Bankruptcy Brief

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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Legislation Moving Through House Aims to Overhaul Debt-Collection Laws

The “Comprehensive Debt Collection Improvement Act” (H.R. 2547), sponsored by House Financial Services Chair Maxine Waters (D-Calif.), is working its way through the House and aims to reform laws regulating debt collectors and to provide new relief to private student loan borrowers, Forbes reported. The legislation, which passed 30-23 out of the House Financial Services Committee on April 21, incorporates text similar to the following bills:

• The Small Business Lending Fairness Act, a bill by Representative Nydia Velazquez (D-N.Y.), which would amend the Truth in Lending Act (TILA) to restrict the use of confessions of judgment for small business owners, extending the protections that currently exist in consumer lending.

• The Fair Debt Collection Practices for Servicemembers Act, a bill introduced by Representative Madeleine Dean (D-Pa.) to amend the Fair Debt Collection Practices Act (FDCPA) to prohibit debt collectors from threatening a servicemember with reducing their rank, having their security clearance revoked, prosecuting them under the Uniform Code of Military Justice, or otherwise communicating with the commanding officer or any other senior officer in the chain of command above a servicemember regarding an outstanding debt.

• The Private Loan Disability Discharge Act, a bill introduced by Representative Madeleine Dean (D-Pa.), which would amend TILA to require the discharge of private student loans in the case of permanent disability of the borrower, providing rights that already exist for federal student loan borrowers.

• The Consumer Protections for Medical Debt Collections Act, a bill introduced by Representative Rashida Tlaib (D-Mich.), which would bar entities from collecting medical debt or reporting it to a consumer reporting agency without giving a consumer notice about their rights under the FDCPA and Fair Credit Reporting Act (FCRA) related to that debt, including a minimum one-year delay before adverse information is reported to a consumer reporting agency. It would also bar reporting of adverse information relating to medical debt arising from medically necessary procedures.

• The Ending Debt Collection Harassment Act, a bill introduced by Representative Ayanna Pressley (D-Mass.), which would amend the FDCPA to prohibit a debt collector from contacting a consumer by email or text message without a consumer’s consent to be contacted electronically.

• The Stop Debt Collection Abuse Act, a bill introduced by Representative Emanuel Cleaver (D-Mo.), which would extend FDCPA protections as they relate to debt owed to a federal agency, and it would limit the fees debt collectors can charge. Additionally, it requires the Government Accountability Office (GAO) to conduct a study into the use of third-party debt collectors by government agencies.

• The Debt Collection Practices Harmonization Act, a bill introduced by Representative Gregory Meeks (D-N.Y.), which would expand the definition of debt covered under the FDCPA to include money owed to a state or local government, clarifying that private debt collectors who pursue debts such as municipal utility bills, tolls, traffic tickets and court debts, are subject to the FDCPA. It also updates monetary penalties for inflation and clarifies that courts can award injunctive relief, and adds protections to consumers affected by national disasters.

• The Non-Judicial Foreclosure Debt Collection Clarification Act, a bill introduced by Representative Jake Auchincloss (D-Mass.), which would reverse the recent Supreme Court decision in Obduskey v. McCarthy and Holthus LLP by amending the FDCPA to clarify that entities in nonjudicial foreclosure proceedings are covered by the statute.

The House is expected to vote on the bill this week. Its fate in the Senate, however, is uncertain.
​​​

Unemployment Claims Fall to Pandemic Low as U.S. Businesses Seek to Hire More Workers

Applications for U.S. unemployment benefits fell last week to a fresh pandemic low, reflecting more aggressive efforts by companies to hire new workers amid a rapid economic recovery, MarketWatch.com reported. Initial jobless claims in the states dropped by 34,000 to 473,000 in the seven days ended May 8, the government said Thursday. It was the fifth decline in a row. Businesses are trying to hire more people as the economy moves toward a full opening and consumers itch to satisfy cravings for many purchases they put off during the pandemic. Massive federal spending has put more cash in people’s pockets, and dwindling coronavirus cases have given them the confidence to spend it. Yet despite record job openings, the economy only created a paltry 266,000 new jobs in April. Wall Street had forecast a much larger increase of 1 million. Unemployment claims are still more than twice as high now compared to the last month before the pandemic. The number of applications had been running in the low 200,000s before the viral outbreak early last year.​​​



