Bankruptcy
Credit Slips 
A discussion on credit and bankruptcy.
Post Frequency: 2.1/day Last Entry: November 18, 2009 at 09:55:22 Recent Entries: 668
By Bob Lawless, Adam Levitin, Angie Littwin, Katie Porter,
John Pottow, Debb Thorne, Elizabeth Warren
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Son of Pine Gate
Posted on November 18, 2009As Credit Slips readers may know, a group of key Philadelphia newspapers are currently in chapter 11. The debtor that owns the papers owes its secured lenders north of $290 million. It wants to sell itself under a plan to...
Lehman & Barclays
Posted on November 17, 2009Lehman has sued Barclays over the incredibly rushed sale of Lehman's key brokerage assets to Barclays a year ago. No doubt the financial industry crowd will use this to further promote their argument that chapter 11 does not work for...
Repeal the Safe Harbors?
Posted on November 16, 2009Today I'm speaking (along with my co-blogger, Adam) at the ABI's conference on chapter 11 reform at Georgetown. I'll be making the case for the repeal of the derivative safe harbors in the Code -- my paper can be found...
Modification Scams
Posted on November 12, 2009While the loan origination fraud is largely shut down, the foreclosure crisis has spawned a whole new consumer fraud in the form of foreclosure rescue and loan modification scams. These companies offer to help consumers get a loan modification or...
Senate Hearing on Medical Bankruptcies (Oct. 20, 2009) (Pottow)
Posted on November 12, 2009Yes, I went back to D.C. for more congressional bankruptcy brouhaha, this on the rising incidence of medical bankruptcies. C-SPAN decided to broadcast the proceedings in all their glory. Sen. Franken (D-MN) was armed with statistics on Swiss medical bankruptcies...
Subprime, Exotic or "Crap?" Mortgage Industry Lingo
Posted on November 05, 2009Former Credit Slips guestblogger Max Gardner is always trying to understand the real mechanics and economics of mortgage servicing. At one of his infamous bootcamps, he had an employee at a now-deceased mortgage servicer share an insider?s perspective on default...
Evans and Wright on the CFPA: Round 2
Posted on November 04, 2009A couple of weeks ago I wrote a short critique of one piece of a long study written by David Evans and Joshua Wright about the Consumer Financial Protection Agency and funded by the American Bankers Association. The related blog...
October Bankruptcy Filings Set New Post-2005 Record
Posted on November 03, 2009The daily bankruptcy filing rate in October hit 6,200, setting a new record since the 2005 changes to the U.S. bankruptcy law. There were about 130,200 total filings spread over the 21 business days in October. The October filing rate...
Looking Forward in the Supreme Court
Posted on November 02, 2009This just in from our Washington, DC, bureau: the Supreme Court has granted certiorari in Hamilton v. Lanning, No. 08-3009 (10th Cir. Nov. 13, 2008), where the Tenth Circuit adopted the "forward-looking test" for how much a chapter 13 debtor...
How to Fail My Secured Credit Exam Two Different Ways
Posted on November 02, 2009By way of Underbelly comes this story from the Seattle Times chronicling the many failures at the now defunct WaMu. Among the stories was that a WaMu banker gave O.J. Simpson a second mortgage on his Florida home despite the...
Spookiest Bankruptcy Opinion of 2009
Posted on October 30, 2009It's Halloween, and time for nominations for the Spookiest Bankruptcy Opinion of the Year. Comments are open. Name the opinion that gives you goosebumps, and explain why others should be scared . . . very, very scared. My own nomination...
Would this work?
Posted on October 28, 2009Word on the street is that Capmark liquidated its derivative portfolio pre-bankruptcy to avoid having to deal with the safe harbors in the Bankruptcy Code. Cash is still subject to the automatic stay, unlike derivative contracts. Imagine, for a moment,...
Means Test Changes Won't Mean Much
Posted on October 26, 2009Controversy abounds these days about whether government programs should adjust downward to reflect cost-of-living and income declines. I?d like to stir up a little controversy here at Credit Slips about Bob Lawless? recent post that said the drop in median...
Too-Big-To-Fail Resolution: Why One Size Can't Fit All
Posted on October 25, 2009The debate over what to do about too-big-to-fail is heating up (see here (FRB) and here (BoE) and here (Simon Johnson for a summation and commentary). A lot of the moves in the debate are well-rehearsed: the moral hazard issues...
Things That Have Piled Up
Posted on October 23, 2009Long time readers of Credit Slips may have noticed that my blogging has flagged the past few months. That is because my colleagues, Jennifer Robbennolt and Tom Ulen, and I have been working on a text entitled Empirical Methods in...
Bogus Statistics: The Banking Industry's Go-To Lobbying Tool
Posted on October 22, 2009Fake statistics have been a central feature of the banking industry's lobbying strategy on every major consumer credit issue since the 2005 bankruptcy amendments. In 2005, there was the phantom $400 bankruptcy tax used to push through the BAPCPA. Then...
Lehman Fees
Posted on October 20, 2009The FT has a front page story today about the total fees incurred by the debtor's professionals in the London part of the Lehman case. So far the accountants (who play the lead role in the UK) and the attorneys...
Congress to Outlaw Indiana Pension Funds
Posted on October 16, 2009Not really, of course. But Felix Salmon does have an important new post about how, in the sovereign debt context, Congress is honestly considering preventing purchasers of distressed sovereign debt from collecting the full face amount of the debt. It...
Tightening the Bankruptcy Laws in the Midst of a Deep Recession
Posted on October 14, 2009Beginning on November 1, some people might suddenly find they are now ineligible for chapter 7 bankruptcy. Making it harder to file bankruptcy in the middle of our financial crisis may not be the best policy idea to come down...
Debt Collectors Are Not Always "Debt Collectors"
Posted on October 14, 2009This just in from our Tampa bureau: a debt collector threatens a debtor and his family, including the lovely threat "I'm going to f*** you up" if you don't pay. Abusive debt collection practices seem to be pretty widespread but...
Hey Ernie, Let's Play 11!
Posted on October 13, 2009The Cubs filed for Chapter 11. Yes, I recognize that this has nothing whatsoever to do with the quality of their play, which has itself frequently been bankrupt. But the Southsider in me is enjoying a moment of Schadenfreude despite...
An inside view of Chrysler (and GM)
Posted on October 12, 2009Corrine Ball has a post today offering her insights on the automotive cases, which she was involved in as lead counsel for Chrysler. Not surprisingly, she and I share similar views about the cases and the arguments that have been...
Lying Is Wrong
Posted on October 09, 2009You might think that we all caught the lesson that lying is wrong somewhere between Sunday School and warnings that Santa only brings presents to good boys and girls. But an Ohio federal court recently caught a debt buyer making...
How Many Bankruptcy Filings Were There in September?
Posted on October 07, 2009In a post yesterday, I used bankruptcy filing figures from Automated Access to Court Electronic Records (AACER) that showed just over 125,500 total filings in the month of September. A large number of news stories reported there were 124,790 consumer...
Risks of Reverse Mortgages
Posted on October 07, 2009In a world of news stories about crippled credit markets, at least one group of Americans still faces the problem of aggressive loan marketing. Senior citizens are on pace to set a new record in 2009 for reverse mortgages, complicated...
Bankruptcy Filings Maintain a Steady State
Posted on October 06, 2009The good folks at Automated Access to Court Electronic Records (AACER) report there were over 125,500 total bankruptcy filings in September. The daily bankruptcy filing rate was 5,980 for an increase from August of only 0.5%. Recent media reports and...
Was it just by chance? Could this be Kismet?
Posted on October 06, 2009Somehow you always knew these two would get together. AIG and Lehman are in a dispute about credit default swaps. A whole bunch of credit default swaps to be precise. It seems AIG and Lehman sold 125 CDS contracts to...
Amici Bankruptcy Professors Pottow & White "Win" on BAPCPA 11 U.S.C. 522(p)
Posted on October 03, 2009Yes, self-serving, but What Is To Be Done? A few years ago, my Michigan Law colleague Jim White (J.J. White to some) -- who has guest blogged for Credit Slips -- and I picked up a BAPCPA case trickling though...
Help Me Decide -- Is a "Replacement" New Collateral
Posted on September 30, 2009This semester, I have been teaching secured credit from Lynn LoPucki and Elizabeth Warren's wonderful textbook. One of the problems from the book was, I believe, inspired by my former colleague at UNLV and current bankruptcy judge, Bruce Markell, who...
Schwab v. Reilly -- The Amicus Brief
Posted on September 30, 2009Last week, I agreed to join an amicus brief in the pending U.S. Supreme Court case of Schwab v. Reilly. This case will not receive a lot of medial attention, but it could have a big practical effect on the...
Thank You to Stephanie Ben-Ishai
Posted on September 28, 2009Credit Slips would like to thank Professor Stephanie Ben-Ishai of the Osgoode Hall Law School at York University for joining us last week. Professor Ben-Ishai gave us a fairly comprehensive overview of the changes to the Canadian bankruptcy law that....
Unresolved Access Issues
Posted on September 25, 2009Yesterday?s post on means-measuring versus means-testing offered a positive perspective on the Canadian bankruptcy reforms. The focus was on debtors who are currently able to access the bankruptcy system and how this will change with the enactment of the reforms...
Means-Measuring versus Means-Testing
Posted on September 24, 2009As readers of the Credit Slips blog are well aware, a central feature of BAPCPA was means-testing. Means-testing requires all debtors to calculate their estimated ability to pay (according to complex formulae) and to file these calculations with their Chapter...
The Deviant Canadian Debtor
Posted on September 23, 2009The reforms we?ve discussed so far signal that a paradigm shift with respect to consumer bankruptcy in Canada is well under way. A key component of consumer bankruptcy in Canada has, since 1919, been the non-waivable or mandatory consumer bankruptcy....
Key Canadian Consumer Bankruptcy Reforms
Posted on September 22, 2009Today?s post is a summary of the key Canadian consumer bankruptcy reforms. The most significant aspects of the consumer reforms touch on the following nine issues: 1. Automatic Discharge 2. Creditors? Participation and Pay Out 3. Bankrupts with High Income...
Minimum Payments Help the Credit Card Industry
Posted on September 22, 2009If you make only the monthly minimum payment on your credit card account, the debt has a fair chance of outlasting the expected life of the plastic used to manufacture the credit card. That may be hyperbole but not by...
Welcome to Stephanie Ben-Ishai
Posted on September 21, 2009Credit Slips is excited to welcome Professor Stephanie Ben-Ishai of Osgoode Hall Law School at York University. Ben-Ishai has published widely on bankruptcy and commercial law and has several studies on how Canadian bankruptcy laws affect low-income consumers in Canada...
Ten Years of Corporate Bankruptcy from The Deal
Posted on September 21, 2009Transactional tracker The Deal magazine has been celebrating its tenth anniversary (hard to believe). As part of that, the magazine has been reviewing how the last ten years have treated different parts of the deal-making scene. Matt Miller has written...
Where Should Lehman Have Filed?
Posted on September 21, 2009As many Credit Slips readers know, I have spent a good bit of my academic career writing about professionals in chapter 11. Thus I was drawn to the Economist's recent article about the "bonanza" of professional fees in Lehman. The...
Introduction to the Canadian Bankruptcy Reforms
Posted on September 21, 2009Thank you for the introduction Bob. I am delighted to have the opportunity to Guest Blog this week about the Canadian bankruptcy reforms. On Friday September 18, 2009, the remaining amendments contained in Chapter 36 of the Statutes of Canada,...
Chapter 11 & Financial Institutions
Posted on September 15, 2009The FT has a good story today about "living wills," the idea that banks and other large financial institutions should provide a plan for the own wind-down in the event of a future financial crisis. The hope is that such...
Derivatives in Bankruptcy -- part 3
Posted on September 14, 2009In two prior posts earlier this month, I examined the Chicago Board of Education's adversary complaint against Lehman, in which the Board struggles mightily to avoid termination of an interest-rate swap under the procedures set forth in the ISDA Master...
Tenant Protections in Foreclosure
Posted on September 14, 2009A foreclosure has a ripple effect, as a number of commentators have observed. Foreclosed properties often sit vacant, leading to nuisance concerns, lower property values for neighboring houses, and higher crime rates. But some properties are not vacant on the...
Bank of America-SEC Settlement
Posted on September 14, 2009Judge Jed Rakoff nixed Bank of America's settlement with the SEC. As he rightly noted, the price for management malfeasance is borne by shareholders, not by the managers. Maybe the shareholders toss the bums out, but the entrenchment of corporate...
Pottow on CFPA
Posted on September 10, 2009Credit Slips very own John Pottow has an op-ed about the proposed Consumer Financial Protection Agency in yesterday's Detroit Free Press that observes that a CFPA would help small banks relative to big banks because of reducing fixed regulatory costs...
Chrysler and GM, Again
Posted on September 09, 2009The TARP Congressional Oversight Panel's September report, The Use of TARP Funds in Support and Reorganization of the Domestic Automotive Industry, is out today. The paper I wrote for the report can be found here or as an appendix to...
August Filings Hold Steady
Posted on September 08, 2009It is September 8, and I never did my monthly post about the latest U.S. bankruptcy filing figures. Hopefully, late is better than never. According to data from Automated Access to Court Electronic Records (AACER), there were slightly more than...
Derivatives in Bankruptcy -- Part 2
Posted on September 08, 2009In my last post, I used the Chicago Board of Education's suit against Lehman Brothers to explore some of the interesting issues concerning derivative contracts that have been brought forward by Lehman's chapter 11 case. While I expressed some skepticism...
Overspenders to Face Tax Audits?
Posted on September 08, 2009A recent article in the Wall Street Journal reported on a new effort by the IRS to catch tax cheats. The IRS is going to compare data on mortgage-interest payments provided by financial institutions with homeowners' declarations of income on...
Derivatives in Bankruptcy -- part 1
Posted on September 04, 2009The Lehman Brothers case has surfaced a good number of important and interesting issues concerning the intersection of derivatives and chapter 11. In particular, while the derivatives industry seemed to think that the 2005 creation of massive ?safe harbors? in...
A Failure of Research: Posner on Law Professors and the Financial Crisis
Posted on September 04, 2009I just came across a Richard Posner piece in the Atlantic that claims that law professors "have not made a contribution to the understanding and resolution of the current economic crisis, even thought it bristles with legal questions." Whoa! This...
Bankers, pawnbrokers, actors, jugglers, acrobats, quacks, and brothel keepers...in 16th Century Holland
Posted on September 04, 2009It's pretty amazing how the status of some professions has changed over time. I came across this astounding passage in Simon Schama's The Embarassment of Riches: An Interpretation of Dutch Culture in the Golden Age (now you know what I...
What About Forum Shopping?
Posted on September 02, 2009For those who haven't seen it, Sheila Bair, chair of the FDIC, has an op-ed in today's New York Times. In a piece entitled The Case Against a Super-Regulator, she argues that creating one regulator with authority over all our...
Are You a Work Horse?
Posted on September 02, 2009Two items of interest . . . . First, from West's "headnote of the day" service on a case interpreting what it meant for a horse to a "work horse" within the meaning of an exemption statute. Given the holding,...
When Children and Parents Fight
Posted on September 01, 2009Asarco's bankruptcy reorganization is moving along nicely. (I don't have a link to the pleadings, but here's a background link on the company here -- one of our delightfully nerdy and more internet-savvy followers should feel free to post them.)...
Morning graph
Posted on August 28, 2009From a new dataset of CDS prices I'm working with -- this suggests that even though the credit crisis began in the summer of 2007, the market didn't pick up on Lehman's problems until Spring 2008, and even then really...
Chapter 11 today
Posted on August 26, 2009Two recent chapter 11 stories strike me as indications of how the growth of secured lending to distressed companies, particularly second lien and other subordinated forms of secured lending, have changed chapter 11. One is the Chrysler creditors' fraudulent transfer...
Another Sign of the Futility of the 2005 Bankruptcy Law
Posted on August 25, 2009A big feature of the 2005 changes to the U.S. bankruptcy law was supposed to be a means test that would get people into chapter 13 instead of chapter 7. Because a chapter 13 requires a 3- or 5-year repayment...
The Benefits of Being Litigious
Posted on August 24, 2009Adam and I have recently discussed our take on whether and why the Fair Debt Collection Practices Act (FDCPA) should apply to mortgage servicers. The take-away was that the current interpretation of the FDCPA, based on its legislative history, is...
Mortgage Modification Investor Lawsuit
Posted on August 20, 2009The District Court ruling in Greenwich Financial Services v. Countrywide, addressing the servicer safe harbor provision for doing loan modifications, is linked here. See here for the NYTimes story. See here for the complaint. Quick version: the ruling went against...
Complaining to HUD about Servicing: Thunder on Deaf Ears?
Posted on August 20, 2009In my own research, and frequently on Credit Slips, I've noted problems that homeowners face in dealing with their mortgage servicers. As a recent post from guest blogger Max Gardner explained, many of these problems are structural to the servicing...
Thanks to Max
Posted on August 18, 2009As always, it was a delight to spend (virtual) time with Max Gardner. His posts reflect his extensive experience as a consumer bankruptcy attorney, and his dedication to using legal tools beyond bankruptcy--such as RESPA, the Truth in Lending Act,...
Private Tax Collection
Posted on August 18, 2009The New York Times has a story today that Credit Slips readers will want to check out. It catalogs the growing trend of local governments to sell their real estate tax debts to private investors. The reporter, Jack Healy, succinctly...
The Lack of Evidentiary Foundations Fosters Fraud
Posted on August 18, 2009The expanding market for that buying, selling and securitization of consumer debts has resulted in a serious problem regarding the ?quality and admissibility? of the computer data that is being tendered to the United States Bankruptcy Courts to prove the...
Show Me the Original Note and I Will Show You the Money
Posted on August 17, 2009As mortgage delinquencies rise each month, and as the number of foreclosures increase each quarter, the ?new mantra? of many pro-se and represented consumers is to demand that the mortgage servicer ?prove up the original note.? Is this just some...
The Alphabet Problem and the Pooling and Servicing Agreements
Posted on August 14, 2009The securitization of residential mortgage notes has created a maze of complex issues and problems for the bankruptcy and foreclosure courts. One fundamental issue is who is the actual holder and owner of the mortgage note. In order to answer...
Does a Tarnished Credit Report Equal an Untrustworthy Employee?
Posted on August 14, 2009Last week, the NYT ran a piece describing how common it has become for employers to use the credit report as a screen device for job applicants ("Another Hurdle for the Jobless: Credit Inquiries"). In a nutshell, if your credit...
How Much Credit Card Debt Do Bankrupt Consumers Have?
Posted on August 13, 2009We here at Credit Slips frequently get asked the question, Just how much credit card debt do people filing for bankruptcy actually have? So as a public service of sorts, I?m going to begin answering it. I say ?begin? answering...
What Does RESPA Have to do with Consumer Bankruptcy Cases?
Posted on August 13, 2009I have trained over 350 attorneys at my Bankruptcy Boot Camps and to my surprise less than 10 percent know what I mean when I refer to a "QWR." This is shocking in that a reasonable QWR can provide the...
HAMP--Is It Really All About the Money?
Posted on August 12, 2009Are mortgage servicers really refusing to modify mortgage loans solely because of all of the "ancillary fees" they can generate from a completed foreclosure? Is the problem really all about the money or is there something more to it? The...
Countrywide Sanctioned by Ohio Court Citing Porter & Twomey
Posted on August 12, 2009As many Credit Slips readers may be aware, Countrywide Home Loans (which is now part of Bank of America) has been the subject of proceedings in several bankruptcy courts because of the shoddy recordkeeping behind their claims in bankruptcy cases....
The Consumer Financial Protection Agency
Posted on August 11, 2009I've written a short research brief (also here) on the Obama administration's proposed Consumer Financial Protection Agency for the Pew Financial Reform Project. The research brief is a non-partisan guide to the issues involved in creating a CFPA. It begins...
