Analysis: The Supreme Court Faces a Different Trump Contest

Analysis: The Supreme Court Faces a Different Trump Contest

ABI Bankruptcy Brief
ABI Bankruptcy Brief

May 26, 2016

 
ABI Bankruptcy Brief
 
 
 

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NEWS AND ANALYSIS

Analysis: The Supreme Court Faces a Different Trump Contest

The U.S. Supreme Court today took its first look at Unite Here Local 54 v. Trump Entertainment Resorts, a case that arose out of the bankruptcy of the Trump Taj Mahal Casino in Atlantic City, N.J., the National Law Journal reported today. The legal issue involves the authority of bankruptcy courts, but the fallout suffered by union workers may not enhance presumptive GOP presidential candidate Donald Trump's campaign message. The union, which represents about 1,100 of the 3,000 Taj workers, is asking the justices to review a January decision by the U.S. Court of Appeals for the Third Circuit. The appeals court upheld a bankruptcy judge's 2014 ruling that Trump Entertainment could alter its contract with Local 54 and stop funding the union's health care and pensions as part of its reorganization plan. The National Labor Relations Board filed an amicus brief supporting the union in the Third Circuit. The union’s petition asks the justices whether “a bankruptcy court may authorize a unionized debtor employer to abolish its employees’ pensions, health coverage and other benefits without complying with its bargaining obligations under the National Labor Relations Act, when no collective bargaining agreement exists.” Trump founded the casino, which is owned by Trump Entertainment Resorts, in 1990. He sold majority ownership of the company in 2012. The company went into bankruptcy in 2014 due to a loss of $25 million in 2013. Trump gave up his remaining 10 percent stake in the company earlier this year. Wall Street magnate Carl Icahn is expected to take over the casino resort when it exits bankruptcy.
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The case was discussed during a segment on today's episode of "Eye on Bankruptcy" featuring Bankruptcy Judge Kevin Huennekens (E.D. Va.) and Brian Shaw of Shaw Fishman (Chicago). Click here to watch the discussion.

To watch current and archived episodes of "Eye on Bankruptcy," click here.

Commentary: Sovereign Default: It’s Not Personal, Just Business

Less than three years after the governor of Puerto Rico called repayment of its debt a “moral obligation,” the U.S. territory is headed for the fourth-largest government default on record, according to a Wall Street Journal commentary today. Though markets have met the event with a shrug, that shouldn’t diminish the significance of the moment, according to the commentary. It underlines how much the stigma about government default has faded. Investors would be wise to build this risk into their calculations when lending to governments from now on, according to the commentary, especially since arithmetic suggests more defaults are on the way. With less moralizing and more planning, both creditors and debtors will be better off.
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Households in Fed Survey Feel Vulnerable Despite Economic Gains

A substantial share of Americans lacked retirement savings and fewer households were confident in the outlook for their income at the end of last year, Bloomberg News reported yesterday. That’s according to a Federal Reserve report on the economic well-being of U.S. households in 2015, released yesterday. The findings show that while respondents increasingly reported that they are “doing OK” or “living comfortably,” a smaller share said they expected income growth than in the prior year’s survey. Thirty-one percent of non-retired Americans said that they had no retirement savings at all, unchanged from 2014.
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Study Examines How Credit Access Affects the Way Unemployed Search for New Jobs

A new study from the National Bureau of Economic Research looks at job losses and examines how credit access affects the way Americans go about finding new jobs, Bloomberg News reported on Tuesday. It turns out that credit can often help jobseekers get back on their feet, especially those with lower income and fewer savings. When workers lose their jobs, the study found, a higher credit limit allows them to take longer to find a new one. The study linked up an employment database with millions of TransUnion credit reports from 2001 to 2008. It showed that a credit limit increase equal to 10 percent of a person’s prior annual salary can translate into their spending as many as three weeks more looking for a job.
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Click here to read the study.
 

Commentary: Fannie, Freddie and the Secrets of a Bailout with No Exit

When the federal government took over beleaguered mortgage giants Fannie Mae and Freddie Mac during the collapse of the housing market and the financial crisis of 2008, it was with the implicit promise that they would be returned to shareholders after being nursed back to health, according to a New York Times commentary on Saturday. But now, with the unsealing of documents last week that were produced as part of a lawsuit filed against the government, new evidence is coming to light on how intimately the White House was involved in the Treasury’s decision in August 2012 to keep all the companies’ profits for the government. That move effectively maintained Fannie’s and Freddie’s status as wards of the state. The newly released documents go beyond previous disclosures in the case and make clear that the Obama administration never had any intention of restoring Fannie and Freddie, which enjoyed implicit backing from the government before the takeover, to their status as stand-alone entities. An email from Jim Parrott, then a top White House official on housing finance, was sent the day the so-called profit sweep was announced. It said that the change was structured to ensure that the companies couldn’t “repay their debt and escape as it were.” The documents also show the Treasury moving to modify the terms of the mortgage finance giants’ $187.5 billion bailout shortly after a July 2012 meeting when the Federal Housing Finance Agency, Fannie’s and Freddie’s regulator, learned that they were about to enter “the golden years” of profitability. Since then, Fannie and Freddie have returned to the Treasury over $50 billion more than they received in the bailout. But the amount they owe to the government remains outstanding.
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UPCOMING EVENTS
ABI Live Webinar: “Labor Issues in Coal Cases” June 2, 2016 Online Webinar
Central States Bankruptcy Workshop June 16-19, 2016 Geneva, Wisc.
Northeast Consumer Forum July 14-16, 2016 Bretton Woods, N.H.
Northeast Bankruptcy Conference July 14-17, 2016 Bretton Woods, N.H.
Southeast Bankruptcy Workshop July 21-24, 2016 Amelia Island, Fla.
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Midwest Regional Bankruptcy Seminar August 18-19, 2016 Cincinnati, Ohio
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BLOG EXCHANGE

New on ABI’s Bankruptcy Blog Exchange: Puerto Rico, PROMESA and Presiding Judges

A Credit Slips blog post by ABI Resident Scholar Prof. Melissa Jacoby examines H.R. 5278  (PROMESA) as it passed out of the House Natural Resources Committee yesterday. Jacoby examines Sect. 308 of the bill calling on the Chief Justice of the United States to designate a district court judge to sit by designation to conduct the case, meaning that the first territorial bankruptcy in history would be handled by a judge who, in all likelihood, has never presided over a bankruptcy of any size.

For a list of amendments made during yesterday’s House Natural Resource Committee markup, please click here.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
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