Appropriations Package Containing Disaster Relief, Judgeship Act Continues on Path Toward President's Desk

H.R. 2266, the "Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2017," is currently awaiting Senate approval to resolve differences in amendments on the bill before it heads to President Trump to be signed into law. The bill, passed by the House last week, appropriates $36.5 billion in hurricane and wildfire relief that would give Puerto Rico access to $4.9 billion in low-interest Treasury loans and allow the troubled National Flood Insurance Program to keep paying claims. Also contained in the legislation is the "Bankruptcy Judgeship Act of 2017," which would amend the federal judicial code to:

- Convert certain temporary bankruptcy judges to permanent bankruptcy judges and authorize the appointment of additional bankruptcy judges in Delaware and Michigan;
- Convert temporary bankruptcy judges to permanent bankruptcy judges in specified judicial districts in Florida, Maryland, Nevada, North Carolina, Puerto Rico, and Virginia; and
- Authorize the appointment of an additional bankruptcy judge in the Middle District of Florida.
- Increase the quarterly fee payable to the U.S. Trustee by chapter 11 (reorganization) debtors whose disbursements equal or exceed $1 million in a fiscal year unless the balance in the U.S. Trustee System Fund exceeds $200 million.

The Senate is expected to act on the bill soon, then it will be signed into law by President Trump. Click here for the latest bill text.

Hartford Must Restructure Debt to Get State Help to Avert Bankruptcy

Hartford would have to restructure its debt to get the state assistance needed to keep it out of bankruptcy, according to legislative sources familiar with the tentative state budget deal, the Connecticut Mirror reported today. But Connecticut also would guarantee a major refunding of the city’s debt and cover a major share of the city’s debt payments — at least for this fiscal year and next. “This budget gives the city all of the tools it needs to be on a structural path to sustainability,” said House Majority Leader Matt Ritter (D-Hartford), who praised leaders from both parties for recognizing the need for a vibrant capital city. Hartford Mayor Luke Bronin has said the city needs about $40 million annually in new state assistance to avert bankruptcy. Sources said the new budget includes $28 million per year for a new Municipal Accountability Review Board — the state panel proposed by Gov. Dannel P. Malloy (D) to target municipalities at risk of fiscal insolvency and to intervene beforehand. About $20 million of that $28 million would be earmarked for Hartford.

Commentary: A Shortsighted Plan to Scrap Dodd-Frank’s Liquidation Rules

The Treasury Department will soon decide whether to recommend scrapping the Dodd-Frank Act’s rules for liquidating failing banks, as some Republicans are urging, according to a New York Times commentary today. What’s known as the Orderly Liquidation Authority was established by the Dodd-Frank Act to avoid confusion if a complex financial institution fails, like Lehman Brothers did a decade ago. The act gave the Federal Deposit Insurance Corp. the power to unwind bank holding companies, systemically important nonbanks and other financial firms, and to set up a fund to pay for the associated costs. The FDIC would initially borrow from the Treasury and recoup the expenses with a fee imposed on big banks. Some congressional Republicans decry this arrangement as another taxpayer-funded bailout, according to the commentary. They have introduced bills to eliminate the liquidation procedures and replace them with an improved Bankruptcy Code. The criticisms prompted President Trump in April to order the Treasury Department to review those procedures and assess whether bankruptcy was a better method. But according to the commentary, the debate in Washington, D.C., ignores the global nature of big banks and the role that international regulators play. The FDIC-supported method would deal with a failing bank at the holding-company level, eliminating the need for each division — including overseas units — to have their own wind-down plans. Overseas watchdogs would defer to regulators in the U.S. and work in close cooperation with them. Bankruptcy judges don’t have those relationships, and the process, even with improvements, would be too slow to handle the fast-paced chaos of a large failing bank. Overseas regulators have smartly worked to get ahead of the decision, warning that without the Dodd-Frank rules, overseas subsidiaries of American banks could be subject to higher capital requirements, restructuring and ring-fencing.