Truth in Lending or Truth in Ownership of Residential Mortgage Notes
Posted on August 10, 2009During my last two Bankruptcy Boot Camps, one of the topics we have discussed has been the recent amendments to the Truth in Lending Act, brought about by Section 404 of Public Law 111-22. Specifically, our interest has been focused...
The Problem with Houston
Posted on August 10, 2009Two recent decisions from the bankruptcy courts in the Southern District of Texas have me wondering if Houston will become shunned as a locale for large chapter 11 cases. First, in In re Gulf Coast Oil Corp., the bankruptcy court...
Greetings to Max Gardner
Posted on August 10, 2009Credit Slips welcomes O. Max Gardner III as a guest blogger. In my opinion, Max is as close to a celebrity as the consumer bankruptcy bar has today, gaining fame for his Bankruptcy Boot Camps. At those camps, and as...
Bankruptcy Filings Rise in July, Set Off Most of June's Decline
Posted on August 07, 2009My blogging has been a little light lately. Two of my University of Illinois colleagues (Jen Robbennolt and Tom Ulen) and I have been finishing our forthcoming text, Empirical Methods in Law. I am glad to say that we now...
Remote Deposit Capture (RDC) iPhone App
Posted on August 07, 2009One of the quieter revolutions going on in the payments world is Remote Deposit Capture (RDC), the process of depositing checks electronically without ever going to a bank branch. The paper check is slowly going the way of the dodo--many...
How to Count Medical Debt in Bankruptcy
Posted on August 07, 2009Most Credit Slips readers will be familiar with the debate about the role medical debt plays in consumer bankruptcy. A big part of that debate is one about methodology with disputes about how to count "medical debt." Personally, I've always...
Congressional Hearing on Medical Bankruptcies (July 28, 2009)
Posted on August 06, 2009Last week I joined the Credit Slips custom of presenting testimony to Congress on bankruptcy matters. (My written testimony has apparently been posted here.) This outing was before the House Judiciary Committee's Subcommittee on Administrative and Commercial Law...
2d Circuit Chysler Opinion
Posted on August 05, 2009Released today (and posted below). The opinion contains a substantial discussion of §363(f), which should make the S.D.N.Y. the home for §363 sales for years to come. It will also reaffirm the belief that the GM appellants will need either...
Exporting Chapter 11
Posted on August 05, 2009FT has a great, and extensive, article today about the push to adopt chapter 11-like procedures in Europe. One thing missing from the article is any discussion of the relative size of the respective jurisdictions. My sense is that chapter...
A Note on Senior Debt
Posted on August 04, 2009Many of the comments and emails I have received regarding my Forbes commentary lead me to believe that there is a general lack of understanding about how senior debt -- like that at issue in Chrysler -- differs from traditional...
Geithner's Blowup
Posted on August 04, 2009Apparently federal financial regulators resistance to particular parts of the Obama administration's financial regulatory reform plan proved too much for Treasury Secretary Timothy Geithner. I'm both amused and disturbed by this incident. I'm glad to see that the Treasury Secretary...
Fed Conference on Consumer Credit
Posted on July 30, 2009The Federal Reserve Bank of Philadelphia is hosting its biennial researh conference, Recent Developments in Consumer Credit and Payments. The seven selected papers represent hot topics in economic research on consumer credit. Two papers focus on mortgage issues, including a...
Once more unto the breach, dear friends, once more
Posted on July 26, 2009My thoughts on the automotive chapter 11 cases, on Forbes.com.
After Notice and a Hearing -- One Out of Two Ain't Bad?
Posted on July 26, 2009Wow. I missed this one last week. New York Attorney General Andrew Cuomo has brought civil and criminal charges against lawyers and process servers who were abusing the debt collection system. From the New York Times article: According to a...
Mortgage Servicing Update
Posted on July 24, 2009Complaints about mortgage servicers are piling up almost as fast as foreclosures. Yesterday CNN reported that the GAO has concluded that the Obama Administration's HAMP and HARP programs to do loan modifications are off to a very, very slow start....
We're Three Years Old!
Posted on July 24, 2009Today is the third anniversary of the launch of Credit Slips. Happy Birthday to us! (And, Happy Birthday to my daughter who turns 10 tomorrow.) Sitemeter says that we have had 783,463 visits during that time (which doesn't count people...
Can You Judge an Industry By a Few Blog Comments?
Posted on July 24, 2009I'm annoyed this morning. OK, for those of you who know me, I'll make the necessary correction -- I'm annoyed more than usual. And, yes, I've had my morning cup of coffee. It seems that we are getting more and...
A Big Win for Consumers: NAF Leaves Arbitration Business
Posted on July 23, 2009Credit Slips bloggers have written a number of posts about the National Arbitration Forum (NAF) (here, here, here, here, here and here). NAF was a business friendly--and especially a credit card company friendly--arbitration forum, but that looks to be a...
Is Bankruptcy Mortgage Modification Back?
Posted on July 23, 2009As I write this, the Senate Judiciary Committee's Subcommittee on Administrative Oversight and Courts is holding a hearing entitled, "The Worsening Foreclosure Crisis: Is It Time to Reconsider Bankruptcy Reform." The witnesses include Credit Slips's own Adam Levitin...
Does Securitization Affect Loan Modifications?
Posted on July 22, 2009A few days ago I wrote a long and detailed critique of a Boston Federal Reserve staff study that argued, among other things, that securitization was not a factor in the paucity of loan modifications. The study reached this conclusion...
CIT's Holdout Problem
Posted on July 21, 2009So today word comes that CIT's bondholder-provided $3 billion of new financing will not solve its liquidity problems. That's not really surprising, given that CIT has $10 billion in debt maturing through the start of next year. The more pressing...
Does This Mean We Will Be Getting a Pepper Spray Fee?
Posted on July 19, 2009ATM theft in South Africa has gotten so bad that some ATMs are being weaponized with pepper spray to deter thieves. If the ATM detects someone trying to tamper with it, the spray is released. These ATMs apparently can spray...
Is Redefault Risk Preventing Mortgage Loan Mods?
Posted on July 16, 2009There's a very interesting new study on mortgage loan modifications out from the Boston Federal Reserve staff. This sort of study is long-overdue and from an academic standpoint, there's a lot I really like about this study. But the study...
Bring Back Bob the Banker
Posted on July 14, 2009If you?re over 40 years old and didn?t grow up in the big city, you knew Bob. Bob was a local banker. He lived in the same town where his bank was. He was a loan officer, probably a Vice...
Is Borrowing a Substitute for Getting Paid??
Posted on July 11, 2009Many thanks to the organizers of Credit Slips for inviting me to blog this week. Henry Ford had a good idea. In January, 1914 he announced to the world that his workers would be paid five dollars a day. The...
Welcome to Prof. Kevin Leicht
Posted on July 11, 2009I'm delighted to welcome Professor Kevin Leicht to a guest-blog stint at Credit Slips. Kevin is a colleague of mine at the University of Iowa, where he is the Director of the Institute for Inequality Studies and the Director of...
California
Posted on July 10, 2009I just gave an interview with a reporter from Santiago, Chile on the situation in California. My assessment of the situation, which may be of interest to Credit Slips readers, follows: The key problem in California is that the state...
Highly Questionable Medical Bankruptcy Figures from Fraser Institute
Posted on July 09, 2009The National Center for Policy Analysis (NCPA) is flogging a study from the Fraser Institute in Canada that purports to show U.S. medical bankruptcies are a "myth" because the Canadian bankruptcy rate is higher than in the United States. Reuters...
GM Update
Posted on July 09, 2009Another appeal has been filed, while the District Court has denied the ad hoc committee's request for a stay pending appeal. All signs point to a quick closing either late today or early tomorrow. Then we can expect the debtors...
The Tabb-ed Second Edition Is Out
Posted on July 08, 2009From time to time, I'm asked to recommend a desk reference on bankruptcy law. I have long thought that it was hard to top Charles Tabb's The Law of Bankruptcy. Of late, my only hesitation was that I had thought...
GM Appeals (update)
Posted on July 07, 2009A second appeal has been filed, this one by the "Ad Hoc Committee of Asbestos Personal Injury Claimants." The Ad Hoc Committee -- whose standing to appeal I doubt (although the members could appeal, so perhaps I'm being pedantic) --...
In Favor of the Consumer Financial Protection Agency (CFPA)
Posted on July 07, 2009Adam's earlier post started the ball rolling on the CFPA discussion, and I wanted to weigh in (favorably) having now waded through the 153 pages of proposed legislation. I take the case to be made for sheer regulatory consolidation as...
GM Appeals, Part Deux
Posted on July 07, 2009The pending request for certification to the U.S. Court of Appeals for the Second Circuit (CA2), if granted, would bypass the first rung on the appellate ladder of the U.S. District Court for the Southern District of New York. But...
Certification Denied
Posted on July 07, 2009The bankruptcy court has denied the motion to certify the GM appeals to the 2d Circuit. (And the request for the stay too).
Not so fast (says GM)
Posted on July 07, 2009The debtors have filed an objection to the motions to expedite the appeal to the 2d Circuit. In short, the debtors argue The issues that the Movants wish to raise on appeal do not rise to matters of public importance....
GM Sale Approved
Posted on July 06, 2009The opinion and order have been posted. And the first appeal has also been filed.
I'm Confused (California Edition)
Posted on July 06, 2009On the day that California's credit rating has dropped through the floor, the FT has an article noting that traders are looking to buy the IOUs that California has been issuing to pay daily obligations, quoting one buyer who "would...
Bankruptcy Filings Decline 6% in June
Posted on July 03, 2009The most recent bankruptcy filing data from Automated Access to Court Electronic Records (AACER) show a 6.1% decline in the U.S. daily bankruptcy filing rate. The were about 124,800 bankruptcy filings in June which, spread over the 22 business days...
Bankruptcy as a Disqualifying Factor for Child Custody?
Posted on July 02, 2009Several sources, including our friends over at Bankruptcy Beat, are reporting that Michael Jackson's mother, who has been awarded temporary custody of her three grandchildren, might have trouble gaining final custody because of a 1999 bankruptcy filing...
In the Home Stretch
Posted on July 01, 2009Note: The following was just sent from Credit Slips blogger Stephen Lubben: "At the GM hearing, although closing arguments may run over to tomorrow. I don't think there has been anything thus far that would prevent the sale from going...
Health Insurance to Go Broke With
Posted on July 01, 2009An article in today;s New York Times chronicles how medical debt can financially ruin U.S. citizens even with health insurance. Policies with limits, often hidden from the consumer, quickly run out and leave the insured with mounds of debt. This...
The Case for a Consumer Financial Protection Agency
Posted on July 01, 2009Yesterday, the White House released proposed statutory languagefor the creation of a Consumer Financial Protection Agency (CFPA). The bill is long, but the CFPA, the brainchild of our co-blogger Elizabeth Warren, is by far the boldest part of the Obama...
Who Loses in Cuomo v. Clearing House?
Posted on June 30, 2009Adam Levitin already posted on this week's decision in Cuomo v. Clearing House Association where the U.S. Supreme Court struck down a regulation from the Office of the Comptroller of the Currency's (OCC). The regulation preempted state enforcement of consumer...
The Supreme Court and What Attorneys Can Say
Posted on June 30, 2009Some other obligations have kept me away from blogging for the past few weeks. One great thing about a group blog is having great colleagues who pick up the slack. I had wanted to say a few words about the...
Cuomo v. The Clearing House Association: OCC Loses Even with Chevron Deference
Posted on June 29, 2009The Supreme Court delivered its decision in Cuomo v. the Clearing House Association today. The issue in the case was whether the a regulation passed by the Office of the Comptroller of the Currency (OCC) preempted state enforcement of state...
GM and §363(f)
Posted on June 28, 2009As I noted in a recent post, "new GM" has agreed to "assume all products liability claims arising from accidents or other discrete incidents arising from the operation of GM vehicles occurring subsequent to the Closing of the 363 Transaction."...
GM Sale Objections
Posted on June 28, 2009I have not covered the GM objections with the same intensity as I did in Chrysler, in part because the vast bulk of the objections raise the very same issues. For example, I'm sure most Credit Slips readers know how...
GM decides speed is better
Posted on June 27, 2009GM has decided not to fight the §363(f) issue and will not attempt to "cleanse" its assets of tort claims when transfered to "New GM." I have previously argued that §363(f) should be read to apply to tort claims, subject...
Transnational Bankruptcy
Posted on June 25, 2009At the final day of the INSOL conference in Vancouver, I attended a fascinating panel on the issues that arise when a multinational corporate group seeks to reorganize. The panel was staffed by judges from Canada, the UK, Korea, and...
The current paradox
Posted on June 23, 2009I'm spending the week at the INSOL conference in Vancouver. I think it is important for academics to interact with the "real world" on occasion, to make sure that one's scholarship does not become too ivory tower. And the INSOL...
Open-Source Law Review Publication Contracts
Posted on June 23, 2009I know this isn't standard Credit Slips fare and will probably be of little interest to most readers, but it's of reasonable concern to academic readers: the lack of standardization among law review publication contracts. I've encountered only a limited...
Too Big to Fail? Is Obama Proposing an Implicit Government Guarantee of Goldman Sachs' Liabilities?
Posted on June 18, 2009Secretary Geithner was quoted by the Times as saying that from now on, ?no one should assume that the government will step in to bail them out if their firm fails.? Sorry, but that's just not credible. The Obama financial...
Making the GM sale hearing a bit more contentious?
Posted on June 18, 2009I'm still thinking about the Supreme Court's opinion today, which held that the terms of the 1986 Manville plan are binding even if they exceeded the bankruptcy court's jurisdiction, but my initial take is that this makes the fight over...
ABA Consumer Protection Conference: Credit Slips out in Force
Posted on June 17, 2009Angie Littwin and I will be speaking on a very timely panel about the need for a consumer financial product safety commission Consumer Financial Protection Agency (CoFiPro=Coffee Pro?) at the ABA's Section on Antitrust 's Consumer Protection Conference at Georgetown...
Skin in the Game
Posted on June 17, 2009The proposed skin-in-the-game requirement for securitization strikes me as misguided, no matter how its structured. Different industries use securitization for different purposes, and while skin in the game might not have much of an impact in some, it runs contrary...
California and default
Posted on June 16, 2009As I noted previously, a default by California would have serious repercussions for the larger national and even global economy. Extreme budget cuts in California to avoid such a default could also have serious effects on the larger economy, given...
When is a market too big?
Posted on June 16, 2009The emerging details of the Administration's securitization regulations have got me to thinking about an issue I first began to consider with regard to CDS. Namely, at what point do apparently useful tools allow a market to become "too big,"...
A further thought on securitization regulation
Posted on June 16, 2009As I noted in my earlier treatise post, the Administration has proposed requiring all originators to keep a stake in each asset securitization, to ensure that they have "skin in the game." In particular, the Administration proposes requiring retention of...
So maybe Chrysler was only worth $2 billion after all
Posted on June 15, 2009The WSJ has the details on what the lenders who supported the deal were looking at. In short, the "analysis suggests that the $2 billion that the Treasury Department agreed to pay to Chrysler?s largest lenders, including J.P. Morgan Chase,...
The Effect of Legislation of Credit Card Interest Rates...
Posted on June 15, 2009Is a drop? According to Bankrate.com, credit card interest rates stayed steady for low-rate cards and dropped for some high-rate cards. So what this means that the Credit CARD Act has resulted in lower interest rates, right? Of course not....
The growing, unseen chapter 11 wave
Posted on June 15, 2009Over the weekend, Six Flags -- the owner of Magic Mountain in Los Angeles and other amusement parks -- filed a chapter 11 petition in Delaware. This morning, the Extended Stay hotel chain filed a chapter 11 petition in New...
GM Retention Applications
Posted on June 14, 2009The key retention applications were filed on Friday, and by the morning we can expect the inevitable gasping story about how Harvey Miller bills at $950 an hour. The press keeps doing this, and the big firms have no reason...
Claim or Interest -- part 2
Posted on June 14, 2009In my prior post on this topic, I examined and rejected the argument that reference to §1141 helps us understand §363(f), inasmuch as the term "interest" is used in different ways in the two sections. But what about the core...
A final thought on the Chrysler sale
Posted on June 13, 2009A recent exchange with a commenter on the blog lead me to this conclusion: doesn't the argument that the consideration going to the Unions should have instead gone into the estate, for the benefit of the secured lenders, amount to...
Claim or Interest -- part 1
Posted on June 13, 2009One of the key disputes in both the GM and Chrysler cases has been the use of §363(f) to sell the assets "free and clear" of successor liability claims. The normal rule is that a corporation that buys another corporation's...
Bank Regulatory Arbitrage and Deregulation: the Number of Bank Regulators Matters
Posted on June 13, 2009One of the key points of debate over financial institution regulation reform is how many different bank regulators there should be and the extent of their respective bailiwicks. Some argue that the number of regulators is a secondary issue. It's...
Interchange Legislation Overview
Posted on June 12, 2009It's summer, so it must be interchange season here in DC. A trio of interchange-related bills have been introduced (or really reintroduced) in Congress. First, there is the House version of the Credit Card Fair Fee Act of 2009, H.R....
Next Up, Ford
Posted on June 12, 2009So now that Chrysler's closed and GM's speeding along, where does that leave Ford? Well, with still about $30B in debt for starters. But this raises a theme in corporate bankruptcy of dominated industries like automotive and airlines. Will Ford...
Oakland = GM?
Posted on June 11, 2009Where have I heard this before: Oakland City Council members may have privately bandied about the possibility of the city filing for bankruptcy, an unusually rare event in U.S. history. But none says it's likely, and Mayor Ron Dellums virtually...
Another Chrysler Appeal
Posted on June 11, 2009This time a dealership, appealing from the bankruptcy court's order authorizing the rejection of the dealership agreement. I don't get the fight these dealers are putting up -- once the sale closed, staying with "old Chrysler" does not strike me...
Those wacky members of Congress
Posted on June 11, 2009I assume the Automobile Dealer Economic Rights Restoration Act of 2009 (H.R. 2743) is going nowwhere fast, but I do appreciate that a few members of the House were kind enough to provide this bankruptcy professor with some interesting reading...
GM's Bondholders
Posted on June 10, 2009The "Unofficial Committee of Family & Dissident GM Bondholders" -- a group comprised of 3 individuals who hold 0.0085% of the outstanding GM bonds -- has moved to become an official committee. I have never seen a case where a...
California and the Argentine Option
Posted on June 10, 2009As a person who still considers Los Angeles home, I often find myself reading the Los Angeles Times webpage. Yesterday I saw that Los Angeles County's recent note offering got a lower than expected credit-rating, in part because of the...
42 Days and Out
Posted on June 10, 2009The Chrysler sale has closed. Now the rejected dealers, underpaid secured lenders, and other unsecured creditors can file their proofs of claim and wait to see if there is anything left in "old Chrysler" to make any sort of a...
Lubben Is Around to Stay
Posted on June 10, 2009On behalf of all the regular Credit Slips bloggers, it is a pleasure to announce that Professor Stephen Lubben is joining us as a regular blogger. In associating himself with us, we are pretty sure that Lubben has thereby flunked...
What did the Indiana funds want?
Posted on June 10, 2009Felix Salmon wonders about this editorial and why anyone would pay White & Case lots of money to contest either the Chrysler or GM deals. The editorial is easily dispatched as the usual jumble from people who can't be bothered...
Nevermind that stuff our CEO said
Posted on June 09, 2009Fiat notes that the Chrysler deal, by its terms, automatically expires on June 15th if not closed. Lyle at SCOTUSblog has more on the responses to the Indiana Funds' filing this morning.
GM, Chrysler, and Future Tort Claims
Posted on June 09, 2009Steve Jakubowski continues his interesting ruminations over the Chyrlser sale, noting that he doubts that Justice Ginsburg is "losing sleep over whether the sale is a sub rosa plan or whether the absolute priority rule was violated." I agree, although...
