Detroit Mayor Claims Orr Overestimated City's Finances, Weighs Lawsuit

The city of Detroit is weighing the merits of a lawsuit against its lead bankruptcy law firm, Jones Day, because, Mayor Mike Duggan said today, former Emergency Manager Kevyn Orr kept him in the dark about certain financial assumptions used in the city’s bankruptcy exit plan, the Detroit Free Press reported today. And now, because of that secrecy, the city needs to come up with $50 million to contribute toward future pension payments, Duggan said. During his annual budget presentation to City Council, Duggan said that the potential lawsuit hinges on whether Orr was obligated to keep Duggan in the loop about financial projections used in estimating future pension payments. Those financial projections were too optimistic, Duggan said, and now the city has to set aside tens of millions each year for larger-than-expected pension payments that begin in 2024.

 

For-Profit Schools Enjoy Better Financial, Regulatory Outlook Under Trump

Since Election Day, for-profit college companies have been on a financial hot streak, according to a New York Times report on Tuesday. DeVry Education Group’s stock has leapt more than 40 percent, Strayer’s jumped 35 percent and Grand Canyon Education’s rose more than 28 percent. This stock boost comes in the wake of the inauguration of President Trump, who agreed to a $25 million settlement prior to the election of lawsuits aimed at the now-defunct Trump University. Just weeks before Trump took office, the Department of Education identified 800 failing programs by applying its new “gainful employment” rule, which links vocational schools’ access to federal funds with their record on job placement and earnings. Ninety-eight percent of the programs were at for-profit colleges. However, incoming Education Secretary Betsy DeVos suggested that she was unlikely to play the executioner when asked at her confirmation hearing about rules like gainful employment. “I will review that rule and see that it is actually achieving what the intentions are,” she said. “The last thing any of us want is to unnecessarily close down important programs.”


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Commentary: The Next Financial Crisis Might Be in Your Driveway
Lured by low interest rates, low gas prices, and a crop of seductive vehicles that are faster, smarter and more efficient than ever before, Americans are heavily leveraged in their auto purchases, according to a Bloomberg News commentary on Tuesday. The country’s collective auto debt hit a record high in the fourth quarter of 2016, according to the Federal Reserve Bank of New York, when a rush of year-end car shopping pushed vehicle loans to a dubious peak of $1.16 trillion. Every licensed driver in the U.S., on average, now owes about $6,100 in car payments. Barring a few finance startups, the manufacturers are the ones loaning money to the riskiest buyers. In the past two years, U.S. drivers with credit scores of less than 620 borrowed $244 billion to buy cars, a tally not matched since 2006 and 2007 when the same strata of buyers totaled $254 billion in auto loans.

 

S&P/Experian: Bank Card Default Rate Hits 42-Month High in January

The bank card default rate for January recorded a 3.21 percent default rate, up 26 basis points from December, according to data released on Tuesday by S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults. Auto loan defaults came in at 1.06 percent, up three basis points from the previous month. The first mortgage default rate was 0.72 percent, up one basis point from December. "While consumer credit default rates on mortgages and auto loans remain low and stable, default rates on bank cards have popped up to the highest level seen since July 2013," says David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. "Current default levels do not present any immediate concerns for the economy."

 

ASM Spotlight: Former U.S. Energy Secretary Spencer Abraham to Examine E&P Industry Recovery, Future Policy

Former Senator and U.S. Energy Secretary Spencer Abraham will be providing the luncheon keynote at the Annual Spring Meeting on Friday, April 21. Sworn in as the U.S.’s 10th Energy Secretary in 2001, Abraham led efforts to broaden America's international energy partnerships, working with China, Japan, Russia, the E.U., countries in South America and Africa, and certain OPEC nations. Prior to being named Secretary of Energy, Abraham served as a U.S. Senator from Michigan for six years, chairing two subcommittees: Manufacturing and Competitiveness, and Immigration. Abraham is currently chairman and CEO of The Abraham Group, an international strategic consulting firm based in Washington, D.C.

Don't miss the engaging speakers and sessions at the 2017 Annual Spring Meeting! Click here for more information and to register.
 

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