Commentary: How the U.S. Should Fix Puerto Rico

To avoid an economic and human catastrophe, Puerto Rico needs to cut debt and boost economic growth, according to a commentary in today's Wall Street Journal. The Obama administration proposed a plan last week that addresses the first issue, but does too little about the second. With $72 billion in debt, Puerto Rico and its public enterprises owe an amount equal to 100 percent of annual output. Gradually easing the burden of the minimum wage and poorly designed entitlements, reducing the cost of electricity and shipping, and making labor rules less onerous should all eventually boost economic output and tax revenue and slow migration to the mainland. The alternative is stagnation, growing dependency on federal generosity, and the risk of another fiscal crisis someday. Read the full commentary. (Subscription required.)

For further analysis, news and commentary on Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.

Dallas's Credit Rating Cut by Moody's over Growing Pension Debt

Dallas's credit rating on $1.7 billion of general-obligation debt was lowered by Moody's Investors Service because of the city's growing pension-fund deficit and the backlog of spending needed on its infrastructure, Bloomberg News reported today. The New York-based company lowered the city's rank by one level to Aa2, the third-highest investment grade. The outlook is stable, signaling that no further changes are imminent. The downgrade comes after the city's unfunded liabilities to its three pension systems swelled to $2.9 billion in 2015 from about $1.9 billion in 2014, following a reduction to its estimate for the investment gains it counts on to cover future retirement checks. Moody's said that the shortfall is expected to grow because of legal and political obstacles that prevent it from putting more tax money into the retirement system.

Commentary: Glass-Steagall's Political Firewall

The Glass-Steagall Banking Act of 1933 -- repealed in 1999 -- prohibited deposit-taking banks from engaging in securities underwriting, but it has come to stand more broadly for various laws that separated commercial banks from investment banks and insurance companies, according to a commentary by Prof. Adam Levitin in the Huffington Post. Contrary to conventional wisdom, the importance of Glass-Steagall was not as a financial firewall between speculative investment activities and safe deposits. Glass-Steagall never prevented deposits from being put at risk, as bank loans can be every bit as risky as securities or derivatives. Instead, Levitin writes that Glass-Steagall's importance was as a political firewall that kept the different sectors of the financial services industry from uniting in their lobbying efforts and undermining financial regulation.

U.S. Government Uses Race Test for $80 Million in Payments

By the end of this week, the U.S. government will be a step closer to sending out millions of dollars to minority borrowers who were allegedly discriminated against by auto lender Ally Financial Inc., the Wall Street Journal reported today. But there is a potential hitch: No one knows for certain whether all the people getting the checks will actually be minorities. The attempt to sort that out is the end result of a unique settlement in which Ally agreed to pay borrowers at least $80 million to settle allegations of racial or ethnic discrimination, even though the lender is prohibited by law from collecting data on the race or ethnicity of its borrowers.

Op-Ed: Payday Loans Cost the Poor Billions, but There's an Easy Fix

Millions of Americans who need a short-term loan for a variety of reasons find themselves going to payday lenders, either online or through one of the thousands of payday-lending storefronts nationwide, according to an op-ed in today's New York Times. Annual interest rates for payday loans typically run between 391 and 521 percent, according to the Center for Responsible Lending (CRL), an activist group on subprime lending based in North Carolina. Most people who use them end up paying more in fees over the course of the year than they originally received in credit, according to CRL. Nationally, borrowers spend roughly $8.7 billion per year on payday-loan fees. The U.S. government could put billions of dollars back into the pockets of these consumers by fixing a small regulatory problem and allowing banks to get into the business of small loans, according to the op-ed.

Space Still Available for Free abiLIVE Webinar Examining Pending Changes in the Bankruptcy Forms!

As most official bankruptcy forms will be replaced with substantially revised, reformatted and renumbered versions effective Dec. 1, ABI's Consumer Bankruptcy Committee will host an abiLIVE webinar on Nov. 16 to examine the pending changes in the forms. Join members of the Advisory Committee on Bankruptcy Rules, as well as a software expert from Stratus BK, to learn about the new forms. Registration is free, but is limited to 100 registrants! Click here for more information and to register.