Unemployment Claims Hit New Pandemic Low of 406,000

Weekly initial unemployment claims continued their steady downward trend in the third week of May, hitting a new pandemic low of a seasonally adjusted 406,000, a drop of 38,000, or 8.6 percent, from the previous week, The Hill reported. While the claims remain well above historical averages, the new total was better than the 425,000 claims economists expected, and it points to a steadily recovering labor market. The growing level of vaccinations has brought daily cases of COVID-19, hospitalizations and deaths down dramatically in recent weeks, allowing local and state governments to ease restrictions and giving people renewed confidence to leave their houses and spend money. Thursday’s report had other sunny spots as well, including a continued drop in claims through emergency unemployment programs set up for the pandemic. Pandemic Unemployment Assistance, which offers benefits to gig workers and the self-employed, dropped to 93,546 claims, only the second time it was below 100,000 since the pandemic began. Amid the earliest pandemic restrictions at the same time last year, the program had over 1.3 million claims.​​​

Notice Regarding the UST Program’s New Chapter 11 Periodic Reports Effective June 21

On Dec. 21, 2020, the U.S. Trustee Program (USTP) promulgated a final rule,“Procedures for Completing Uniform Periodic Reports in Non-Small Business Cases Filed Under Chapter 11 of Title 11,” according to a press release. The Final Rule, which is authorized by 28 U.S.C. § 589b, requires that chapter 11 debtors in possession and trustees — other than small business debtors — file monthly operating reports (MORs) and post-confirmation reports (PCRs) using streamlined, data-embedded, uniform forms in every case in every judicial district where the USTP operates. The Final Rule will be in effect for all reports filed on or after June 21, 2021. Prior to the effective date, the USTP encourages bankruptcy professionals to engage with their local USTP offices to learn more about the Final Rule and forms so that they will be ready to file data-embedded MORs and PCRs beginning June 21, 2021. Local USTP offices will make training available for bankruptcy professionals about completing, filing and serving the new uniform MOR and PCR forms. The uniform forms and instructions for their use and filing, which may be periodically updated prior to the effective date, are available on the USTP’s website at https://www.justice.gov/ust/chapter-11-operating-reports.​​​

Analysis: The Small Business Administration’s Gaffes Are Now Guzman’s Job to Fix

Isabella Casillas Guzman, President Biden’s choice to run the Small Business Administration, inherited a portfolio of nearly $1 trillion in emergency aid and an agency plagued by controversy when she took over in March. She has been sprinting from crisis to crisis ever since, the New York Times reported. Some new programs have been mired in delays and glitches, while the SBA’s best-known pandemic relief effort, the Paycheck Protection Program, nearly ran out of money for its loans this month, confusing lenders and stranding millions of borrowers. Angry business owners have deluged the agency with criticism and complaints. Now, it’s Guzman’s job to turn the ship around. “It’s the largest SBA portfolio we’ve ever had, and clearly there’s going to need to be some changes in how we do business,” she said. When the coronavirus crisis struck and the economy went into free fall last year, Congress and the Trump administration pushed the Small Business Administration to the forefront, putting it in charge of huge sums of relief money and complicated new programs. Just seven days after President Donald J. Trump signed the $2.2 trillion CARES Act in late March 2020, the Small Business Administration began accepting applications for the Paycheck Protection Program. Agency employees describe a blurry month of round-the-clock work to manage the program’s launch and early days. The agency’s 68 district offices, which normally field a few hundred inquiries a week, received 12,000 phone calls a day from desperate business owners. Despite lots of speed bumps — including confusing, often-revised loan terms and several technical meltdowns — the program enjoyed some success. Millions of business owners credit it with helping them survive the pandemic and keeping more workers employed. More than 8 million companies got forgivable loans totaling $788 billion — nearly as much money as the government spent on its three rounds of direct payments to taxpayers. But there were pitfalls, some of which will take years to unravel. Fraud is a major concern: The Justice Department has charged hundreds of people with stealing more than $440 million, and scores of federal investigations are active.​​​

COVID-19 Fraud Charges Leveled Across the Country

Nearly a dozen people have been charged by federal prosecutors in the past week with participating in fraud schemes related to the pandemic, as the Justice Department ramps up investigations into misconduct tied to COVID-19 and the trillions of dollars in government relief funds that have been provided since last year, the Wall Street Journal reported. The new cases collectively account for around $143 million in fraudulent bills to government health care programs, the agency said. “These medical professionals, corporate executives and others allegedly took advantage of the COVID-19 pandemic to line their own pockets instead of providing needed health care services during this unprecedented time in our country,” said Deputy Attorney General Lisa Monaco. Several of the alleged schemes appear to have started in the years before the pandemic, escalating as the federal government loosened health care billing restrictions in early 2020 in an effort to speed care to patients around the country and to avoid overwhelming health care systems.​​​

