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New ABI Podcast: Bankruptcy Professors Analyze the Supreme Court's Decision in U.S. Bank N.A. v. Village at Lakeridge

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March 8, 2018

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ABI Bankruptcy Brief

New ABI Podcast: Bankruptcy Professors Analyze the Supreme Court's Decision in U.S. Bank N.A. v. Village at Lakeridge

The Supreme Court on March 5 ruled in U.S. Bank National Association v. Village at Lakeridge (15-1509) that the Ninth Circuit was right to review the Bankruptcy Court’s determination for clear error (rather than de novo). ABI Editor-at-Large Bill Rochelle talks with former ABI Resident Scholars Prof. Charles Tabb of the  University of Illinois College of Law and Prof. Drew Dawson of the University of Miami School of Law about their perspectives on the impact of the Supreme Court's ruling. Click here to listen.

Watch: Chapter 11 Reform Commission Co-Chair Testifies at Senate Hearing, Proposes Legislation for Viable Reorganization of Small and Medium-Sized Enterprises

Not able to catch yesterday's testimony by Robert J. Keach of Bernstein, Shur, Sawyer & Nelson, P. A. (Portland, Maine) and co-chair of ABI's Commission to Study the Reform of Chapter 11 before the Senate Judiciary Subcommittee on Oversight, Agency Action, Federal Rights and Federal Courts? During the hearing titled "Small Business Bankruptcy: Assessing the System," Keach proposed legislation based on the Commission's recommendations to provide a viable option for small and medium-sized enterprises (SMEs) looking to reorganize under the Bankruptcy Code. Watch the proceeding and read Keach's prepared testimony by clicking here.

Analysis: Under Trump Administration, Payday Lenders and Consumer Protection Agency Exhibiting Cozier Relationship

The former chief executive of a payday lending company that had been under investigation by the Consumer Financial Protection Bureau has asked to be considered for the top job at the watchdog agency. Such a request would have been extraordinary in the years when the agency was run by an Obama appointee and often targeted payday lenders. Along with recent actions taken by the CFPB, it suggests a cozier relationship between industry and regulator since the Trump administration took over the regulator's leadership last November, according to an analysis in the LA Times. Under Mick Mulvaney, Trump's budget director and acting director of the CFPB, the bureau has taken a decidedly friendlier approach to the financial industry, including cutting down on enforcement and dropping investigations or lawsuits against payday lenders and other companies. It has also proposed to revise or rescind many rules put into place by Richard Cordray, the first permanent director of the agency, including some that would have put additional restrictions on payday lenders. The CFPB has made other moves that have benefited payday lenders since Mulvaney, a harsh critic of the agency, has come into office. Late last year, the bureau put into place regulations that would have made it more difficult for payday lenders to make repeat loans to customers. The practice is particularly profitable, but largely criticized by consumer groups as a tactic that buries payday lending customers — mostly the poor — in debts for months or years.
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Commentary: Big Bank Custody Fight Looms

The Senate is debating a bill that would relax Dodd-Frank’s chokehold on small banks, but a couple of provisions that ease capital and liquidity standards for the giants will make the financial system more vulnerable in a panic, according to a commentary in the Wall Street Journal. Tucked into Banking Chairman Mike Crapo’s legislation is a directive to federal agencies to amend the “supplementary leverage ratio” for custodial banks by excluding deposits at a central bank. Custodial banks secure assets for clients such as large institutional investors and fund managers. At first glance, this provision would appear to apply only to Boston-based State Street, Chicago’s Northern Trust and Bank of New York Mellon. But Citigroup and J.P. Morgan also offer custodial services and are trying to join the party. As we saw during the crisis, financial regulators are poor judges of risk, according to the commentary. Banks had piled into investments that regulators deemed low risk, such as mortgage-backed securities and sovereign debt, that let them meet capital standards even while remaining highly leveraged. So the Federal Reserve and other regulators in 2014 adopted a simple, non-risk weighted measure of equity to total assets called the supplemental leverage ratio: 5 percent for global giants. The big guys gripe that the Fed’s capital standards are excessive, according to the commentary. But if banks want to lend more, they can build equity. Big banks were undercapitalized prior to the panic and experienced losses on average equal to 6 percent of assets. Most have built up about that much now. The economy could use more risk-taking, according to the commentary, and some small businesses have had trouble getting credit under the new Dodd-Frank regime. But the Senate bill would remedy this problem by reducing administrative burdens on regional and community banks where regulatory compliance has gratuitously diverted resources from customer services.
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*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI. 