In other Chrysler news
Posted on June 09, 2009The bankruptcy court entered an order today that allows the debtor to reject more than 700 dealership agreements, effective today. The order includes the following slightly odd finding: To the extent that any Dealer Laws conflict with the terms of...
Chrysler Appeal -- let the closing commence
Posted on June 09, 2009The Supreme Court has lifted the stay.
The Absolute Priority Rule?
Posted on June 09, 2009Part of the debate about the GM and Chrysler cases has turned on the putative violation of the Absolute Priority Rule. I've previously argued that the actual deal structure in both cases contains no such violation, because the value going...
Prognostications on Appellate Procedure
Posted on June 09, 2009Justice Ginsburg's stay should not be over-read. She is exercising her single justice authority to accord more time for the full court to pass on the petition. The Supremes have a well oiled procedural machinery to deal with quick-response stays...
Chrysler Appeal -- stay edition
Posted on June 08, 2009Justice Ginsburg has entered a temporary stay that essentially extends the 4pm deadline, without telling us more. UPDATE: My friends at SOTUSblog (whom I've never met) have more on the order. They describe the order as having "no legal significance."
Why it will be good to be a bankruptcy lawyer
Posted on June 08, 2009or at least a chapter 11 lawyer, even after the Chrysler and GM sales close. Assuming, of course, the Supreme Court does not outlaw 363 sales.
Chrysler Sale Order Appeal -- U.S. Weighs In
Posted on June 08, 2009The Solicitor General's memorandum urging Justice Ginsburg to deny the request for a stay is here. The pleading highlights the difficulties the appellants will have overcoming the bankruptcy court's findings of fact. The pleading also rejects my suggested interpretation of...
The Politics of GM and Chrysler
Posted on June 08, 2009There is no doubt that both GM and Chrysler are highly political bankruptcy cases, and the Politico blog has a new story that examines the Republican party's efforts to use GM to attack the President. In part this ability to...
That wasn't so smart
Posted on June 08, 2009Fiat's CEO flushes his company's leverage, saying Fiat won't walk away from the deal even if it goes past June 15, potentially complicating things for Chrysler's attorneys, who have argued that any delay will "kill the sale." The Obama Administration...
What's Going On?
Posted on June 07, 2009Throughout the Chrysler case, the Indiana Pension Funds have asserted that they hold $42 million of the senior debt. But in their application last night (at page 6), asking the Supreme Court for a stay, they assert they hold $100...
Chrysler's Sale Order & Filene's Basement
Posted on June 07, 2009At pages 20-21 of their application for a stay of the bankruptcy court and 2d Circuit's rulings, the appellants state that the Supreme Court will want to consider their appeal because: This matter also raises an important issue of first...
Chrysler Sale Order Appeal -- Supreme Court Edition
Posted on June 07, 2009The appellants have asked Justice Ginsburg to stay the closing of the 363 sale so that the Supreme Court can consider the issues in the appeal. The SOCTUSBlog has good coverage of the various pleadings. I have previously indicated that...
Link to full medical bankruptcy article
Posted on June 06, 2009On June 5, CBS ran a story, "Medical Debt Huge Bankruptcy Culprit." CBS News story. Not only is it an interesting write up, but there is a link to our (Himmelstein, Thorne, Warren and Woolhandler) full article, "Medical Bankruptcy in...
Federalist 44
Posted on June 05, 2009As others have noted, the Indiana Pension Funds invoke the founding fathers in support of their claim that the government is rolling over their rights as creditors. This part of the brief particularly stands out: As James Madison wrote long...
As Seen on NPR's Fresh Air . . . .
Posted on June 05, 2009I'm fond of saying that I have a face made for radio, granted not the most original line in the world but maybe that it's me and not radio. Check out Credit Slips blogger Adam Levitin grinning from ear to...
Shocked, Shocked
Posted on June 05, 2009Steve Jakubowski has a great new post up summarizing the bankruptcy court's decision in Chrysler, and in it he makes plain an argument that I've only referred to obliquely. In particular, in both GM and Chrysler many of the banks,...
Credit Card Line Reductions and Eliminations
Posted on June 05, 2009In the coming months and years we are likely to hear the banking industry and its supporters blame the Credit CARD Act for reductions in consumer credit availability. That might end up being the case, but we should be skeptical...
The latest Consumer Bankruptcy Project publication: Medical Bankruptcies
Posted on June 05, 2009Along with my co-authors (Himmelstein, Warren and Woolhandler), I would like to share with the readers of Credit Slips some of the highlights of our most recent publication from the Consumer Bankruptcy Project 2007: "Medical Bankruptcy in the United States,...
The 2d Circuit
Posted on June 05, 2009As you have no doubt have heard by now, and as I had long expected, the 2d Circuit affirmed the bankruptcy court's decision in Chrysler, essentially incorporating the Bankruptcy Judge's opinion by reference. The courtroom was packed -- at least...
Chrysler Briefs (copies)
Posted on June 04, 2009By popular demand, below are some of the key briefs in the Chrysler appeal. There are about a dozen total briefs in this appeal, but reading these will give you the core arguments. Download Debtor Brief Download US Brief Download...
GM's New Chapter
Posted on June 04, 2009It's not surprising that GM is advertising heavily during the NBA Finals, despite, or perhaps because of, its recent bankruptcy. But what did catch me off guard is the new slogan I just heard at the end of a commercial:...
The Chrysler Briefs
Posted on June 04, 2009Tomorrow at 2pm a panel of the 2d Circuit (09-2311) will hear arguments in the expedited appeal of the Chrysler sale order. I hope to attend the hearing. In preparation, I've been slogging through as many of the briefs as...
Credit Card Defaults--Piggybacked Underwriting
Posted on June 04, 2009If you want to get a window on why credit card defaults are soaring, look at credit card underwriting. There is virtually no income verification in the card industry--all loans are stated income loans (a/k/a liar loans), and we know...
Let the Canadians Run It
Posted on June 03, 2009The Financial Times mentions that Senator Alexander has proposed distributing the U.S. Treasury's stake in reorganized GM to taxpayers. After we all receive our 0.0000003% stake in GM (talk about separation of ownership and control), the Canadians and the UAW...
Chrysler Appeal
Posted on June 03, 2009The 2d Circuit is holding a hearing on Friday. No word in the article on whether they'll stay the closing, which can happen any time after noon on Friday. Unfortunately the Circuit's PACER page is not as useful as the...
May Bankruptcy Filings Climb to Over 6,000 Per Day
Posted on June 03, 2009According to data from Automated Access to Court Electronic Records ("AACER"), there were over 120,000 U.S. bankruptcy filings in May 2009 or 6,020 for each of the 20 business days in May. That is the first time daily bankruptcy filings...
GM & Opel
Posted on June 03, 2009On the day GM filed, the Times ran a story noting that GM's European division ? Opel/Vauxhall ? had been ?spared? going into bankruptcy by the deal with Magna and some Russian investors. Are we so certain they were spared?...
GM & Our Socialist Angst
Posted on June 02, 2009Much hand-wringing has occurred over the government's large equity stake in GM (or, New GM) announced as part of its mostly prepackaged plan of reorganization, with of course "Government Motors" appearing on newscast graphics. Leaving aside the socialists in our...
What's Up With This?
Posted on June 02, 2009A financially savvy Credit Slips correspondent--but aren't they all?--wrote with the following story: "Just received a robo-call telling me that my credit card interest rates were going up, and I should press '6' for more, live information to do something...
GM & Investor Rights
Posted on June 02, 2009David Brooks has a generally smart column in today's Times about GM, in which he notes that the chapter 11 case can only resolve GM's operational and financial problems, it can't change GM's management. And as I've noted before, there...
Chrysler Sale Order Appeal
Posted on June 02, 2009The bankruptcy court has certified both of the sale-related orders for immediate appeal to the 2d Circuit. Under 28 U.S.C. §158(d)(2), it will be up to that court to decide whether to accept the appeal.
Chrysler Sale Order Appeals -- growing by the minute
Posted on June 02, 2009The notices of appeal are coming fast and furious now. But some of the appeals are filed by parties of dubious standing. Are the Center for Auto Safety or Public Citizen (founded by noted bankruptcy commentator Ralph Nader) really "persons...
GM Has Filed
Posted on June 01, 2009Case was assigned to Judge Gerber, case no 09-50026. UPDATE: Download GM Petition
Movin' Right Along
Posted on June 01, 2009The bankruptcy court has scheduled a first day hearing in GM for 4pm today. GM won't have any trouble meeting its first "Case Milestone;" it has already filed its sale motion. Unfortunately, the requested bidding procedures include the requirement that...
A Forum Shopping Update
Posted on June 01, 2009As Bankruptcy Judge Steven Rhodes of Detroit commented in Time magazine, "There is no district in this country that has a greater stake in the outcome of a General Motors case than the Eastern District of Michigan." Exactly. And that...
The End of an Aphorism
Posted on June 01, 2009The United States will own 60% of the reorganized General Motors, meaning that what is good for General Motors is good for the United States, literally. Can you still use an aphorism that has lost its punch? Is this any...
What?
Posted on June 01, 2009Or as my daughter used to say when she was learning to speak "what say? From the aforementioned DIP motion: Any delay will result in significant irretrievable revenue perishability to the detriment of all interests and will exacerbate consumer resistance...
The GM Fast Track
Posted on June 01, 2009I've been reading over GM's DIP Financing motion, and came across the following: The "Case Milestones" include: June 3, 2009: deadline to file motion to approve 363 Transaction (as defined below); June 5, 2009: deadline for commencing hearing on motion...
GM's Plan: The Basic Outline
Posted on June 01, 2009The basic outline of GM's plan to reorganize (as opposed to a plan of reorganization) as it's seeping out is pretty neat. GM wants to separate its productive assets from its liabilities. The basic way to do this is to...
Beating around the bush
Posted on June 01, 2009It is amusing -- in a dark sort of way -- that the GM Q&A for investors never mentions that the shareholders are expected to get no recovery under the proposed reorganization structure. The repeated intonation of phrases to the...
The Minnow & the Whale
Posted on June 01, 2009GM filed in the Southern District of New York as a related case to Chevrolet-Saturn of Harlem, Inc., a company-owned dealership located on 2nd Avenue in New York.
Chrysler Appeals
Posted on June 01, 2009As I noted earlier, the Indian Pension Funds have filed two appeals. The debtors have now asked the bankruptcy court for permission to go directly to the 2d Circuit Court of Appeals -- bypassing the Southern District of New York....
And in other news
Posted on June 01, 2009The Indiana Pension Funds have appealed from Judge Gonzalez's opinions approving Chrysler's sale motion and ruling that the pension funds don't have standing to challenge the Treasury's actions under the TARP program. I suspect they may have jumped the gun...
Chrysler Sale Order
Posted on June 01, 2009The court has entered a final order approving the sale. The court also granted a partial waiver of FRBP 6004(h), so that the debtors can close any time after noon on Friday (absent a stay by an appellate court). The...
GM First Day Hearing
Posted on June 01, 2009The hearing is coming to a close -- looks like GM will not only get its typical first day motions approved, but also its sale procedures. Sale hearing is set to commence on June 30. At this pace they are...
Let's Try This Again
Posted on June 01, 2009Despite my best efforts (see here, here, here, here, you get the idea), we have yet another story today about how the Chrysler sale is a "rub rosa" plan that violates the absolute priority rule. It is not -- and...
Chrysler & GM
Posted on May 29, 2009Word is that the Chrysler ruling won't come until Monday -- when everyone expects GM to file. A busy day at the Alexander Hamilton Custom House. Update: here's the story.
Chrysler & Credit Bidding, Again
Posted on May 29, 2009At the hearing tonight, the government has asserted that they told the representative of JP Morgan Chase, the lead bank among the senior lenders, that if they did not like the proffered deal, the senior lenders could credit bid. If...
Nader on Chapter 11
Posted on May 29, 2009Ralph Nader, the consumer activist and (perhaps) decider of presidential elections, is out today with an editorial in the WSJ that argues for more Congressional involvement in the automotive bankruptcy cases. Think about that for a moment. More people involved...
Speeding up the process
Posted on May 28, 2009GM now has a committee of 20% of its bondholders supporting a plan to give the bondholders 25% of reorganized GM. The unanswered question is what the marginal difference in value is between 10% (previously offered) and 25%. From GM's...
The Inefficient Capital Markets Hypothesis
Posted on May 28, 2009The Efficient Capital Markets Hypothesis (sometimes just called the Efficient Markets Hypothesis) states that liquid markets quickly absorb information, so that it is essentially impossible for an average investor to make excess profits trading on public information...
A couple of quick Chrysler points
Posted on May 27, 2009On the eve of the big sale here, there have be a few new developments. First, the district court denied the Indiana pension funds' motion to withdraw the reference. I suspect the pension funds are working on those "stay pending...
GM's Bondholders
Posted on May 27, 2009Felix Salmon has an important new post on the practical differences between the Unions and GM's bondholders, even if they are both formally unsecured creditors. It's also important to remember that the GM bondholders are unsecured, unlike the dissenting creditors...
The Cost of Going Broke
Posted on May 26, 2009The NY Times is out today with a kind of obvious, yet important article making the point that the big beneficiaries from the seemingly inevitable GM bankruptcy will be the bankruptcy lawyers and other bankruptcy professionals. As the Times notes,...
§363(f) and Successor Liability
Posted on May 25, 2009Another interesting objection to the Chrysler sale motion comes from the State of Connecticut. The State argues Neither the Supremacy Clause of the United States Constitution nor the doctrine of preemption obligate state courts to enforce an otherwise valid order...
363(f) and Dealership Agreements
Posted on May 24, 2009With the Chrysler sale hearing slated to begin Wednesday morning, the attorneys at Jones Day are no doubt spending their Memorial Day weekend writing an omnibus response to the many objections already on the docket, as well as negotiating resolutions...
What do they think will happen now?
Posted on May 22, 2009GM bondholders are rejecting the exchange offer that would give them 10% of the company. I've always said that getting 90% of the bonds, given the widely dispersed ownership, was an extreme longshot. But I hope the bondholders understand that...
Thorne's Post to the NYT's blog, "Room for Debate"
Posted on May 21, 2009A couple days ago, I was asked to write up a comment/response to the following statement for the NYT?s blog, ?Room for Debate: A Running Commentary on the News?: ?As Congress and federal regulators move to limit how much banks...
Sub Rosa Plans
Posted on May 21, 2009Lots of discussion of sub rosa plans lately, but little discussion of the fact that the 2d Circuit has never really embraced the Braniff-type analysis of this issue. For example, the sale objection filed by the "Committee of Chrysler Affected...
Repealing Marquette
Posted on May 20, 2009Senator Sheldon Whitehouse has introduced, with Senator Dick Durbin, the Empowering States' Right to Protect Consumers Act of 2009 (S. 255). The statute would repeal the thirty-one year old Marquette decision, which was the United States Supreme Court ruling that...
Once More, with Feeling
Posted on May 20, 2009I've said before that I don't see how the absolute priority argument in Chrysler has legs, unless the senior creditors can show that Chrysler's assets are currently worth more than $2 billion. There is no indication that the consideration going...
A Williams Act for Derivatives
Posted on May 20, 2009One reason I?ve often thought that the benefits of moving credit derivatives to a central clearing house/exchange model have been oversold turns on the ability to move trades offshore. This is highlighted in an excellent article in today?s FT, in...
Collateral, Collateral Everywhere
Posted on May 19, 2009IDSA has been trumpeting the increased use of collateral in derivative transactions, which is said to reduce the systemic risk associated with derivatives. An article in today?s Financial Times notes that non-financial users of derivatives are concerned that the Administration?s...
Credit Card Legislation
Posted on May 19, 2009The most significant credit card reform legislation since the 1968 Truth-in-Lending Act cleared its last major hurdle today, when it was overwhelmingly approved by the Senate. There are some not inconsequential details to iron out in conference (House version, Senate...
Do Bidding Procedures Matter?
Posted on May 18, 2009I?m just back from the American Law and Economics Association annual meeting, and the big topic of discussion was Chrysler?s recently approved bidding procedures. In particular, virtually everyone I spoke with was dismayed by the requirement that a bidder assume...
AP Launches the Economic Stress Index
Posted on May 18, 2009The Associated Press has launched the Economic Stress Index. Credit Slips readers will find it very useful and interesting. For a dataphile like myself, it's just plain cool. OK, it's not cool at all because it shows the tremendous depth...
Home Depot Spends More on Interchange than on Health Care
Posted on May 17, 2009I was bowled over by a figure in The Home Depot's presentation at the Chicago Fed?s 2009 Payment Systems Conference this week: The Home Depot paid more in interchange than for employee health care last year. That?s astounding. Interchange is...
Gamble Away the Risk
Posted on May 14, 2009Bankruptcy is a back-stop for risk management errors. Last week I attended a conference sponsored by the Center for Health, Economic, and Family Security at Berkeley Law on the appropriate level of risk that government, private industry, and individuals should...
The Footwear Begins to Fall
Posted on May 14, 2009Chrysler has filed its motion (Docket No. 780) to reject about a quarter of its dealership agreements. And while I don?t want to become as grumpy as this guy, it would be nice if the press could accurately relay the...
Credit Default Swaps & Regulation
Posted on May 14, 2009The administration has proposed new regulations that would move a substantial part of the extant CDS market onto exchanges and force clearing through central clearing agents. This is fine, as far as it goes. The clearing agents will provide regulators...
Chrysler & 363 Sales, Again
Posted on May 14, 2009Two leading bankruptcy professors are out with new critiques of the pending Chrysler sale motion. Todd Zywicki argues that the President has violated the rule of law by promoting a plan that violates the absolute priority rule, because the union...
Haven't we been over this already?
Posted on May 13, 2009Bloomberg is out with a breathless new story about how the "30 to 60 days" that the President referred to with regard to Chrysler is not actually the length of the bankruptcy case but the time until "new Chrysler" emerges...
Setting up the Bondholders
Posted on May 12, 2009GM?s CEO said today that the company would not alter the terms of its exchange offer, and that the company?s fate rested with the bondholders. But GM can?t be that naïve ? exchange offers rarely work, especially with a high...
Marginal Credit Card Borrowers Come Back to Haunt Banks
Posted on May 12, 2009The New York Times just ran a fascinating, short piece on the relationship between unemployment and credit card defaults. Historically, there has been a strong correlation between the two, and there still is. But this time around the measures are...
A Note on GM and CDS
Posted on May 12, 2009It is CDS day on the blog. Both the comments to my prior post and a recent post by Felix Salmon raise the issue of why GM's attempts at an out of court restructuring don't constitute a "restructuring" credit event...
Let's Make It Perfectly Clear About GM
Posted on May 12, 2009In a post yesterday, Lubben referred to the role credit default swaps are playing in the GM, but let's make sure no one missed the point. So far, everyone seems to have missed a major point, and I think it...
Looking Ahead: GM
Posted on May 11, 2009It seems increasingly likely that GM will follow Chrysler into bankruptcy: GM recently announced that it would pay its trade creditors five days earlier than usual, which looks like an attempt to settle up with trade creditors before the filing....
Bankruptcy Remote ? Bankruptcy Proof?
Posted on May 09, 2009"Bankruptcy remoteness" is the bedrock of asset securitization. Bankruptcy remoteness means both that the assets will not be part of the originator's bankruptcy estate and that the securitization vehicle (SPV) will not itself file for bankruptcy. The former is achieved...
Anyone else notice this?
Posted on May 08, 2009Chrysler's disenting senior creditors filed their much discussed 2019 statement the other day. A copy can be found here. Under Federal Rule of Bankruptcy Procedure 2019(a), the statement must include "a copy of the instrument, if any, whereby the ....