Commentary: Distressed Commercial Real Estate Is Still Sitting in Purgatory

Since the pandemic struck, many experts have predicted that commercial real estate would be hit hard. The surprise to date has been how few bankruptcies have occurred in commercial real estate, according to a Bloomberg BusinessWeek commentary. One reason for that is a slow fuse. Manus Clancy, a senior managing director at Trepp, a real estate data firm, said, “We have tons of stuff that’s in purgatory.” The unsettled question is what share of distressed properties will recover, and of those that don’t recover, how the losses will be distributed. A strengthening economy is both good and bad: It’s good in that it increases demand for leases, but bad in that it puts upward pressure on building owners’ borrowing costs, according to the commentary. The Federal Reserve flagged commercial real estate as a trouble spot in February in its semiannual Monetary Policy Report to Congress, which indicated that prices “appear susceptible to sharp declines” from historically high levels, something that would be more likely to happen if the pace of distressed sales picks up or if the pandemic leads to longer-term declines in demand. One sign of lenders’ confidence is that the ICE Bank of America index of fixed-rate commercial mortgage-backed securities, which began falling in March 2020, has since fully recovered. Another sign of health: On April 15, Real Capital Analytics Inc., which tracks dealmaking, reported that based on preliminary data for the first quarter, more U.S. commercial real estate was worked out of distress than became distressed. It was the first time that’s happened since the second quarter of 2019. “We are not finished with all aspects of distress, however. There is a looming supply of potentially distressed loans that still may have an impact,” Jim Costello, a senior vice president at Real Capital Analytics, wrote. Lots of loans are in forbearance, meaning that lenders are cutting borrowers some slack in hopes that conditions will improve and that they will eventually get their money back. Full recovery won’t always happen, though, especially in sectors that have become outmoded by COVID-induced changes in behaviors.​​​



Don’t miss the June 8 abiLIVE webinar “Key Concepts in Post-COVID Real Estate Restructurings,” during which experts will survey the current commercial real estate market and provide their insights on future restructurings. Register for FREE.

Senate Republicans Unveil $928 Billion Infrastructure Offer

Senate Republicans presented a $928 billion infrastructure plan to the White House, closing the gap with the White House’s latest $1.7 trillion offer as the two sides attempt to break an impasse over the scope of an infrastructure package and how to pay for it, the Wall Street Journal reported. The $928 billion plan is an increase from the GOP’s original five-year, $568 billion proposal, dedicating funding to roads, bridges, rail and transit systems over eight years. GOP negotiators have said they would seek to pay for the offer by redirecting federal COVID-19 aid, an idea that Democrats on Capitol Hill are set to oppose. While President Biden had set a Memorial Day deadline for making progress in the bipartisan talks, the White House said that the negotiations, which have lasted for months, would move into June. Republicans panned the White House’s $1.7 trillion offer last week, itself a decrease from the Biden administration’s original $2.3 trillion plan, arguing that the White House hadn’t narrowed its proposal enough. About $257 billion of the GOP offer is above baseline levels of projected federal spending if current programs continued, according to the Republicans. The White House has said the entirety of its $1.7 trillion plan is above current baseline levels, although Congress will need to set a new spending baseline by the end of this fiscal year.​​​

Central Banks Face New Balancing Act with Their Huge Asset Piles

Central bankers around the world are mulling the future of their massive bond-buying programs in a post-pandemic world, knowing that with big balance sheets come big expectations, Bloomberg News reported. The Group of Seven developed economies piled on about $7 trillion in debt last year as they spent heavily to fight the pandemic and prop up their economies. Central banks ended up owning much of that new debt, according to Bloomberg Economics. Even as asset-purchases continue, with hundreds of billions of dollars spent each month, officials at the U.S. Federal Reserve and the European Central Bank are among those figuring out how — or if — they can reduce asset piles that have been a mainstay of financial markets for more than a decade. The problem is that markets have come to expect central banks to use their buying power to smooth over any hint of trouble. Governments may be tempted to lean on monetary authorities to use it to keep borrowing costs low indefinitely. And activists now also call on monetary officials to use their firepower to fight inequality and even climate change. Those disparate expectations add to the unease fueled by economists who for years have warned about the long-term effects of quantitative easing. “The Fed balance sheet is going to be gigantic for a long time,” says Alan Blinder, a former Fed vice chairman who’s now a Princeton professor. The size of the Fed balance sheet in coming years will largely be determined by Federal Open Market Committee decisions regarding asset purchases and reinvestment policies, the New York Federal Reserve Bank noted in a late May report. Yet the report projects that the balance sheet could rise by 2023 to $9 trillion, equivalent to 39% of gross domestic product. Under a range of scenarios, Fed assets could remain at that level through 2030 or drop as low as $6.6 trillion.​​​

Applications for ABI’s 2021 40 Under 40 Class Due June 30
ABI’s “40 Under 40” program recognizes outstanding bankruptcy, insolvency and restructuring professionals from around the world who are 40 years old or younger as of Dec. 1, 2021. The application deadline for members of the 2021 Class is June 30. Honorees will be announced in October and recognized at a special awards ceremony during the 2021 Winter Leadership Conference in early December. In addition:

• Honorees will be invited to attend an exclusive reception with ABI leaders and judicial faculty at the Winter Leadership Conference, as well as future special events;
• Honorees will be profiled on ABI’s website and in the ABI Journal; and
• Each class of honorees will receive other special recognition when attending ABI events. Know a colleague who should be recognized, or would you like to nominate yourself? Click here.

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