Analysis: Ten Years After the Bear Stearns Bailout

Analysis: Ten Years After the Bear Stearns Bailout

ABI Bankruptcy Brief
ABI Bankruptcy Brief
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March 15, 2018

 
ABI Bankruptcy Brief
 
 
 
 
NEWS AND ANALYSIS

Analysis: Ten Years After the Bear Stearns Bailout

Ten years ago yesterday, major investment bank Bear Stearns Cos. careened toward bankruptcy after excessive leverage had helped put it on the brink, the Wall Street Journal reported. The Federal Reserve tried to limit the damage with extraordinary actions, first extending the firm credit before forcing it into a hasty weekend shotgun marriage to JPMorgan Chase & Co., with $29 billion in assistance. It was the first time the Fed had intervened with a noncommercial bank since the Great Depression. “Industry participants didn’t want to see Bear Stearns go down, and they didn’t want to see others go down,” says Alan Schwartz, then Bear’s chief executive. Today, those involved with the unprecedented Bear bailout agree it only temporarily staved off a broader meltdown. Its fall was one of the first dominoes in a downturn that months later engulfed all of Wall Street, causing stocks to shed nearly half their value, Lehman Brothers Holdings Inc. to file for chapter 11, Merrill Lynch & Co. to sell itself to Bank of America Corp. for $50 billion and American International Group Inc. to take a $182 billion bailout. The debates endure — on everything from the causes of the crisis to the government’s response. Key players in the bailout, many of whom remain in finance, have spent the last decade arguing about what was done, defending decisions made then and wondering whether it could happen again. The consensus: It would be unlikely for another big firm to get into such trouble, or for the government to orchestrate such a bailout, according to the analysis. Read more. (Subscription required.)

Join thought leaders from academia and the bench, representatives from U.S. and European governmental agencies and private organizations in Washington, D.C., 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.

 

Automakers Knew Earlier of Takata Airbag Issues, Plaintiffs Contend

General Motors, Volkswagen AG, Fiat Chrysler Automobiles and Daimler AG knew of problems with Takata airbag inflators and should have moved faster to recall vehicles, according to company documents cited yesterday by owners suing the automakers, Reuters reported. Amended class-action complaints filed in U.S. District Court in Miami say that the four automakers knowingly misrepresented their vehicles as safe. The lawsuits, which claim economic losses, cite internal company documents that suggest the automakers knew of issues earlier than previously known -- and well before issuing recalls. At least 22 deaths and hundreds of injuries worldwide are linked to the Takata inflators that can explode with excessive force, unleashing metal shrapnel inside cars and trucks. The defect led Takata to file for bankruptcy protection in June.
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Don't Miss the "Cross-Border Collisions" panel at the INSOL International Annual regional Conference in New York on April 29. Insolvency professionals involved in both the Takata airbag class action and the Montreal Maine Atlantic Railway crash will provide insights from various perspectives.

Analysis: Puerto Rico Faces Tough Decision Amid Oversight Panel's Consideration of Governor's Fiscal Plan

Almost six months after Hurricane Maria, Bloomberg News reported, Governor Ricardo Rosselló is proposing what, for many, might seem unthinkable after a decade of recession: austerity. His plan to consolidate government departments and reduce municipal and university aid underscores just how bad things have gotten since the September storm. The sober reality: The government was kept afloat by borrowed money for years, and now the spigot is shut off. The U.S. territory is bankrupt and running a deficit, and creditors are fighting in bankruptcy court for the $74 billion they’re owed. If the federal panel that oversees Puerto Rico’s finances approves the governor’s plan by March 30, self-imposed discipline is bound to increase the pain, much as it did in Greece. For bondholders and the 3.3 million residents, the question is whether the move will do more harm than good, or help Puerto Rico overhaul its economic engine and repay more of its debt. “It’s not like things will magically get better,” said Jason Bram, a New York Fed research economist. “Hard decisions are made. People are upset.” Investors, bond-insurance companies, the oversight board and island officials have been discussing how to write down the burden through mediation as part of the island’s bankruptcy. Rosselló’s fiscal plan estimates the central government may be able to repay almost half the $41 billion of principal it owes, an amount that has left creditors unsatisfied.
read more

The people of Puerto Rico need your help. Thousands are still without regular power service, and many more need to rebuild their homes. Please join the ABI Endowment and the Mariano Rivera foundation for a charity benefit for Puerto Rico on April 4, 2018, at the New York Athletic Club.