Nevermind
Posted on May 08, 2009The Chyrsler dissenting lenders have disbanded. This does not, of course, resolve the issues I raised here.
Chrysler & Credit Bidding
Posted on May 07, 2009As I made clear in my prior post, I think that many of the arguments advanced against the Chrysler sale motion are largely noise, generated by confusion over the structure of the deal. But I also mentioned that one real...
The Chrysler Sale Motion
Posted on May 06, 2009I wanted to start with something about the Chrysler sale because commentators whom I respect (see here and here) seem to be somewhat skeptical of the endeavor. I think these commentators have misunderstood the structure of the sale, no doubt...
Look for Lubben's Lucidity Here
Posted on May 06, 2009Professor Stephen Lubben of Seton Hall has appeared in the New York Times, the Associated Press, PBS, and many other media outlets commenting on the Chrysler bankruptcy, and now he has coming back to Credit Slips. Lubben has kindly agreed...
Bankruptcy Filings Dip Slightly in April
Posted on May 04, 2009April 2009 bankruptcy filings dipped slightly from March. The 2.2% decline keeps the calendar year 2009 in line with recent historical patterns of heavy filing increases in the first part of the year followed by no changes or slight declines...
Thank You Again to David Lander
Posted on May 04, 2009Credit Slips guest blogger David Lander wrote me over the weekend and said he might have one more post, but before he got away, I wanted to thank him for taking time out of his busy schedule to share his...
Thanks to Demos
Posted on May 01, 2009Several years ago Demos organized a small conference to bring together consumer advocacy groups with academic and think tank economists and sociologists and a few bankruptcy and consumer protection lawyers and law profs and Foundation funders. Not only was it...
Debt Management Plans and Chapter 13 Plans: Non Identical Twins Or Distant Cousins?
Posted on April 29, 2009The drop in the percentage of U.S. consumer bankruptcy filings that are chapter 13 cases (commented upon in Credit Slips recently by Bob Lawless) is mirrored by the reduction in the percentage of overindebted consumers who are ?qualifying? for Debt...
Chrysler and Foreclosures: the Contrast
Posted on April 28, 2009Today it's reported that Chrysler has convinced its creditors to agree to modify its debt obligations. Chrysler was able to do this in part because of the leverage it had by threatening to file for bankruptcy. It's instructive to contrast...
Does Anybody Know If Credit or Foreclosure Counseling Helps?
Posted on April 28, 2009The infusion of millions of dollars to pay "counselors" to forestall foreclosures on behalf of consumers who are delinquent on their mortgage payments seems as American as apple pie and should perhaps help some homeowners. These dollars are split among...
Creating Legislative Intent Years After Passage of Revised Article 9
Posted on April 27, 2009The legislative drafting errors in BAPCPA have certainly launched a fascinating set of statutory construction challenges for the courts. For example: What level of ambiguity is necessary before the court resorts to legislative intent? If the statute itself is clear...
Welcome to David Lander
Posted on April 27, 2009St. Louis bankruptcy attorney David Lander has kindly agreed to a reprise of his guest blogging stint on Credit Slips for a few days. Lander is with the law firm of Thompson Coburn, LLP, and is well known to many...
Why Card Issuers Engage In Rate-Jacking
Posted on April 26, 2009The media has been abuzz recently with articles (here and here and here and also here) about rate-jacking--the often arbitrary increases in cardholders' interest rates. At first glance rate jacking makes little sense. Why raise rates on a good, paying...
A Map that Is Cool, Useful, and Scary
Posted on April 24, 2009Slate has a put up a map that animates first job growth and then scary job losses from January 2007 to February 2009. It's worth a look, although the sea of red at the end might cause some sleepless nights....
Mortgage Modification Vote in Senate
Posted on April 24, 2009Credit Slips has featured a lot of articles about a legislative proposal to give bankruptcy judges the power to modify home mortgages in chapter 13 (here, here, here, here, and here for a just a few examples). Heck, we were...
Finally, Some White House Interest in Credit Card Abuses
Posted on April 23, 2009The Obama Administration today turned its attention toward abusive credit card practices. After years of presidencies that were at best indifferent or at worst supportive of the credit card industry abuses, to finally have the White House give some attention...
Chapter 13 Rate Down Sharply in March
Posted on April 21, 2009The 2005 changes to the U.S. bankruptcy law were supposed to move more debtors into chapter 13 with the idea that they would have to pay at least a portion of their debts. In March, however, the chapter 13 rate...
Mortgage Symposium at Pepperdine
Posted on April 15, 2009On Friday, Pepperdine University School of Law is hosting a symposium entitled, "Bringing Down the Curtain on the Current Mortgage Crisis and Preventing a Return Engagement." As the announcement notes, the Pepperdine Law Review is bringing top scholars and Bob...
Elizabeth Warren on The Daily Show
Posted on April 15, 2009Credit Slips co-blogger Elizabeth Warren officially just became the coolest person I know. She will appear as tonight's guest on The Daily Show with Jon Stewart. One of the other Credit Slips co-bloggers told me that "being the coolest person...
AALS Debtor-Creditor Call for Papers
Posted on April 11, 2009The Association of American Law Schools' Debtor-Creditor Section issued a call for papers on debtor-creditor scholarship, most broadly understood, for presentation at the AALS Annual Meeting in New Orleans in January 2010. Proposals are welcome from a wide array of...
Interchange Fee Settlement
Posted on April 07, 2009MasterCard settled a lawsuit brought by the European Commission's Directorate General for Competition, which alleged that MC (and Visa's) "Multilateral Interchange Fee" (MIF) an interbank fee for cross-border transactions in Europe (basically good old US interchange) was anticompetitive...
Does President Obama need to nominate 339 (or so) bankruptcy judges?
Posted on April 06, 2009Tuan Samahon's new article, Are Bankruptcy Judges Unconstitutional?, 60 Hastings L. Journal 233 (2008), offers a fresh twist on the constitutionality of the bankruptcy judiciary. He sidesteps the Northern Pipeline v. Marathon debate about whether bankruptcy judges can or should...
Courts as Creditors
Posted on April 06, 2009I teach my students that the days of the debtor's prison and the workhouse are long past; the only debt you can go to prison for are domestic support obligations. But it turns out that there's another jailable offense: failing...
Bankruptcy Filings Rising Faster Than Expected
Posted on April 02, 2009In March 2009, data from Automated Access to Court Electronic Records (AACER) report there were almost 131,000 total U.S. bankruptcy filings for a rate of 5,945 filings per business day. That is a 9.2% increase from February and a year-over-year...
Landing Claims from LandAmerica
Posted on March 31, 2009A Richmond Times-Dispatch reporter, Emily Dooley, called me yesterday and clued me into an interesting story from the bankruptcy of LandAmerica, the Virginia based title insurance company that is in chapter 11. Her story is here, and Credit Slips readers...
Pun of the Day
Posted on March 31, 2009Several people have asked me why Obama can't simply order a restructuring plan for the auto makers. As I've explained, his ability to do so depends on the company: he can't dictate terms to GM, but Chrysler he can fix...
Consumer Overindebtedness Around the World
Posted on March 27, 2009My plan for the evening is to go in search of a giant sculpted head of Karl Marx. Fortunately, I'm in Chemnitz, Germany, where such a monument is a feature of the town square, a holdover from the days when...
AIG Bonuses as Fraudulent Transfers
Posted on March 27, 2009We?ve heard Fed Chairman Bernanke and Treasury Secretary Geithner say that there are no legal avenues to clawing back the AIG bonuses. I?m not so sure that?s true. What about good old fraudulent transfer law? That?s a cornerstone of creditor-debtor...
Laughing through the Pain
Posted on March 26, 2009This economic meltdown isn't fun for anyone, not even bankruptcy law professors. But Americans are creative, resilient folks and in the midst of hardship, some people are finding ways to cheer themselves with humor. Here are three recent examples to....
Going Broke Like a Pro
Posted on March 25, 2009There are a couple of interesting stories in the sports mags about the financial problems of professional athletes. ESPN has a piece about Michael Vick's Chapter 11. And Sports Illustrated has a longer piece about why professional athletes often have...
Thank You, Professor Kilborn
Posted on March 23, 2009In addition to Professor Weller, Credit Slips also is saying "come back again soon" to Professor Jason Kilborn. As he always does for us, Professor Kilborn has provided an international and comparative perspective on consumer indebtedness and bankruptcy...
Thank You, Professor Weller
Posted on March 23, 2009Credit Slips needs to thank Professor Christian Weller again for all of his contributions and insights as a guest blogger. As an economist, his posts always add a new perspective to our other content. Thanks again, Christian, for taking the...
How to Start to Get Trillions in Lost Wealth Back
Posted on March 22, 2009The fact that wealth is rapidly declining deserves public policy attention. Wealth serves critical functions in the U.S. economy that relies heavily on individual initiative. It is primarily an insurance against a range of economic risks. The more such insurance...
Easterbrook: Banks Free to Gouge Consumers (at least for now)
Posted on March 20, 2009Yesterday the Seventh Circuit upheld a district court decision permitting the retroactive application of penalty credit card interest rates to existing balances. Writing for the court, Judge Frank Easterbrook noted that (1) the plaintiff's state law claims were preempted by...
Warning: Credit Card Practices Can Be Detrimental to Your (and Their) Health
Posted on March 19, 2009Here is another example from the list of ?things that we saw coming, but nobody cared.? Credit card companies are suffering from record default rates. In the fourth quarter of 2008, credit card companies charged off ? declared as uncollectible...
Austrian Banks, East European Subprime, and Hungarian Consumer Bankruptcy
Posted on March 19, 2009Change the names, and you don't even have to read the rest of the story any more. Europe and the United States are on parallel tracks to hell in a handbasket. Today's Washington Post has a fascinating story on the...
Is AIG Insolvent?
Posted on March 18, 2009Apparently just about every law professor in the country had the same reaction I did upon reading that the AIG bonuses were paid because the contracts were binding, a reaction that can probably be summed up as: ?What??? As a...
Rx Contract Abrogation (Use Only As Directed)
Posted on March 18, 2009Former Credit Slips guest blogger Anna Gelpern has a nice post on AIG and contract abrogation on Nouriel Roubini's RGE Monitor. Anna argues that there are times when abrogating contracts makes sense, but that AIG just isn't one of them....
Rebuilding the Retirement Dream
Posted on March 17, 2009Ahh, retirement ? so many possibilities, so little time! Turns out that for millions of Americans the dream of a secure retirement was just a dream. From 2007 to 2008, total retirement wealth in private and public sector pension plans...
Whatever Happened to Bankruptcy?
Posted on March 17, 2009It's hard to remember in the midst of the bailout craze, but the United States does have legal mechanisms for dealing with insolvency. We have the FDIC system for banks and bankruptcy for everyone else just about. These are well-established...
AIG--My Very Own Rick Santelli Moment
Posted on March 17, 2009The AIG bonus episode pisses me off. But not for the reason it ticks off most other people. Yes, it's outrageous that the shmoes who drove AIG off a cliff are getting a bundle of cash. But what really bothers...
Open Access Factories
Posted on March 16, 2009This semester, I have been teaching a seminar simply called "Bailouts." This week, we have been talking about the automobile industry. One of my students, Aaron Moshiashwili, put forth an interesting idea in his written work for the week. In...
Our House in the Middle of Our Street is no Longer Our House
Posted on March 16, 2009Here?s a news flash: The housing market is bad. Actually, it is really bad, historically, woefully bad. And, the bad news won?t stop coming. Housing wealth is dropping precipitously, families own ever smaller shares of their own homes, and home...
Gone in 1.8 Seconds
Posted on March 15, 2009A trillion here, a trillion there and all of a sudden you are talking real money. We are getting used to the ?T? word. Over the past year and half ? from the middle of 2007 through the end of...
Christian Weller Again to Lend His Expertise
Posted on March 15, 2009Professor Christian Weller, a senior fellow at the Center for American Progress and professor of public policy at the University of Massachusetts Boston, has again kindly agreed to lend his time and expertise with Credit Slips readers. As an economist,...
Party Time in the Netherlands?
Posted on March 13, 2009A comment from the Netherlands reminded me to post about an intriguing statistic I've been exploring. While consumer insolvency filing rates have been up around the world this past year (at least in the last quarter of 2008, as mentioned...
A Vignette from Champaign
Posted on March 12, 2009Driving down one of our main thoroughfares yesterday, I drove past one of our local banks that was advertising its CD rates on the electronic sign out front. OK, nothing usual there. What was unusual was the line that appeared...
Cognitive Dissonance About BAPCPA
Posted on March 12, 2009I don't know why I continue to be surprised by the statements about BAPCPA made by the now-infamous Prof. Zywicki, but like a moth to a flame, I keep reading them with utter amazement. Yesterday's hearing before the House Judiciary...
Hoping for Failure!?
Posted on March 11, 2009As if negotiating a confirmable reorganization plan weren't difficult enough already, apparently credit default swaps (CDS) are making it even more difficult. The March 7th issue of the Economist has a great sidebar article, aptly entitled "Burning down the house...
Shared Suffering in Airports and in Bankruptcy
Posted on March 11, 2009Warning: this is one of my odder posts. Today I got a postcard in the mail encouraging me to sign up for Flyclear, a private service that for a mere $174 annual membership will provide me with a special ID...
Great New Reading on Mortgage Modification
Posted on March 11, 2009It's not all just fun and games with old credit cards at Katie Porter's house! She and a couple of co-authors have a great new paper on SSRN describing the history of the anti-modification provision for principal residence mortgages, an...
National Banks in Real Estate Brokerage
Posted on March 11, 2009It appears that Congress is going to permanently ban national banks from engaging in real estate brokerage. This is a major win for the National Association of Realtors, who worry that if banks get in the brokerage business, they will...
Interchange is No Laughing Matter
Posted on March 11, 2009The Merchants Payments Coalition, a merchant alliance that is pushing for reform of the credit card interchange fee system, has a nifty little cartoon out in Roll Call and the Washington Times. So a few words of explanation. Interchange is...
We're in the Money!(?)
Posted on March 10, 2009Here in the U.S., lawyers in other areas must be eyeing their bankruptcy counterparts with envy, as our sector enjoys (if we can use that word without multi-directional guilt!) rapid growth while others areas are contracting. In England, this U.S.-bankruptcy-lawyer...
A Second Life for Old Cards
Posted on March 10, 2009Credit Slips has an internal policy of not posting about anything other than debt or credit. No movie reviews, no divulging secret recipes, no waning on fabulous vacation to Nebraska. But I am nothing if not resourceful in circumventing policies,...
Anticipating Refund Anticipation Loans
Posted on March 07, 2009I've clearly become predictable in my posts, as someone recently wrote to me wondering where is my annual tax-time rant against refund anticipation loans (RALs). In fact, I have written about them twice before on Credit Slips, here and here....
U.S. Banks Are Not Alone in Feeling the Pain
Posted on February 26, 2009In yet another instance of "it's a small world," Royal Bank of Scotland yesterday posted the largest annual net loss in British banking history--£24 thousand million (US$34 billion). Like many U.S. megabanks, RBS (1) suffered from extreme investments in complex...
New English Bankruptcy History Archive on SSRN
Posted on February 24, 2009Actually, it's not really an archive per se, but the long list of collected works by John Paul Tribe, KPMG Lecturer in Restructuring at Kingston University (London) School of Law, is impressive enough to merit its own subject heading in...
United Arab Meltdown & Bailout
Posted on February 23, 2009It's often shocking how stories emerge from the other side of the globe that seem almost perfectly to echo the U.S. experience. Take, for example, this story, from the front page of the W$J today: "The cash infusion from the...
Financial Distress Has No Borders
Posted on February 20, 2009The Swedish word designating a corporation is aktiebolag (lit., "stock company"), abbreviated "A/B." This A/B represents the last two letters in the name of one of Sweden's most beloved companies, Saab (Svenska Aeroplan A/B, Swedish Airplane Co.), which took a...
Reorganization Is the Worst Option . . . Except For All Others
Posted on February 19, 2009The tried and true criticisms of bankruptcy procedures that salvage jobs while forcing creditors to internalize losses are making the rounds again. People just don't understand. In England, in particular, the financial press is all over "pre-packs" that allegedly allow...
U.S. No Longer "Most Liberal" Consumer Bankruptcy System?
Posted on February 18, 2009Unlike Bob, I am not a statistics wizard, but like him, I like to follow consumer bankruptcy filing trends. Since 2005, I've been following these trends with an eye toward deciding where the U.S. stands among the "most liberal" consumer...
Scandinavian Home Mortgage Lien Stripping
Posted on February 17, 2009It seems increasingly likely that we'll see a reform of U.S. law to allow home mortgage loans to be stripped down (or crammed down, if you prefer) to the value of the home. I was surprised to learn recently that...
Islamic Bankruptcy?
Posted on February 16, 2009Thanks so much, Bob, for the extremely gracious introduction. I wish my knowledge of bankruptcy law were as capacious as Bob suggests. I'm working hard to live up to Bob's description in the narrower realm of consumer debt relief, but...
Thanks for Kathleen Keest
Posted on February 16, 2009Credit Slips thanks Kathleen Keest, Senior Policy Counsel with the Center for Responsible Lending, for her contributions as guest-blogger last week. Kathleen highlighted some historic trends in consumer credit and gave her insights on some very pressing current matters, including...
Household Income and Debt Trends Since 1980: Quick Picks
Posted on February 16, 2009The folks who write Credit Slips are among those who have long wondered what the ?exit strategy? was for an economy that was predictably on a wobbly course, with about 70% of GDP driven by household spending when many of...
Credit Cards in the 2007 Survey of Consumer Finances
Posted on February 16, 2009The Federal Reserve has released its much anticipated triennial summary of the Survey of Consumer Finances. There's a lot to digest in this important report. I fear, though, that the 2007 SCF is already hopelessly dated because of the economic...
Welcome Back to Jason Kilborn
Posted on February 15, 2009Comparative bankruptcy law guru Jason Kilborn has kindly agreed to reprise his guest blogging role on Credit Slips. Kilborn, a professor at The John Marshall Law School in Chicago, is a regular over at the Commercial Law blog blog, but...
Mortgage Database
Posted on February 14, 2009The National Mortgage Data Repository is making its data available to a select group of applicants to conduct mortgage resarch. The Repository is a joint project of the National Consumer Law Center and the University of Connecticut School of Lawand...
Thank You Again, Jean Braucher
Posted on February 14, 2009We have to thank Jean Braucher for joining us a second time as a guest blogger on Credit Slips. I was about to write that we learned she was an Uniform Commercial Code article 9 "supernerd," but looking over that...
Some Good News for Homeowners
Posted on February 13, 2009JPMorgan Chase and Citigroup have announced a weeks-long moratorium on foreclosures while they await the release of the Obama administration's forthcoming plan to deal with the issue. J.P. Morgan said its moratorium will apply to loans it owns and services,...
The Other Underwater Loans: Negative Equity in Auto Finance
Posted on February 12, 2009On Tuesday Fed Chairman Bernanke announced another installment in the effort to alleviate the credit crunch in testimony before the House Financial Services Committee. One new tool in the kit is a joint Treasury ? Fed facility to lend against...
Getting to Know Suze
Posted on February 11, 2009Last spring, during our Debtor World conference here at the University of Illinois, it was a pleasure to get to know James Scurlock, the director/producer/writer of Maxed Out. If you have not see the movie, now is a good time....
What a Surprise, the Ability to Pay Matters on Mortgage Modifications, Too.
Posted on February 11, 2009Last week the Center for Responsible Lending posted a foreclosure ticker on its web site that counts projected new foreclosure filings as they occur: a new one every 13 seconds in 2009. That puts it at nearly 276,000 as I...
Treasury Recognizes GM/Chrysler Loan SNAFU
Posted on February 09, 2009It seems like Treasury now realizes that it did a terrible job structuring its loans to GM and Chrysler, as I wrote at the time. (Of course, this assumes that the government was looking to recover the loans, not just...
