ANALYSIS: NEW FLASH OF OPTIMISM FOR SMALL BUSINESS OWNERS
Small-business optimism surged in July and August to some of the highest levels since the recession started, according to a handful of recent surveys, the Wall Street Journal reported today. A quarterly small-business optimism index from Wells Fargo and Gallup also reached its highest level since the third quarter of 2008, and a similar index from the National Federation of Independent Business released in August had its fourth-highest reading since December 2007. While small-business confidence is at its highest level in years, it is still well under pre-recession levels. "Let's not get too excited," said NFIB chief economist Bill Dunkelberg, who added that its own confidence index "is still well below the average reading" of the past 35 years. Read more. (Subscription required.)
For more on the outlook for small businesses in bankruptcy, be sure to listen to the latest ABI podcast featuring Fall 2013 ABI Resident Scholar Prof. Kara Bruce speaking with Prof. Anne Lawton of Michigan State University. Prof. Lawton proposes to simplify the definition of a small-business debtor in bankruptcy to help produce better results in the middle market. Prof. Lawton's proposal was featured in an article in the Summer edition of the ABI Law Review. To listen to the podcast, please click here.
CFPB WANTS PUBLIC WORKERS BETTER INFORMED ABOUT STUDENT LOAN BREAKS
Following President Obama's call to ease the burden of student loan debt for graduates, the Consumer Financial Protection Bureau launched an initiative yesterday to urge public-service organizations to better inform their employees about loan-repayment and forgiveness options, U.S. News and World Report reported today. In a report issued in tandem with the initiative, the CFPB reports that one in four American workers may be eligible for student loan debt-forgiveness programs that are open to public service employees, such as teachers, health workers, police officers, firefighters and social workers. "People give up higher incomes to serve their city, their state, or their country," said CFPB Director Richard Cordray in a call with reporters Wednesday. "We believe that people who contribute part of their talents, part of the benefits of their education, to society as a whole should not be mired in debt because they stir themselves to the calling of public service." The starting salary for a social worker, according to the U.S. Census Bureau, is around $32,000, but after completing the master's work necessary to become a social worker, most students have incurred $36,000 in student loan debt and would end up paying $415 each month under a standard 10-year repayment plan. Federal loan repayment programs such as the Public Service Loan Forgiveness program wipe away remaining debt for public-service employees after 10 years of on-time payments. However, many public-service workers are not aware of these options and may feel pressure to find higher-paying jobs in order to keep up with their student loan payments. Read more.
COMMENTARY: A SIMPLE SOLUTION ON EXECUTIVE PAY THAT MADE A HARD PROBLEM MORE DIFFICULT
Congressional leaders, in their rage against ever-rising executive compensation and income inequality, have ironically created more murkiness, according to a commentary in the New York Times DealBook blog yesterday. The irony, according to the commentary, is that it all came out of such a simple-sounding idea: requiring that the pay of a company's chief executive be compared to the median salary of its employees. Carrying out the law may well result in costs that are just as obscene as the pay it is disclosing. When the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act was being completed, a new section, Section 953(b), was inserted during the final hours of negotiations. What the section required was that all public companies disclose their median worker pay side-by-side with the chief executive's pay. The first problem is how compensation is calculated. We are decades past the time when manager compensation was simply what you received in a paycheck. Now, compensation includes options, pensions, 401(k) matches, health benefits, parking allowances and various other perquisites. Calculating this all as one figure -- and in particular, valuing average stock options for employees as well as top executives -- can be difficult. The ambiguity arises because the rule says that the median is calculated with respect to "all" employees. Read the full commentary.
