Federal Private-Pension Safety Net Running 62 Billion Deficit

Federal Private-Pension Safety Net Running 62 Billion Deficit

ABI Bankruptcy Brief | November 11, 2014
 
  

November 18, 2014

 
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FEDERAL PRIVATE-PENSION SAFETY NET RUNNING $62 BILLION DEFICIT

The Pension Benefit Guaranty Corp.'s (PBGC) annual report showed that the federal government's safety-net program for private pensions is running a nearly $62 billion long-term deficit, largely due to long-standing problems in a type of pension plan that is common in transportation, construction and some other industries, the Wall Street Journal reported yesterday. The problems are likely to bankrupt the federal safety-net program for so-called multi-employer pension plans within the next decade, perhaps in the next few years. Such an outcome could hit more than 1 million people, according to the PBGC's report. The PBGC operates by collecting insurance premiums from employers that offer pensions and paying usually-reduced benefits to retirees in insolvent plans. The PBGC has two separate insurance programs, one for multiemployer plans and a larger one for single-employer pension plans. The multiemployer program — which is in much worse shape — insures benefits of more than 10 million workers and retirees in about 1,400 plans, the agency says. The plans are typically jointly managed by employers and unions. Read more. (Subscription required.)

LATEST ABI VIDEOCAST FEATURES PROF. KEN KLEE PROVIDING A HISTORICAL LOOK AT BANKRUPTCY ISSUES BEFORE THE SUPREME COURT

ABI Resident Scholar Lois Lupica is joined by Prof. Kenneth Klee of UCLA's School of Law and Klee, Tuchin, Bogdanoff & Stern LLP (Los Angeles) to take a look at how the Supreme Court has historically handled bankruptcy issues. Klee, who recently completed Bankruptcy and the Supreme Court: 1801-2014 (West Academic, 2015) with co-author Whitman L. Holt, examines recent Article III decisions and bankruptcy litigation topics, among other issues. Click here to watch the videocast.

MOODY'S JOINS FITCH IN SLAMMING SUBPRIME AUTO BONDS

The booming market for securities backed by subprime car loans is riskier than their ratings imply, say two of the biggest assessors of bond credit quality, Bloomberg News reported today. Moody's Investors Service and Fitch Ratings analysts said that the grades that their competitors have assigned to a crop of new issuers — most of which are backed by private-equity firms — are too high. The lenders lack a track record in the bond market proving their underwriting acumen and ability to handle the specialized task of collecting on soured debt during a downturn, according to the analysts. Half the issuers tracked by Standard & Poor's hadn't sold bonds before 2010, and concern is mounting that growth in the market for securities backed by car loans to people with poor credit poses a risk to the whole auto industry. Wall Street banks have arranged $20.6 billion of the deals this year, up from $8.6 billion in 2010, according to Barclays Plc. Read more.

ANALYSIS: MEGA-MERGERS POPULAR AGAIN ON WALL STREET

Mergers worth $100 billion, made on Monday, put Wall Street on pace for a year of deal-making rivaling those during the dot-com bubble and the private-equity upsurge that occurred just before the financial crisis, the New York Times DealBook blog reported yesterday. The announcement of two more mega-deals — the $66 billion acquisition of Botox-maker Allergan by Actavis, and the $34.6 billion takeover of oil field services firm Baker Hughes by a bigger rival, Halliburton — made Monday a symbolic tipping point. With those transactions on the books, about $1.5 trillion in deals targeting American companies have been announced this year, the most since 2000, according to Thomson Reuters. Five years after the end of the financial crisis, which reshaped the economy, it appears that big companies are finally willing to make big bets again, especially in the health care, technology and media industries. The conditions are ideal, with borrowing costs low and share prices rising. And chief executives are no longer worried about a double-dip recession or another eurozone crisis. Instead, they are betting on growth in the years ahead. "The fact that we're getting all these deals suggests that CEOs are feeling pretty good about things," said Mark Zandi, chief economist at Moody's Analytics. Read more.