?Shock and Gall? ? The Penalty Rates That Might Eat Your Wage Gains.
Posted on February 09, 2009By now most Credit Slips readers know that new federal credit card unfair and deceptive acts or practices, or ?UDAP,? rules will prohibit banks from applying rate hikes to existing balances in most cases. (The big exception will be where...
Mortgage Servicing Problems for Prepayments
Posted on February 09, 2009With all the problems in the mortgage industry caused by defaults, it's easy to forget that the traditional bugbear of mortgage lenders isn't credit risk, but prepayment risk. If a lender contracted for a 6% return and the loan is...
Welcome to Kathleen Keest
Posted on February 08, 2009Credit Slips welcomes Kathleen Keest, an expert in consumer credit. Kathleen brings multiple perspectives to her opinions, having provided legal representation to low-income families as a legal aid attorney, exercised enforcement authority as an Assistant Attorney General in Iowa, and...
What the Credit Crunch Looks Like
Posted on February 07, 2009The Maryland suburbs where I live have been fairly insulated from the economy's problems overall. The federal government provides a steady economic anchor for the region, so we aren't too badly hit with layoffs. We don't have a major negative...
Some Thoughts from Ray
Posted on February 05, 2009While consumer credit was booming a couple of years back, I posted about one of my favorite tunes, "Master Charge," by blues legend Albert Collins. This evening, I've been sitting here writing with my iTunes list going, and a different...
The Good, the Bad and the Ugly of Mortgage Servicing and Implications for Mortgage Modification
Posted on February 04, 2009It looks as if the mortgage cramdown--er, modification-- legislation will be sitting around for a while, at least until the stimulus package gets through Congress. So it seems worth talking about its reference to making ?payments of such modified loan...
Bankruptcy Filing Rate Declines for Second Straight Month: Not Necessarily Great News
Posted on February 04, 2009The U.S. bankruptcy filing rate declined again in January 2009. This was the second straight month of declines, when bankruptcy filings are computed on a daily basis as should be done. Don't be fooled, however, into thinking the news is...
What's in a word (or 2?) Cramdown
Posted on February 02, 2009Last Sunday's New York Times Magazine's feature, On Language, discussed the etymology and signification of the word "cramdown." (Or is it "cram down?" That's a separate debate that professors have with law review editors every year). William Safire observes that...
WSJ's "Bankruptcy Beat"
Posted on January 31, 2009The Wall Street Journal has launched a new blog called "Bankruptcy Beat." The focus looks like it will be more on business than consumer bankruptcy. They describe their blog as follows: "Bankruptcy Beat provides an inside view into the latest...
Big Brother Is Looking After You
Posted on January 31, 2009The NYTimes has a story about how American Express is analyzing where its cardholders are making purchases and using that information to determine whether to likely to default and adjusting credit limits and rates accordingly. This sort of behaviorally-based pricing...
It's Not You, It's Where You Shop
Posted on January 30, 2009A lot of stories had been circulating on the Internets and through the Google that consumers were getting hit with lower borrowing limits on the credit cards. Sometimes, they received notice the limit was lowered, and sometimes they found out...
Bankruptcy Risk Scores
Posted on January 30, 2009People talk a lot about credit scores as if there is some magic number hanging over your head and that number is following you everywhere. Isn't there maybe even some commercial like that? Like many things, the perception about credit...
Here Is Your Interest Rate, Except When It Isn't
Posted on January 30, 2009Credit card companies often make you promises with fine print that nullifies the promise. The Simpsons episodes (maybe the best . . . . show . . . . ever) often will include an advertisement promising some great product with...
Calling All Article 9 Supernerds--Negative Equity and State Law
Posted on January 30, 2009What?s a blog for? For law professors, a key attraction is to float a question you don?t have time to write a law review article about. So here is the question: As a matter of state (not bankruptcy) law, should...
Slipstering on Midmorning
Posted on January 28, 2009For those of you with bandwidth and time to spare on Thursday morning, you might want to catch two of us Credit Slips bloggers on Minnesota Public Radio's "Midmorning with Kerri Miller." Katie Porter and I will talk about bankruptcy...
Mortgage Cramdown--Layering On Complexity
Posted on January 26, 2009Chapter 13 is already too complicated, and cramdown legislation will make it more so and lead to a new round of litigation and expense that will stand in the way of keeping people in their homes. By all means, Congress...
Welcome Back to Jean Braucher
Posted on January 26, 2009Credit Slips would like to welcome back Jean Braucher, the Roger C. Henderson Professor of Law at the University of Arizona. Professor Braucher, a highly regarded expert in commercial and bankruptcy law, is an important voice in how these bodies...
Bankruptcy Modification and the Emperor's New Clothes
Posted on January 24, 2009A new argument being advanced against bankruptcy modification is that it will result in trillions of dollars of losses and the collapse of the financial system. This is the "the sky will fall" argument. Leaving aside the grossly inflated numbers,...
Cramdown and Future Mortgage Credit Costs: Evidence and Theory
Posted on January 24, 2009I've written extensively (see here, here, e.g.) on why permitting modification of mortgages in bankruptcy would generally not result in higher credit costs or less credit availability. As the debate over bankruptcy reform legislation to help struggling homeowners and stabilize...
Should I file bankruptcy?
Posted on January 24, 2009Several news stories have tackled this question about when a consumer should consider bankruptcy. In addition to the Newsweek piece that attracted lots of attention, today's New York Times Cost of Living column by M.P. Dunleavey is entitled "Bankruptcy as...
A Class on Bailouts
Posted on January 21, 2009In early 2008, I had to figure out what courses I would teach in the next academic year, and it was decided that I would offer a seminar of some sort in the 2009 spring semester. "Just call it a...
New Blog from American Banker
Posted on January 20, 2009The American Banker magazine has started a new blog called BankThink. In its words, "Written by the journalists at American Banker, BankThink is about ideas, trends, and other developments in financial services." It looks it will discuss many of the....
Focus 580 Appearance
Posted on January 20, 2009Once again proving that I have a face made for radio, I'll be on Focus 580 with David Inge tomorrow morning. For persons in the Champaign, Illinois area, you can listen beginning at 10:06 AM (Central Standard Time) at 580...
Shared Appreciation Clawbacks
Posted on January 15, 2009As bankruptcy modification of mortgages (a/k/a Chapter 13 "cramdown") looks more and more likely to become law, it's worth considering what the final legislation might look like. Already there have been some compromises in order to get Citibank's support...
Cramdown Controversy #2--Will I "Succeed?"
Posted on January 12, 2009Our active readers at Credit Slips already started debating the second controversy about the pending cramdown legislation: is the failure rate of chapter 13 too high to make mortgage modification in bankruptcy a very useful tool? To briefly reprise that...
New Orleans DA's Chapter 9?
Posted on January 12, 2009A couple of years ago, it looked like New Orleans itself would have to file for Chapter 9. Now it might just be the DA's office, which is mulling a rare Chapter 9 filing. To file for Chapter 9, an...
Cramdown Commentary
Posted on January 09, 2009Bob scooped me on an initial post about the deal between Citigroup and Senate Democrats on pending legislation to permit bankruptcy judges to modify mortgages in bankruptcy. But I have details. And commentary. And questions. First, the letters from Citibank...
Cramdown Controversy #1--Who Do I Pay?
Posted on January 09, 2009The pending legislation to permit courts to modify home mortgages is stirring up some controversies--even among its advocates. The key issues are operational and very important, I think, to the success of this legislation. Here's the first brewing controversy: How...
Chapter 13 Cramdown Bill
Posted on January 08, 2009The Wall Street Journal is reporting that Citigroup is negotiating over the terms of a bill to give bankruptcy judges the power to adjust home mortgages in chapter 13. The article further reports that the National Association of Home Builders...
Bullshit--Professionally Speaking
Posted on January 07, 2009I don't get to post very often right now, but sometimes I can put on my academic robes and talk about a new piece of scholarship. And what better thing to talk about when wearing academic robes than bullshit? Curtis...
Credit Slipping in Newsweek
Posted on January 07, 2009Newsweek columnist Jane Bryan Quinn has a column this week about when it might make sense for a consumer to file bankruptcy. See "The Case for Walking Away. " For expert commentary, Quinn's column features three Credit Slips regulars: Professors...
Chapter 11s Rise 62% in 2008
Posted on January 06, 2009Yesterday, I posted about the increase in total bankruptcy petitions. Today, I want to focus on one particular subset of that figure and that is the number of chapter 11 petitions, which also are on the rise. Again, Automated Access...
Student Writing Competition on Bankruptcy
Posted on January 05, 2009Aspiring bankruptcy geeks (I surely mean experts) and their law professors take note: the National Association of Chapter Thirteen Trustees is sponsoring a law student writing competition. The paper can be on any issue that concerns chapter 13. The winner...
Bankruptcy Filings Rise 32% in 2008
Posted on January 05, 2009Bankruptcy filings in 2008 rose 32% as compared to 2007 according to data from Automated Access to Court Electronic Records (AACER). There were just under 1.1 million total bankruptcy filings in 2008 as compared to 827,000 in 2007. Those figures...
General Blog Update
Posted on January 05, 2009In the fall, we were migrated. I had thought that entailed a change of location, but apparently it meant our blog hosting service upgraded our blog with new and improved technology. The biggest change is that readers will notice is...
Thank You, Tara Twomey
Posted on January 05, 2009Credit Slips thanks Tara Twomey for reprising her role as a guest blogger. Twomey's posts on the hurdles to successful loan modification and recent courtroom developments about the 2005 bankruptcy law attracted a lot of interesting, judging by the large...
Loan Modification Quality Matters
Posted on December 23, 2008Yesterday new foreclosure and loss mitigation data was released by HOPE NOW in its "Loss Mitigation National Data July 07 to November 08" and by the OCC/OTS in their "Mortgage Metrics Report." Combined the reports show a steadily increasing number...
More on the Auto Bailouts
Posted on December 20, 2008The term sheets are up here and here. Two initial observations:(1) These are supposed to be secured loans, but they are almost assuredly junior liens--Chrysler already has a second lien facility, so that would make Treasury third. These liens might...
Auto Bailout
Posted on December 19, 2008TARP funds are now going to be used to bail out the auto industry. Whether or not this is ultimately a good or responsible idea is something that I will reserve comment on for now. The loans' term sheet isn't...
BAPCPA Gag Rule Found Constitutional by Fifth Circuit
Posted on December 19, 2008Rarely do we get two important consumer bankruptcy decisions from the circuit courts in the same week, but it appears this is no ordinary week. As noted previously, the Seventh Circuit this week decided an important means test issue, and...
Projected Bankruptcy Filings in 2009
Posted on December 18, 2008Someone asked me about projections for U.S. bankruptcy filings in 2009, raising the issue of whether one can predict the future. Because I can't predict the past, however, we'll have to settle for my projections about the year to come....
Seventh Circuit Decides Hotly Debated Means Test Issue
Posted on December 18, 2008One of the more divisive post-BAPCPA consumer issues has been whether a debtor who has no monthly vehicle loan or lease expense can claim a vehicle ownership deduction when applying the means test. Until Wednesday, no circuit court of appeals...
Poor Servicing Paves the Path for Predators
Posted on December 16, 2008Thanks to Credit Slips for having me back. I wanted to start the week talking about how poor mortgage servicing is paving the path for a new breed of predators and how little is being done to address the situation....
Welcome Back to Tara Twomey
Posted on December 15, 2008Credit Slips welcomes back Tara Twomey who will join us for a week or two. Twomey is an attorney with the National Consumer Law Center and was a guest blogger back in March 2007. She is an expert in mortgages...
Auto Bailout Proposals
Posted on December 14, 2008Over at Conglomerate, David Zaring has an interesting discussion of some of the auto bailout plans. What follow are some assorted thoughts on the auto bailout:1. The Bailout Debate Is Irrelevant Absent a Viable Business PlanTo my mind, the debate...
Fund Manager Fraud Insurance
Posted on December 13, 2008The Bernard Madoff scandal in which perhaps $50 billion of investor funds were lost due to fraud has left me perplexed. In addition to market risk, against which investors can hedge, we also see that investors (even, or perhaps especially...
Massachusetts SJC to Subprime Lenders: Clean Up Your Own Mess
Posted on December 10, 2008A major legal development in the foreclosure crisis occurred today in Massachusetts. The Massachusetts Supreme Judicial Court, regarded as one of the finest state courts in the country, upheld a preliminary injunction against Fremont Investment and Loan for foreclosing on...
The Sky is Falling on Newspapers. Sorry, Dad.
Posted on December 09, 2008?Nobody outside the newspaper industry really understands just how bad things are.? For over a decade I?ve heard this statement and others like it everywhere ? at the dinner table and on family vacations, over the telephone and in the...
Tribune Bankruptcy: A Coup for Mark Cuban?
Posted on December 08, 2008As has been widely reported, the Tribune Company has filed for Chapter 11 bankruptcy in the Delware. Among the Tribune's major assets are its ownership of the Chicago Shlubs Cubs, a ne'er-do-well "ball" club, but still an extermely valuable Major...
We'll Miss You Tanta
Posted on December 08, 2008The world of financial blogging lost a great contributor last week. Doris Dungey, who blogged under the pseudonym "Tanta" passed away from cancer at a far-too-young age. The NY Times obituary is here. I'll miss the erudition (and the mystery)...
Bankruptcy Filing Rate Climbs Slightly in November
Posted on December 03, 2008Don't let other headlines fool you. On a daily basis, the bankruptcy filing rate rose in November and went over 5,000 for the first time since the 2005 changes to the U.S. bankruptcy law. The 91,355 filings in November were...
Bankruptcy in the Senate, December 4
Posted on December 03, 2008I'm in Providence, Rhode Island, for a field hearing of the Senate Judiciary Committee. The hearing is "Credit Cards and Bankruptcy: Opportunities for Reform." The other witness are former Credit Slips guest blogger and attorney for the National Consumer Law...
The Role of Recourse in Foreclosures
Posted on December 03, 2008Martin Feldstein has been pushing a mortgage bailout proposal that has been getting some undeserved attention (see here and here, e.g.). Feldstein gets (here, and here) how central negative equity is to the economic crisis. Homeowners with negative equity have...
A Business Model that Encourages Irresponsible Lending
Posted on November 30, 2008Friday's Detroit Free Press and today's San Diego Union-Tribune feature an op-ed I authored about the Treasury Department getting into the credit card business. I argue that interchange and billing tricks and traps are integral parts of a business model...
How Congress Could Save GM
Posted on November 29, 2008Ronald Trost is surely one of the sharpest minds in Chapter 11. He negotiated the Chrysler non-bankruptcy bankruptcy back in 1979. (His work is highlighted in Moritz & Seaman, Going for Broke: The Chrysler Story. Jay Westbrook and I still...
Whiteboarding Credit
Posted on November 26, 2008Yes, I meant "whiteboarding." If you're not an expert and are looking for plain English explanations of concepts like asset-backed securities, credit default swaps, and margin calls, check out the Marketplace Whiteboard. It's an effort by Paddy Hirsch, senior editor...
Citi and GM
Posted on November 24, 2008If I were a line-worker at GM, I?d be pretty pissed right now. My boss flew into DC on a private plane and came away with bupkes. Citi, on the other hand, just got a fourth big bailout. (Bailout 1:...
Bankruptcy Bill, the Cartoon
Posted on November 24, 2008For those of you who have not found it, take a peak at Bankruptcy Bill, a comic strip by Gideon Kendall and Steven Horowitz. Five strips have appeared so far. You'll have to click through to read them. I won't...
Tying an Auto Industry Bailout to Health Care
Posted on November 21, 2008I'm skeptical about a government-sponsored auto industry bailout and think chapter 11 probably provides the best policy tool to deal with the current problem. Although auto industry execs have balked at the idea of a bankruptcy filing, some have promoted...
Scholar in Residence for American Bankruptcy Institute
Posted on November 20, 2008The American Bankruptcy Institute is inviting applications from academics to serve as Robert M. Zinman Resident Scholar for the 2009 Fall Semester. The ABI Scholar performs a variety of tasks such as advising congressional staff, testifying before congressional committees, speaking...
Thank you to Anna Gelpern
Posted on November 18, 2008As the first snow of the season swirls around here in Washington, I'd like, on behalf of the Slips, to thank Anna Gelpern for her guest-blogging tour of duty. Anna introduced us to some of the international aspects of the...
Financial Architecture Summit
Posted on November 16, 2008The G-20 Summit to Save the World and Reinvent Finance produced a surprisingly meaty declaration and action plan. At least one specific mention of bankruptcy: * National and regional authorities should review resolution regimes and bankruptcy laws in light of...
Contracts in Crisis: Variations in Z and S
Posted on November 16, 2008Luigi Zingales of Chicago GSB put out a mortgage modification proposal about a month ago that got a bit of attention, but deserves more even if it has no political prayer. It is one of a genre -- advocating across-the-board...
T.A.R.P. R.I.P.: Illiquency Watch
Posted on November 14, 2008TARP's third incarnation as a consumer lending catalyst goes straight to my pet crisis peeve. I am endlessly flummoxed at the authorities' insistence on throwing liquidity at a solvency problem -- with TARP I, AIG, and now, the consumers. I...
Do We Want More Consumer Lending?
Posted on November 13, 2008Yesterday, Treasury Secretary Paulson announced a major shift in strategy for the federal government's financial rescue plan. Treasury now would make $50 billion available for lending to companies making credit card, automobile, and student loans. The idea is to jump...
International Financial Architecture: Dumb Chills and Opportunities
Posted on November 12, 2008I am grateful to Adam, Bob and Credit Slips for scheduling this guest stint on the eve of what is billed as the Grand Global Rethink of All Things Finance. This Saturday, November 15, the leaders of the Group of...
Welcome to Anna Gelpern
Posted on November 10, 2008Credit Slips would like to welcome Anna Gelpern as our newest guest blogger. Anna is an Associate Professor of Law at Rutgers School of Law Newark; she has a joint appointment with the Rutgers Division of Global Affairs and is...
Circuit City Bankruptcy Petition
Posted on November 10, 2008Thanks to a Credit Slips contributor, the chapter 11 petition for Circuit City can be found here. The document includes the list of the fifty largest creditors. The case was filed in Richmond, Virginia, which is not known as a...
Operation Repo
Posted on November 10, 2008TruTV has a reality series called Operation Repo. Basically they follow around a crew of brawny, heavily tattooed auto reposessors (men and women) in the San Fernando valley. Drama and hijinks ensue. I'm sure they only show the more dramatic...
Bankruptcy Filings Spike in October
Posted on November 03, 2008As yet another indicator of the tough economic times for American families, bankruptcy filings spiked in the month of October. According to the latest data from Automated Access to Court Electronic Records (AACER), there were 108,595 total bankruptcy petitions filed...
Fellowships for Consumer Debt Book
Posted on October 31, 2008Just a brief announcement for our academic audience (law or non-law) that I am directing the University of Iowa's Obermann Summer Seminar in 2009. Up to 6 fellowships of $2250 (plus an award of $1250 to cover travel, housing, per...
Hands on Their Faces
Posted on October 26, 2008Whenever there's a stock market crash, you can be sure that a bunch of newspapers are going to run cover photos of some broker with his hands on his face. There's probably an interesting history to this cultural meme. I...
Worst Practices: Residual Interest
Posted on October 25, 2008Professor LoPucki's APR issue might not be two-cycle billing as many of the commentators think. Just as likely, it is residual interest (a/k/a trailing interest), the often ignored, but just as potent cousin of double-cycle billing. Residual interest has not...
Bank Derivative Activities and Capital
Posted on October 25, 2008We've heard a lot in recent months about bank derivative activities. What's striking is how rapidly they grew without capital growing to cover potential losses. Here's a time series graph of bank derivative exposures (all types of derivates, including credit,...