WALL STREET'S RENTAL BET BRINGS QUANDARY FOR HOUSING POOR
Since private-equity firms, hedge funds and real estate investment trusts have bought more than 100,000 U.S. homes, they have become dominant single-family landlords in markets hardest-hit by the housing crash such as Atlanta, Bloomberg News reported today. As the companies seek thousands of tenants to fill newly renovated properties, their decision as to whether to lease to low-income Americans with Section 8 vouchers stands to affect both their profitability and their poor residents who have been longtime renters. Blackstone -- the largest company in the fledgling industry after spending more than $5 billion to buy 32,000 U.S. homes -- inherited at least 200 Section 8 tenants when it bought a portfolio of Atlanta-area houses in April for about $100 million. That brought the amount of homes occupied by voucher-holders to less than 1 percent of its portfolio, the company said at the time. Invitation Homes, which operates the business, leases to 81 of the almost 17,000 families with vouchers in Atlanta and neighboring DeKalb and Cobb counties, according to data from the three largest Atlanta-area housing authorities. Some institutional landlords, including Waypoint Homes Realty Trust Inc. and Sylvan Road Capital LLC, consider voucher-holders to be a reliable client base because they have a low turnover rate and the government pays most of their rent on a timely basis. Other investors that are building home-rental companies may not want to take on the red tape, stigma of renting to poorer tenants and the potential extra costs, said Christopher Thornberg, principal at research firm Beacon Economics LLC in Los Angeles. They also don't want to leave their homes vacant for long, he said. "As the markets become more saturated with rentals, you may find these guys going to a Section 8 model -- if they don't decide to sell -- simply because they don't want these houses sitting empty," Thornberg said. Investors are buying houses for the potential value appreciation as much as for the rental cash flow, and some may be reluctant to commit to Section 8 tenants because those leases come with long-term constraints that reduce their ability to sell quickly, according to Raphael Bostic, assistant secretary for policy development and research at the U.S. Department of Housing and Urban Development from 2009 to 2012. Read more.
BLOOMBERG'S LATEST "BILL ON BANKRUPTCY" VIDEO: APPEALS COURT CHANGES THE LAW ON FRAUD
The U.S. Court of Appeals in Chicago may be out on a limb by itself, or an opinion this week may signal a change in attitude toward lenders who discover a customer's fraud and do nothing, as Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle discuss in their new video. To watch the video, please click here.
RECORDING NOW AVAILABLE OF THE ABILIVE WEBINAR EXAMINING THE NEW U.S. TRUSTEE FEE GUIDELINES!
If you were not able to join last week's well-attended abiLIVE webinar examining the U.S. Trustee Fee Guidelines for chapter 11 cases filed on or after Nov. 1, a recording of the program is now available for downloading! A panel of experts, including Clifford J. White, the director of the U.S. Trustee Program, discussed some of the ways the new guidelines could change day-to-day operations in firms, issues relating to the new market rate benchmarks, and how these changes might alter insolvency practice. The 90-minute recording is available for the special ABI member price of $75 and can be purchased here.
ABI GOLF TOUR UNDERWAY; LAST STOP FOR 2013 IS WINTER LEADERSHIP CONFERENCE IN DECEMBER
The 7th and final stop for the 2013 ABI Golf Tour is on Dec. 5 at the Trump National Golf Club, held in conjunction with ABI’s Winter Leadership Conference. Final scoring to win the Great American Cup — sponsored by Great American Group — is based on your top three scores from the seven ABI events. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! A 22-handicapper won the tour event at July’s Southeast Bankruptcy Workshop. There's no charge to register or participate in the Tour.
ABI IN-DEPTH
NEW CASE SUMMARY ON VOLO: IN RE SENTINEL MANAGEMENT GROUP, INC. (APPEAL OF FREDERICK J. GREDE; 7TH CIR.)
Summarized by Mazyar Hedayat of M. Hedayat & Associates PC
The Seventh Circuit affirmed the district court's denial of an illegal contract claim that had been filed by the trustee, but reversed the lower court's denial of fraudulent-transfer and equitable-subordination claims, remanding the case back to the district court for further proceedings.
There are more than 1,000 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.
NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: FIFTH CIRCUIT PERMITS SECURED CREDITOR TO DISREGARD CHAPTER 11 CASE
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post reported that a few weeks ago in In re S. White Transportation, the U.S. Court of Appeals for the Fifth Circuit permitted a secured creditor that had indisputably received notice of the debtor's chapter 11 case, but took no steps to protect its interests until after the confirmation of the debtor's plan, to continue to assert a lien against the debtor's property post-confirmation.
Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.
ABI Quick Poll
Success fees for financial advisors should be prohibited.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
INSOL INTERNATIONAL
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