Senate Rolls Back Rules Meant to Root Out Discrimination by Mortgage Lenders

The Senate yesterday passed a sweeping bill that some assert may weaken the government’s ability to enforce fair-lending requirements, the Washington Post reported. The bill rolls back banking rules passed after the 2008 financial crisis, including a little-known part of the Dodd-Frank Act that required banks and credit unions to report more detailed lending data so abuses could be spotted. The bipartisan plan, the most significant revision of banking rules in the decade since the Great Recession, would exempt 85 percent of banks and credit unions from the new requirement, according to a Consumer Financial Protection Bureau analysis of 2013 data. The mortgage industry says the expanded data requirements are onerous and costly, especially for small lenders. But civil rights and consumer advocates say the information is critical to identifying troubling patterns that warrant further investigation by regulators.
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Federal Judiciary Unveils First Reforms from Harassment Working Group

A working group has come up with nearly 20 reforms aimed at dealing with concerns about workplace harassment throughout the federal judicial system, the National Law Journal reported. James Duff, director of the Administrative Office of the U.S. Courts, told the Judicial Conference in an interim report on Tuesday, “Any harassment in the judiciary is too much.” The 26-member conference, composed of federal judges from across the country, convened at the U.S. Supreme Court for its regular spring meeting. Chief Justice John Roberts Jr., who presides over the conference, said, “The work of this group will help our branch take the necessary steps to ensure an exemplary workplace for every court employee.”
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Don’t miss the discussion on “Restructuring a Firm After Discrimination or Sexual Harassment Claims” at the Annual Spring Meeting. Retired Bankruptcy Judge Judith K. Fitzgerald (ret.) of Tucker Arensberg provides a preview.

For more information and to register for the Annual Spring Meeting, please click here: http://www.abiasm.org/. The deadline for the special hotel rate for the conference expires tomorrow — register and secure your room soon!


Nominations Now Being Accepted for the 2018 Class of ABI's “40 Under 40” Program!

Nominations are now open for ABI's “40 Under 40” program. This program recognizes outstanding young insolvency professionals who are driven by success, motivated by challenges and are role models for their peers. If you are, or know of, a dynamic insolvency professional who is committed to growth and excellence both professionally and in your community, this is one opportunity not to be missed! Visit the website for additional details on nominations and applications.

New Business and Consumer "Best of ABI" E-Books Available in the ABI Store

Pick up the Best of ABI 2017 e-books, now available in the ABI Store! Both the consumer and business bankruptcy e-books provide the top ABI Journal articles and educational materials published over the past year. Each book comes in a convenient e-book format (downloadable for Kindle, iPad or as a PDF) for the low price of $25 each.

•    The Best of ABI 2017: The Year in Consumer Bankruptcy addresses the hottest consumer topics, including post-petition assets and income in chapter 13, student loan discharge, family and elderly issues in bankruptcy, Rule 3002.1, HOA dues, late and stale claims, tax issues and much more. It was edited by Miriam T. Goott of Walker & Patterson P.C. (Houston), who was selected last year as an emerging leader in ABI’s inaugural “40 Under 40” initiative. Click here to purchase your copy of Best of ABI 2017: The Year in Consumer Bankruptcy.

•    The Best of ABI 2017: The Year in Business Bankruptcy covers 2017's hottest business bankruptcy topics, including retail, health care, international issues, bankruptcy lending issues, the Jevic decision and more. The e-book was edited by Monique D. Hayes of Goldstein & McClintock LLLP (Miami), who is also a member of ABI's inaugural "40 Under 40" class. Click here to purchase your copy ofBest of ABI 2017: The Year in Business Bankruptcy.

INSOL International Buenos Aires One-Day Seminar on March 22 Open to ABI Members

ABI members are welcome to attend the INSOL International Buenos Aires One-Day Seminar to be held on March 22 at the Marval O'Farrell Mairal in Buenos Aires. Expert panels will be discussing the latest developments in Argentina, Brazil and the wider Latin American region. The seminar will benefit from simultaneous translation in English and Spanish. Topics include:

- Coordinating cross-border insolvencies: Should Argentina adopt the UNCITRAL Model Law?
- Significant potential changes in the Argentine and Brazilian insolvency laws
- Facilitating reorganization through financing companies in insolvency proceedings
- Lessons learned in cross-border insolvencies
- What claims should be given priority in insolvency proceedings?

Click here for more information and to register.

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BLOG EXCHANGE

New on ABI's Bankruptcy Blog Exchange: MB Financial Facing Lawsuit over Alleged Overdraft Abuses

A customer is claiming that the Chicago bank operates a "predatory" overdraft fee program, according to a new blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

 
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