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NEWS AND ANALYSIS
U.S. BANKS BIGGER THAN GDP AS ACCOUNTING RIFT MASKS RISK
Applying stricter accounting standards, such as those proposed by FDIC vice chairman Thomas Hoenig, for derivatives and off-balance-sheet assets would make the banks twice as big as they say they are -- or about the size of the U.S. economy -- according to data compiled by Bloomberg yesterday. "Derivatives, like loans, carry risk," Hoenig said. "To recognize those bets on the balance sheet would give a better picture of the risk exposures that are there." U.S. accounting rules allow banks to record a smaller portion of their derivatives than European peers and keep most mortgage-linked bonds off their books. Applying international standards for derivatives and consolidating mortgage securitizations, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co., would double the asset size while Citigroup Inc. would jump 60 percent, third-quarter data show. JPMorgan would swell to $4.5 trillion from $2.3 trillion, leapfrogging London-based HSBC Holdings Plc and Deutsche Bank AG, each with about $2.7 trillion. Read more.
COMMENTARY: TOO BIG TO FAIL CASTS LONG SHADOW
Despite the push to end corporate bailouts, the prospect of the government backstopping even more of the financial system is a possibility being debated within regulatory circles in regard to non-bank financing activity and was recently raised by the head of the Federal Reserve Bank of New York, according to a commentary in yesterday's Wall Street Journal. Regulators have been wrestling with how to reduce the risk of runs on the so-called shadow banking system, funding markets outside regulated banks. In particular, they have focused on making money-market funds less vulnerable. And they have looked to rein in risks posed by repurchase, or repo, markets, which involve the transfer of cash and securities between banks and financial firms. While regulated banks have faced far tighter oversight following the financial crisis, the shadow-banking market remains a source of potential instability. It is worth remembering that runs on non-bank institutions engaging in financing, rather than traditional bank runs, were a cause of the crisis and led to seizures of credit markets, according to the commentary. Read more. (Subscription required.)
FEDERAL RESERVE UNLIKELY TO END STIMULUS EFFORTS SOON
The prevailing sentiment at the Federal Reserve is that the central bank's efforts to pump tens of billions of dollars into the economy every month should not end anytime soon, the Washington Post reported today. Consumers are just beginning to reap the benefits of ultra-low interest rates and increased credit. Cutting off the program now could harm that fledgling progress before it is fully realized, according to Fed officials. That means the Fed is likely to give its latest stimulus initiative more time to filter through the broader economy. Read more.
CONSUMER BUREAU SAID TO WARN BANKS OF AUTO LENDING SUITS
The U.S. Consumer Financial Protection Bureau has told at least four banks that it may sue them over vehicle loans and interest-rate markups by auto dealers that appear discriminatory, Bloomberg News reported today. The banks received letters from the CFPB last week giving them 15 days to provide an explanation of the practice. The letters indicate the bureau believes the banks may have violated the Equal Credit Opportunity Act, a 1974 law that bars discrimination in lending. The letters, sent as vehicle loan originations are on the rise, demonstrate that the CFPB may be willing to sanction banks over mark-ups by auto dealers, which were excluded from the bureau’s supervision in the 2010 Dodd-Frank Law. As the economy has improved, auto truck loans climbed to $85.8 billion in the third quarter of 2012, according to the Federal Reserve. Read more.
LATEST ABI PODCAST EXAMINES ISSUES SURROUNDING "CROWDFUNDING" A CHAPTER 11 PLAN
ABI Resident Scholar Prof. Scott Pryor speaks with David C. McGrail of McGrail & Bensinger LLP (New York), author of the article "'Crowdfunding' a Chapter 11 Plan" in the February ABI Journal. McGrail explores the uses of crowdfunding, the effect of the JOBS Act on crowdfunding and how crowdfunding might be applicable in a chapter 11 reorganization. To listen to the podcast, please click here.
JUST ADDED! ABI LIVE WEBINAR ON APRIL 5 - "LEGACY LIABILITIES: DEALING WITH ENVIRONMENTAL, PENSION, UNION AND SIMILAR TYPES OF CLAIMS"
A panel of experts has been assembled for a webinar on April 5 from 1-2:15 p.m. ET to discuss environmental and pension liabilities, the statutory schemes under which these liabilities arise and the key players involved. Are non-monetary environmental claims dischargeable? Do post-petition expenditures for environmental cleanup constitute administrative expenses? When can an employer terminate a pension plan in bankruptcy, what is the process and what are the consequences? Learn the answer to these questions and more from the comfort of your own office. Special ABI member rate is available! Register here as this webinar is sure to sell out.