Banks Want a Bigger Piece of Student Loans

Private lenders are pushing to break up the government’s near-monopoly in the $100 billion-a-year student-loan market, the Wall Street Journal reported. As the banking industry’s main lobbying group, the Consumer Bankers Association, is pressing for the government to institute caps on how much individual graduate students and parents of undergraduates can borrow from the government to cover tuition, it could lead more families to turn to private lenders to cover portions of their bills, meaning lower interest rates for households with good credit histories and constrained funding for households with blemished records. A group of investors also is lobbying for legislation to provide a clearer legal framework for “income-share agreements,” under which private investors provide money upfront to cover tuition in exchange for a portion of a student’s income after school. Firmer rules would help spur more agreements, the group said. At stake is potentially billions of dollars in new business for private lenders, a group dominated by SLM Corp. (better known as Sallie Mae), Wells Fargo & Co. and Discover Financial Services. The U.S. Education Department makes about 90 percent of student loans annually, a market that totaled $107 billion in new originations in the most recent academic year, according to the College Board. Private lenders pushed for legislative changes in previous years to no avail, but now they are receiving a more welcome reception from congressional Republicans and the Trump administration. House Republicans, looking to revamp higher-education policies for the first time in a decade, have included the industry’s proposals in a wide-ranging bill unveiled in November, which they hope to pass this year.
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U.S. Consumer Borrowing Growth Slows to $13.9 Billion in January

American consumers increased their borrowing at a slower pace in January, as the category that covers credit cards recorded the smallest increase in three years, the Associated Press reported. January's gain of $13.9 billion followed a $19.2 billion increase in December and a November surge of $30.9 billion, the Federal Reserve reported Wednesday. In January, borrowing in the credit card category edged up $701 million. That followed an increase of $6.1 billion in December and was the smallest monthly advance since a gain of $605 million in February 2015. Borrowing in the category that covers auto loans and student loans rose by $13.2 billion in January, basically matching the $13.1 billion increase in December. The overall economy, as measured by the gross domestic product, grew at a moderate pace of 2.5 percent in the October-December quarter. For 2017, the economy grew by a moderate 2.3 percent. But many analysts believe growth this year will be stronger, stemming from the $1.5 trillion tax cut passed by Congress in December and $300 billion in increased government spending over the next two years.
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Don’t Miss the ASM Panel on Restructuring a Firm After Sexual Harassment or Discrimination Claims!

What topics will be discussed at the "Restructuring a Firm After Discrimination or Sexual Harassment Claims" panel at the Annual Spring Meeting? Click below to watch Hon. Judith K. Fitzgerald (ret.) of Tucker Arensberg provide a preview of the panel discussion:

For more information and to register for the Annual Spring Meeting, please click here. The deadline for the special hotel rate for the conference expires next Friday, 3/16- register and secure your room soon!

INSOL International Buenos Aires One-Day Seminar on March 22 Open to ABI Members

ABI members are welcome to attend the INSOL International Buenos Aires One-Day Seminar to be held on March 22 at the Marval O'Farrell Mairal in Buenos Aires. Expert panels will be discussing the latest developments in Argentina, Brazil and the wider Latin American region. The seminar will benefit from simultaneous translation in English and Spanish. Topics include:

- Coordinating cross-border insolvencies: Should Argentina adopt the UNCITRAL Model Law?
- Significant potential changes in the Argentine and Brazilian insolvency laws
- Facilitating reorganization through financing companies in insolvency proceedings
- Lessons learned in cross-border insolvencies
- What claims should be given priority in insolvency proceedings?

Click here for more information and to register.

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New on ABI's Bankruptcy Blog Exchange: Regulators Need to Step Up Their Game to Stop Tech-Based Discrimination

Financial agencies must prepare themselves to evaluate the practical effects of automated decision-making in lending and other programs to better detect fair-lending violations, according to a new blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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