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Big Bank Failures Can’t Be Treated as Normal Insolvencies, According to Law Professor

Seton Hall University School of Law Professor Stephen Lubben says that it is time to stop pretending big banks and other systemically important financial institutions (SIFIs) can be wound down in bankruptcy court, WSJ Pro Bankruptcy reported. In an article set for publication in the Texas Law Review, Lubben says that most attempts to address big bank insolvencies try to squeeze financial institutions with special needs into a system with a different set of priorities. Since the global financial crisis and the 2008 bankruptcy of Lehman Brothers Holdings Inc., the question of what to do with big banks facing insolvency has vexed lawmakers. Without a credible threat of failure, government backstops encourage banks to take substantially greater risks, according to Lubben. Shareholders with nothing to lose have every incentive to leave taxpayers holding the bag, he writes. Read more.

Join thought leaders from academia and the bench, representatives from U.S. and European governmental agencies and private organizations on April 19 for a symposium to examine the policies, strategies & proposals erected in the 10 years since the Financial Crisis. Click here for more information and to register. 

Trump Calls Meeting on Biofuels Policy After Refiner Bankruptcy

President Trump has called a meeting for early next week with key senators and Cabinet officials to discuss potential changes to biofuels policy, which is coming under increasing pressure after a Pennsylvania refiner blamed the regulation for its bankruptcy, Reuters reported. The meeting comes as the oil industry and corn lobby clash over the future of the Renewable Fuel Standard (RFS), a decade-old regulation that requires refiners to cover the cost of mixing biofuels such as corn-based ethanol into their fuel. Oil refiner Philadelphia Energy Solutions, which employs more than a thousand people in Philadelphia, declared bankruptcy last month and blamed the regulation for its demise. The meeting, scheduled for Tuesday, will include Republican Senators Ted Cruz of Texas, Chuck Grassley and Joni Ernst of Iowa, along with Environmental Protection Agency Administrator Scott Pruitt, Agriculture Secretary Sonny Perdue, and potentially Energy Secretary Rick Perry.

States Reach $650 Million Settlement over Takata Airbags

Virginia and Maryland were among dozens of states to reach a $650 million settlement with the U.S subsidiary of a Japanese company that manufactured faulty airbags installed in millions of automobiles worldwide, bags that sprayed deadly shrapnel that killed at least 22 people and injured hundreds more, the Washington Post reported. The agreement was reached with TK Holdings, Inc., the American subsidiary of Takata, as part of a settlement between 44 state governments and Washington, D.C., requiring a $650 million payout by the Japanese firm. Nearly 34 million of the 250 million vehicles on U.S. roads have been part of the largest recall in U.S. history.

Analysis: To Survive a Challenging Future, Shopping Malls Look to the Past

For years, many analysts in the retail and commercial real estate sector have predicted the death of U.S. shopping malls, but a closer look at recent industry data shows that despite sweeping closures and thinning foot traffic, malls are far from dead, MorningConsult reported. While recent reports paint a gloomy outlook — an April report from Cowen and Co. predicted that as many as 20 percent of stores at some mass and middle-market mall retailers will close in the next five years, and a Credit Suisse report from May forecast that 25 percent of all U.S. malls could shutter by 2022 — those projections don’t portend the imminent death of malls, according to other industry experts who say it’s more that the industry is correcting itself in a country that built too many retail centers over the past few decades. “Malls are coming back to where they started,” said James Hughes, a professor and dean emeritus at Rutgers University’s School of Planning and Public Policy. “They’re coming back to where they should have never left.” Read more

Occupancy issues are at the heart of many significant retail cases, as detailed in the forthcoming ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available for pre-order at the ABI Store. 

Aerosoles’ Sale to Alden Global Wins Court Approval

The operator of Aerosoles shoe stores won court approval to sell itself to hedge fund Alden Global Capital LLC, a month after scratching its original reorganization plan and sale process, WSJ Pro Bankruptcy reported. Bankruptcy Judge Kevin Carey signed off on the sale on Wednesday, which will see Alden buy Aerogroup International Inc.’s assets for nearly $26.2 million. Aerosoles’ sale to Alden comes after the retailer’s first deal with GBG USA Inc., which licenses brands such as Under Armour and Kenneth Cole, fell through. Judge Carey had signed off on that deal, but Aerosoles’ reorganization plan failed to win key support from the U.S. Trustee and ultimately couldn’t pass muster in court.

Fed Officials Say Economy Is Ready for Higher Rates

Robust economic growth has increased the confidence of Federal Reserve officials that the economy is ready for higher interest rates, according to an official account of the central bank’s most recent policymaking meeting in late January, the New York Times reported. The Fed did not raise its benchmark interest rate at the meeting on Jan. 30 and 31, but the account reinforced investor expectations that the Fed would raise rates at its next meeting in March. The account said that Fed officials have upgraded their economic outlooks since the beginning of the year and listed three main reasons: the strength of recent economic data, accommodative financial conditions and the expected impact of the $1.5 trillion tax cut that took effect in January. The Fed is seeking to raise rates gradually to maintain control of inflation without impeding an economic expansion that is nearing the end of its ninth year, one of the longest stretches of continuous economic growth in American history.