EXPLORE CURRENT ISSUES FOR FINANCIAL ADVISORS IN BANKRUPTCY CASES AND MORE AT ABI'S 31ST ANNUAL SPRING MEETING
The 2013 Annual Spring Meeting, to be held April 18-21, 2013, at the Gaylord National Resort and Convention Center in National Harbor, Md., features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various “tracks,” including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. More than 16 hours of CLE/CPE is offered in some states, along with ethics credit totaling 3 hours, making the cost only about $50 per credit. In addition, committee sessions will drill down on other topics to provide you with the most practical and varied CLE/CPE experience ever. Sessions include:
• 17th Annual Great Debates
• Mediation: An Irrational Approach to a Rational Result
• Creditors’ Committees and the Role of Indenture Trustees and Related Issues
• The Individual Conundrum: Chapter 7, 11 or 13?
• The Power to Veto Bankruptcy Sales
• Real Estate Issues in Health Care Restructurings
• Law Firm Bankruptcies
• How to Be a Successful Expert
• The Ethical Compass: Multiple Ethical Schemes Applicable to Financial Advisors
• Chapter 9s, Nonprofits and Other Nontraditional Restructuring Processes
• And much more!
The Spring Meeting will also feature a field hearing of the ABI Commission to Study the Reform of Chapter 11, a report from the ABI Ethics Task Force, a luncheon panel discussion moderated by Bill Rochelle of Bloomberg News, and a Final Night Gala Dinner featuring a concert by Joan Jett and the Blackhearts!
Click here to register today!
ABI IN-DEPTH
MARK YOUR CALENDARS FOR APRIL 10 TO TAKE PART IN ABI’S LIVE WEBINAR "STUDENT LOANS: BANKRUPTCY MAY NOT HAVE THE ANSWERS – BUT DOES CONGRESS?"
Do not miss the "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?" webinar presented by ABI's Consumer Bankruptcy Committee on April 10 from noon-1:15 ET. ABI's panel of experts will provide an overview of the student loan industry, examine the numbers behind and causes of student loan debt, and discuss federal loan programs as well as federal consolidation and forgiveness programs. Faculty on the webinar includes:
- Prof. Daniel A. Austin of Northeastern University School of Law (Boston)
- Edward "Ted" M. King of Frost Brown Todd LLC (Louisville, Ky.)
- Craig Zimmerman of the Law Offices of Craig Zimmerman (Santa Ana, Calif.)
CLE credit will be available for the webinar. This webinar is sure to sell out; register now for the special ABI member rate of $75!
NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!
An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!
The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!
LATEST CASE SUMMARY ON VOLO: MELLENTINE V. AMERIQUEST MORTGAGE CO. (6TH CIR.)
Summarized by Prof. Laura Bartell of Wayne State University Law School
The Sixth Circuit reversed dismissal of claim under the Fair Debt Collection Practices Act (FDCPA) by homeowners against a law firm representing a lender in connection with the foreclosure of mortgage, holding that the law firm was a "debt collector" under the FDCPA. The Sixth Circuit also reversed judgment on the pleadings entered against the lender under the Real Estate Settlement and Procedures Act (RESPA), holding that the homeowners pleaded sufficient facts to state a claim. The court affirmed the dismissal of all other claims under FDCPA and RESPA.
There are more than 750 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: ASSIGNMENT OF RENTS: ABSOLUTE MAY NOT BE SO ABSOLUTE
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines the case of In re MRI Beltline Industrial, L.P. in which the debtor moved for authority to use rents received from tenants of commercial buildings that it owned, and for a "carve out" to permit it to use rents for administrative expenses (including its attorney fees). In response, the mortgagee asserted that the debtor did not have any interest in the rents, and thus could not use them, because its assignment of rents was absolute.
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
As a result of the RadLAX decision, the right to credit-bid will likely chill bidding at auctions, as potential purchasers may be dissuaded from participating in the bidding process.
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 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.
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TOMORROW:
9th Annual Wharton Restructuring and Distressed Investing Conference
Feb. 22, 2013
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