Greenspan Admits "Mistake"
Posted on October 23, 2008If you missed Former Fed Chairman Alan Greenspan's incredible admission today, here it is. In a stunning statement, he said that much of his previous faith in free markets had been wrong: "I made a mistake in presuming that the...
What Happened to Truth-in-Lending?
Posted on October 23, 2008Professor Lynn LoPucki sent this email, which I pass along with his permission. Perhaps someone will want to answer his question. Last month I was a little short of cash, so I left $3,000 on my credit card balance. The...
Layaway Christmas
Posted on October 23, 2008K-Mart has a new ad: Pick out your Christmas presents today, pay a little now and a little as you go along, then pick up your paid-for presents in time for holiday giving. If we needed evidence of the constriction...
Thank You Again, Christian Weller
Posted on October 22, 2008Thanks again to Christian Weller of the Center for American Progress and the University of Massachusetts, Boston for taking the time to guest blog here. Professor Weller is an economist and offered many informative perspectives on the current financial crisis...
Was There a Systemic Banking Crisis?
Posted on October 22, 2008A group of researchers at the Minneapolis Federal Reserve has a new study out that argues that Federal Reserve data indicates that that many of the stories that have animated the political discourse about the bailout are incorrect. The four...
Creditors: Fear Not?
Posted on October 21, 2008Just as public ire at the mortgage industry reaches a pinnacle, courts have offered the mortgage companies refuge from their mistreatment of consumers in some recent rulings. While these decisions may be aberrations, they have powerful lessons for consumer debtors...
Note to Policymakers: Be Aggressive, but Smart
Posted on October 20, 2008With Wall Street in turmoil and the economy on a downward slope, policymakers' ingenuity to help financial markets and the economy is demanded. The response will have to be large, but also smart. Voters will likely not accept an approach...
That Low Interest Rate May be Higher Than it Appears
Posted on October 19, 2008The other day I listened to an ad, where a mortgage bank was arguing that, although mortgage interest rates have recently gone up, they are still relatively low at historical rates. Never mind the wisdom of fighting a crisis of...
Behaviorally Informed Financial Services Regulation
Posted on October 19, 2008Behaviorally informed financial institution regulation has potential, but it also poses several pitfalls.
DIP Lending Dries Up
Posted on October 17, 2008The Wall Street Journal is reporting that DIP financing--lending to companies reorganizing in chapter 11 bankruptcies--is hard to come by and the GE has gotten out of the business. This is actually a much more shocking story than it appears...
Some Curious Parallels with the 1930s
Posted on October 17, 2008There are lots and lots of differences in the financial institutions situation of the Depression and today. And yet there are some remarkable parallels in the problems and government responses. We shouldn't overread parallels as predictive matters. But some of...
Whoops!
Posted on October 17, 2008Turns out that the Treasury's loan investment in major financial institutions can't count as Tier I capital. That's a big whoops . I've had trouble identifying the specific problem, but as far as I can tell it might stem from...
It's Still the Economy
Posted on October 16, 2008You can't be serious! Federal Reserve chairman Ben Bernanke says what anybody with a passing interest in economics already knows -- that it will take time for the economy to turn the corner -- and the market tanks. The market...
The Moral Hazard of Treasury's "Equity" Injection
Posted on October 14, 2008Treasury Secretary Paulson is jawboning banks to use the Treasury's capital injection to lend, rather than to just sit on the funds. This is very telling about the way Treasury sees the financial crisis and should concern us because it...
Preferred Stock=Subordinated Debt
Posted on October 14, 2008Treasury's "equity" injection in the form of preferred stock is really a loan, not an equity investment, but it is structured to bolster bank capital adequacy.
Regulation Cannot Depend on Irrational Markets
Posted on October 14, 2008At this point, it is all too clear that financial markets can get things wrong. This is not an isolated phenomenon. No, getting it wrong tends to be the name of the game for financial markets. Understanding that financial markets...
Wealth Destruction by the Numbers
Posted on October 13, 2008Financial markets went into free fall in late September and early October. The third quarter of 2008 continued the wealth destruction that took place in the previous nine months. This wealth decline is large, broad, and quick. The primary reason...
How Long is the Way Out of the Hole?
Posted on October 13, 2008The stock market just ended its worst week in history. This has sharply eroded families' financial security. Under rather optimistic expectations it would take about six years before families can hope to achieve the same level of financial security as...
More Trusted Salespeople Needed
Posted on October 12, 2008There is a serious danger that the economy will fall into the dreaded "liquidity trap" -- no matter how cheap money is, companies and families will not borrow since they are too freaked out about the future. Worldwide financial rescue...
LA Times: Illegal Immigrants Have Lower Mortgage Delinquency Rates
Posted on October 12, 2008The LA Times ran an article earlier this week reporting that undocumented immigrants to the United States had generally lower rates of mortgage delinquencies than other types of borrowers. It is an informative read and should be of interest to...
This is a Financial Crisis like Any Other ? Treat it Like One
Posted on October 11, 2008I wanted to thank Bob Lawless, Elizabeth Warren and Credit Slips to invite me back as guest blogger. It seems an appropriate time to discuss topics in two of my areas of expertise -- financial crises and retirement income security...
More on the McCain Plan
Posted on October 10, 2008Good news: McCain bailout will stop foreclosures. Bad news: it's horribly expensive for taxpayers and there's a better alternative with no cost to taxpayers.
Welcome Back Christian Weller
Posted on October 10, 2008Credit Slips would like to welcome back Professor Christian Weller of the Center for American Progress and the University of Massachusetts Boston. Professor Weller will offer his insights as an economist on the current crisis and what we might do...
Ratio of Chapter 13s Is Declining
Posted on October 10, 2008A centerpiece of the 2005 bankruptcy law was to force more debtors into chapter 13. The credit industry claimed many debtors were abusing the process by filing chapter 7 when they could at least make a partial repayment to creditors...
Who Needs Bankruptcy Reform?
Posted on October 10, 2008When Eric Nguyen, a 3L at Harvard Law School, conducted his research on the disproportionate efforts of families with children to save their homes through bankruptcy, he seemed to be embarking early on a promising scholarly career. But events have...
Underwater Homeowners
Posted on October 08, 20081 out of every 6 US homeowners is underwater. There's probably no better indicator than being underwater of a mortgagor who is likely to end up in foreclosure. That's very worrisome. And it means that foreclosure prevention plans that don't...
Why the McCain Mortgage Refinancing Plan Won't Fly
Posted on October 08, 2008The McCain mortgage refinancing plan cannot work because it does not account for the problems created by securitization.
A Countrywide Settlement
Posted on October 06, 2008Bank of America has agreed to settle a deceptive mortgage practices lawsuit on behalf of its relatively new subsidiary, Countrywide Financial, the notoriously aggressive mortgage lender. The attorneys general of Illinois and California negotiated the settlement on behalf of their...
Foreclosure Tragedy
Posted on October 03, 2008An excruciatingly sad story about the human costs of the home-mortgage crisis: http://www.cnn.com/2008/US/10/03/eviction.suicide.attempt/index.html. A 90-year-old woman, Addie Polk, shot herself inside her foreclosed, Akron, Ohio home. It appears that she will live, although she is still in the hospital...
Homeowners in Bankruptcy
Posted on October 02, 2008Katie Porter makes some excellent observations about the Carroll and Li study of homeowners in bankruptcy. There's another crucial point to add: the study's conclusions only tell us, at best, about bankruptcy today. It shouldn't be much of a surprise...
Bankruptcy Filings Reset Post-2005 Record
Posted on October 02, 2008September 2008 bankruptcy filings are up 1.9% from the previous month and up 28.8% from the same month one year before. That is an annual growth rate of 25.3%. Those figures represent an average of 4,574 bankruptcy petitions were filed...
What Happens to Homeowners in Bankruptcy?
Posted on October 01, 2008Amending bankruptcy law to permit judges to modify home loans for chapter 13 debtors does not seem to be gaining traction in Congress, despite the fiasco with the bailout vote and pressure to incorporate more "Main Street" provisions. For many...
Future of Bank Regulation: GSE-lites?
Posted on October 01, 2008Two possible directions are possible in banking regulation: a move to universal banking, in which there is no distinction between commercial banking, investment banking, and insurance (much like in Germany) or a return to the stricter divisions of Glass-Steagall...
Senate Bailout Bill: Just a 451-Page Version of Paulson's Two-and-a-Half Pages
Posted on October 01, 2008The 451-page Senate version of the bailout bill has almost no substantive differences from the two-and-a-half page bill that Treasury originally proposed.
$250K FDIC Caps: Nice, but Irrelevant
Posted on October 01, 2008Raising the FDIC deposit insurance cap is a helpful, but largely irrelevant move.
Bailout Bill Executive Compensation Provision: Lipstick on a Pig
Posted on September 29, 2008The executive compensation provisions of the bailout bill are lipstick on a pig: they apply, at most, to reducing the corporate income deduction by $1.5MM for a handful of very large financial institutions.
How State Government Can Help Financially Distressed Homeowners
Posted on September 29, 2008Now that Congress has failed to act to stem the foreclosure crisis, it is up to states to try to protect their residents and economies. A few possibilities remain for state action, some of which states have either toyed with...
Congress to Homeowners: Drop Dead
Posted on September 28, 2008A draft of the bailout plan is out. And it contains nothing substantive for financially distressed homeowners. The plan directs the Treasury Department to engage in reasonable modifications for residential mortgage loans it controls and to encourage servicers to do...
Colonel Ken
Posted on September 27, 2008Colonel Ken Allard is no whiner. He's military tough, a firm believer in personal responsibility. But he has been so badly treated by Bank of America that he decided to go public, here and here. Along the way, he picked...
Is the Crisis Real?
Posted on September 26, 2008At a Harvard panel discussion yesterday, economist professor Ken Rogoff made an interesting point: The liquidity crisis isn't real. Or, to restate it: Any liquidity crisis is caused by the promise of a government bailout. Ken said that his many...
Why The Government Cannot Modify Mortgages If It Purchases $700BN of MBS
Posted on September 24, 2008I've written a short explanation of the why even if the Treasury buys $700BN of MBS it will be unable to modify the underlying mortgages. The explanation, which is more detailed than any of my previous postings on the subject,...
The Bailout -- another perspective (part 4)
Posted on September 24, 2008I want to thank the Credit Slips folks for allowing me to drop in unannounced -- I'm off to talk with the bankruptcy judges at their annual meeting, so I expect this will be my last post on the topic...
Mortgage Bankers Association's Cramdown Claim Debunked
Posted on September 24, 2008I have received several inquiries about the Mortgage Bankers Association's spurious claim that permitting modification of mortgages in bankruptcy will result in higher interest rates or less credit availability. I have drafted a very short explanation of why the MBA's...
The Bailout -- another persepctive (part 3)
Posted on September 24, 2008What is the purpose of the bailout fund? Even the proponents don't agree on this. It seems clear from Paulson's initial proposal, and Bernake's testimony yesterday, that they see the fund as a fix for a market that has "gone...
"My Country Has Had Crisis..."
Posted on September 23, 2008If you're like me and seek solace in satire when things go bad, this parody from a blog on The Nation's web site hits the note with perfect pitch. I won't spell out the whole thing here, but it begins,...
The Bailout -- how do we know we really have a problem?
Posted on September 23, 2008As the politics of the bailout get more and more heated, my friend and colleague Frank Pasquale, a regular at this blogging stuff who has also been thinking about the proposed bailout, was kind enough to comment on one of...
What Does It Take to Modify a MBS Servicing Agreement?
Posted on September 23, 2008This evening I did a little sample of MBS indentures and pooling and servicing agreements (PSAs) to see what it takes to modify them. This is an important issue because it will determine the amount of MBS that the government...
The Bailout: Terms of the Debate
Posted on September 23, 2008A quick couple of observations about the bailout debate: 1. No one is arguing about the method of doing the bailout. The idea of a individualized institution-by-institution bailout seems to be the only idea getting any traction even though it...
The Bailout -- another perspective (part 2)
Posted on September 23, 2008In my prior post I talked about why the bailout was probably the best, if still unattractive, solution to the current mess, while noting that the Fed and administration have done a pretty lousy job of explaining what is at...
Mortgage Modification in Bankruptcy: Redux
Posted on September 23, 2008The Dodd and Frank bailout proposals have both put the possibility of modifying mortgages in bankruptcy back on the table. To some Credit Slips readers, this is old hat (see below for links to our past posts). But I want...
A Ray of Sunshine
Posted on September 23, 2008I know things are moving fast and furious on the bailout, but the House did a significant bit of business today that deserves note. By a vote of 312 to 112, Congresswoman Maloney's credit card bill has passed the House...
The Bailout -- another perspective (part 1)
Posted on September 23, 2008First, I want to thank Bob Lawless and the rest of the Credit Slips folks for having me back yet again -- I'm getting to be like the guest who would not leave. Second, while it might make me part...
The Right and the Left of It
Posted on September 22, 2008As debate on the bailout continued today, a funny thing happened on the New York Times' op-ed page. William Kristol, the Times' current token-ultraconservative columnist, and Paul Krugman, who might just be the most-read liberal economist in the country, agreed...
A Modest Bailout Proposal
Posted on September 22, 2008There are two ways to do a bailout: wholesale and retail. The current proposals all look like retail-level proposals--individually negotiated deals with separate institutions. This sort of bailout, however, is (1) high on transaction costs and (2) vulnerable to favoritism...
The Dodd Bailout Proposal
Posted on September 22, 2008Senator Christopher Dodd is apparently circulating an alternative bailout proposal to the Treasury's. I haven't found a link to the draft legislation, but purportedly it A link to the bill can be found here. It would require financial institutions to...
Before I Hand Over a $700 Billion Check, How About Some Balances?
Posted on September 22, 2008When the government bailout of the financial industry was first announced, we were told more details would be forthcoming. The weekend has passed, and we still have few details. We're being told that there is a big threat, things have...
Lehman: the Filing Mystery
Posted on September 20, 2008There's been more going on this week than financial reporters have been able to cover. Lehman's bankruptcy filing now looks like a footnote. But there's a big question that remains unanswered about Lehman: what triggered the filing? Lehman's first day...
Comments Again Unmoderated
Posted on September 20, 2008We had a spate of spam we experienced that caused me to make the comments moderated temporarily. That seems to have stopped, and comments are again unmoderated. That means comments will appear right after you post them. We still will...
Thoughts on the Bailout Plan
Posted on September 20, 2008[Revised 9.21.08 at 1:40 pm9.20.08 at 4:15pm] The Treasury's bailout plan is out. There's really not much to it: under the plan, the Treasury would be authorized to purchase up to $700 billion in mortgage-related assets from US headquartered financial...
Why Have the Government Bailouts Involved Only a 79.9% Equity Position?
Posted on September 19, 2008A small but unexplained detail in the federal government's nationalization of Fannie, Freddie, and AIG has been that the deals have been structured so that the Fed or Treasury ends up owning no more than 79.9% of the nationalized entities'...
Relaxation of Regulatory Capital Rules
Posted on September 17, 2008As I noted in an earlier blog, the Fed seems to be knocking down every firewall that exists in banking regulation in an effort to stanch the current crisis. The danger, of course, is that by demolishing prudential firewalls, the...
It's Easier to Shoot Roadkill than Big Game
Posted on September 17, 2008I'm a little miffed about the recent FTC settlement with Bear Stearns and its subsidiary, EMC Mortgage Corporation. The complaint alleged that EMC engaged in unlawful practices in servicing consumers' home mortgage loans, including violating the Fair Debt Collections Practices...
Lehman's Bankruptcy Petition
Posted on September 15, 2008Courtesy of Credit Slips guest blogger extraordinaire, Stephen Lubben, here is the chapter 11 bankruptcy petition for Lehman Brothers Holdings, Inc.
Lehman 2007 Bonuses?
Posted on September 15, 2008Lehman paid out around $5.7 billion in bonuses in 2007. Are those bonuses safe? Maybe not. The bonuses might be recoverable as fraudulent transfers---transfers made while insolvent without receiving reasonably equivalent value. (UFTA 5(a)). Thus, the key question is whether...
Market Apropos Reading
Posted on September 14, 2008As a way to searching for some historical frame of reference for the current financial crisis, I've eschewed LTCM, etc. and gone back to the granddaddy of modern market crises, 1929. To that end, I've been reading Maury Klein's Rainbow's...
Are Bank Regulators Creating More Systemic Risk?
Posted on September 14, 2008Systemic risk seems to be the byword for financial institutions regulators now, but a trio of developments indicates that it is only deepening: 1. Professor Anna Gelpern at Rutgers-Newark notes a scary change in Federal Reserve policy: the Fed just...
As Treasury Sows, So Shall It Reap
Posted on September 14, 2008Once the Treasury bailed out Bear Stearns with government guarantees, the next buyer of a major US financial institution might expect similar help. Barclay's was the last likely buyer of Lehman Brothers. Minutes ago, it announced that without the US....
Lose Your Home, Lose Your Vote
Posted on September 11, 2008With both political parties are focused on Michigan this fall, high foreclosure rates and the neighborhood fallout from those foreclosures are likely to become a political issue. The GOP has announced a new way to deal with the problem: challenge...
Moderated Comments for the Time Being
Posted on September 10, 2008We're getting lots of comment spam from organizations explaining how their payday lending operation or credit-repair firm really could help you out. Not likely. Unfortunately, to prevent this spam from becoming an even bigger problem, I've had to set the...
Weller on Time to Avoid a Banking Bailout
Posted on September 07, 2008Former Credit Slips guest blogger Christian Weller wrote me over the weekend to point out that the charge-off rate on credit cards hit an eye-popping 5.47% for the second quarter of 2008. That led to an e-mail conversation about what...
Connect the Dots
Posted on September 06, 2008As I was reading last night, I came across three separate little dots of information. The first dot was good news for AmEx, the credit card of choice for higher-income, less financially stressed families, from JD Powers rating company: American...
8th Circuit Rules Section 526(a)(4) Unconstitutional as Applied to Attorneys
Posted on September 05, 2008The United States Court of Appeals for the Eighth Circuit just ruled on a matter of first impression among circuit courts--the constitutionality of the treating attorneys as "debt relief agencies" under provisions of the 2005 Bankruptcy Abuse Prevention and Creditors'...
Congress is Costing You Thousands of Dollars...?
Posted on September 03, 2008The other day I heard an alarming advertisement on the radio. It began by warning that a new federal law could cost "you" thousands of dollars. It then proceeded to say that, if you want to avoid paying this money,...
Revisiting the 2005 Amendments When Times Get Hard
Posted on September 03, 2008As a follow up to my earlier post about the forces that have made bankruptcy less workable for reorganizations, I note a new Businessweek article. Retailers are feeling the pain of reduced consumer spending and tough credit terms, and now...
Bankruptcy Filings Reach New High in August
Posted on September 02, 2008The U.S. bankruptcy filing rate climbed again in August, reaching a new post-2005 high of 4,476 filings per day. The year 2005 is significant because it was the year that the bankruptcy law changed making it more expensive and more...
Paying for Mistakes--Redux
Posted on June 12, 2008Well, if the comments are any indication, Tuesday's post--where I discussed articles about problems with home equity lenders pulling their lines and errors in bond ratings--seems to have a struck a nerve. Rather than reply to each, I will reply...
Senate Rule XXVI and the Consumer
Posted on June 12, 2008Yesterday, Senator Patrick Leahy caused the Senate Committee on the Judiciary to hold a hearing with the intention of shedding some light on how Supreme Court decisions affect everyday Americans. In the middle of answering my first question, Senator Whitehouse...
Have You Already Lost?
Posted on June 10, 2008The reasons to dispute a credit charge are many--mistakes, failure to credit a return, identity theft, a lost payment that triggered penalty interest and fees, etc. Maybe the company will be nice and settle, or maybe the charge will be...
