TRANSCRIPT AND ANALYSIS AVAILABLE FROM YESTERDAY'S SUPREME COURT ORAL ARGUMENT IN CLARK V. RAMEKER
The U.S. Supreme Court yesterday heard oral arguments in the case of Clark v. Rameker on the issue of whether an inherited IRA is exempt. The court appeared to be divided over reconciling the plain language of the Code with what could be considered a windfall for the debtor. To access a transcript of yesterday's arguments, please click here.
To access an expert analysis of the oral arguments by ABI Resident Scholar Charles Tabb, please click here.
COMMENTARY: BURDEN OF STUDENT LOANS STIFLES THE HOUSING MARKET
Despite shrinking unemployment rates and recovering housing prices, fewer would-be borrowers are applying for loans in part due to the growing burden of student loan debt, according to a commentary yesterday in American Banker. According to the Consumer Financial Protection Bureau, student loan debt has surpassed the $1 trillion mark. Seven out of 10 college graduates in 2012 have an average of $29,400 in student loan debt, compared to $26,600 for 2011 graduates, according to the Project on Student Debt at the Institute for College Access and Success. The high student debt burden is stifling the overall willingness to enter into a mortgage from both the lender's and the consumer's perspective, according to the commentary. From the lender's side, the Qualified Mortgage (QM) rule has codified tightened standards for lenders wanting to close QM-eligible loans by requiring a debt-to-income (DTI) ratio of less than 43 percent. With more young adults making large student loan payments instead of saving up for a down payment, combined with car payments and possibly credit card debt, the 43 percent DTI becomes a very difficult barrier for lenders working within the QM standards. Read more. (Subscription required.)
For additional perspectives on the student loan debt crisis, be sure to attend ABI's Student Loan Debt Crisis Symposium on May 30 at the Georgetown University Law Center. To register or for more information, please click here.
SHADOW BANKING DEALS PROMPT SEC PLAN TO CAP LEVERAGE FOR BROKERS
U.S. regulators concerned that banks and brokerage firms remain too dependent on risky types of short-term funding are weighing new rules designed to reduce reliance on parts of what is often called the shadow banking system, Bloomberg News reported today. Now the SEC is considering new funding rules for brokers, as well as a limit on leverage, similar to those used by the Federal Reserve and other regulators for banks, according to a regulatory document and SEC officials familiar with the matter. The initiatives are aimed at financing tools such as repurchase agreements, or repos, that were relied on by Bear Stearns Cos. and Lehman Brothers Holdings Inc. until their failures accelerated the 2008 financial crisis. Lehman's bankruptcy provoked criticism of the Securities and Exchange Commission for lax oversight of investment banks. Federal Reserve officials have warned for years that the $4.5 trillion web of repo deals remains prone to unraveling during a panic, potentially leading to fire sales of assets that could spread losses across the financial system. Read more.
FED STUDY: U.S. BANKS ENJOY "TOO-BIG-TO-FAIL" ADVANTAGE
A study released today by Federal Reserve economists found that large U.S. banks enjoy a "too-big-to-fail" advantage in financial markets, Reuters reported today. The series of research papers, published today by the U.S. central bank's influential New York branch, suggests that the biggest and most complex banks benefited even after the financial crisis from lower funding and operating costs compared to smaller firms. The researchers used data through 2009. While the study did not pinpoint the reason big banks borrow more cheaply, Wall Street critics say that it is because investors believe the U.S. government would again rescue them in a panic, despite new rules adopted in the wake of the 2007-2009 crisis and aimed at avoiding future bailouts. Read more.
Click here to read the New York Fed's series of research papers.
SEC PROBING DEALINGS BY BANKS AND COMPANIES IN LOAN SECURITIES
The Securities and Exchange Commission is investigating whether a Wall Street boom in complicated bond deals is creating new avenues for fraud, the Wall Street Journal reported today. SEC investigators are looking at whether banks and companies are using the bond deals to hide certain risks illegally. Separately, the government has expanded an inquiry into how Wall Street banks sell the deals. The securities being examined aren't traded on any exchanges or open platforms, and their prices are negotiated privately between buyers and sellers. In previous investigations, the SEC primarily explored how the banks put the deals together. The new probes look at how these complex securities are being used and traded. Read more. (Subscription required.)
