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GOP Lawmaker Drops Debit-Card Provision From Regulatory-Overhaul Bill

The Republican author of a bill to roll back Obama-era financial regulations has agreed to remove a controversial provision concerning debit-card swipe fees that had divided GOP lawmakers and threatened to derail passage of the sweeping legislation next month, the Wall Street Journal reported today. Rep. Jeb Hensarling of Texas, the chairman of the House Financial Services Committee, agreed to remove a provision that repealed a cap on debit-card transaction fees known as the Durbin amendment — an issue that pits retailers and banks against each other and was bitterly fought as the legislation progressed to the House floor. “We won’t let this one provision hinder passage of an important priority bill,” Hensarling said. While the Choice Act is now expected to pass the House along party lines in early June, it faces dim prospects in the Senate, where Republicans are writing their own legislation to ease financial regulations.

Puerto Rico Lays Claim to $400 Million Held by Bond Trustee

Puerto Rico says it owns $400 million in cash being held by a bondholder trustee, raising an issue at the heart of the territory’s $74 billion bankruptcy, Bloomberg News reported yesterday. By making the claim in court papers on Tuesday, lawyers for the commonwealth’s sales-tax agency, known as Cofina, boosted the stakes for bondholders who have been fighting among themselves over how to divide $16 million in interest due on June 1. Any interest payments would come from the $400 million to which Puerto Rico is now laying claim. “This is unusual,” said Daniel Solender, head of municipals at Lord Abbett & Co., which manages $19 billion of state and local debt, including senior and junior Cofinas. “There is a pool of money there, so everyone’s going to try to claim it.” Next week, U.S. District Judge Laura Taylor Swain is scheduled to decide whether the interest should be paid or held in trust with the rest of the cash while Puerto Rico’s bankruptcy case moves forward.

Judges Grill CFPB’s Critics on Case Against Bureau’s Current Structure

Several federal judges hearing a constitutional challenge to the Consumer Financial Protection Bureau’s structure yesterday called into question whether the agency’s critics are right in their argument that it has inflated powers that unfairly limit presidential authority, MorningConsult.com reported yesterday. The en banc hearing of the case, PHH v. CFPB, provided the rare opportunity of seeing two federal government agencies face off in federal court. A panel of 11 judges on the U.S. Court of Appeals for the District of Columbia Circuit heard the case to decide whether they should uphold a separate panel’s 2016 decision authored by one of their colleagues, Judge Brett Kavanaugh, which faulted the agency’s single-director structure. Judge Kavanaugh, a member of the en banc panel, openly promoted that decision at yesterday’s hearing, and provided rhetorical backup for critics who charge that the CFPB’s structure make it uniquely unaccountable. Under the 2010 Dodd-Frank Act, the president can only fire the CFPB’s director for cause before the position’s five-year term ends.

Seadrill Says Debt Restructuring Talks Are Progressing

Offshore drilling services company Seadrill Ltd. has made "significant progress" with its banks on the terms of a debt restructuring plan that will likely require filing for bankruptcy in the U.S. or U.K., Dow Jones Newswires reported yesterday. Seadrill said yesterday that it is in advanced talks with secured lenders and third-party investors on the terms of a "comprehensive recapitalization." Absent an additional extension from creditors, Seadrill faces a July 31 deadline for implementing a restructuring plan. "While discussions with our secured lenders and certain investors have advanced significantly, a number of important terms continue to be negotiated and no assurance can be given that an agreement will be reached," Seadrill said. A restructuring will likely involve converting Seadrill's bond debt into equity. Any recovery for existing shareholders would be minimal at best, the company said.

Judges Examine Legitimacy of SEC’s In-House Courts

A federal appeals court on Wednesday sharply questioned the powers of the U.S. Securities and Exchange Commission’s in-house courts in a case that could transform how the Wall Street regulator carries out its enforcement authority, the Wall Street Journal reported today. The SEC tribunals are run by officers who have career appointments, such as U.S. district judges, but are classified as employees of the agency. The SEC’s administrative judges conduct trials and are expected to independently oversee hearings, although any punishments they impose must be confirmed by the agency’s commissioners to take effect. Judges on the U.S. Court of Appeals for the District of Columbia Circuit probed whether the SEC’s judges exercise enough power that, under the Constitution’s appointments clause, they should have been hired by the SEC’s commissioners. The challengers to the SEC’s system say that it is a fatal flaw that the judges were hired by a human resources office, violating the Constitution’s call to limit the power of government officials who don’t answer to elected officeholders. The SEC argues its system for hiring judges is legitimate because the judges’ decisions aren’t final without the commission’s involvement. But several judges on the appeals court on Wednesday said the standard is whether the SEC’s judges wield significant authority, such as assessing the credibility of witnesses and deciding what evidence to allow.

Westinghouse Gets Buyer Interest, Sees Talks Starting in Summer

Westinghouse Electric Co. has fielded interest from those looking at buying Toshiba Corp.’s majority stake in the bankrupt U.S. nuclear contractor and expects to begin a sale process in late summer, according to Westinghouse’s interim chief executive officer, Bloomberg News reported yesterday. While Westinghouse has already received interest, it’s too early to be having conversations with potential buyers, interim CEO Jose Emeterio Gutierrez said yesterday. The sale process will begin after Westinghouse gains approval of a business plan that it expects to file in bankruptcy court in early July, he said. Tokyo-based Toshiba put Westinghouse into bankruptcy on March 29 and has warned it may not be able to continue as a going concern because of losses from the business. “We will start in late summer the process to sell the company,” said Gutierrez, adding that it’ll be part of a “very structured process” and that the company expects it’ll be sold before exiting bankruptcy or at the time of emerging.

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