FEDERAL HOUSING ADMINISTRATION IN THE BLACK FOR THE FIRST TIME SINCE 2011

The Federal Housing Administration (FHA) is projected to be in the black for the first time since 2011, but the FHA's independent annual audit also found that the pace of recovery remains slow, potentially complicating the agency's efforts to help strengthen the housing market's recovery, the Wall Street Journal reported today. The audit released yesterday found that the FHA's insurance fund had an economic value of $4.8 billion at the end of September, up from negative $1.1 billion last fiscal year. Its capital reserve ratio, which the FHA is supposed to keep above 2 percent, grew to 0.41 percent. More important, the report estimated that the FHA won't return to the congressionally mandated 2 percent threshold until 2016, a year later than last year's estimate. The FHA doesn't issue mortgages; it insures lenders against losses. Borrowers can pay for insurance on mortgages with down payments of as little as 3.5 percent. Officials with the Department of Housing and Urban Development, which oversees the FHA, emphasized that the fundamentals of the FHA's portfolio were sound and that the fund was on an upward trajectory. They attributed a large part of the unexpectedly slow growth to the FHA's reverse-mortgage program, the economic value of which has dropped sharply. Read more. (Subscription required.)

USTP NOTICE OF PROPOSED RULEMAKING ON CHAPTER 11 MONTHLY OPERATING REPORTS

Section 602 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) authorizes the U.S. Trustee Program (USTP) to issue rules requiring uniform periodic reports by debtors in possession or trustees in non-small business cases under chapter 11. The USTP just published in the Federal Register a notice of proposed rulemaking seeking public comment on the proposed rule and periodic report forms. The proposed rule is published in the Federal Register at 79 FR 66659 (Nov. 10, 2014) (to be codified at 28 C.F.R. pt. 58). The proposed rule, along with the proposed periodic report forms and instructions, may be viewed on the USTP's website. The proposed rule may also be accessed at www.regulations.gov. All public comments must be submitted on or before January 9, 2015, via www.regulations.gov. Please note that the proposed rule and forms only apply in chapter 11 cases filed by debtors that are not small businesses. Small business debtors are already required to use Official Form 25C, "Small Business Monthly Operating Report."

ABI MEMBERS WELCOME TO ATTEND TRIBUTE DINNER ON DEC. 11 TO HONOR BANKRUPTCY JUDGE STEVEN W. RHODES

ABI members are invited to attend a tribute dinner honoring the 29 years of service of Bankruptcy Judge Steven W. Rhodes of the United States Bankruptcy Court for the Eastern District of Michigan for his commitment to the bench, bar and community. The Tribute Dinner will be held at the Roostertail on the Detroit River and is being hosted by the Bankruptcy Community to honor and celebrate Judge Rhodes' service and career. Please contact David Lerner at (248) 901-4010 for more information. To attend, please go to http://www.cbadetroit.com/events/Judge-Rhodes-USBC-Invite-and-Form.pdf

NEW CASE SUMMARY ON VOLO: CARLSON V. U.S. BANK (IN RE CARLSON; 8TH CIR.)

Summarized by Lars Fuller of BakerHostetler

The Eighth Circuit BAP affirmed the rulings of the U.S. Bankruptcy Court for the District of Minnesota denying the debtors' motion for violation of the automatic stay, violation of the homestead exemption, violation of discharge and creditor misconduct. The BAP ruled that the failure of the pro se debtors-appellants to provide a record of the bankruptcy court's oral rulings prevented the BAP from finding that the bankruptcy court's factual basis for the rulings was clearly erroneous. The BAP also noted that based on the debtors' brief, its legal arguments for reversal were without merit in that the debtors' premise that liens do not survive bankruptcy was incorrect. Liens do survive discharge unless expressly avoided. BAP also rejected debtors' arguments that the homestead exemption avoided liens, and that a postponing foreclosure sale violated the automatic stay.

There are more than 1,500 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: FURTHER ANALYSIS OF SUPREME COURT'S CONSIDERATION OF LIEN-STRIPPING CASES

A recent blog post takes a closer look at the cases for which the Supreme Court granted certiorari to address the issue of lien-stripping in chapter 7 cases.

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

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Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

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2014

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