Paying for Mistakes
Posted on June 10, 2008Our legal system is predicated in part on the idea that liability follows error. As Colin Powell said: You break it, you buy it. Not so in world of credit, however. Here, contract apparently has the power to shift the...
The Supreme Court and the Consumer
Posted on June 10, 2008Tomorrow, the United States Senate Committee on the Judiciary will hold a hearing entitled "Short-change for Consumers and Short-shrift for Congress? The Supreme Court's Treatment of Laws that Protect Americans' Health, Safety, Jobs and Retirement." The committee will shed light...
Reading Redux
Posted on June 09, 2008Last year around this time, I wrote a Credit Slips post about a law-professor friend whose realtor expressed shock and dismay when she and her husband insisted on reading every document she gave them to sign regarding the house they...
Obama on Credit Cards and Bankruptcy
Posted on June 09, 2008This is quick post about Obama's speech on the economy in Raleigh, N.C. He spent two and a half "paragraphs" of it discussing credit cards and bankruptcy. (The link is to the whole speech. I've also excerpted the relevant passage...
Footing the Billary
Posted on June 09, 2008Thanks to Bob and the other Credit Slips authors for having me back. I hope to post about several different things, some more topical than others. The first may be the most topical of all--the presidential campaign. Now that Hillary...
Changing of the (Guest Blogger) Guard
Posted on June 08, 2008Credit Slips thanks University of New Mexico law professor Nathalie Martin for joining us the past few weeks and giving us some "on the ground" perspective of how the credit crisis is affecting persons she sees in her legal clinic....
2.47% of All Residential Mortgage Are in Foreclosure
Posted on June 05, 2008According to the Mortgage Bankers Association's Delinquency Survey, 2.47% of 1-4 family residential mortgages are in foreclosure and 6.35% are delinquent. And Credit Suisse's prediction of 6.5 million foreclosures by 2012 still looms. Scary numbers.
May 2008 Bankruptcy Filings Continue to Show Increase
Posted on June 04, 2008The latest bankruptcy filing data have just become available from Automated Access to Court Electronic Records ("AACER"). Where we were just treated to a round of headlines about the government's data that went through March, the AACER data bring us....
From Redlining to Target Practice
Posted on June 04, 2008H&R Block, subprime mortgage, Option One, racial discrimination
Consumerism and the Environment: What Would Jesus Buy and Subsequently Throw Away?
Posted on June 03, 2008Sorry, Morgan Spurlock, had to steal that one. One key to meaningful financial literacy education is that a person has to really care about something to work for it. If you take the time to let it sink in, people...
Financial Literacy Education Under Attack: Man?s Search for Meaning
Posted on June 03, 2008As a provider of financial literacy education, I read with great interest Professor Lauren Willis? recent article Against Financial Literacy Education. It is a creative, must-read for anyone interested in the subject and adds greatly to the literature in this...
Justifying Debt Forgiveness: Information Asymmetry and Risk Allocation
Posted on June 03, 2008In my last guest blogs before quitting, I want to briefly discuss, and hopefully get a discussion going, about two topics related at the Illinois Debt Symposium. This was a fabulous interdisciplinary event, about which Mechele Dickerson has blogged extensively...
Credit Card Debt Absent the Mortgage Bubble
Posted on May 31, 2008But for the mortgage bubble, credit card debt levels would be much higher.
Why Is This Legal?
Posted on May 31, 2008Are there some deals that are so bad that they shouldn't occur? Or it is enough to say that people have choices, and if they make bad choices, tough? I had lunch with a bankruptcy lawyer, who followed up with...
What is the Difference Between a Crack Dealer and a Creditor Soliciting a Bankruptcy Debtor?
Posted on May 30, 2008The crack dealer leaves you alone once you're broke, right? I know bankruptcy debtors are seemingly better credit risks than average people because they cannot get another bankruptcy discharge for 8 years, and because they seemingly have less debt, but...
Many Internet Payday Loans are Unenforceable
Posted on May 29, 2008Internet payday loans are often even more impossible to pay off than storefront loans. Internet payday lenders are also among the most aggressive collectors, but maybe not for long. As it turns out, many of these loans are unenforceable. First,...
The Myth of the Non-Bankruptcy Exemptions
Posted on May 28, 2008How does the saying go, possession (of a lawyer) is 9/10ths of the law? When it comes to exercising ones rights under the state exemption schemes, the adage is true. The common lore is that if a person's assets are...
Unconscionability and Funky Mortgages
Posted on May 28, 2008People have posted some comments to the funky mortgage story and I wondered if anyone had any experience using the doctrine of unconscionability to help ward off foreclosure and keep people in their homes. As a contracts teacher, I know...
NAF, Just NAF
Posted on May 28, 2008"NAF" sounds like maybe something you should say when you're frustrated. "NAF!, I stubbed my toe." In some circles, NAF may already be turning into an expletive. NAF stands for the National Arbitration Forum, a for-profit business that has twisted...
The Magical Mystery Mortgage: Loans Gone Wild
Posted on May 27, 2008This site has had some fabulous posts about mortgage fees in Chapter 13 and mortgage services fraud. This is a short story about mortgage fees or funky interest rates, or perhaps just plain old fraud, in the context of the...
Welcome Back to Nathalie Martin
Posted on May 26, 2008Nathalie Martin, the Dickason Professor of Law at the University of New Mexico, will be joining us again as a guest blogger. Regular readers of Credit Slips will remember Professor Martin's guest blogging stint at the beginning of the year....
The Credit Card Lesson
Posted on May 22, 2008The effective repeal of usury laws in the US was accomplished in the quietest possible way: In 1978, the Supreme Court interpreted an century-old banking law to determine that federally-chartered banks to lend to people in other states so long...
The Repo Man Cometh
Posted on May 21, 2008Repossession isn?t just for struggling car owners or low-income rent-to-own borrowers anymore. The combination of the recent overextension of credit and the current corresponding crash has resulted in a newly strengthened market for the repo man: boats...
Foreclosures and More Bankruptcy Filings
Posted on May 21, 2008It is popular to assume the increases in the bankruptcy filing rate are tied to the home mortgage foreclosure crisis here in the United States. Is that really the case? I've checked the data, and it appears that it is....
Can you tell a $1 from a $20 with your eyes closed?
Posted on May 20, 2008If you're vision-impaired it can be difficult or impossible to distinguish US paper currency of different denominations. Unlike just about every other Western country, all of our bills are the same size, same color (excluding some recent changes to keep...
Vulture Mentality of Piling On Fees or Countercyclical Diversification Strategy
Posted on May 16, 2008In the recent hearing on mortgage servicing, the Senators probed Countrywide's chief executive for loan administration, Steve Bailey, on exactly how mortgage servicers (distinct from the owners of the mortgage) make their profits. Mr. Bailey confirmed the description in my...
Senate Investigates Mortgage Servicing
Posted on May 15, 2008Last week, I testified before a subcomittee of the U.S. Senate Judiciary committee about mortgage servicing in bankruptcy. You can read the written testimony or watch a webcast. Both the Chair of the subcommittee, Senator Schumer, and the Ranking Member,...
Why I Use AACER's Filing Statistics
Posted on May 13, 2008Every month, I try to post on the latest bankruptcy filing statistics using data provided by a private company, Automated Access to Court Electronic Records (AACER). Recently, Jason Kilborn, a law professor at Chicago's John Marshall Law School, posted a...
Call for Papers on Regulation of Financial Institutions
Posted on May 12, 2008The Association of American Law Schools Section on Financial Institutions and Consumer Financial Services Program for the 2009 Annual Meeting (January in San Diego) has announced its topic: Does Modern Financial Institution Regulation Work? Reflections on Deregulation and Internationalization of...
Thank you to Judge Eugene Wedoff
Posted on May 12, 2008The Credit Slips bloggers thank Judge Eugene Wedoff, U.S. Bankruptcy Court for the Northern District of Illinois, for his participation as a guest blogger last week. His posts identified a number of important consumer bankruptcy issues, including student loans, the...
Mortgage Fees in Chapter 13: Rules to the Rescue?
Posted on May 10, 2008In a February post to Credit Slips, Katie Porter pointed out a recurring problem for U.S. debtors trying to deal with mortgage defaults through a Chapter 13 plan. They can make all of the payments needed to cure their pre-bankruptcy...
Student Loans and U.S. Bankruptcy Law: Hard to Understand
Posted on May 10, 2008Student loan debt in the U.S. is a growing problem, with college students graduating with an average debt load of nearly $20,000 as of 2006. In my last post, I pointed out a recent opinion suggesting a bankruptcy approach that...
Not Valid Unless Signed
Posted on May 10, 2008All my credit and debit cards state on the back above the signature specimen block "Not Valid Unless Signed". I'm curious as to what exactly that means. If I make a purchase with an unsigned card, could it possibly absolve...
Bankruptcy help for students and their lenders?
Posted on May 08, 2008Yesterday, the President signed into law H.R. 5715, the ?Ensuring Continued Access to Student Loans Act of 2008.? The law responds to a perceived liquidity crisis in student lending by allowing government purchases of privately-issued student loan portfolios, so that...
Housing Bankruptcy Ripple Effect
Posted on May 08, 2008We're starting to see the bankruptcy ripple effect of the housing crisis beyond the housing and financial services industry. Now municipalities are being forced to declare bankruptcy because property tax revenue has dried up while foreclosures have imposed significant strains...
Preemption Chutzpah
Posted on May 07, 2008Elizabeth Warren draws our attention to an astonishing example of banking industry chutzpah--claiming preemption protection against state foreclosure laws. Not only has no one ever historically believed that state foreclose law was preempted; the OCC's preemption reg's specifically carve out...
One More Means Test Problem
Posted on May 06, 2008Another example of questionable legislative drafting in BAPCPA--the 2005 amendments to U.S. Bankruptcy Code--appears in an opinion of the Ninth Circuit BAP issued last month, In re Weigand. At issue is whether ?current monthly income? (CMI) includes the gross receipts...
Banks: State Laws Not for Us
Posted on May 06, 2008Just when you think the mortgage mess can't get any worse, the banks come up with a new idea: They shouldn't have to obey state law when they foreclose on someone's home. Pre-emption has been a gravy train for the...
Gathering Your Private Information for Private Gain
Posted on May 05, 2008Professor Elizabeth Warren?s (Harvard) paper, Balance of Knowledge, questions why academics do interdisciplinary work at all. But, she easily answered that question. She noted the role that empirical data played during the BAPCPA discussions. She mentioned both the influence of...
When Agencies Get it Wrong, They Reeeeeeeeeeeeeeeeeealy Get it Wrong
Posted on May 05, 2008We ended the first day of the conference with management professors, Professor Gerry McNamara (Michigan State University) and Professor Paul M. Vaaler (University of Minnesota). They discussed How and Why Credit Assessors "Get It Wrong" when Judging the Risk of...
Many, Many Thanks to Mechele Dickerson
Posted on May 05, 2008On behalf of all the regular Credit Slips bloggers, I wanted to express our deep appreciation to Associate Dean and Professor Mechele Dickerson. Her contributions were just superb. Professor Dickerson did a great job of blogging the Debtor World conference,...
Lawyers Make Good Laws?
Posted on May 05, 2008I attended last weekend's University of Illinois/ABI Symposium on Debt?a tour de force, as readers of Credit Slips can glean from Mechele Dickerson's recent reports. My main interest in attending was to gain insights about how to improve U.S. consumer...
Hasta La Vista
Posted on May 05, 2008Let me (again) thank the Credit Slips bloggers generally, and Bob Lawless specifically, for inviting me to be a guest blogger. I have never done this before and, and quite honestly the thought of blogging terrified me. But, had I...
Why People Should Be Allowed to Walk Away from Their Debts
Posted on May 05, 2008Professor Heidi M. Hurd, a law and philosophy professor at the University of Illinois, ended the conference by discussing first principles in The Jurisprudence of Bankruptcy. Why should we forgive people who break contracts and harm others?
Where Do All the Corporate Debtors Go During Reform Time?
Posted on May 05, 2008Dr. Terrence Halliday, a sociologist at the American Bar Foundation, shifted us back to corporate insolvencies. His paper, Missing Debtors: National Lawmaking and Global Norm-Making of Corporate Bankruptcy Regimes, discusses the systems that are created to regulate corporate debt and...
Still on Target for 1,000,000 Bankruptcy Filings
Posted on May 05, 2008While I was busy with last week's Debtor World conference, the April 2008 bankruptcy filing figures became available from AACER. If I wanted to be sensational, I could compare the latest figures to the 2007 figures and tout how filings...
How did Lenders Get it So Wrong?
Posted on May 04, 2008An economist, Professor Amir Sufi (University of Chicago), shifted our focus in the afternoon session from debtor, to lender, behavior. In discussing his paper, Lender Incentives, Credit Risk, and Securitization: Evidence from the Subprime Mortgage Crisis, Professor Sufi asks why...
Welcome to Judge Eugene Wedoff
Posted on May 04, 2008I'm delighted to introduce Eugene Wedoff, who will be the first judge to guest blog at Credit Slips. He is a judge in the U.S. Bankruptcy Court in the Northern District of Illinois, a position that he has held since...
Should We Not Disclose Credit Card Information?
Posted on May 03, 2008The paper Professor Richard Wiener (Univ. of Nebraska), a psychology professor, discussed presents findings that are completely contrary to economic predictions. Standard economic theory would predict that if consumers are given complete information, they will act rationally and not overspend...
The heady conversation
Posted on May 03, 2008After the lunch at the Debt conference on Friday, Professor Brian Knutson, a professor of Psychology & Neuroscience at Stanford, presented a paper on Brain, Decision, and Debt. The field of neuroeconomics (which has been around for about a decade)...
Proposed Fed/OTS/NCUA Credit Card Regulations
Posted on May 02, 2008An initial analysis of the Fed's proposed credit card unfair and deceptive practices regulations.
Consumption is too important to be left to Consumers
Posted on May 02, 2008Professor George Ritzer, another sociologist (University of Maryland), presented a hyper paper ("Hyperconsumption" and "Hyperdebt": A "Hypercritical" Analysis). He argues that it has now become part of our public duty to consume. We were asked to consume after 9-11...
Data, data, data
Posted on May 02, 2008Provost (at Michigan) Teresa Sullivan presented the second paper of the morning, Debt and the Simulation of Social Class. She opened by repeating two conversations she heard while waiting at the airport yesterday. One involved a couple that was concerned...
God was the poor man?s only surety
Posted on May 02, 2008The Conference opened with a talk on "Debt, Credit and Poverty in Early Modern England" presented by Dr. J. Craig Muldrew, a history professor from Cambridge (the one in England, not the one in the US). (He used the term...
Live, From A Debt World
Posted on May 02, 2008I just accomplished probably the most important thing I needed to do this morning. I figured out how to log on the University of Illinois network. Because I was a bit concerned that I would mess that up, I got...
Maxed Out
Posted on May 02, 2008The luncheon speaker for the conference was James. D. Scurlock, the director and producer of Maxed Out, which airs this month on Showtime. For those of you who haven?t seen the documentary, it?s a scathing, eye-opening depiction of how the...
The Very Big Men Who Sort Out Debt
Posted on May 02, 2008During the last session this morning, Professor Stephen Lea (University of Exeter) provided a psychological perspective on debt in poor households in Britain. He initially listed the people he believes to be the cast of characters involved in debt. First,...
A week in the life of mortgage "reform"
Posted on April 30, 2008Here's a mortgage crisis chronology for this week, as reported by the New York Times and Washington Post. Can you guess what these articles have in common? On Sunday, Michelle Singletary's The Color of Money column discussed Treasury Secretary's Henry...
Streaming Academics
Posted on April 29, 2008I hope our readers will excuse a little promotional material, but I have received several inquiries about our upcoming conference, "A Debtor World: Interdisciplinary Academic Symposium on Debt." Shockingly, Champaign, Illinois, is not a major travel destination for many of...
Homeownership Myth (Part II)
Posted on April 29, 2008As I argue in the earlier posting, the Sunday Washington Post article raises a number of interesting points about the value of homeownership as an investment device. I discuss many of these points in an article that will be published...
The Myth of Homeownership
Posted on April 29, 2008An article in the Sunday Washington Post asks whether -- given the current housing crisis -- real estate or the stock market is the better investment. Of course, the answer is -- it depends. Formulating a longer, more sensible answer...
Congrats to Professor Warren!
Posted on April 28, 2008What do B.B. King, Justice John Paul Stevens, University of Illinois chancellor Richard Herman, and Credit Slips blogger Elizabeth Warren have in common? They were all named today as part of the 2008 class of fellows for the American Academy...
Student Loans, and the Housing Crisis
Posted on April 28, 2008I am honored to have been asked to be a guest blogger on Credit Slips. Not only is this my first posting for the week, this is the first time I?ve ever posted anything to a blog anywhere. With that...
Welcome to Mechele Dickerson
Posted on April 28, 2008Credit Slips would like to welcome Professor Mechele Dickerson as a guest blogger. Dickerson is the Associate Dean for Academic Affairs and the Fulbright & Jaworski Professor of Law at the University of Texas School of Law. She is a...
Frontier and First Data Corp.
Posted on April 28, 2008Felix Salmon has a great piece in CondeNast portfolio.com about the role of First Data Corporation in precipitating Frontier Airline's bankruptcy. It's unusual to find a story that connects consumer credit card rights with a corporate bankruptcy, so I'll summarize...
Abe Simpson Gets His Wish?
Posted on April 24, 2008Dear Mr. President: There are too many states nowadays. Please eliminate three. /s/ Abe Simpson For those of you who do not watch The Simpsons as maniacally as I do--and that probably would be pretty much all of you--Abe Simpson...
The Future of Mortgage Servicing
Posted on April 23, 2008In my prior post on mortgage servicing, I talked about the potential of mortgage servicers to be harmful barriers between homeowners and investors, both of whom may want to negotiate a loan modification. Recognizing such a problem raises the question...
Why Don't More Walk Away
Posted on April 23, 2008My buddy, Buce over at Underbelly, has a post up using the concept of option value to help explain why more people are not walking away from their underwater homes. By "underwater," we're not talking about Homer Simpson's imaginary home...
Lubben on Corporate Bankruptcy Costs
Posted on April 21, 2008Professor Stephen Lubben of Seton Hall University (and a former Credit Slips guest blogger) has recently published the findings from his massive study of professional fees in corporate reorganizations. The paper appears under the very descriptive title of "Corporate Reorganization...
MasterCard?s Machiavellian Twist
Posted on April 21, 2008Having just spent the last six months or so giving job talks on a paper about why credit cards issuers should allow consumers to precommit to certain levels of spending and borrowing, I am simultaneously excited and disappointed to see...
The meaning of the loss of home
Posted on April 18, 2008When Bob Lawless posted yesterday (April 17) the table showing the daily filings for March, 2008, it got me thinking about what exactly those numbers mean, and specifically, about the families who are represented by those statistics and in the...
Monthly Filings, Jan. 2006 - Mar. 2008
Posted on April 17, 2008A reader asked about the total U.S. bankruptcy filings for a month earlier this year. Looking around, I found I had not updated those figures in a while, and I thought others also might have a use for those figures....
Who Speaks for Mortgage "Lenders"?
Posted on April 15, 2008The mortgage modification debate has been missing some important voices--those of the MBS holders, PMI insurers, and bond insurers who bear the ultimate risk on mortgages. They, and not mortgage servicers, should be speaking for the mortgage industry.
Bankruptcy Filing Rates by District, Apr. 2006 to Mar. 2008
Posted on April 15, 2008The March 2008 bankruptcy data showed that the U.S. average filing rate went over 4,000 per day for the first time since the 2005 bankruptcy. Bankruptcy filings have been steadily rising since the 2005 law's effective date, but national trends...
