COMMENTARY: THE GOOD, BAD & UGLY OF BANK FAILURE RESOLUTION
Amid recent meetings of G-20 finance ministers, Mary Miller, a Treasury undersecretary, insisted that U.S. policy toward insolvent banks, including the biggest, no longer includes bailouts. Yet in early March, Miller said that the Financial Stability Oversight Council (FSOC) would vote "in the next few months" about which banks the FSOC would designate as "systematically important financial institutions" (SIFIs), according to a commentary in Forbes yesterday. Does the U.S. still abide by its TBTF doctrine, as it did from 1982 to 2009, or has it formally terminated the policy, which abundant research over the years has shown to foster "moral hazard" and undue bank risk-taking? Can anyone say definitively, whether by reference to statutory law or regulatory law, that the TBTF policy won't be revived again, especially during the next crisis? In truth, Dodd-Frank does not specifically forswear or prohibit TBTF. In fact, the Dodd-Frank rules probably won't accomplish the aim of less reckless banking any more than similar rules have done so in the past, according to the commentary. Bank capital adequacy rules have existed for at least three decades, and still exist now because the root source of capital inadequacy hasn't been rescinded by Dodd-Frank or any other measure. The real reason so many financial institutions are highly leveraged—the reason so many of them play it so close to the edge (of insolvency)—is that they enjoy the privilege of government deposit insurance coverage, of near-unlimited access to the Fed's discount window, and of the TBTF policy. The only way banks feel they can maximize their return on equity is by minimizing their equity. Click here to read the full commentary.
ANALYSIS: U.S. MINERS' UNION CHARTS NEW COURSE TO SAVE BENEFITS IN BANKRUPTCY
As mineworkers and retirees battle to salvage their pensions and benefits from the bankruptcy of Patriot Coal Corp., lawyers for their union are trying an unusual gambit—and one that may be a test case for workers' rights when companies spin off assets, Reuters reported yesterday. With a difficult road ahead in bankruptcy court in the Patriot Coal case, the United Mine Workers of America has brought a parallel lawsuit 500 miles away, in West Virginia, the heart of coal country. That lawsuit is not against Patriot but rather challenges Peabody Energy Corp., which spun Patriot off in 2007, saying that the former parent must pay retiree pensions and benefits if Patriot cannot. While experts say the lawsuit is a long shot, if successful it could upend how companies like Peabody dispose of assets in the future. For mineworkers, the lawsuit seeks to preserve a right to lifetime health and pension coverage that dates back to the Truman administration. The union argues that when Peabody spun Patriot off in 2007, it knew the new company was going to fail. Parting with only about 16 percent of its assets, Peabody loaded Patriot up with nearly 60 percent of its post-employment benefit liabilities, the union alleges. Click here to read the full article.
HOME PRICES JUMP 9.3 PERCENT IN QUICKEST RISE SINCE 2006
Home prices are rising at the fastest rate in seven years, with some communities seeing double-digit gains, as buyers are returning to a market where the number of properties for sale is in short supply, the Wall Street Journal reported yesterday. Prices increased 9.3 percent in February from a year earlier while mortgage-interest rates hovered at near record lows, according to the Standard & Poor's/Case-Shiller index, which tracks home prices in 20 major metropolitan areas. All 20 cities posted year-over-year gains for the second consecutive month, which has not happened since 2005 before the crash. In some of the hardest-hit markets, the gains have been particularly heady. Home prices rose 23 percent from a year ago in Phoenix and 18.9 percent in San Francisco. Nationally, the median home price in March stood at $184,300, well below the peak of $230,400 in 2006 but up from $154,600 in January 2012. Click here to read the full article (subscription required).
U.S. JOBLESS CLAIMS FALL TO 5-YEAR LOW
A measure of layoffs fell to its lowest level in more than five years last week, but it's unclear whether U.S. employers are also boosting hiring during the slow economic recovery, according to the Wall Street Journal today. The number of Americans seeking initial jobless benefits, a proxy for layoffs, decreased by 18,000 to a seasonally adjusted 324,000 in the week ended April 27, the Labor Department said today. That's the lowest level for claims since January 2008, just after the last recession started. A drop in jobless claims is often accompanied by increased hiring, which would be a welcome development for the economy after March's disappointing payroll gain ignited fears of a spring slowdown. But some economists say that while companies are no longer dismissing workers, they might not be adding many, either. Managers may be reluctant to hire because they're concerned about a slowing global economy and the durability of U.S. consumer demand. Businesses are also managing to produce more with their existing workforces. The Labor Department will release its major jobs report and unemployment tally on Friday. Click here to read the full article.
