MORTGAGE DELINQUENCY RATE IN U.S. DECREASES TO 2008 LEVELS
The U.S. mortgage delinquency rate declined in the first quarter to the lowest level since 2008 as lower consumer spending and tighter lending standards resulted in fewer defaults, Bloomberg News reported yesterday. The share of home loans at least 30 days late dropped to 7.4 percent from 7.58 percent in the previous three months, according to a report today from the Mortgage Bankers Association (MBA). The rate peaked at 10.1 percent in the first quarter of 2010 and reached its lowest point since the third quarter of 2008, when it was 6.99 percent. The share of homes that had received a foreclosure notice and had not been seized by banks increased to 4.39 percent, up 1 basis point, or 0.01 percentage point, from the previous quarter, the MBA reported. Read more.
FITCH WARNS BANKS MUST RAISE $566 BILLION IN NEW CAPITAL
The world's largest banks must raise a combined $566 billion to satisfy new capital requirements, Fitch Ratings said today, as the authorities demand that banks hold more cash in reserve to protect against future financial shocks, the New York Times' DealBook blog reported. The figure represents a 23 percent increase on what the banks currently hold in reserve and will most likely reduce return on equity, a critical figure used to gauge a firm's profitability, Fitch said. The banks affected are the 29 "systemically important financial institutions" as designated by the global Financial Stability Board. Read more.
U.S. SENATE PANEL TO LOOK AT DERIVATIVES REGULATION NEXT WEEK
Derivatives regulators are likely to be questioned about their oversight of complex trades at JPMorgan Chase & Co., which resulted in a more than $2 billion loss, at a Senate Banking Committee hearing scheduled for next Tuesday, Dow Jones Newswires reported today. Securities and Exchange Commission Chairman Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler are scheduled to appear at a hearing about implementation of the derivatives regulatory regime laid out in the 2010 Dodd-Frank financial overhaul law. On Monday, the panel's Democratic chairman, Sen. Tim Johnson (S.D.), announced upcoming hearings on financial regulation at which the JPMorgan trades are "expected to be discussed," but not a specific inquiry into the company's loss. Sen. Mike Johanns (R-Neb.) on Tuesday called for JPMorgan Chief Executive James Dimon to come to the Hill for a hearing specifically to look into the trades. The House Financial Services Committee has not yet scheduled a hearing, but Rep. Randy Neugebauer (R-Texas) on Tuesday called for one to look into the losing trades. Read more.
COMMENTARY: THE DANGER WITH BIG BANKS
Taxpayer safety nets such as the FDIC should be available only to banks that are in the loan business, not those in the investment business, according to a commentary in yesterday's Wall Street Journal. In 1970, according to data from the Federal Reserve Bank of Dallas, the five largest U.S. institutions owned 17 percent of banking industry assets; in 2010 that share was 52 percent. As the financial crisis of 2008 showed, the very diversification, structure and size of most of our largest banks put the their assets at tremendous risk, according to the commentary, leaving the government no recourse but to rescue them. Harvey Rosenblum, the Dallas Federal Reserve Bank's executive vice president and director of research, wrote last year that "these rescues have penalized equity holders while protecting bondholders and, to a lesser extent, bank managers." In other words, by protecting people from the consequences of their errors, the bailouts raised the risk that the same errors will be made in the future. Taxpayer safety-net programs, such as the Federal Deposit Insurance Corporation (FDIC), should be available only to banks in business to provide insured deposits, according to the commentary. Financial institutions that primarily provide investment, hedging and speculative services do not deserve protection either by the FDIC's explicit guarantees or by an implicit understanding that taxpayers will bail them out because there is no other alternative. Read the full commentary. (Subscription required.)
MORTGAGE-BOND TRANSPARENCY PLAN MEETS RESISTANCE FROM TRADERS
The Financial Industry Regulatory Authority's (FINRA) latest plan to increase transparency in a corner of the $6.5 trillion mortgage-bond market is meeting resistance from Wall Street’s largest lobbying group, Bloomberg News reported today. Investors and dealers are concerned that the level of detail FINRA proposes to publish on trades of government-backed securities as so-called specified pools will reveal shifts in strategy because individual bonds are often owned by only one holder, according to the Securities Industry and Financial Markets Association. The group is pushing for a "masking" of a bond's unique identifier, known as a CUSIP, as FINRA adds trade-by-trade disclosures including prices to its Trade Compliance and Reporting Engine. Read more.
