Analysis: Potential Impact of Hurricanes Harvey and Irma on Bankruptcy Filings
by Ed Flynn, ABI
Hurricane Harvey did extensive damage to parts of Texas and Louisiana. Preliminary estimates show that it might be the most expensive hurricane ever. Additionally, Hurricane Irma is bearing down on the state of Florida with potentially catastrophic results. Millions of people will suffer economic losses as a result. Will these storms have an impact on bankruptcy filings in the affected areas? For this analysis, the four most expensive hurricane events were examined: Katrina, Sandy, Andrew and Ike. Additionally, the four hurricanes that hit Florida in 2004 (Charley, Frances, Ivan and Jeanne) were combined into one event. Total filings for the three years prior to the hurricane were compared to filings in the three years after.
ABI's thoughts are with those suffering in the wake of Hurricane Harvey. For information and ways to help, please click here.
Senate Passes Bill on Storm Aid, Debt Limit and Government Spending
The Senate today approved a contentious deal struck between President Donald Trump and Democratic leaders that rolled together emergency relief for Harvey victims with a short-term extension of the government’s funding and its borrowing limit, the Wall Street Journal reported. In an 80-17 vote on legislation that came together swiftly today, the Senate approved $15.25 billion for relief and recovery efforts for the Harvey and Irma hurricanes, as well as provisions keeping the government running and its debt limit suspended until Dec. 8. The government’s current funding expires by Oct. 1, and Treasury Department officials had said that Congress needed to raise the debt limit by month’s end to avoid any risk of defaulting on the debt. The package now heads to the House, which is expected to vote on it Friday. Many conservatives are reluctant to vote to increase the debt limit without taking any other steps to curb federal spending. But most, if not all, Democrats are likely to support it, as are many Republicans from Texas, Louisiana and Florida, all states affected by or bracing for the storms.
U.S. Banks May Alter Loans in Light of Hurricane Irma
Regulators say that U.S. banks may temporarily lighten loan terms to help those affected by Hurricane Irma and that some regulatory paperwork can be filed late in light of the storm, Reuters reported yesterday. Dangerous Category 5 Hurricane Irma hammered the Caribbean island of St. Martin yesterday and is expected to hit Florida over the weekend. “Bankers should work constructively with borrowers in communities affected by Hurricane Irma,” the Federal Reserve wrote in a memo with other regulators. The agency sent a similar directive ahead of Hurricane Harvey, which hit Texas late last month. “The agencies recognize that efforts to work with borrowers in communities under stress can be consistent with safe-and-sound banking practices,” reads the memo, which was also signed by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.
In related news, a New York Times analysis today found that if a storm the size of 1992’s Hurricane Andrew were to strike Florida today in the same spot, it would be far more catastrophic — causing up to $100 billion in damage, according to a recent analysis by Swiss Re, the reinsurance firm. That’s even after accounting for the fact that South Florida has strengthened its building codes since Andrew. Central and South Florida have grown at a breathtaking pace since 1990, adding more than 6 million people. High-rises and condominiums keep sprouting up along Miami Beach and other coastal areas. A lot more valuable property now sits in harm’s way. With Hurricane Irma — currently a Category 5 storm and one of the strongest hurricanes ever recorded in the Atlantic — possibly set to pummel Florida this weekend, the state is confronting the fact that rapid development has made its coastline far more vulnerable to hurricane damage than it used to be.
Analysis: ‘Too Big to Fail’ Label May Shrink for Some Firms Under Trump
The Trump administration is examining the labeling of large non-bank financial institutions as “too big to fail,” with a closely anticipated Treasury Department report on the initiative expected next month. It is unclear whether the White House will move to entirely eliminate the label, a product of the Dodd-Frank financial regulations, but analysts and industry officials predict that its use will most likely be curtailed significantly, according to the New York Times on Monday. “This is probably a tool that goes dormant for the time being,” said Edward Mills, a financial policy analyst with FBR Capital Markets. Just two non-bank companies are designated as “systemically important financial institutions,” or SIFIs: the insurers American International Group and Prudential Financial. That number is down from four a couple of years ago. Under Dodd-Frank, banks with more than $50 billion of assets are also subject to heightened standards, including annual stress tests. While such banks are commonly referred to as being systemically important, they do not receive a formal designation.
NYC Landlords That Can’t Find Buyers Turn to Borrowing Instead
At a time when commercial-property purchases have slowed to a trickle, Manhattan landlords who can’t sell are still getting money out of their buildings — by turning to lenders, Bloomberg News reported yesterday. A growing chasm between what buyers are willing to pay and what sellers think their properties are worth has put the brakes on deals. In New York City, the largest U.S. market for offices, apartments and other commercial buildings, transactions in the first half of the year tumbled about 50 percent from the same period in 2016, to $15.4 billion, the slowest start since 2012, according to research firm Real Capital Analytics Inc. At the same time, the market for debt on commercial properties is booming. Across the U.S., sales of office towers, apartment buildings, hotels and shopping centers have been plunging since reaching $262 billion nationally in 2015, just behind the record $311 billion of real estate that changed hands in 2007, according to Real Capital. Property investors are on the sidelines amid concern that rising interest rates will hurt values that have jumped as much as 85 percent in big cities like New York, compounded by overbuilding and a pullback of the foreign capital that helped power the recent property boom.
Participate in Next Consumer Commission Meeting on Sept. 15 at NABT
The Committee on Chapter 7 of the ABI Commission on Consumer Bankruptcy will hold a public meeting during the National Association of Bankruptcy Trustees (NABT) on September 15 from 12:30 to 2:00 PM in the Marriott New Orleans in New Orleans, Louisiana. Attendees are invited to speak at the public meeting. For more information, including submission guidelines, please click here.
A list of topics under consideration by the Commission is available on the Commission’s website at https://consumercommission.abi.org/. To submit any comments or suggestions for the Commission, please e-mail [email protected].
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Senior Citizens Becoming Overwhelmed with Student Loan Debt
Senior citizens are becoming overwhelmed with student loan debt — not their own student loan debt, necessarily, but rather student loans that they either borrowed themselves, such as a parent-plus loan, or may have cosigned with their children and even grandchildren, according to a recent blog post.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
