FED TO HIT BIGGEST U.S. BANKS WITH TOUGHER CAPITAL SURCHARGE
The Federal Reserve plans to hit the biggest U.S. banks with a costly new requirement aimed at reducing the risk that some financial firms remain "too big to fail" nearly six years after the financial crisis erupted, the Wall Street Journal reported today. In testimony prepared for a Senate Banking Committee hearing today, Fed Governor Daniel Tarullo said that the regulator intends to impose a capital surcharge that will require the biggest U.S. banks to maintain fatter cushions to protect against potential losses. The Fed's version of the capital surcharge will be tougher than one agreed upon by international regulators. The Fed also will penalize U.S. banks that rely heavily on volatile forms of short-term funding, such as overnight loans, in determining the size of a new capital surcharge. Read more. (Subscription required.)
To read prepared witness testimony from today's Senate Banking Committee hearing, please click here.
HOUSE HEARING TO EXAMINE WHETHER MEDICAL DEBT SHOULD BE INCLUDED IN CREDIT REPORTING SYSTEM
Legislators will discuss medical debt in relation to credit scores during a House Financial Services Subcommittee on Financial Institutions and Consumer Credit hearing tomorrow titled "An Overview of the Credit Reporting System," ACAInternational.org reported today. Tentative witnesses include Howard Beales from the Federal Trade Commission, Stuart Pratt from the Consumer Data Information Association, Chi Chu Wu from the National Consumer Law Center and a representative of the Consumer Financial Protection Bureau. More witnesses may be invited to testify at the hearing. In August 2014, FICO announced that it had refined its credit scoring model to offer options to differentiate medical from non-medical collection agency accounts. In May, the Consumer Financial Protection Bureau released a white paper, "Data Point: Medical Debt and Credit Scores," that evaluated whether medical and non-medical collections are equally predictive of consumers' credit performance. "The answer appears to be no," the CFPB stated. "Our results suggest that consumers with more medical than non-medical collections had observed delinquency rates that were comparable to those of consumers with credit scores about 10 points higher." Read more.
For more information on the hearing, please click here.
U.S. CONSUMER CREDIT UP A RECORD AMOUNT IN JULY
U.S. consumer credit growth increased sharply in July, continuing the strong growth trend that has been seen since last December, MarketWatch.com reported yesterday. Consumers increased their debt by a seasonally adjusted $26.0 billion in July, up from an $18.8 billion gain in the prior month, the Federal Reserve said yesterday. By dollar amount, that's a record gain, and on a percentage basis, it's the highest since July 2011. Monthly debt rose at a 9.7 percent annual rate in July, compared with a 7.1 percent rate in the prior month. Non-revolving debt, especially federal student loans, led the monthly increase, rising $20.6 billion, or 10.6 percent in July, following an 8.8 percent gain in the prior month. Read more.
For more on July's consumer debt figures from the Federal Reserve, be sure to check out today's ABI Chart of the Day.
ANALYSIS: SIX-FIGURE INCOMES AND FACING FINANCIAL RUIN
Some high earners end up leading a lifestyle that they can barely afford, saving little or nothing for retirement and living paycheck to paycheck, according to an analysis in the Wall Street Journal on Saturday. "Some people you wouldn't expect are teetering on the edge of bankruptcy," says Charles Bullock, a bankruptcy attorney in Southfield, Mich., who has worked with lawyers, doctors and corporate executives, some of whom had to seek help after just three months out of work. There are no comprehensive data on overspending by the affluent, experts say. But Bullock says he has seen an uptick in personal bankruptcy filings among high earners over the past six months, a trend he expects will continue as it becomes easier for consumers to borrow again and investors grow more confident about the stock market. He said clients who got into financial trouble soon after losing their jobs often weren't willing to scale back their lifestyle. To avoid such an emergency, create a "thoughtful and long-term" financial plan, says Katie Nixon, the Chicago-based chief investment officer for wealth management at Northern Trust. Count up all income and all required spending, including taxes. Don't factor in "nice-to-haves" such as vacations, she says. Read more. (Subscription required.)
MONDAY'S ABI WORKSHOP TO EXAMINE LENDING TO DISTRESSED COMPANIES
Asset-based lending deals done within the current environment of excess liquidity fueled by historically low interest rates present unique challenges. Attend ABI's Workshop on Sept. 15 featuring three panels of experts from the worlds of law, banking, turnaround finance, portfolio management and factoring who will share their insights into today's lending environment. The lead session will assess the current market conditions for middle-market companies in need, while the follow-up session will address portfolio and credit management in the post-recession era, including how lenders make strategic decisions, manage credit through a turnaround situation, and seek out alternative entities such as hedge funds, business development companies and CLOs. A legal panel will round out the workshop by addressing inter-creditor and lender-liability issues, equitable subordination, fee structures and make-whole provisions. The Workshop will begin with a networking lunch and conclude with a cocktail reception on ABI's rooftop deck overlooking the Potomac River. Join ABI either live or via webcast and earn 3.25/3.5 hours of CLE/CPE credit! Register here.
NEW CASE SUMMARY ON VOLO: SINKFIELD V. STATE FARM INSURANCE (6TH CIR.)
Summarized by Prof. Laura Bartell of Wayne State University School of Law, former ABI Resident Scholar
Affirming grant of summary judgment by district court for the E.D. of Mich., the Court of Appeals held that the defendant insurer did not breach a contract for insurance when it denied the plaintiff's claim, because the plaintiff fraudulently misstated the value of the plaintiff's property.
There are more than 1,400 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: A CLOSER LOOK AT THE RECENT TRENDS AT THE INTERSECTION OF INTELLECTUAL PROPERTY AND BANKRUPTCY LAW
A recent blog post takes a closer look at some of the current business bankruptcy trends, including the intersection of intellectual property and bankruptcy law, that were discussed at ABI's 22nd Annual Southwest Bankruptcy Conference last week.
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
SARE cases should not be allowed in chapter 11.
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