Prudential: Housing Debt Causing Problems for Retirees
Prudential Financial released a white paper saying that Americans are carrying higher levels of debt as they head into retirement, raising the specter of financial headaches in their old age, National Mortgage News reported yesterday. Much of that debt Americans are taking with them into retirement is housing debt, Prudential noted on Tuesday in a white paper based on data from the Center for Retirement Research at Boston College. Citing Federal Reserve data, Prudential reported that median home values for those 65 to 74 years old increased 76 percent, while housing debt skyrocketed 393 percent. Another factor contributing to Americans' willingness to retire with debt is the change in income, as today both parties in a couple can collect Social Security since more households have dual incomes. "The increased debt means the monthly payments will eat away at their Social Security checks and the situation for many could become especially difficult for couples when one of them passes away," Perlin said.
Lawyer Fees Reach $11 Million for Twin Cities Archdiocese
The Archdiocese of St. Paul and Minneapolis has racked up $11 million in fees to attorneys and other professionals since declaring bankruptcy in January 2015, the Minneapolis Star Tribune reported today. Another $1 million is divided between the U.S. Conference of Catholic Bishops and the Minnesota Catholic Conference, a lobbying organization. This year alone, attorney and professional fees reached nearly $6 million through July. They ranged from $388,000 to $867,000 a month for at least five law firms and dozens of staffers. Legal fees accounted for most of that amount. That’s on top of more than $5 million spent last year.
Commentary: It's Not Just Wells Fargo: Wall Street Bankers Are Cross-Sellers, Too
Cross-selling is a practice that doesn't just happen at Wells Fargo, and it's not just in retail banking; Wall Street's investment banks do it all the time, according to a commentary from TheStreet.com on Monday. As new regulations and low interest rates squeeze lenders' profit margins, Bank of America and Citigroup are increasingly touting their cross-selling success as a way to generate maximum fees from corporate clients. Executives refer to it as "maximizing wallet share" -- another consultant-speak term that involves selling any given customer fee-rich derivatives, mergers advice, and foreign exchange and stock offerings alongside loans, credit lines and corporate cash management. "Successful investment banks will use client profitability and other data to analyze multi-product client relationships and promote cross-selling," consultants at Ernst & Young wrote in a 2016 report. It's theoretically a good business strategy for the banks, but when taken to the extreme, it can lead to abuses from stifling competition to short-changing clients, according to regulators and academics. Earlier this month, a group of investors filed an amended suit against JPMorgan Chase claiming that investment bankers in 2015 guided mobile-security software-maker Good Technology toward an acquisition by Blackberry, at least partly because the merger fees would be higher than those from an initial public offering. "They are conflicted by the nature of their jobs," said William Wilhelm, a professor at the University of Virginia who specializes in investment banking. "It's very easy for things to go awry."
Reckoning Comes for U.S. Pension Funds as Investment Returns Lag
The $1.9 trillion shortfall in U.S. state and local pension funds is poised to grow as near-record-low bond yields and global stock market turmoil reduce investment gains, increasing pressure on governments to put more money into retirement systems, Bloomberg News reported yesterday. With the Federal Reserve deciding to hold interest rates steady at its meeting yesterday, the funds will continue to be squeezed by rock-bottom payouts on fixed-income securities just as stocks fall overseas and post only modest U.S. gains. As a result, pensions in Illinois, Missouri and Hawaii this year have moved to roll back the assumed rate of return on their investments, joining the dozens that have taken that step over the past two years. Pensions count on annual investment gains of more than 7 percent to cover much of the benefits that come due as workers retire. But public plans had a median increase of 1 percent for the year ended June 30, the smallest advance since 2009, when they lost 16.2 percent, according to the Wilshire Trust Universe Comparison Service.
Analysis: Bust Hits America's Cowboy Coal Basin after 40 Years of Boom
The Powder River Basin, a 300-mile corridor stretching from Wyoming north into Montana, thrived for four decades on the strength of the cleaner low-sulfur coal carved from its vast plains, but that has come to an end, according to a Bloomberg News analysis on Tuesday. After producing more than 400 million tons every year since 2004, the region’s output this year will drop by about 100 million tons, analysts say, undercut by cheap natural gas, growing utility use of renewables and new environmental rules. Since last fall, 1,100 workers, or 17 percent of the mining workforce, have lost their jobs, leaving the industry and the economy reeling. “Has the Powder River Basin ever had a real bust? Not really,” said Matt Preston, a research director at consulting firm Wood Mackenzie Ltd. “This year is a total collapse.” Through Sept. 10, coal output in Wyoming, the biggest U.S. producer, is down 25 percent from a year earlier, while Montana is down 26 percent, according to the U.S. Energy Information Administration. Ted O’Brien, chief executive officer of Doyle Trading Consultants in New York, estimates that the output may drop to 332 million tons this year from 418 million tons in 2015. The drop comes after a year in which three producers dominant in the region — Peabody Energy Corp., Arch Coal Inc. and Alpha Natural Resources Inc. — filed for bankruptcy.
In related news, the Senate Finance Committee yesterday approved legislation to free up federal funds to help the $4.4 billion United Mine Workers of America 1974 Pension Plan, Washington, which is severely underfunded, P&IOnline.com reported. The mine workers bill, whose supporters say will have a floor vote by the end of the year, was approved 18-8. It would allow the use of surplus funds from the Abandoned Mine Land Reclamation Fund, which currently goes to the U.S. Treasury. Without the funds, the pension fund could become insolvent and overwhelm the Pension Benefit Guaranty Corp. Also on Wednesday, the Senate Finance Committee unanimously approved a package of retirement savings reforms that would, among other things, allow employers to access open multiple-employer plans, make it easier for them to offer annuities, expand access to 401(k) plans to some part-time workers, and offer startup and automatic-enrollment tax credits for small businesses. Cooperatives and charities would avoid PBGC premium increases, in keeping with their special funding rules.
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New on ABI’s Bankruptcy Blog Exchange: Is It Time for the CFPB to Regulate Retail Bank Employee Compensation?
There's little regulation of retail banking employee compensation, according to a recent blog post. Instead, banks are relied upon to self-regulate, to have the good sense not to have unduly coercive incentive compensation and to have internal controls to catch the problems that incentive compensation can create.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