 

Analysis: Puerto Rico Faces Accelerated Demographic Exodus

During the decade before Hurricane Maria, economic decline and depopulation, a slower-moving catastrophe already took a staggering toll: The number of residents had plunged by 11 percent, the economy had shrunk by 15 percent, and the government had become unable to pay its bills, the Washington Post reported yesterday. It already ranked among the worst cycles of economic decline and depopulation in postwar American history, and projections indicated that the island’s slide could continue for years. Now, even as officials in Washington, D.C., and Puerto Rico undertake the government aid package, residents are expected to leave en masse, fueling more economic decline. Whatever happens with Puerto Rico, moreover, will have far-reaching effects, because while the disaster is felt most keenly on the island, the accelerated exodus is already being felt on the mainland. Cities popular with Puerto Ricans, such as Orlando, Hartford, Conn., and Springfield Mass., are bracing for more students, many of whom come from families living below the poverty level.


In related news, billionaire investor Seth Klarman on Wednesday resisted calls for Puerto Rico’s debt to be wiped out and said the island’s residents will be better off in the long run if obligations are honored, Reuters reported. Klarman’s comments came in an email to investors, offering fresh details about how his $30 billion hedge fund Baupost Group sees its bet on Puerto Rican bonds after Hurricane Maria, which largely destroyed the island’s infrastructure. Baupost is one of many Wall Street firms that stands to lose money on investments in Puerto Rican real estate and debt as the U.S. territory struggles to rebuild. Calls to forgive Puerto Rico’s more than $70 billion in outstanding obligations have mounted in recent weeks, as much of the island still has no electricity or running water.


This year’s hurricane season has become one of the most destructive in recent memory. To provide assistance to those affected and direct others in how you can help, ABI encourages you to visit our Hurricane Relief webpage.

Homeowners Hurt by Hurricanes Now Falling Behind on Mortgages
Homeowners affected by the hurricanes in Florida and Texas are now falling behind on their mortgages, Bloomberg News reported today. In areas hit by Hurricane Irma, the number of borrowers who were at least 30 days past due increased 48 percent last month from August, according to Black Knight Inc. The figure surged 67 percent in Texas communities hurt by Harvey, the Jacksonville, Fla.-based mortgage data and software firm said in a report today. Before the storms, Texas and Florida ranked 20th and 22nd, respectively, among U.S. states for non-current mortgages. Now they’re third and fifth. Nationally, monthly foreclosure starts fell to a 17-year low because of temporary federal freezes on foreclosures in storm disaster areas, the company said. The U.S. delinquency rate, which excludes foreclosures, rose almost 3 percent from a year earlier, the first annual jump since 2010 – largely because of the storms.

Federal Student Loan Complaints Overtake Those from Private Lender
A report by the Consumer Financial Protection Bureau (CFPB) shows that student loans —especially those backed by the government — remain a major source of consumer complaints to the agency, CreditandCollectionNews.com reported yesterday. The report documents a surprising increase in complaints about federal student loans, generally regarded as being more consumer-friendly than those from banks and other private lenders. The annual Student Loan Ombudsman Report found that over the last year, the CFPB received nearly 23,000 complaints involving all types of student loans. More than half were complaints about federal loans.

Next Consumer Commission Open Meeting to Take Place Nov. 10 at ABI’s Seventh Circuit Consumer Bankruptcy Conference

ABI's Commission on Consumer Bankruptcy will hold a public meeting during the Hon. Eugene R. Wedoff Seventh Circuit Consumer Bankruptcy Conference on November 10, 2017, from 12:00-1:30 PM at Jenner & Block’s Conference Center in Chicago. The Consumer Commission invites attendees to request time to make an oral statement at this public meeting, and in addition (or alternatively) to submit a written statement to the Commission. To request a time for a public statement or to send a written statement, please use the Commission’s public email address: [email protected].

To access the list of topics under consideration by the Commission’s committees and previous hearing statements, please click here.

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