The U.S. Supreme Court agreed to hear its first bankruptcy case of the October 2015 term and will decide whether or not "actual fraud" under the Bankruptcy Code requires a false representation, BloombergBNA's Bankruptcy Law Reporter reported on Friday. The appeal comes out of the Fifth Circuit, where the circuit court held that barring the discharge of a debt for "actual fraud" requires a false representation by the debtor. This ruling was at odds with a Seventh Circuit case from 2000 that held that fraudulent conduct can be enough to constitute "actual fraud" even if no false representation is made. Shortly after the Fifth Circuit's decision, the First Circuit also weighed in on this issue and adopted the Seventh Circuit's approach. The case is Husky International Electronics Inc. v. Daniel Lee Ritz, Jr. (14-20526)
Puerto Rico Is Running Out of Options
After years of borrowing to prop up the island's stagnant economy, Puerto Rico's government faces $720 million in debt payments in the next two months, and it may run out of cash as early as December, Bloomberg Businessweek reported today. Puerto Rico's economy has shrunk about 15 percent since 2006, when Congress ended tax breaks for manufacturers there. The unemployment rate stands at 11.4 percent, more than twice the national average. Forty-five percent of families live below the poverty line. Last year the island lost an average of 1,200 people each week to the mainland, the most since the U.S. Census Bureau began tracking departures a decade ago. While legislative proposals have been introduced in Congress, no action has been taken. Read more.
Commentary: The Turmoil and Decline of the Banking Industry
With the aftershocks of 2008 still hitting the global economy -- and central banks in the U.S. and U.K. shying away from normalizing ultra-accommodative monetary policies -- banks, formerly seen as the powerhouses of growth, are under pressure on every side, the Financial Times reported yesterday. Regulation is piling up, competitors are stealing business and many lenders are shrinking fast. Hit by challenging markets and onerous post-crisis regulation, bank profitability has been squeezed hard. Today, even JPMorgan Chase, the most profitable Wall Street bank on recent performance, generates a return on equity (ROE) of just 12 percent. That compares with the pre-crisis industry average of about 25-30 percent. Goldman Sachs, another of the banks that has prospered relative to rivals, suffered a near 40 percent slump in third quarter net income. Goldman's ROE is now just 7 percent.
Commentary: Why the Fed Should Raise Rates
Rates have been too low for too long, and it is time for them to rise, according to a Manhattan Institute commentary. The labor force participation rate, those who are employed or looking for work, is stuck at 62.4 percent, the same level as in 1977. As the economy has gradually strengthened, people who dropped out of the labor force show no signs of coming back. In contrast to the U.K., where labor force participation rates for prime-age British men and women have been rising, rates for similar Americans have been declining. Despite these data, the Fed should not delay beginning its long-overdue rate increases, according to the commentary. An increase of 25 basis points in December will still leave the Fed in a position of substantial monetary accommodation.
Bill Rochelle, Former Columnist for Bloomberg News, Joins ABI Staff as Editor at Large
The American Bankruptcy Institute is pleased to announce that Bill Rochelle, formerly a columnist for Bloomberg News, has joined the ABI staff as Editor at Large. An insightful writer known for his authoritative take on legal developments affecting bankruptcy practice, Rochelle published for Bloomberg every day from 2007 until this fall. Prior to his second career in journalism, he practiced bankruptcy law for 35 years, including 17 years as a partner in the New York office of Fulbright & Jaworski LLP. He earned his undergraduate and law degrees from Columbia University, where he won Harlan Fiske Stone Scholar awards in the law school. Rochelle will be resident in New York and occasionally at ABI's offices on the Potomac River in Alexandria, Va.
U. Penn's Wharton School of Business Wins 12th Annual Corporate Restructuring Competition
A team of students from the University of Pennsylvania's Wharton School of Business earned top honors at the ABI Corporate Restructuring Competition, besting nine other teams from seven schools at the 12th annual event, hosted by The Wharton School in Philadelphia on Nov. 6. It was the school's fifth time on the Bettina M. Whyte Trophy, which is presented each year to the winning team. Students were given just a week to solve a hypothetical complex case and present their proposed solutions to judges representing key industry stakeholders.
Upcoming abiLIVE Webinars Provide Insights on Pending Changes in Bankruptcy Forms, Tax Credit Projects in Distress
Two abiLIVE webinars, presented by two of ABI's membership committees, will provide insight on key bankruptcy developments for practitioners in November. ABI's Consumer Bankruptcy Committee will host the first webinar on Nov. 16, presenting experts who will discuss pending changes to bankruptcy forms. The second webinar on Nov. 19, hosted by ABI's Bankruptcy Taxation and Real Estate Committees, will feature experts discussing tax credit projects in distress. Attendees for both webinars will have the ability to purchase CLE credit.
New on ABI's Bankruptcy Blog Exchange: Delaware Bankruptcy Court Addresses When, if Ever, Unsecured Creditors Are Entitled to Post-Petition Interest
A recent blog post looked at Judge Christopher Sontchi's decision to weigh in on post-petition interest issues as they have arisen in the Energy Futures Holdings chapter 11 cases -- specifically, when unsecured creditors are entitled to receive post-petition interest under a chapter 11 plan.
To read more on this blog and all others on the ABI Blog Exchange, please click here.