REGULATORS TARGET HOME APPRAISALS
U.S. bank regulators have proposed rules aimed at improving the accuracy of home appraisals by boosting the qualifications of those assessing property values, the Wall Street Journal reported today. The move is part of a post-financial crisis attempt to overhaul the appraisal industry and ensure that those assessing a home's value have no hidden financial ties to lenders that could influence assessments. Appraisers have been criticized for too-high estimates of home values during the housing boom, as well as overly conservative estimates during the housing bust. The 2010 Dodd-Frank law required bank regulators to establish minimum standards for state-led regulation of "appraisal management companies" hired by lenders to select appraisers. The proposal by the Office of the Comptroller of the Currency, Federal Reserve and other regulators mandates that appraisal-management companies hired by federally regulated banks use only state-licensed appraisers with "the requisite education, expertise, and experience necessary" to complete appraisals competently. Read more. (Subscription required.)
PENSION PLANS BRACE FOR A ONE-TWO PUNCH
Not only do employers face a 52 percent increase by 2016 in the regulatory cost of administering their pension plans, they also face a $150 billion surge in liabilities from longer-living retirees, the Wall Street Journal reported today. The looming costs and growing liabilities are forcing many companies to consider ways to cut pension expenses, accelerating a decades-long shift away from defined-benefit pensions plans --which guarantee a set payout for life -- to plans that shift the burden of retirement savings on to workers. Caitlin Long, head of the corporate strategies group at Morgan Stanley, estimated that the higher fees could add $20 billion in costs to companies' $2 trillion in pension obligations over the life of the pension plans. Increasingly, companies are closing their pension plans to new hires, offering lump-sum payments to shrink their outstanding obligations or handing over management of their pension assets to insurers. More than 60 million American workers and retirees are covered by defined-benefit plans, according to the American Institute for Economic Research, although their numbers have been shrinking rapidly in recent years. In 1979, 38 percent of U.S. private-sector workers were covered by such plans; by 2011, the most recent data available, the number had fallen to 14 percent, says the Employment Benefit Research Institute. By contrast, the percentage enrolled in defined-contribution plans, such as 401ks, more than doubled to 42 percent. Read more. (Subscription required.)
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ABI MEMBERS WELCOME TO ATTEND "THE LEGACY OF MR. PONZI: THE MADOFF AND STANFORD CASES" PROGRAM THIS WEEK PRESENTED BY THE AMERICAN COLLEGE OF BANKRUPTCY
The American College of Bankruptcy First Circuit Fellows will present "The Legacy of Mr. Ponzi: the Madoff and Stanford Cases" program from 1-4 p.m. ET on Friday, March 28, at the Boston College Law School in Newton, Mass. The program will include a panel discussion featuring the Madoff trustee, a co-Liquidator of Stanford International Bank, and reporters from the New York Times and Associated Press who covered the Madoff and Stanford cases. There is no charge to attend the program. For more information or to register, please click here.
NEXT WEEK: LEADING SCHOLARS TO PRESENT RESEARCH AND PROPOSALS FOR POTENTIAL CHAPTER 11 REFORMS AT THE ABI ILLINOIS SYMPOSIUM ON CHAPTER 11 REFORM
Advancing the dialogue on important reform issues in conjunction with ABI's Commission to Study the Reform of Chapter 11, ABI and the University of Illinois College of Law have assembled leading scholars to present academic papers on issues related to the Commission's work. Scholars will present papers and debate the consequences of the increased importance of secured credit to modern restructuring law to members of the Commission and fellow scholars at the ABI Illinois Symposium on Chapter 11 Reform at the Kirkland & Ellis Conference Center in Chicago on April 3-5. The papers presented at the Symposium will be published in a forthcoming issue of the University of Illinois Law Review.
For a schedule containing a list of all presenters and commentators at the Symposium and to register, please click here.
NEW CASE SUMMARY ON VOLO: IN RE BISHOP (3D CIR.)
Summarized by Mary Augustine of Bifferato Gentilotti LLC
The Third Circuit ruled that a state court judgment may not be appealed to bankruptcy court because the bankruptcy court lacks jurisdiction to review the merits of a state court proceeding.
There are more than 1,200 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: PAPER EXAMINES STIGMA RELATED TO FILING FOR BANKRUPTCY
A recent blog post suggests ways for struggling companies to reduce their preference exposure in compliance with § 547 of the Code.
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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