STUDENT-LOAN DEBT ROSE TO $904 BILLION IN FIRST QUARTER
The Federal Reserve Bank of New York reported today that debt from educational loans in the U.S. rose 3.4 percent to $904 billion in the first quarter, Bloomberg News reported. Outstanding student debt increased from $874 billion three months earlier, the New York Fed said in the report. The total includes loans that are backed by the U.S. government as well as private borrowing by students and their parents. In the year ended March 31, outstanding student debt rose by $64 billion from a year earlier, while all other forms of household debt fell a combined $383 billion, according to the report. Ninety-day delinquency rates for student loans increased to 8.69 percent from 6.13 percent in the first quarter of 2003, higher than that of mortgages, auto loans and home equity lines of credit, the New York Fed said. Read more.
Make sure to look in next Tuesday's Bankruptcy Brief for a notice about a special ABI podcast examining student debt issues. The featured guests will be Profs. Daniel Austin of Northeastern University School of Law and G. Marcus Cole of Stanford Law School discussing current issues surrounding educational debt and bankruptcy.
COMMENTARY: DODD-FRANK ACT WOULD NOT HAVE PREVENTED AIG’S DOWNWARD SPIRAL
The Dodd-Frank Wall Street Reform and Consumer Protection Act contains ample measures aimed at preventing a repeat of the AIG debacle, but unfortunately something similar could happen again, according to a Bloomberg News commentary today. The law gives regulators new powers to oversee insurance companies and other nonbank financial institutions. It sheds more light on the credit derivatives that got AIG in trouble, so that regulators can see if any company is taking on too much risk. It also requires that parties to derivatives contracts put up adequate collateral. But a problem with the Dodd-Frank Act, according to the commentary, is that it ignores the crucial element that ultimately brought AIG to the brink and threatened to topple its counterparties: the way demands for collateral can come all at once, particularly when market turmoil turns seemingly safe bets into big risks. Read the full commentary.
SHORT SALES OF U.S. HOMES ON TRACK TO EXCEED FORECLOSURE DEALS
RealtyTrac Inc. reported today that short sales of U.S. homes rose to a three-year high in the first quarter as banks agreed to let more borrowers unload property at a loss, putting the transactions on pace to surpass deals for foreclosures, according to Bloomberg News. Sales of homes in the pre-foreclosure process increased to 109,521, up 25 percent from a year earlier and the most since the first three months of 2009, the Irvine, Calif.-based data service said. The number of bank-owned homes sold during the quarter fell 15 percent from a year earlier to 123,778. Pre-foreclosure homes, or those that had received a default or auction notice, sold for an average $175,461 in the first quarter, with an average discount of 21 percent compared with properties not facing seizure, RealtyTrac said. The average discount was 16 percent a year earlier. Read more.
COMMENTARY: WHY SEC SETTLEMENTS SHOULD HOLD SENIOR EXECUTIVES LIABLE
U.S. District Judge Jed S. Rakoff rejected a proposed settlement last year between Citigroup and the Securities and Exchange Commission, focusing on a lack of admission of guilt by Citigroup even as it agreed to pay $285 million and promised not to violate securities laws in the future, according to a commentary in the New York Times' DealBook blog on Tuesday. The SEC had alleged that Citi had defrauded investors by selling them collateralized debt obligations that included assets the bank handpicked and then bet against. The SEC and Citi appealed the rejection; an appeals court sided with them and stayed Judge Rakoff's order. Whether or not Citi's behavior was illegal, it is clearly behavior that should be discouraged, according to the commentary. A recent hearing of the House Financial Services Committee focused on the role of settlements and, particularly, whether the SEC and other regulators should insist on an admission of wrongdoing in their settlements. Most witnesses testified that settlements should not require such admissions. Defendants would almost always refuse to settle on such terms, in part because an admission of a violation invites an onslaught of private securities suits seeking enormous damages. Regulators would be forced to litigate far more cases, often against adversaries with far greater resources. Requiring settlements to include an admission of guilt is not the best way to proceed; a more effective approach would be to make senior, highly compensated officers of the bank pay some portion of the fine, according to the commentary. A bank's most highly compensated officers — those making more than $1 million a year — should be personally and collectively liable for paying a significant portion (perhaps 50 percent) of SEC fines levied against their bank, a liability that could not be waived by the commission. Officers should be liable for an amount in proportion to the size of their compensation that year, according to the commentary. Click here to read more.