In related news, nearly 900,000 Americans in Alabama, Mississippi and 11 other Republican-led states are set to see their unemployment checks slashed dramatically starting in June, as GOP governors seek to restrict jobless benefits in an effort to force more people to return to work, the Washington Post reported. The cuts are likely to fall hardest on more than half a million people who benefit from stimulus programs adopted by Congress at the height of the pandemic, including one targeting those who either are self-employed or work on behalf of gig-economy companies such as Uber. Beginning next month, many of these workers are likely to receive no aid at all. Governors in states including Mississippi, Montana and Tennessee contend that generous federal benefits parceled out over the past year have deterred people from returning to their old positions now that the public health crisis is waning. The reality is more complicated, labor experts say. The slowdown in hiring may instead reflect workers’ concerns about their safety and difficulties in obtaining child care, or their trouble finding suitable positions in hard-hit industries like tourism on top of mounting frustration over wages they see as too low. That means the loss of unemployment benefits over the next month threatens to inflict new financial harm on those who already say they’re struggling.​​​

Secret Service Seizes $2 Billion in Fraudulent Covid Unemployment Payments, Returns Funds to States

The U.S. Secret Service has confiscated and returned to states about $2 billion in stolen Covid unemployment relief funds, agency officials said yesterday, CNBC.com reported. Programs in at least 30 states received the money after the agency determined recipients had fraudulently applied for pandemic-related unemployment. “This is typical of the cyberfraud we deal with annually. It’s just compounded based on additional funds (from) Covid relief,” Roy Dotson, Secret Service assistant special agent in charge, told CNBC. “The criminals did take full advantage of the programs to try to steal from them.” He said that the $2 billion returned to the states was a “conservative estimate” and that pandemic-related fraud investigations are ongoing. He said last year that the Secret Service sent advisories to financial institutions to flag possibly fraudulent accounts where the money may have been deposited. Dotson said fraudsters typically stole the identities of people who qualified for unemployment benefits. In other cases, he said, identities were stolen from people who hadn’t even filed for unemployment.​​​

In Reversal, Retirements Increased During the Pandemic

After decades in which it decreased, the retirement rate rose during the pandemic, according to the latest government data, the New York Times reported. In the year since the pandemic started — the 12 months ending in March 2021 — 17.0 percent of Americans aged 55 to 64 were retired, up from 16.8 percent in the two previous years. But this is still a lower percentage than in earlier decades. The retirement rate rose more for people 65 to 74: It was 65.6 percent in the year up to March 2021, versus 64.0 percent in the year before the pandemic. That brought the rate back up almost to its level in 2011, though still below its 2001 level. Job losses and business closings could have prompted some older workers to retire earlier than they’d expected, a pattern seen in previous recessions. Another factor: Older workers were more at risk than younger ones from the coronavirus. At the same time, home prices and stock market values rose, putting some owners of such assets in a better position financially to retire.​​​

Senate Democrats Take Aim at Carried Interest

Legislation that would end carried interest for investment managers was introduced yesterday by a group of Senate Democrats, Pensions&Investments reported. The proposed Carried Interest Fairness Act would take away the current 20% long-term capital gains tax rate, leaving investors to pay ordinary income tax rates of up to 37%. It would have a large effect on income that private equity and other alternative managers, for example, receive as compensation. The Joint Committee on Taxation estimates that making the change would raise $15 billion in revenue over 10 years. Introduced by Sens. Tammy Baldwin of Wisconsin, Joe Manchin of West Virginia and Sherrod Brown of Ohio, the legislation is co-sponsored by 11 other Democratic senators. Threats of ending what some legislators characterized as a tax loophole that benefits Wall Street firms have been a recurring theme. Former President Donald Trump raised it as a campaign issue, and President Joe Biden has called for Congress to end it as the economy and workers struggle to recover from the COVID-19 crisis. A White House fact sheet on President Biden's American Families Plan proposal said that permanently eliminating carried interest “is an important structural change that is necessary to ensure that we have a tax code that treats all workers fairly.”​​​

