U.S. ECONOMY GREW AT FASTEST RATE IN MORE THAN A DECADE
The U.S. economy grew at its fastest rate in more than a decade between the months of July through September, according to government data released Tuesday morning, the Washington Post reported today. The Commerce Department said gross domestic product growth hit an annualized rate of 5 percent in the third quarter, revised upward from the previous estimate of 3.9 percent. Not since 2003 has the economy expanded so quickly. At an annualized rate, consumer spending was up in the third quarter by 3.2 percent. Though incomes have stagnated for years among the middle and lower classes, there were nascent signs of wage growth last month, and households have deleveraged bad debt that held them back in the wake of the financial crisis. Consumer sentiment is also at a post-recession high, and the nation has seen its best year of hiring in 15 years. Read more.
WELLS FARGO ORDERED TO PAY $54.8 MILLION IN MORTGAGE CLASS-ACTION LAWSUIT
Wells Fargo & Co. has been ordered to pay $54.8 million in damages tied to a class-action lawsuit alleging that fees charged by two mortgage servicers were excessive, the Wall Street Journal reported today. On Friday, a Manhattan federal jury ruled against the San Francisco lender in a suit alleging that late fees charged by now-defunct mortgage firms The Money Store and HomEq were improper and unlawful. HomEq was owned by Wachovia, which Wells Fargo acquired in 2008. Wachovia subsequently sold HomEq to Barclays PLC in 2006, and Barclays in turn sold the unit to Ocwen Financial Corp. The Money Store was owned by First Union Corp., which merged with Wachovia. First Union closed The Money Store in 2000. The plaintiffs claimed that The Money Store and HomEq improperly charged late fees after the lenders had accelerated homeowners' mortgage loans, so no further monthly payments were actually due. They alleged that the late fees were prohibited under the terms of the loan agreement. Read more. (Subscription required.)
COMMENTARY: THE FDIC'S BANK HOLDING COMPANY HEIST
The FDIC's proposed new bank-resolution process would seize the property of a bank holding company's shareholders and creditors to bail out the creditors of its failing subsidiary bank, which is not authorized under the Dodd-Frank Act, according to a commentary in today's Wall Street Journal. This idea has gained momentum among bank regulators since it was introduced late last year and is likely to be adopted by the FDIC in the near future. Never mind that the plan is at odds with the way corporate law applicable to banks has worked in the U.S., according to the commentary, or that the plan could impose losses on a bank holding company far in excess of its equity investment in a failing bank. Assume that a bank holding company has $600,000 in equity and $1 million in assets, which includes an investment of $500,000 in a subsidiary bank. If the bank suffers a $1 million loss, it will wipe out the holding company's investment in the subsidiary bank. Although the loss would cause the subsidiary bank to fail, under limited shareholder liability the bank holding company would still have $100,000 in equity and $500,000 in assets. Under the FDIC plan, however, the agency will seize all the remaining bank holding company assets and use them to recapitalize the failed bank. In effect, in order to protect the creditors of the bank, the shareholders of the bank holding company are wiped out. Read the full commentary. (Subscription required.)
ANALYSIS: NEW LAW LETS SOME PENSION PLANS CUT PROMISED BENEFITS
Tucked into the recently passed federal spending bill were provisions that will allow certain struggling multi-employer pension plans to reduce benefits already being received by retirees, the Washington Post reported on Sunday. The move was the result of an alarm from the Pension Benefit Guaranty Corp. that multi-employer plans covering more than 1 million participants are substantially underfunded and, without legislative changes, will probably fail. The deficit for PBGC's multi-employer insurance program has jumped to $42.4 billion, up from $8.3 billion last year. Multi-employer plans provide benefits to more than 10 million workers and retirees in industries such as building and construction, retail, manufacturing, trucking and transportation. Those troubled multi-employer plans that estimate they won't have enough money to pay 100 percent of benefits within 15 or 20 years can cut benefits, according to the Pension Rights Center. There are certain limits to how much of the plan trustees can cut. Trustees have to notify all plan members, the center points out, and those plans with 10,000 or more participants must appoint a retiree to represent the interest of pensioners. Read more.
