AUTO SAFETY AGENCY POINTS FINGER AT GM FOR CAR SAFETY ISSUES AT EXPLOSIVE HOUSE HEARING TODAY
The nation's top auto safety regulator cast blame on General Motors in testimony today before a House subcommittee looking into the ignition problem of Chevrolet Cobalts and other cars, the New York Times reported today. In prepared hearing testimony, David Friedman, the acting administrator of the National Highway Traffic Safety Administration, said that "GM had critical information that would have helped identify this defect." At issue is a faulty ignition switch that can turn off if it is bumped, shutting off the engine and disabling the air bags. GM has linked 13 deaths to the defect and has recalled 2.6 million cars. "I cannot tell you why it took years for a safety defect to be announced," GM CEO Mary Barra said in her prepared testimony. But she pledged to be "fully transparent" when she had answers. She also made public an offer previously communicated to dealers, that people who owned one of the recalled vehicles and did not want to drive it could get a loaner car or a rental car from a GM dealer. And she will add that "if a customer is already looking for another car, dealers can provide an additional cash allowance for the purchase or lease of a new vehicle." Read more.
For the prepared witness testimony from today's House Energy and Commerce Oversight and Investigations Subcommittee hearing, please click here: http://energycommerce.house.gov/hearing/"-gm-ignition-switch-recall-why-did-it-take-so-long."
New GM shielded itself from liability for crashes that happened before its 2009 bankruptcy. Victims are left to sue a shell company that has few assets. Congressional pressure is building for GM to establish a victim compensation fund notwithstanding the limit on liability. For further analysis, make sure to attend the "Large Complex Trusts: A General Motors Case Study" panel at ABI's Annual Spring Meeting. This panel will discuss the General Motors bankruptcy case with an in-depth discussion about the issuance of public units in a major bankruptcy. The session will also include the challenges addressed by the trust such as liability claims. For more information or to register, please click here.
IMF: PROBLEM OF BANKS SEEN AS "TOO BIG TO FAIL" STILL UNSOLVED
The International Monetary Fund issued a report yesterday warning that the world's largest banks still receive implicit public subsidies worth as much as $590 billion because of their status as "too big to fail" and the assumption of a government bailout if they get into trouble, the Financial Times reported today. The warning, to be included in the fund's twice-yearly Global Financial Stability Report, highlights the failure of post-financial crisis reforms to solve the problem of too-big-to-fail despite a vigorous lobbying campaign by the largest banks claiming it is no longer an issue. The IMF report showed that in the event of another financial crisis and in the absence of new reforms, taxpayers could still be liable for hundreds of billions of dollars of support for banks. According to IMF estimates, the largest globally active banks alone benefit from implicit subsidies worth $15-$70 billion in the U.S., $25-$110 billion in Japan, $20-$110 billion in the U.K. and $90-$300 billion in the eurozone, depending on the method used to calculate them. The fund calculated the figures by comparing the cost of insurance against default for investors in the bonds of larger and smaller banks alongside the different credit ratings for these institutions. It estimated that the implicit subsidies have fallen since 2009, but that they remain sizeable. Read more. (Free registration required.)
Learn more about balancing "too big to fail" remedies and systemic risk at the ABI Illinois Symposium on Chapter 11 Reform this week in Chicago. For more information on the papers to be presented, or to attend, please click here.
ANALYSIS: CONDITIONS FOR PEOPLE FINANCING HOMES AND NEW CARS ARE THE BEST IN FIVE YEARS
While qualifications of borrowers are scrutinized more closely than they were before the Great Recession, it is currently easier to get a loan for a new home or new car than it's been in five years, according to an analysis in yesterday's Wall Street Journal. It is still very difficult for borrowers with tarnished credit to borrow, and even on credit cards, where banks are more willing to lend, regulatory changes have generally lowered borrowing limits. In general, however, lending "is loosening up again after being extremely tight," says Michele Raneri, vice president for analytics at Experian Information Solutions, a major consumer credit-rating company. "For years, it was really difficult to get different kinds of loans, bank cards, as well as mortgages." Melanie Welsh, president of Envision Mortgage, a Wilmington, N.C., mortgage broker, says that she's seeing some loosening of credit standards for mortgages, with banks willing to underwrite loans on slightly lower credit scores than a year or so ago. Even though the worst of the financial crisis has passed, banks are finding themselves in a much stricter regulatory environment since the government has clamped down on the lax lending practices that led to banks being saddled with billions of dollars in bad loans. Read more. (Subscription required.)