DATE CHANGE: WEBINAR EXAMINING HOW TO HANDLE AN ADMINISTRATIVELY INSOLVENT ESTATE TO BE HELD ON JUNE 6
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 6 titled, "Handling the Administratively Insolvent Estate: What to Do When Your Chapter 11 Goes South." (Note the change of date: This program will now take place on June 6 rather than the previous date of June 5.) CLE credit will be available for the webinar, which will last from 11 a.m. - 12:30 p.m. ET.
• 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.
WEBINAR ON JUNE 26 TO EXAMINE SUPREME COURT'S RULING IN RADLAX CASE
Having already examined the oral argument in a previous ABI media teleconference, panelists will reconvene for an ABI and West LegalEd Center webinar on June 26 to discuss the Supreme Court's ruling on Tuesday in RadLAX Gateway Hotel LLC v. Amalgamated Bank. CLE credit will be available for the webinar, which will be held from 2:00-3:30 p.m. ET.
Experts on the program include:
• David Neff of Perkins Coie LLP (Chicago), the counsel of record for petitioner RadLAX Gateway Hotel LLC and participant in the argument.
• Jason S. Brookner of Andrews Kurth LLP (New York), whose article was cited in the brief for the respondent.
• Prof. Charles Tabb, the Alice Curtis Campbell Professor of Law at the University of Illinois College of Law, who recently published a paper titled "Credit Bidding, Security, and the Obsolescence of Chapter 11."
ABI Resident Scholar David Epstein 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.
- David M. Neff goes behind the scenes arguing on the RadLAX case before the Supreme Court.
- Ericka Fredricks Johnson and Thomas M. Horan discuss the "Outer Limits of Jurisdiction: What Happens after a Bankruptcy Case Has Been Dismissed?"
-PLUS: Excerpts from the Chapter 11 Commission's Public Hearing on Capitol Hill in April, and Aubrey E. Kauffman reviews one of ABI's newest books, Insolvency Law in Canada: A Primer for Practitioners.
LATEST CASE SUMMARY ON VOLO: BROWN COMMERCIAL CONSTRUCTION CO. V. CORBIN PARK, L.P. (IN RE CORBIN PARK, L.P.; 10TH CIR.)
Summarized by Tony Bisconti of Bienert, Miller & Katzman
The Bankruptcy Appellate Panel (BAP) for the Tenth Circuit affirmed the bankruptcy court's order ruling that a lender's mortgage interest in property has priority over mechanics' lien claims. The BAP found that based on the evidence, the bankruptcy court's finding that one of the contractor-appellants had not done lienable work under a contract with the debtor prior to the filing of lender's lien was not clearly erroneous. The BAP also found that, under Kansas mechanic's lien law, a contractor-appellant who had done work on the subject property for a different owner under a different contract previously (which was satisfied) could not use that work to tack work performed under a different contract with the debtor to achieve priority of its mechanic's lien. Accordingly, the lender's lien was in first priority.
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: ACCOUNTING SHOULD GUIDE VOLCKER RULE ON WHAT COUNTS AS A HEDGE
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post makes the case that the Volcker Rule does not consider accounting rules for deciding which trades are proprietary and which ones get the exemption for hedging.
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 few “net winners” in a bankrupt Ponzi scheme should be required to turn over to the trustee any returns in excess of their original investment (with no special defenses or exceptions), to be distributed to the many “net losers” victimized by the scheme.Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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ABI'S "Handling the Administratively Insolvent Estate- What to Do When Your Chapter 11 Goes South" Webinar
Date Change: Webinar to Now Be Held on June 6, 2012 Register Today!