BANKS HAUL IN $430 MILLION IN FEES FROM TREASURY'S STOCK SALES
With Treasury completing the sale of its remaining shares in Ally Financial Inc. with a $1.3 billion offering last week, it's possible now to tally up the fees earned by banks for underwriting those offerings, the Wall Street Journal reported today. The stock sale by Ally — an auto-finance company once known as GMAC — marked the last major piece of a $426 billion rescue package that saved a swath of U.S. companies but never won broad public support. Since 2009, banks have gotten paid some $430 million in underwriting fees, net of expenses, to investment banks for work on offerings of stock in which the U.S. government was a seller, according to Dealogic. And it was a non-U.S. institution — Germany's Deutsche Bank AG — that earned the biggest share of those fees, at $89 million, Dealogic figures show. That was in large part because it was Deutsche that ran a series of Dutch auctions — a process to find the highest bidders — for Treasury to sell warrants for U.S. banks that received smaller bailouts. Read more.
ABI MEMBERS INVITED TO TRY BLOOMBERG BNA'S RECENTLY LAUNCHED BLOOMBERG LAW BANKRUPTCY TREATISE
Bloomberg BNA welcomes ABI members to try the Bloomberg Law: Bankruptcy Treatise, an online-only resource recently launched to help attorneys find information and conduct legal research in the fast-moving, procedurally complex area of bankruptcy. The Bankruptcy Treatise integrates the news content of Bloomberg BNA's bankruptcy news coverage with over 600 chapters and more than 13,000 pages of content and expert analysis from over 60 renowned judges, law professors and practitioners. The Bloomberg BNA editorial team, with input from outside contributors, will update the material as bankruptcy rules change and courts apply and react to them, ensuring that all aspects of federal bankruptcy law and local rules are current. Practitioners will be pleased to discover that Bloomberg Law: Bankruptcy Treatise includes expert commentary and analysis for all 92 different local rule sets throughout the country, providing unique insights across jurisdictions. For more information on Bloomberg Law: Bankruptcy Treatise and to request a free trial of Bloomberg Law, please click here.
USTP NOTICE OF PROPOSED RULEMAKING ON CHAPTER 11 MONTHLY OPERATING REPORTS
Section 602 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) authorizes the U.S. Trustee Program (USTP) to issue rules requiring uniform periodic reports by debtors in possession or trustees in non-small business cases under chapter 11. The USTP just published in the Federal Register a notice of proposed rulemaking seeking public comment on the proposed rule and periodic report forms. The proposed rule is published in the Federal Register at 79 FR 66659 (Nov. 10, 2014) (to be codified at 28 C.F.R. pt. 58). The proposed rule, along with the proposed periodic report forms and instructions, may be viewed on the USTP's website. The proposed rule may also be accessed at www.regulations.gov. All public comments must be submitted on or before January 9, 2015, via www.regulations.gov. Please note that the proposed rule and forms only apply in chapter 11 cases filed by debtors that are not small businesses. Small business debtors are already required to use Official Form 25C, "Small Business Monthly Operating Report."
NEW CASE SUMMARY ON VOLO: SULLIVAN V. HARNISCH (IN RE SULLIVAN; 9TH CIR.)
Summarized by Bryan Robinson
In an unpublished opinion, the Ninth circuit bankruptcy appellate panel reversed the ruling and order of the bankruptcy court to dismiss the appellants' chapter 11 bankruptcy case because the appellant filed the bankruptcy petition in bad faith. The appellate panel found that the bankruptcy court abused its discretion, when the court failed to consider the best interests of all creditors and the estate, not just the interest of the creditor who filed the motion to dismiss the petition, asserting it was filed in bad faith. The appellate panel also found that the bankruptcy courts finding that the bankruptcy case was filed in bad faith was in error.
There are more than 1,500 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: IRS AUCTIONING DEFERRED ANNUITY OF FORMER BASEBALL PLAYER
A recent blog post looks at the IRS auction of the deferred annuity the New York Mets owe to former major league baseball player Darryl Strawberry.
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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