Commentary: Detroit Showed What ‘Build Back Better’ Can Look Like

Burdened by an overwhelming public health crisis, drained of resources by economic stagnation, and torn apart by racial injustice and unrest, cities are confronting the reality that conventional formulas of municipal finance and practices of working cannot sustain our urban places, according to a Bloomberg commentary. The significance of this moment was not lost on the Biden-Harris administration, which quickly advanced an ambitious mandate commensurate with the challenge: a domestic Marshall Plan called Build Back Better. Already, the first prong — the $1.9 trillion American Rescue Plan — has helped shore up city budgets, restore desperately needed funding for public transportation, and keep businesses open and families in homes. The second leg, the $2 trillion American Jobs Plan, represents a bold shift from short-term recovery to long-term transformation. However, the federal government cannot masterplan this infrastructure of economic mobility, nor should cities be expected to absorb massive volumes of funding in heavily prescribed ways, according to the commentary. Cities must have creative latitude to customize strategies to residents’ needs and build partnerships across the public, private, nonprofit and philanthropic sectors. Those relationships can multiply federal resources, unlock new forms of innovation, and engage community residents in the complexities of local problem-solving. Rather than ushering in doom, Detroit’s bankruptcy catapulted the city into reimagination, recalibration and renewal. The good news is that U.S. cities, by necessity, have become a crucible for exactly this kind of reinvention during the pandemic. COVID-19 forced local governments to create decentralized systems for testing, education, treatment and vaccine distribution, while the economic downturn and municipal debt have required them to share responsibilities with other sectors to keep critical services operational.​​​

Colonial Pipeline ‘Ransomware’ Attack Shows Cyber Vulnerabilities of U.S. Energy Grid

A major fuel pipeline that was shut down this week after a brazen cyberattack has since come back online, but security experts warned that the nation must take more seriously persistent vulnerabilities in America’s aging energy infrastructure, the Washington Post reported. The Colonial Pipeline running from Houston to New Jersey, supplying the East Coast with 45 percent of its fuel, was taken offline Friday after a hacker group known as DarkSide infiltrated the Georgia-based company’s servers and encrypted its data, demanding a fee to restore access in what is known as a “ransomware” attack. It also stole a copy of the data, possibly to later release it publicly unless Colonial paid an additional fee. Several cybersecurity experts said the incident represents the biggest known cyberattack on U.S. energy infrastructure. On Monday, Biden administration officials sought to assuage fears that the attack could lead to price spikes, fuel shortages or panicked buying up and down the East Coast.​​​

“Rewind” Any Annual Spring Meeting Sessions Through May 31

ABI’s Annual Spring Meeting has now concluded, but if you missed any of the hard-hitting sessions, replays are available through the innovative virtual platform. If you have registered for ASM, you can access the replays through May 31! Not registered? You can still sign up; click here.​​​

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Analysis: Is the U.S. Student Loan Program Facing a $500 Billion Hole? One Banker Thinks So

In 2018, Betsy DeVos, then U.S. education secretary, called JPMorgan Chase & Co. Chief Executive Jamie Dimon for help. Repayments on federal student loans had come in persistently below projections. Did Dimon know someone who could sort through the finances to determine just how much trouble borrowers were in? Months later, Jeff Courtney, a former JPMorgan executive, arrived in Washington. And that’s when the trouble started, according to an analysis in the Wall Street Journal. According to a report he later produced, over three decades Congress, various administrations and federal watchdogs had systematically made the student loan program look profitable when in fact defaults were becoming more likely. The result, he found, was a growing gap between what the books said and what the loans were actually worth, requiring cash infusions from the Treasury to the Education Department long after budgets had been approved and fiscal years had ended, and potentially hundreds of billions in losses. The federal budget assumes the government will recover 96 cents of every dollar borrowers default on. In reality, the government is likely to recover just 51% to 63% of defaulted amounts, according to Courtney’s forecast in a 144-page report of his findings, which was reviewed by the Wall Street Journal. Courtney’s calculation was one of several supporting the disclosure in a Journal article last fall that taxpayers could ultimately be on the hook for roughly a third of the $1.6 trillion federal student loan portfolio. This could amount to more than $500 billion, exceeding what taxpayers lost on the savings-and-loan crisis 30 years ago, according to the analysis.​​​

