law. The essays comprising this volume are authored by dozens of leading U.S. and international academics who have written about debt or issues related to debt in a wide range of disciplines including law, sociology, psychology, history, economics and more. The collection explores debt as neither a problem nor a solution but as a phenomenon, and promotes the exchange of knowledge to better comprehend why consumers and businesses decide to borrow money. It explores what happens to businesses and consumers under heavy debt loads, and what legal norms and institutions societies need in order to encourage the efficient use of debt while promoting a greater understanding of the global phenomenon of increased indebtedness and societal dependence. To order your copy and receive an ABI member discount, please click here and enter promo code "31256" when making your purchase. The discount expires 12/31.

ABI IN-DEPTH

MEMBERS WILL NOT WANT TO MISS ABI'S PROGRAM AT NCBJ'S ANNUAL MEETING ON OCT. 26



Members planning to attend the 86th Annual NCBJ Annual Conference in San Diego from Oct. 24-27 will not want to miss the exciting line-up scheduled for the ABI program track on Oct. 26. In addition to roundtable discussions on the hottest consumer and business bankruptcy topics, ABI will be hosting a ticketed luncheon that will feature the presentation of the 7th Annual Judge William L. Norton, Jr. Judicial Excellence Award and entertainment by Apollo Robbins, a sleight-of hand artist, security consultant and self-described gentleman thief. Click here to register for the Conference.

To view the list of ABI programs on Oct. 26 and the full NCBJ Annual Conference schedule, please click here.



ABI's Chapter 11 Reform Commission will also be holding a public hearing on Oct. 26 from 2:30-4:30 p.m. PT at the San Diego Marriott. Interested parties have the opportunity to submit testimony at the hearing. For further information, please contact ABI Executive Director Samuel J. Gerdano at sgerdano@abiworld.org.

LATEST CASE SUMMARY ON VOLO: WILLIAMS V. KING (IN RE KING; BAP 8TH CIR.)



Summarized by Lars Fuller of Baker and Hostetler LLP

The Eighth Circuit BAP affirmed an order of the U.S. Bankruptcy Court for the Western District of Missouri denying a motion to reconsider an order awarding sanctions and directing a creditor to dismiss a claim pending in state court as violating the debtor's chapter 7 discharge. The bankruptcy court had first granted a motion for sanctions against the appellants, then denied the appellants' motion to reconsider. The appellants appealed both the order for sanctions and the order denying the motion to reconsider. The BAP indicated that the appeal of the motion for sanctions was likely untimely, but the timeliness was not necessary for disposition, given the affirmation of the bankruptcy court's order on the merits and the timely appeal of the denial of the motion to reconsider.

There are more than 650 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: LETTING YOUR CREDITORS SUE YOU



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post raises the notion of debtors allowing creditors to sue them, rather than the debtors filing for bankruptcy, as a way to deal with debt.

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

Bankruptcy courts should adopt formal loss mitigation procedures to facilitate the negotiation of residential mortgage modifications for consumer debtors.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

HAVE YOU TUNED IN TO BLOOMBERG LAW'S VIDEO PODCASTS?



Bloomberg Law's video podcasts feature top experts speaking about current bankruptcy topics. The podcasts are available via Bloomberg Law's YouTube channel so that you can access the programs from your computer or device of your choice! Click here to view the Bloomberg Law video podcasts.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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.

October

- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar

October 15, 2012

- ABI/Bloomberg Distressed Lending Conference

October 16, 2012 | New York, N.Y.

- International Insolvency and Restructuring Symposium

     October 18, 2012 | Rome, Italy

- ABI/St. John's "Bankruptcy and Race: Is There a Relation?" Symposium

     October 19, 2012 | Queens, N.Y.

- ABI Program at NCBJ's Annual Conference

     October 26, 2012 | San Diego, Calif.

November

- U.S./Mexico Restructuring Symposium

     November 7, 2012 | Mexico City, Mexico

- Professional Development Program

     November 9, 2012 | New York, N.Y.

- Detroit Consumer Bankruptcy Conference

     November 12, 2012 | Detroit, Mich.

- Winter Leadership Conference

     November 29 - December 1, 2012 | Tucson, Ariz.

December

- Forty-Hour Bankruptcy Mediation Training

     December 4-8, 2012 | New York, N.Y.

2013

January

- Rocky Mountain Bankruptcy Conference

     January 24-25, 2013 | Denver, Colo.

February

- Kansas City Advanced Consumer Bankruptcy Practice Institute

     February 17-19, 2013 | Kansas City, Mo.