REGISTER FOR THE LABOR & EMPLOYMENT COMMITTEE'S "EVOLVING LABOR ISSUES IN CHAPTER 11" WEBINAR
Make sure to mark your calendars for May 23 from 2-3:30 p.m. ET for the ABI Labor and Employment Committee's "Evolving Labor Issues in Chapter 11" Webinar. A panel of experts will be discussing timely developments in several large complex bankruptcy cases, including Hostess, Kodak, Nortel and American Airlines. The expert panel includes Babette A. Ceccotti of Cohen, Weiss & Simon LLP (New York), former chief counsel of the PBGC Jeffrey B. Cohen of Bailey & Ehrenberg PLLC (Washington, D.C.), Marc Kieselstein of Kirkland & Ellis LLP (New York) and Ron E. Meisler of Skadden, Arps, Slate, Meagher & Flom LLP.
Sam Alberts of SNR Denton (Washington, D.C.) will be the moderator for the program. Issues to be discussed include:
• Hostess' efforts to eliminate their multi-employer pension plan contribution liability through motions to reject their labor agreements under Section 1113.
• Kodak's attempt to terminate retiree health benefits.
• The effect of the automatic stay upon efforts by the U.K. Pension Protection Fund and the U.K. Nortel Pension Plan to enforce its powers under the U.K. Pensions Act.
• American Airlines' efforts to reduce legacy costs in bankruptcy.
COMMENT PERIOD CLOSES MONDAY ON THE U.S. TRUSTEE PROGRAM’S PROPOSED GUIDELINES FOR ATTORNEY COMPENSATION IN LARGE CHAPTER 11 CASES
The U.S. Trustee Program has re-opened the comment period until May 21, 2012, on proposed guidelines for reviewing applications for attorney compensation in large chapter 11 cases ("fee guidelines"). The USTP also scheduled a public meeting for June 4, 2012, at the U.S. Department of Justice in Washington, D.C. on the proposed fee guidelines. Click here for more information on submitting comments or attending the public hearing.
ABI IN-DEPTH
JUNE 5 WEBINAR WILL EXAMINE HOW TO HANDLE AN ADMINISTRATIVELY INSOLVENT ESTATE
Panelists from one of the top-rated sessions at the 2011 Winter Leadership Conference are going to reconvene for an ABI and West LegalEd Center webinar on June 5 titled, "Handling the Administratively Insolvent Estate- What to Do When Your Chapter 11 Goes South." CLE credit will be available for the webinar, which will last from 11 a.m. - 12:30 p.m. ET.
Speakers include:
• Robert J. Feinstein of Pachulski Stang Ziehl & Jones LLP (New York)
• Cathy Rae Hershcopf of Cooley LLP (New York)
• Robert L. LeHane of Kelley Drye & Warren LLP (New York)
Robert J. Keach of Bernstein Shur (Portland, Maine) will be the moderator for the webinar.
The webinar costs $115, and purchase provides online access for 180 days. If you are purchasing a live webcast, you will receive complimentary access to the on-demand version for 180 days once it becomes available. Click here for more information.
LATEST CASE SUMMARY ON VOLO: SENIOR TRANSEASTERN LENDERS V. OFFICIAL COMMITTEE OF UNSECURED CREDITORS (IN RE TOUSA INC.; 11TH CIR.)
Summarized by Summer Chandler of McKenna Long & Aldridge LLP
The Eleventh Circuit reversed the order of the district court, affirmed the liability findings of the bankruptcy court, and remanded to the district court for further proceedings consistent with its opinion. Specifically, the Eleventh Circuit held that the bankruptcy court did not clearly err when it found that certain debtor subsidiary entities (the "Conveying Subsidiaries”) of debtor TOUSA, Inc. (TOUSA) had not received reasonably equivalent value in exchange for the liens they conveyed to secure loans used to pay a debt owed only by TOUSA, such that the liens could be avoided as fraudulent transfers; and (2) the Transeastern Lenders (defined below) who had received loan proceeds secured by such liens were entities “for whose benefit” the Conveying Subsidiaries transferred the liens, such that recovery could be sought from the Transeastern Lenders pursuant to 11 U.S.C. 550(a)(1). Finally, the Eleventh Circuit declined to consider the remedies ordered by the bankruptcy court and matters related to judicial assignment and consolidation because those issues had not yet been considered by the district court and remanded to the district court for further proceedings.
More than 500 appellate opinions are summarized on Volo typically 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 EXAMINATION OF RESCAP'S BANKRUPTCY FILING
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post provides further examination of Ally Financial Inc’s mortgage unit, Residential Capital's (ResCap), bankruptcy filing on Monday.
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 The Constitutional scheme of uniform federal bankruptcy is a bad idea; the states should have more leeway to adopt their own different approaches to financial distress, at least for their own individual citizens and companies with purely intra-state operations.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.
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ABI'S "Evolving Labor Issues in Chapter 11" Webinar
May 23, 2012 Register Today!