CFPB REPORT SHOWS COMPLAINTS ROSE 80 PERCENT IN 2013
The Consumer Financial Protection Bureau (CFPB) reported yesterday that complaints to the agency nearly doubled from 91,000 in 2012 to 163,700 in 2013, ACAInternational.org reported. The bureau opened its doors in July 2011 and started accepting consumer complaints about credit cards. Since then, it has expanded its complaint handling in 2012 to include mortgages, bank accounts and services, private student loans, vehicle and other consumer loans, and credit reporting. In 2013, the bureau began taking complaints on money transfers, debt collection and payday loans. According to the CFPB's Consumer Response Annual Report released yesterday:
- Mortgages accounted for 37 percent, or approximately 67,000, of overall complaints. Consumers were most concerned with problems when they were unable to pay, such as issues relating to loan modifications, collections or foreclosures.
- Debt collection accounted for 19 percent, or approximately 31,000, of overall complaints, even though the bureau did not begin accepting debt collection complaints until July 2013. Consumers were most concerned with collectors attempting to collect debt not owed, communication tactics by the collectors, and collectors taking or threatening illegal action.
- Credit reporting accounted for about 15 percent, or approximately 24,000, of overall complaints. Nearly three out of four consumers were concerned with incorrect information on their credit reports.
To date, companies have responded to more than 93 percent of the complaints sent to them for response, and consumers have disputed only 21 percent of those company responses. Read more.
THURSDAY: LEADING SCHOLARS TO PRESENT RESEARCH AND PROPOSALS FOR POTENTIAL CHAPTER 11 REFORMS AT THE ABI ILLINOIS SYMPOSIUM ON CHAPTER 11 REFORM
Advancing the dialogue on important reform issues in conjunction with ABI's Commission to Study the Reform of Chapter 11, ABI and the University of Illinois College of Law have assembled leading scholars to present academic papers on issues related to the Commission's work. Scholars will present papers and debate the consequences of the increased importance of secured credit to modern restructuring law to members of the Commission and fellow scholars at the ABI Illinois Symposium on Chapter 11 Reform at the Kirkland & Ellis Conference Center in Chicago on April 3-5. The papers presented at the Symposium will be published in a forthcoming issue of the University of Illinois Law Review.
For a schedule containing a list of all presenters and commentators at the Symposium and to register, please click here.
EXPLORE CHALLENGES THAT LIE AHEAD FOR UNITS AND TRUSTS ESTABLISHED FROM GM'S BANKRUPTCY AT SPECIAL PRESENTATION AT ABI'S ANNUAL SPRING MEETING
Watch below to find out more about what is on tap for ABI's 32nd Annual Spring Meeting at the JW Marriott in downtown Washington, D.C. The conference, taking place April 24-27, 2014, features a roster of the best national speakers, while the depth and scope of topics offer something for everyone.
NEW CASE SUMMARY ON VOLO: PLILER V. STEARNS (IN RE PLILER; 4TH CIR.)
Summarized by James Clarke of McGuireWoods LLP
The Fourth Circuit affirmed the bankruptcy court holding that above-median debtors are obligated to maintain chapter 13 plans for 5 years where unsecured creditors are not paid in full, even if the debtors have negative disposable income. The Fourth Circuit first found that the applicable commitment period under §1325(b) is a temporal requirement, which dovetails with the 2005 BAPCPA amendments that debtors devote their full disposable income to repaying creditors.
There are more than 1,200 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: SUPREME COURT DENIES CERTIORARI IN CHAPTER 7 LIEN STRIP-OFF CASE
A recent blog post looks at the U.S. Supreme Court's denial to grant certiorari in Bank of America v. Sinkfield, an Eleventh Circuit case raising the issue of whether a junior lien wholly unsupported by collateral value can be stripped off in chapter 7.
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
Even though the federal government ended up over $10 billion in the hole on the General Motors bankruptcy, the bailout was a necessary evil.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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