NEW BILL TO PROPOSE SINGLE POINT OF ENTRY STRATEGY FOR SIFIS
Legislation is expected to be introduced soon in the U.S. House of Representatives to deal with resolving systemically important financial institutions (SIFIs). The bill would permit an expedited transfer of all the debtor's assets to a new bridge company on a short-term basis. The bill, which would create a new subchapter V of chapter 11, is an alternative to the chapter 14 idea (S. 1861) also under review. A House Judiciary Committee hearing is expected to be held on July 15.
ABI will be holding a 75-minute webinar on July 15 to provide a basic overview of the current chapter 14 proposal providing for the reorganization or liquidation of large financial institutions. Participate in the webinar by registering here.
FED DEFENDS ITS APPROACH TO PUNISHING BANKS FOR IMPROPER FORECLOSURES
The Federal Reserve defended its approach to punishing banks for misconduct in home foreclosures and said in a report issued yesterday that about 83 percent of borrowers have cashed checks reimbursing them for financial injury, the Wall Street Journal reported today. The Fed said the settlement program, under which 13 banks agreed to compensate homeowners whose properties may have been improperly sent into foreclosure, had transferred about $3.1 billion to borrowers as of April. That agreement "provided for payments to borrowers faster" and resulted in banks paying more than they would have under an independent review that was scrapped at the end of 2012, the Fed said in the report. Lawmakers and public advocacy groups have questioned regulators' decision to halt an independent review in favor of a settlement, saying that it may have allowed some banks with high error rates in their foreclosure reviews to escape without providing homeowners proper compensation. Bank regulators ordered an independent review of banks' foreclosure files in April 2011 to determine how many borrowers should be compensated for foreclosure mistakes, but halted the review last year amid concerns it was taking too long and not uncovering enough mistakes. Instead, banks agreed to pay $9.3 billion, including $5.7 billion in noncash assistance and $3.6 billion in cash payments. Read more. (Subscription required.)
BANKS' CUTS OFFSET BY RISING PAY, REGULATORY COSTS
The biggest Wall Street banks have slashed tens of thousands of jobs and pruned all manner of expenses since the financial crisis, but expanding pay packages and the rising cost of complying with government regulations have neutralized those efforts, the Wall Street Journal reported today. Expense control has been a top priority for the banking industry since the financial crisis. However, noninterest expenses -- which include salaries, investments in technology and compliance costs -- are climbing. The six largest banks have already cut about 7.5 percent of their staff, or 88,110 positions, since 2011, according to regulatory filings. But compensation hasn't gone the same way, as salaries and benefits for the six largest banks rose 5.5 percent from 2009 to 2012, to $149.6 billion, before easing slightly last year to $149.4 billion. As a percentage of revenues, the firms' salaries and benefits tallied about 35 percent last year, up from 30 percent in 2009 and 29 percent in 2007. Across all U.S. commercial banks, the pay bump was even larger -- 15 percent to $176.1 billion between 2009 and 2013, said research firm SNL Financial. Regulatory costs are difficult to track, in part because banks don't break them out in financial statements and because they often set aside reserves later used for settlements or other penalties. But both legal costs and compensation have been significant drivers of expenses. J.P. Morgan agreed to more than $20 billion in legal payouts last year, compared with $31.39 billion in compensation and benefits costs. Read more. (Subscription required.)
MARKET EXECUTIVES CALL FOR OVERHAUL OF STOCK TRADING RULES
Market executives called for an overhaul of stock market trading rules in a Senate hearing today, saying that the shift to high-frequency and off-exchange trading has created too much complexity that favors the most sophisticated investors, the Wall Street Journal reported today. The hearing, the second held in a month by the Senate Banking Committee on computer-driven trading, comes amid heightened scrutiny of off-exchange venues such as dark pools and high-frequency trading, which account for about half of all trading in U.S. stocks. Jeffrey Sprecher, chief executive of IntercontinentalExchange Inc., which owns the New York Stock Exchange, said at the hearing that regulations have led to an overly fragmented and complex market in which too much trading takes place away from stock exchanges. Such complexity "hurts market confidence and I believe deters some investors and entrepreneurs from accessing the public markets," Sprecher said. Kevin Cronin, global head of trading at asset manager Invesco Ltd., with $790 billion under management, said that regulations have encouraged market fragmentation, which can favor sophisticated traders. "Markets have become too complex and fragmented not because they need to be but rather because we have allowed them to become so," he said, adding that complex rules governing dark pools "have facilitated an unlevel playing field that unfairly favors sophisticated participants over ordinary investors." Read more. (Subscription required.)
INVESTORS ARE BUYING TROUBLED GOLF COURSES AND GIVING THEM MAKEOVERS
Investors who have the cash are seeing the current market for golf courses as an opportunity to scoop up distressed courses and revamp their business models, the New York Times DealBook blog reported today. "It's certainly a buyer's market," said Larry Hirsh, president of Golf Property Analysts. "There are a lot of distressed courses, financing is difficult and most buyers don't have the ability to write a check." Valuations for golf courses -- and golf course debt -- have been slow to recover even as most asset classes have recovered from the financial crisis. Last year was the eighth consecutive year of net club closings, according to the National Golf Foundation, with 157 closings and 14 openings. Most existing courses, meanwhile, are still worth far less than they were before the recession. Several factors have been dragging down the industry, experts say, including changing family dynamics, overbuilding in the late 1990s and an absence of lenders. In 2007, the three big players in this area -- GE Capital, Textron and Capmark -- had more than $2 billion in golf loans outstanding, which were already in decline, Nanula said. In 2012, that number was $500 million. Today, what lending is done is extremely fragmented, with interest rates starting about 7 percent and loan-to-value ratios around 50 percent, compared with 90 percent before the recession. Read more.
NEW CASE SUMMARY ON VOLO: OLICK V. CITY OF EASTON (IN RE OLICK; 3D CIR.)
Summarized by Elie Worenklein of Lowenstein Sandler LLP
The Third Circuit Court of Appeals affirmed the lower court's decision that a global settlement regarding the collection of real estate taxes that was reached amongst several parties also bound the debtor's family trust, despite the debtor's assertion that the trust was not intended to be a party to the global settlement and should not be bound by the release provision. Upon review of the record, the Third Circuit found that because the trust was a party to the state court litigation, the inclusion of the trust in the settlement effectuates the parties' intent to settle all disputes.
There are more than 1,300 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: FAIR-LENDING RULING MEANS PRICIER LOANS FOR CONSUMERS
A recent blog post found that a disparate-impact ruling against a small Texas bank was supposed to lower the cost of small-dollar loans for Hispanic borrowers, but it has instead had the opposite effect.
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.
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