Economy Grew by 1.6 Percent in First Quarter, Showing Signs of Boom to Come

The U.S. economic recovery picked up speed in early 2021, with the economy growing 1.6 percent in the first three months of the year amid a coronavirus vaccination campaign and massive stimulus spending from the federal government, the Washington Post reported. As Americans have begun to emerge from isolation and started spending again, construction surged and businesses invested in expectation of future growth. It appears likely that all coronavirus-era economic losses will be recovered by the middle of this year, according to data released Thursday by the Bureau of Economic Analysis (BEA). Some of the fastest economic growth in more than four decades occurred from January to March, behind only the initial 7.5 percent surge last year, when businesses first reopened following pandemic-related shutdowns. The quarter’s growth would be 6.4 percent at an annual rate, but annual rates can be misleading amid an unprecedented crisis, because they imply that a quarter’s trend will continue for an entire year. “We need to get used to seeing some big numbers, but also knowing to put them into context,” said Wendy Edelberg, director of the Hamilton Project and a former chief economist at the Congressional Budget Office. “There’s been nothing normal about this recession, and there will be little that’s normal about the recovery.”​​

Shoppers Return to Malls, with an Urge to Spend

Vaccinated shoppers are heading back to the mall, offering hope that the worst of the pandemic downturn is over for this beleaguered industry, the Wall Street Journal reported. Foot traffic at a representative sample of 52 malls in March was up 86% from the same month last year, according to mobile-device location data from analytics firm Placer.ai. While that foot traffic was 24% lower than in March 2019, mall owners are suggesting that their business has turned a corner. Shoppers are eager to get out again, often armed with cash from the latest round of government stimulus checks. Many aren’t just browsing shops but dining out and returning home with bags full of new purchases. “There’s no question things are better. Sales are also better than anticipated four months ago,” said Bill Taubman, president and chief operating officer of Taubman Co. Shares of Simon Property Group Inc., which recently acquired Taubman, are up 45% this year. That is more than three times the gain this year in the S&P 500. The budding rebound in the mall industry echoes the progress made by other types of real estate, such as hotels, that were upended by the pandemic. But shopping centers and lodging have been on the mend also since the Covid-19 vaccine rollout and the recent reopening of much of the U.S. economy.​​​

Analysis: The Economy Is (Almost) Back, but Will Look Different than It Used To

There have been a lot of strange economic numbers over the last 14 months, as the world has been whipsawed by the pandemic. But one particular line of the first-quarter GDP numbers released Thursday stands out even so, according to an analysis in the New York Times. Americans’ spending on durable goods — cars and furniture and other goods meant to last a long time — rose at a stunning 41.4 percent annual rate in the first three months of the year. Yet the central reality of the economy in 2021 is that it’s profoundly unequal across sectors, unbalanced in ways that have enormous long-term implications for businesses and workers. The economy is recovering rapidly, and is on track to reach the levels of overall GDP that would have been expected before anyone had heard of COVID-19. But that masks some extreme shifts in composition of what the U.S. is producing. That matters both for the businesses on the losing end of those shifts and for their workers, who may need to find their way into the growing sectors. In such a tumultuous time, it helps to look at the GDP numbers not in terms of how they changed compared with last quarter or last year, but with the pre-pandemic economy. How does the actual number in the first quarter compare with what that number would have been if it had grown at a steady 2 percent annual rate since the end of 2019, the last quarter unaffected by the pandemic? This approach confirms the basic idea that the economy is not far from that pre-pandemic trend line. In the first quarter, overall GDP was only 3.3 percent below where it would have been in that hypothetical pandemic-free world. The U.S. is on track to surge above that 2019 trend in the second quarter currently underway, according to the analysis.​​​

Commentary: Give the Boss $10 Million, or They're Out of Here

“Pay to Stay” — the practice of companies’ offering fat retention bonuses to executives — is a recipe for trouble with shareholders and the public, according to a Bloomberg commentary. Top executives are accustomed to receiving hefty bonuses when they join a new company and large severance when it’s time to go. Lately, they’ve been getting lots of money just to stay put. Citing the need to retain top talent, Norwegian Cruise Line Holdings Ltd. and AMC Entertainment Holdings Inc. are part of a group of large companies that have offered bosses big retention bonuses recently. Hilton Worldwide Holdings Inc., Cineworld Group Plc and others have modified executive stock plans so their top employees aren’t tempted to hot-foot it. Reasonable or not, such rewards look bad during a period when ordinary workers have faced massive job insecurity and governments have propped up the economy, according to the commentary. It cements the impression that, fair weather or foul, executives can’t lose — and it could presage a frosty shareholder meeting season for big businesses. Companies will “need to explain how such awards do not merely insulate executives from lower pay,” proxy advisor Institutional Shareholder Services warns. In fairness, top managers bore no responsibility for the pandemic and they’ve had to work hard to protect employee health, reinforce supply chains and strengthen balance sheets. With the virus still undefeated, corporate boards are willing to pay bosses handsomely to ensure continuity. Meanwhile, many economies have rebounded quickly, giving managers leverage in pay talks as there are opportunities elsewhere. Yet despite top executives giving up some pay when the pandemic began, their overall compensation has remained very high. Designing a pay plan that keeps all stakeholders happy is difficult right now. If struggling companies are too stingy, they’ll trigger an exodus. If they’re too generous, executives could pocket undeserved windfalls if the shares rebound, according to the commentary.​​​