CREDITOR LAWSUIT COULD UNDO AUTO BAILOUT, FORCE GM INTO BANKRUPTCY



A backroom deal negotiated by General Motors during the auto bailout to fulfill the Obama administration's demand for a quick bankruptcy could be reversed, draining the automaker of nearly all of its cash on hand and leaving it in worse shape than it was when it collapsed in 2009, according to a report in the Washington Free Beacon yesterday. As GM teetered on the edge of bankruptcy in June 2009, it cut a $367 million "lock-up agreement" with several major creditors in order to prevent its Canadian subsidiary from going under. The move spared the subsidiary from fulfilling the $1 billion debt it owed the creditors—major hedge funds—ensuring that GM would not have to face bankruptcy courts in two nations, which could have delayed the company’s recovery. "Many U.S. creditors waived their rights to object because the government wanted to push through the bailout for political reasons," risk analyst Chris Whalen said. "If they had continued through normal channels, they could have easily been in bankruptcy for five years." "When I approved the sale agreement and entered the sale approval order, I mistakenly thought that I was merely saving GM, the supply chain, and about a million jobs,” Bankruptcy Judge Robert Gerber said in July. “It never once occurred to me, and nobody bothered to disclose, that amongst all of the assigned contracts was this lock-up agreement, if indeed it was assigned at all." Industry experts say that GM should be very concerned with the judge’s reaction to the deal. More is at stake than the roughly $1 billion that “old GM’s” spurned creditors are seeking, according to industry observers. Judge Gerber may have to reopen the entire bailout, and that, according to bankruptcy experts, could unravel the entire settlement. Read more.

U.S. CHARGES 530 PEOPLE IN MORTGAGE PROBE WITH $1 BILLION IN LOSSES



Attorney General Eric Holder said today that the U.S. brought charges against 530 people over mortgage schemes that cost homeowners more than $1 billion, Bloomberg News reported. More than 73,000 homeowners were victims of various frauds for which charges were filed during a year-long crackdown, including "foreclosure rescue schemes" that take advantage of those who have fallen behind on payments, the Justice Department said. Typical schemes involved promises to homeowners that foreclosures could be prevented by payment of a fee, according to the statement. As part of the schemes, "investors" purchase the mortgage or the titles of homes are transferred to those taking part in the fraud, resulting in homeowners losing their property, the department said. Read more.

COURT SAYS CONGRESS CANNOT BLOCK PAY HIKES FOR JUDGES



The U.S. Court of Appeals for the Federal Circuit in a 10-2 decision on Friday found that Congress cannot revoke cost-of-living adjustments promised to federal judges in the Ethics Reform Act of 1989, reversing the court's holding to the contrary in 2001, the National Law Journal reported yesterday. Six current and retired federal judges sued over Congress' decision to block cost-of-living adjustments in the past and whether legislation passed after the court's 2001 decision overrode provisions of the 1989 law. In the Oct. 5 decision, the court found that Congress had violated the Compensation Clause of the Constitution, which aims to protect judicial independence by limiting the ability of the other branches of government from reducing judges' salaries. If Congress wanted to amend the 1989 law, the judges wrote, it could, but not in a way that affected any sitting judges. Read more.

WALL STREET REGULATOR RAMPS UP ENFORCEMENT



The Commodity Futures Trading Commission (CFTC), once considered a toothless regulator, brought a record number of enforcement cases over the past year as fines soared, the New York Times DealBook blog reported on Friday. The agency said on Friday that it levied $585 million in sanctions during its 2012 fiscal year, which ended Sept. 30, up from $450 million the year before. The surge in fines is largely tied to one case. In June, the British bank Barclays agreed to pay $200 million to the agency for trying to manipulating a crucial interest rate. Read more.

ABI MEMBERS CAN RECEIVE A DISCOUNT ON THEIR PURCHASE OF A DEBTOR WORLD



A Debtor World, published by Oxford University Press, contains a collection of contributions about the societal implications of private debt from top scholars at the 2008 Debt Symposium sponsored by ABI and hosted by the University of Illinois College of Law. The essays comprising this volume are authored by dozens of leading U.S. and international academics who have written about debt or issues related to debt in a wide range of disciplines including law, sociology, psychology, history, economics and more. The collection explores debt as neither a problem nor a solution but as a phenomenon, and promotes the exchange of knowledge to better comprehend why consumers and businesses decide to borrow money. It explores what happens to businesses and consumers under heavy debt loads, and what legal norms and institutions societies need in order to encourage the efficient use of debt while promoting a greater understanding of the global phenomenon of increased indebtedness and societal dependence. To order your copy and receive an ABI member discount, please click here and enter promo code "31256" when making your purchase. The discount expires 12/31.

SHOW YOUR SUPPORT FOR STEVEN GOLICK, A COLLEAGUE AND ABI LEADER



Our friend Steven Golick (Osler Hoskin & Harcourt LLP, Toronto) is facing a medical crisis. He has been diagnosed with a serious brain tumor, requiring complex surgery and treatment. Steven’s spirits are very strong and he and his family remain optimistic, but he can use our support. A prominent international restructuring attorney and an ABI member since 1994, Steven is also a founding member of the ABI house band, the Indubitable Equivalents. Because the band is important to Steven, his fellow band-mates have organized a new Blog site for Steven's friends and colleagues to show their love and support at this critical time. Please click on this link to share your thoughts with many others, and post as often as you'd like.