BLOOMBERG'S LATEST "BILL ON BANKRUPTCY" VIDEO: KODAK PLAN BUMPS THE DEBT, CRATERS STOCK
Eastman Kodak Co. filed a chapter 11 plan that cratered the stock and bumped up the unsecured notes, although the plan may be revised to pay off second-lien debt fully in cash, as Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle discuss on their video. Next, Rochelle and Pacchia address a decision by a Delaware bankruptcy judge in the reorganization of School Specialty Inc. apparently holding that no make-whole premium will ever be too large for approval. They then discuss the U.S. Supreme Court's decision not to review a decision dismissing an appeal from a confirmation order approving the Charter Communications Inc. chapter 11 plan. The final item is an opinion telling lawyers for consumer bankrupts how they can violate ethical rules when signing clients to flat-fee arrangements. Click here to watch the video.
LIMITED SPOTS AVAILABLE FOR TELECONFERENCE TOMORROW EXAMINING ABI'S ETHICS TASK FORCE REPORT
ABI will be holding a media teleconference tomorrow, May 3, at 1 p.m. ET to examine the recommendations contained in the ABI Ethics Task Force final report. Experts on the teleconference discussing the final report include Task Force reporters Profs. Nancy B. Rapoport of the UNLV William S. Boyd School of Law (Las Vegas) and Lois R. Lupica of the University of Maine School of Law (Portland, Maine), as well as Task Force member Edward T. Gavin of Gavin/Solmonese LLC (Wilmington, Del.). There are limited spots available to ABI members who would like to join the call. Contact John Hartgen, ABI's Public Affairs Manager, at [email protected] if you would like to participate in the teleconference. Click here for a copy of the report..
NEW ABI LIVE WEBINAR ON MAY 29 WILL FOCUS ON CLASS ACTIONS IN BOTH BUSINESS AND CONSUMER CASES
Class action lawsuits in both chapter 11 and 13 cases are becoming more prevalent. Are you wondering whether your clients’ WARN Act claims would be better pursued against a debtor company in a class action adversary proceeding or in a class proof of claim, or both? If your client has been sued in a debtor’s consumer class action adversary proceeding, do you know the best defenses against class certification? ABI's panel of experts will explore the potential benefits and pitfalls of class actions by creditors against debtor companies in chapter 11 cases and by debtors/trustees against creditors in chapter 13 cases by highlighting recent appellate and bankruptcy court decisions on May 29 from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.
ABI GOLF TOUR UNDERWAY; NEXT STOP IS CENTRAL STATES BANKRUPTCY WORKSHOP IN JUNE
Rob Schwartz and Scott Gautier are tied at 34 Stableford Points atop the closely bunched leaderboard after the ABI's Golf Tour's first stop at Lake Presidential Golf Club. Next up for the Tour is the famed Bear course at the Grand Traverse Resort at the Central States Bankruptcy Workshop on June 14. Final scoring to win the Great American Cup—sponsored by Great American Group—is based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! There's no charge to register or participate in the Tour, and women are most welcome.
ABI MEMBERS WELCOME TO ATTEND INSOL'S LATIN AMERICAN REGIONAL SEMINAR ON JUNE 13 IN SAO PAULO
ABI members are encouraged to attend INSOL’s Latin American regional seminar in São Paulo, Brazil, on June 13. The one-day seminar has been organized by INSOL in association with TMA Brasil to cover current cross-border insolvency and restructuring topics. The seminar is designed to be interactive and to allow the attendees to discuss and debate about practical issues with speakers who are leading players in the insolvency and restructuring field and with experience in insolvency proceedings involving different countries. The seminar will benefit from simultaneous translation in English, Portuguese and Spanish. For more information and to register, please click here.
ABI IN-DEPTH
NEW CASE SUMMARY ON VOLO: OWENS V. GMAC MORTGAGE LLC (IN RE OWENS) (11TH CIR.)
Summarized by Jennifer Kimble, Haskell Slaughter Young & Rediker, LLC
The Eleventh Circuit ruled that if an appellant intends to urge on appeal that a finding or conclusion is unsupported by evidence or is contrary to the evidence, the appellant must include in the record a transcript of all evidence relevant to that finding or conclusion.
There are more than 800 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: FIFTH CIRCUIT'S RECENT CRAMDOWN INTEREST DECISION
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post reviews the Fifth Circuit's recent decision in In re Texas Grand Prairie Hotel Realty L.L.C. in which the court reaffirmed its previous holding that Till's prime plus formula was not binding authority in the Fifth Circuit.
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
Bankruptcy courts should implement constructive trusts in any case where applicable state law would recognize them.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
INSOL INTERNATIONAL
INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.