“Rewind” Any Annual Spring Meeting Sessions Through May 31

ABI’s Annual Spring Meeting has now concluded, but if you missed any of the hard-hitting sessions, replays are available through the innovative virtual platform. If you have registered for ASM, you can access the replays through May 31! Not registered? You can still sign up; click here.​​​

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Unemployment Claims Fall to Coronavirus Pandemic Low of 576,000

The Labor Department said today that the number of Americans filing first-time jobless claims last week fell to the lowest level since the onset of the COVID-19 pandemic, FoxBusiness.com reported. Data released Thursday showed that 576,000 Americans filed for first-time unemployment benefits in the week ended April 10, down from an upwardly revised 769,000 the week prior. Analysts surveyed by Refinitiv were expecting 700,000 filings. Continuing claims for the week ended April 3, meanwhile, ticked up to 3.731 million from 3.727 million the prior week. That number was above the 3.7 million that was expected.​​​

Retail Sales Surge Nearly 10 Percent in March, Spurred by Stimulus

Retail sales in March surged 9.8 percent as $1,400 stimulus checks were issued, the weather improved and vaccination rates increased, The Hill reported. The figure was well above the 6.1 percent economists expected, and was a return to form after major storms in February led to a 3 percent drop. That figure was revised upward to 2.7 percent. The $619.1 billion in sales was a whopping 27.7 percent higher than last March, when the pandemic hit in earnest and lockdowns took hold across the country.​​​

Texas Tells Judges They Can Ignore Federal Eviction Ban

Texas has stopped enforcing a federal eviction ban, a move that is accelerating some tenants’ displacement and puts the state on a potential collision course with the U.S. government, the Wall Street Journal reported. Local courts throughout Texas have postponed thousands of eviction cases since September for tenants who declare they have missed rent payments due to financial hardship. The postponements were in compliance with a national moratorium on evictions during the pandemic, a policy that has been extended until June 30. But last month, the Texas Supreme Court let its guidelines for enforcing the ban expire. A state advisory body for Texas eviction courts then said that without that guidance, local judges are no longer bound to uphold the national ban. Several other state court systems, including those in Florida and Ohio, haven’t issued formal guidelines for how the federal moratorium should be applied, leaving the decision-making up to individual judges or local municipalities. That has led to some eviction rulings against tenants in some of those states, according to tenant advocates and housing lawyers. In Texas, the recent reinterpretation of the federal ban could open the door to widespread evictions, lawyers and advocates say. In the state’s Collin County, Judge Michael Missildine is now approving evictions in his courtroom and handing the orders off to the local constable’s office for enforcement. “They’re starting to do them on a very regular basis,” he said. The state’s new interpretation of the federal policy has confused many landlords, and not all are ready to act on it. Some Texas judges, including Judge Missildine, are letting evictions move ahead while reminding building owners that they might be violating federal law by proceeding if their tenants declare themselves protected under the moratorium. Other judges have continued to apply the federal eviction ban in their courts despite the lack of state guidance, Texas housing attorneys said. (Subscription required.)​​​

Treasury Announces COVID-19 Relief Oversight Office

The Treasury Department yesterday announced an office to oversee COVID-19 relief programs approved in multiple bills since last year that totaled trillions of dollars, The Hill reported. “A new, cohesive model for recovery program implementation at Treasury will help get relief distributed quickly and into the hands of those who need it most,” said Deputy Secretary Wally Adeyemo. “Already we are getting individual payments out the door faster and in greater volume than ever before. We hope to continue this improved delivery, while also supporting outreach between Treasury and important stakeholders across the country," he added. The Office of Recovery Programs will be led by Chief Recovery Officer Jacob Leibenluft, currently counselor to Treasury Secretary Janet Yellen and an alumnus of the Obama White House and the left-leaning Center for American Progress think tank. Huge sums of cash have already been disbursed in the form of stimulus payments, but unemployment benefits, tax credits and other forms of COVID-19 relief remain to be spent from the bevy of pandemic legislation. That includes $420 billion from the American Rescue Plan, the $1.9 trillion package President Biden signed into law last month.​​​