ABI IN-DEPTH

LAST CHANCE TO GET YOUR TICKET FOR TOMORROW’S PLAYOFF GAME TO SEE THE ST. LOUIS CARDINALS TAKE ON THE WASHINGTON NATIONALS IN D.C.!



Only a few tickets remain to the ABI Endowment's special event at Nationals Park tomorrow at 1 p.m. ET to see the St. Louis Cardinals take on the Washington Nationals in Game 3 of the National League Division Series. For $400, you will receive a game ticket to a luxury suite, food and open bar. Don't miss playoff baseball in Washington, D.C.! Click here to register!

Sponsorships Are also Available!

Stand out from the crowd and sponsor this historic playoff event! Bring a client; tickets included with your sponsorship. All sponsorships are tax deductible. Click here for details.

MEMBERS WILL NOT WANT TO MISS ABI'S PROGRAM AT NCBJ'S ANNUAL MEETING ON OCT. 26



Members planning to attend the 86th Annual NCBJ Annual Conference in San Diego from Oct. 24-27 will not want to miss the exciting line-up scheduled for the ABI program track on Oct. 26. In addition to roundtable discussions on the hottest consumer and business bankruptcy topics, ABI will be hosting a ticketed luncheon that will feature the presentation of the 7th Annual Judge William L. Norton, Jr. Judicial Excellence Award and entertainment by Apollo Robbins, a sleight-of hand artist, security consultant and self-described gentleman thief. Click here to register for the Conference.

To view the list of ABI programs on Oct. 26 and the full NCBJ Annual Conference schedule, please click here.



ABI's Chapter 11 Reform Commission will also be holding a public hearing on Oct. 26 from 2:30-4:30 p.m. PT at the San Diego Marriott. Interested parties have the opportunity to submit testimony at the hearing. For further information, please contact ABI Executive Director Samuel J. Gerdano at sgerdano@abiworld.org.

LATEST CASE SUMMARY ON VOLO: LIQUIDATORS OF LEHMAN BROTHERS AUSTRALIA LTD. V. LEHMAN BROTHERS SPECIAL FINANCING INC. (IN RE LEHMAN BROTHERS HOLDINGS INC.; 2D CIR.)



Summarized by Janice Grubin of Todtman, Nachamie, Spizz & Johns, P.C.

The Second Circuit vacated and remanded the judgment of the district court and reinstated the appeal for consideration of the bankruptcy court order denying intervention on the merits. Given that (1) denials of intervention are generally considered to be final appealable orders in the non-bankruptcy context, (2) the bankruptcy standard for finality is more flexible than other civil litigation and (3) the pragmatic approach is required by the instant circumstances, the Circuit held that the bankruptcy court's denial of the appellants' motions to intervene was a final, appealable order.

There are more than 650 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: PINNACLE UNIONS BALK AT AIRLINE'S ATTEMPTS TO SCRAP CONTRACT



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post reported on how Pinnacle Airlines Corp.'s thousands of pilots and flight attendants are objecting to the airline’s bid to scrap their contracts, a move the regional carrier says is necessary to exit bankruptcy protection.

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

Bankruptcy courts should adopt formal loss mitigation procedures to facilitate the negotiation of residential mortgage modifications for consumer debtors.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

HAVE YOU TUNED IN TO BLOOMBERG LAW'S VIDEO PODCASTS?



Bloomberg Law's video podcasts feature top experts speaking about current bankruptcy topics. The podcasts are available via Bloomberg Law's YouTube channel so that you can access the programs from your computer or device of your choice! Click here to view the Bloomberg Law video podcasts.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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.

October

- ABI Endowment Event: Nationals Playoff Game

     October 10, 2012 | Washington, D.C.

- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar

October 15, 2012

- ABI/Bloomberg Distressed Lending Conference

October 16, 2012 | New York, N.Y..

- International Insolvency and Restructuring Symposium

     October 18, 2012 | Rome, Italy

- ABI/St. John's "Bankruptcy and Race: Is There a Relation?" Symposium

     October 19, 2012 | Queens, N.Y.

- ABI Program at NCBJ's Annual Conference

     October 26, 2012 | San Diego, Calif.

November

- U.S./Mexico Restructuring Symposium

     November 7, 2012 | Mexico City, Mexico

- Professional Development Program

     November 9, 2012 | New York, N.Y.

- Detroit Consumer Bankruptcy Conference

     November 12, 2012 | Detroit, Mich.

- Winter Leadership Conference

     November 29 - December 1, 2012 | Tucson, Ariz.

December

- Forty-Hour Bankruptcy Mediation Training

     December 4-8, 2012 | New York, N.Y.

2013

January

- Rocky Mountain Bankruptcy Conference

     January 24-25, 2013 | Denver, Colo.

February

- Kansas City Advanced Consumer Bankruptcy Practice Institute

     February 17-19, 2013 | Kansas City, Mo.