U.S. Housing Market Is Nearly 4 Million Homes Short of Buyer Demand

The U.S. housing market is 3.8 million single-family homes short of what is needed to meet the country’s demand, according to a new analysis by mortgage-finance company Freddie Mac, the Wall Street Journal reported. The estimate represents a 52% rise in the nation’s home shortage compared with 2018, the first time Freddie Mac quantified the shortfall. The figures underscore the severity of the housing deficit, which is a major factor fueling the current red-hot housing market. The shortage is especially acute for entry-level homes, which makes it more expensive for first-time home buyers to enter the market, said Sam Khater, chief economist at Freddie Mac. “We should have almost four million more housing units if we had kept up with demand the last few years,” Mr. Khater said. “This is what you get when you underbuild for 10 years.” Freddie Mac reached its shortage figure by assessing the amount of single-family home building needed to match demand from household formation, second-home purchases and replacements of damaged or aging U.S. homes, and comparing that with the pace of construction. (Subscription required.)​​​

IRS Commissioner Says U.S. Is Losing $1 Trillion Annually to Tax Cheats

The U.S. is losing approximately $1 trillion in unpaid taxes every year, Charles Rettig, the Internal Revenue Service commissioner, estimated on Tuesday, arguing that the agency lacks the resources to catch tax cheats, the New York Times reported. The so-called tax gap has surged in the last decade. The last official estimate from the I.R.S. was that an average of $441 billion per year went unpaid from 2011 to 2013. Most of the unpaid taxes are the result of evasion by the wealthy and large corporations, Mr. Rettig said. “We do get outgunned,” Mr. Rettig said during a Senate Finance Committee hearing on the upcoming tax season. Senate Finance Committee Chair Ron Wyden (D-Ore.) called the $1 trillion tax gap a “jaw-dropping figure.” Rettig attributed the growing tax gap to the rise of the $2 trillion cryptocurrency sector, which remains lightly regulated and has been an avenue for tax avoidance. He also pointed to foreign-source income and the abuse of pass-through provisions in the Tax Code by companies. The size of the IRS’s enforcement division has declined sharply in recent years, Mr. Rettig said, with its ranks falling by 17,000 over the last decade. The spending proposal that the Biden administration released last week asked for a 10.4 percent increase above current funding levels for the tax-collection agency, to $13.2 billion. The additional money would go toward increased oversight of tax returns of high-income individuals and companies and to improve customer service at the IRS.​​​

Don’t Miss Next Week’s Live Sessions at ASM; Replays of Previous Sessions Available on the Virtual Platform

ABI's Annual Spring Meeting continues next week with key sessions, an engaging keynote by journalist and author Michele Norris, and many networking opportunities, including the inauguration presentation and networking event for incoming ABI President Robert Reynolds. Sessions next week include:

• Do You Speak Consumer?
• Litigating Director and Officer Claims in Bankruptcy
• What Do I Do with This 1099 Form from the IRS? Cancellation of Debt Income: A Ticking Time Bomb?
• Insolvencies of Cannabis-Producers and Their Cross-Border Implications
• Liquidity Crisis! Dealing with the Cash-Starved Chapter 11 Debtor Prior to and Through Chapter 11
• When Mediation Gets Messy: Ethical Dilemmas
• Circuit and District Splits on Important Commercial Issues with Bill Rochelle
• Great Debates
• Be Careful What You Ask for: Risks and Benefits of Involuntary Bankruptcy Filings
• Evidence and Trial Skills in Bankruptcy
• The Continued Impact of COVID-19 on the Distressed Real Estate Market
• Nightmarish Consumer Issues
• Top Ten Bankruptcy Ethics Traps and How to Avoid Them
• Veterans and Active-Duty Service Members Volunteer Panel

If you missed any of the hard-hitting sessions such as the "State of the Industry" or "The Small Business Reorganization Act: How It's Going So Far," replays are available through the innovative virtual platform. Access the replays for 30 days! Are you registered?

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