The Stimulus that Can't Stimulate
Posted on April 14, 2008Hanging the worldwide economic recovery on reigniting consumer spending is like investing in used fireworks. The pizzazz is already gone. How are Americans planning to spend their stimulus checks? According to a new poll, fully 41% say they will use....
Negotiating with the Mortgage Company
Posted on April 12, 2008At the heart of a loan modification is communication between a creditor and a debtor that leads to an agreement on new contract terms. If the debtor cannot get reach a person with authority to negotiate, a modification won't be...
Light Blogging
Posted on April 11, 2008Our regular readers might have noticed the very light blogging this week. Sorry about that. Events conspired to keep the regular Credit Slips bloggers really busy this week at our day jobs. I have some really cool graphs on state...
San Francisco City Attorney Sues NAF
Posted on April 08, 2008My semi-favorite debt collector, er, I mean arbitration service, the National Arbitration Forum (NAF), has been sued by the San Francisco city attorney. The San Francisco Chronicle reports the story here. Different contributors have discussed the NAF here on Credit...
UST Turned Loose on Countrywide
Posted on April 03, 2008The UST has been turned loose on Countrywide. The United States Trustee has sought to conduct discovery on Countrywide as part of a motion for sanctions against Countrywide for abusing the bankruptcy process by filing claims that included fees Countrywide...
Credit Card Redlining
Posted on April 03, 2008A new study suggests that redlining occurs in the credit card industry
More Than 4,000 Bankruptcy Filings Per Day in March
Posted on April 03, 2008For the first time since the 2005 changes to the bankruptcy law (BAPCPA), the U.S. bankruptcy filing rate went above 4,000 per day in March 2008. There were 90,288 total bankruptcy filings spread over twenty-one business days in March for...
IRS Should Have Gone for a Baker's Dozen with RAL
Posted on April 02, 2008Each year the IRS releases a Dirty Dozen of tax scams. I wish the 2008 list had labeled another practice a scam--refund anticipation loans or RALs. A RAL is a short-term cash advance against an anticipated tax return. Essentially, the...
Credit Card Fair Fee Act
Posted on March 31, 2008I?m all for a market solution to excessively high interchange fees. But I?m doubtful that the market will solve the problem if left solely to its own devices. Court or legislative intervention is necessary.
Illinois Academic Fellowships
Posted on March 31, 2008The University of Illinois College of Law has just announced a program where persons looking to enter the legal academy can spend one or two years in residence. The program's goal is to help prepare persons for tenure-track positions at...
Online International Bankruptcy Course
Posted on March 31, 2008My friend, Professor David Epstein at Southern Methodist University, was telling me about an innovative course in International Bankruptcy. The course is offered at NYU, but through distance learning technology, law students at other schools can participate...
Final Aloha, Aloha
Posted on March 31, 2008Update on Aloha: giving up the ghost and ending passenger service after 60+ years. May sell its cargo business, but lots of sad and confused travelers are going to find canceled flight they'll have to rebook! Story here.
My Very Own Risk-Based Repricing Experience
Posted on March 28, 2008Citibank made a mistake in handling my billing error--and it could lead to me paying other card issuers a lot of money.
Presidential Candidates and Short-Term Fixes
Posted on March 26, 2008In this morning's New York Times is a story about Senator McCain's position on the mortgage crisis. With the story is a graphic comparing the candidates' positions on short-term and long-term fixes to the credit problems in the United States....
Loaded for Bear?
Posted on March 24, 2008Last week, JPMorgan was going to pay $2/share for Bear, Stearns, with any loss absorbed by the Fed (and thus by taxpayers). Now JPMorgan is going to pay $10/share. This new offer shows what a lowball offer $2/share was. The...
Aloha, Aloha
Posted on March 24, 2008Some readers might have seen that Aloha airlines went into chapter 11. Again. They earlier flew there in 2004, scrubbed their books a bit, and then emerged. Why back in? Couple reasons, they say. First, fuel is really expensive. (Who...
The Future of Consumer Credit in the US
Posted on March 21, 2008During these few posts we've been writing about aspects of consumer credit today in the US. We'd like to close our week by inviting comments about the future of consumer credit. How much indebtedness should we expect in the long...
Asymmetric Paternalism
Posted on March 21, 2008With the growing evidence on behaviors that deviate from the rational-choice model, a discussion on paternalism is taking center stage. As an economist, I am pretty averse to taking choices away from people, but can we have our cake and...
The Future of Consumer Credit...Today
Posted on March 21, 2008We need to look at the net picture when we evaluate whether the terms of consumer credit are improving or worsening, but at the same time we need to recognize that within that net picture there may be some winners and some losers. Changes in consumer credit have different impacts on different consumer populations, and this complicates regulatory responses to manipulative lending practices.
Are Bankruptcy Judges Unconstitutional?
Posted on March 20, 2008The title to this post is the question asked by former colleague, Professor Tuan Samahon (UNLV), in an article just posted to SSRN: "Are Bankruptcy Judges Unconstitutional? An Appointments Clause Challenge." Click here to view the abstract or download the...
Are Payday Loans as Profitable as We Think?
Posted on March 20, 2008No. These firms have ordinary profitability despite astonishing interest rates. My recent study with Jeremy Tobacman finds payday lenders? firm-level returns differ little from typical financial returns, notwithstanding their effective annualized interest rates of many thousand percent...
Overoptimism and Subprime Mortgages
Posted on March 19, 2008Beyond all the news on the causes of, and policy responses to the current US economic crisis focusing almost solely on financial markets, it's worth paying more attention to causes and policy responses for households. One household-level cause fits with...
Why Do People Use Payday Loans?
Posted on March 18, 2008Economic models of borrowing and saving offer a hat trick of (not necessarily mutually exclusive) explanations for why people would borrow on high-interest credit like payday loans: 1) Consumers may heavily discount the future, 2) Consumers may experience shocks that...
Are Bankruptcy Filings Highest at the Beginning of the Month?
Posted on March 18, 2008Courtesy of Automated Access to Court Electronic Records ("AACER") come new data about the U.S. bankruptcy filing rate throughout a month. From January 2007 through February 2008, the average daily filing rate for the first 14 days of the month...
The Visa IPO
Posted on March 17, 2008Visa's IPO is setting the stage for a major reconfiguration of the payments world in the next decade.
Bear's Bankruptcy Alternative
Posted on March 17, 2008Regardless of the dollar valuation of Bear in bankruptcy, there would have been significant value provided by the process.
Call for Papers "Real Estate Transactions in Troubled Times"
Posted on March 17, 2008The American Association of Law Schools is having its 2009 Annual Meeting in January in San Diego. The section on Creditors' and Debtors' Rights and the section on Real Estate Transactions are planning a three-hour extended program on Real Estate...
Do Payday Loans Cause Bankruptcy?
Posted on March 17, 2008Anecdotes about the effects of high-interest payday loans abound, but these correlations don't tell us about the causal impact of borrowing at 450% APR. Simply observing payday loan borrowers' in financial distress can't determine which direction the causality goes...
The Bear is Dead
Posted on March 17, 2008The Fed's extraordinary step in propping up Bear Stearns, followed by Morgan Stanley's JP Morgan's purchase of the company at a fire-sale price, has everyone reeling. But for Credit Slipsters there's an odd little irony worth noting: Why didn't the...
Welcome to Paige Marta Skiba and Jeremy Tobacman
Posted on March 16, 2008Credit Slips welcomes Paige Marta Skiba, a behavioral economist who studies payday lending. She earned her Ph.D in economics from the University of California, Berkeley in 2007 and is currently an associate professor of law at Vanderbilt Law School. She'll...
What a Law Professor Does on a Saturday Afternoon
Posted on March 15, 2008It's Saturday afternoon, and as a law professor I'm spending it in my usual way--reading and rereading the various form contracts to which our household is subject. I was all involved with an engrossing new form describing my rights under...
Mr. Autrey Speaks for Himself
Posted on March 14, 2008Steve Autrey was one of those people who had been invited to testify before the House subcommittee yesterday. He showed up, but he was was silenced when the committee decided he couldn't testify unless he signed a waiver permitting his...
Bankrupt Consumer Arbitration
Posted on March 13, 2008A couple of years ago, I got all exorcised about MBNA v. Hill, 436 F.3d 104 (2d Cir. 2006). The case involved a consumer bankruptcy where MBNA had offset $159 from the consumer's account despite MBNA's admission that it had...
Home Equity Shoe Dropping
Posted on March 13, 2008Something that I had been wondering about re: the mortgage meltdown has been home equity loans. We've all been focusing on home mortgages (starting with sub-prime, but slipping up to Alt-A and conventionals), but what I was curious about was...
Credit Slips Goes to Washington
Posted on March 13, 2008Today Katie Porter, Adam Levitin and I testified before the Financial Services subcommittee on Financial Institutions of the House Committee on Financial Services, along with Professor Larry Ausubel and four representatives of the credit card companies...
Solutia Solution
Posted on March 12, 2008I didn't want Credit Slips readers to miss the settlement of the Solutia lawsuit that occurred at the end of February. Solutia sued its consortium of DIP lenders for trying to back out of a $2.05 billion exit financing loan....
Illinois Statute Gives Debtors Less Protection After Bankruptcy?
Posted on March 11, 2008A crazy Illinois law demonstrates how bad drafting is not just for the U.S. Congress. State legislatures can do it too! It is my understanding that some Illinois automobile lenders are citing this law (625 ILCS 5/3?114) as a reason...
Credit Squeeze
Posted on March 09, 2008BusinessWeek reports that more credit card issuers are refusing to cut interest rates to help out consumers in trouble. Until recently, if someone entered formal credit counseling, the card companies would often cut interest rates to zero to keep the...
One in Ten
Posted on March 06, 2008The latest numbers are out: One in ten homeowners has no equity in the family home. The data show that about 15% will be below water if prices continue to slide, owing more than their homes are worth. So what's...
Payment cards continue global growth
Posted on March 06, 2008While Americans continue to lead the world in credit card spending, other forms of plastic payment such as debit cards continue to have an edge in other nations. Overall, Ronald Mann reports that global spending on credit and debit cards...
An Update on Erica Stevens
Posted on March 05, 2008Back on February 24, I posted the story of Erica Stevens (again, not her real name). Erica is one of the respondents of the Consumer Bankruptcy Project 2007. I described how her bank had held a check from the bankruptcy...
Reexamining Non-Judicial Foreclosures
Posted on March 04, 2008If mortgage servicer abuse is rampant in judicial settings, how much worse is it in non-judicial foreclosure?
HOPE Now January Report
Posted on March 04, 2008There's good news and bad news in the January 2008 HOPE Now numbers. The total number of workouts is up, as is the percentage of those that are loan modifications, but the number of completed foreclosure sales rose at a much faster rate.
A Debtor's World: An Interdisciplinary Academic Conference
Posted on March 03, 2008On May 2-3, the University of Illinois College of Law and the American Bankruptcy Institute are sponsoring "A Debtor's World: An Interdisciplinary Academic on Debt." Our goals is to bring together leading scholars from different disciplines to have a conversation...
Unmerchantable McDonalds' Fries? New Commercial Law Blog
Posted on March 03, 2008Several law professors have started a new blog, Commercial Law, to offer their thoughts on issues arising under the Uniform Commercial Code or commercial laws. The blog is off to a lively start with daily postings on all sorts of...
Commercial Law at DePaul
Posted on March 03, 2008On May 1, DePaul University College of Law and the Commercial Law League of America are sponsoring a symposium entitled "Lawyers, Law Firms & the Legal Profession: An Ethical View of the Business of Law." The program appears aimed principally...
February 2008 Filing Rates Hit Post-BAPCPA High
Posted on March 03, 2008This just in. Bankruptcy filings in the U.S. are now at their highest daily rate since the 2005 changes to the federal bankruptcy law. According to Automated Access to Court Electronic Records (AACER), there were 79,198 bankruptcy filings in February...
Surprise!!! You've earned a discharge AND a foreclosure
Posted on February 28, 2008Tomorrow, the Senate is expected to vote on the Foreclosure Prevention Act of 2008, Title IV of which would permit bankruptcy courts to modify home mortgages in certain ways if the loan and the debtor met specified criteria. We've described...
Welcome to the Blogosphere: Less Than the Least
Posted on February 28, 2008Professors David Skeel (Penn, Law) and Bill Stuntz (Harvard, Law) have started Less than the Least. Skeel and Stuntz say they will write about what interests them personally and professionally. Thus, Credit Slips readers may want to check out this...
Webcast on Foreclosure Crisis
Posted on February 26, 2008The Cleveland City Council is webcasting a foreclosure forum on Wednesday February 27th from 10am-1pm. Here's the link to watch. The event is timed to coincide with the visits of the Presidential candidates and national media to Ohio. Senator Obama...
Contracting for Stay Waivers
Posted on February 25, 2008There are doctrinal problems with the enforceability of prepetition waivers of the automatic stay, namely that the stay is a right of the estate's not the prepetition debtor's, so there isn't anything the prepetition debtor can contract for.
Vote on Tuesday
Posted on February 25, 2008The pending bankruptcy amendment that would let judges make a downward adjustment on mortgages when the loan exceeds the value of the property goes to a vote in the Senate tomorrow. It will take 60 votes to push the bill...
The Credit Cardholders' Bill of Rights
Posted on February 25, 2008The Credit Cardholders? Bill of Rights is an important piece of federal consumer protection legislation that will help shield consumers from the worst abuses of the card industry.
Ripped Off by the Banking Industry
Posted on February 24, 2008Bankrupt folks who participated in the Consumer Bankruptcy Project 2007 had the opportunity to complete a telephone interview. For the interview, they were paid $50. Respondents who shared particularly heroic and inspirational stories could be nominated by the interviewers for...
The New Politics of Bankruptcy
Posted on February 24, 2008Recently Albert Winn, a long-time Congressman from Maryland, was challenged in the primary for his seat. His opponent, Donna Edwards, campaigned on several issues, but among the most prominent was her opponent's vote for the 2005 bankruptcy legislation...
What the Foreclosure Mess Tells Us About Private Student Loan Dischargeability
Posted on February 23, 2008How readily should we accept the economic theory claim that greater dischargeability raises loan price and/or decreases lending volume without empirical evidence? How sensitive are different lending markets to bankruptcy outcomes?
30-70%? -- Probably Not the Real Rate of Mortgage Fraud
Posted on February 23, 2008I've been catching up on some reading and again found the statistic that 30% to 70% of early payment defaults on home mortgages can be linked to significant misrepresentations borrowers made on their loan applications. This most recent time I...
Thanks, Christian
Posted on February 22, 2008Christian Weller has given us a very stimulating week. His big picture perspective on the economy, debt, deflation, and debt overhang has been made even more frightening by the data he cites. I don't sleep well when I read Christian's...
A Law Unto Themselves?!
Posted on February 21, 2008A thank you to one of my students, Scott Wilson, for pointing me toward yesterday's front-page article in the Wall Street Journal about the growing phenomenon of "civil demand" that retailers are using against shoplifters. It was a new topic...
OTS ... ?4U ... WITW
Posted on February 21, 2008Office of Thrift Supervision, I have a question for you. What in the world is this? CNN reported that the OTS is in the early stages of a plan that would give some lenders an incentive to write down mortgages...
Why Do Banks Lend More?
Posted on February 21, 2008Why has household debt grown so much? One rather convincing argument is that income growth has not kept pace with the cost of basic consumption. To maintain consumption, many families first increasingly relied on consumer debt. This argument, though, only...
A New Regulatory Tool for Financial Stability
Posted on February 21, 2008Economists tend to be pretty good at pointing out what is currently going wrong with the economy. But we tend to be rather hamstrung at offering solutions. In the current crisis, public policy needs to achieve three things: 1) help...
Another Consequence of Economic Crises: The Loss of our Four-Legged Family Members
Posted on February 20, 2008In my free-time, I frequently cruise the sites of horse rescues and adoption facilities. I certainly don't need another large, four-legged, hairy family member, but, like visiting the local ice cream shop, it's fun to look. Anyway, I've come across...
The Fed Cannot Do it All
Posted on February 20, 2008Many wait for Ben Bernanke and his colleagues at the Fed to save the economy from further turmoil. The reality, though, is that monetary policy is limited in addressing the crisis. In particular, the economy is slowing because the housing...
Credit Card Application Approval Processes
Posted on February 19, 2008What is happening in the credit card application process that allows "children, dogs, cats, and moose" to get cards?
Sliding into the Great Deflation
Posted on February 19, 2008We are headed for the Great Deflation ? a period spanning a decade or more of very slow growth, rising unemployment, flat or falling real wages, fewer employer-provided benefits and increasing pressures on government finances.
A Face for Radio
Posted on February 18, 2008If readers will excuse a little self-promotion, I wanted to say that I'll be on Focus 580 with David Inge on WILL-AM. The program is scheduled for tomorrow morning, February 19, at 11:00 AM (CST). We'll be talking about the...
Do the Math on Recession and Foreclosures
Posted on February 18, 2008Thanks to CreditSlips for inviting me to be a guest blogger and to share my views on credit and the economy. By now, it's obvious that the housing crisis is dragging down the economy. For the past eight quarters, the...
Welcome, Christian Weller
Posted on February 18, 2008It is my special pleasure to welcome Dr. Christian Weller to Credit Slips. First the formal stuff: Dr. Weller is an Associate Professor of Public Policy at the University of Massachusetts Boston, a research scholar at the Political Economy Research...
Financing Boob Jobs, Facelifts, Braces, Root Canals, LASIK, oh, and Artificial Insemination
Posted on February 16, 2008Capital One has an elective healthcare finance operations--boob jobs, braces, face lifts, artificial insemination--Capital One will help you pay.
Forget Credit Cards: Blame Hookers, Strippers, and Porn
Posted on February 15, 2008The UK Insolvency Helpline recently reported that a quarter of its users admitted to having paid money for sex/porn in getting into financial distress. Here's a British article on the report here. I'm just going to let that sink in...
Revolving Credit Rollercoaster
Posted on February 13, 2008The Federal Reserve tracks outstanding revolving consumer debt in its statistical release G.19. Revolving consumer debt is primarily, but not entirely credit card debt. The G.19 statistic includes all balances outstanding, not just those that are accruing interest and fees--it...
Let Them Eat Crumbs
Posted on February 13, 2008The Treasury Department has yet another voluntary plan to fix the mortgage meltdown. This one gives families an extra thirty days to pack their belongings before they lose their homes to foreclosure. For the 2 million families estimated to go...
The December Effect
Posted on February 12, 2008Most every month, I write up a post with some thoughts about the latest monthly filing statistics from AACER. I've always been a little hesitant about those monthly updates because a focus on the monthly ups and downs doesn't really...
Is Spending the Way2Save?
Posted on February 12, 2008It's not clear whether consumers come out ahead in Wachovia's Way2Save program.
$175,862.27 in Credit Card Debt and a Bleg
Posted on February 12, 2008When a debtor racks up $175,862.27 in credit card debt, we have to ask what's going on with the lenders who enabled this type of debt.
Will the Mortgage Industry Fix the Mortgage Mess Itself? A Look at Project Lifeline
Posted on February 12, 2008Project Lifeline, the mortgage industry's latest effort to clean up its mess, is unlikely to help homeowners in a significant number of states.
For-Profit Student Lenders Win Again
Posted on February 12, 2008Yesterday, the U.S. House of Representatives passed H.R. 4137, College Opportunity and Affordability Act of 2007. Reading that, you might query whether the House has a calendar, but the main point of the bill is to make some reforms to...
The Future of Bank Fees
Posted on February 10, 2008The Brits may be showing us the future on bank fees. First, the pain: British banks charge an average of $57 for an overdraft, about 70% more than US banks. Second, the response: A movement has swept across Britain to...
Profit Possibilities
Posted on February 10, 2008One of the hardest things about teaching debtor-creditor law is keeping up with all the market innovations. Subprime mortgages are in the spotlight, but credit card debt has not subsided. Last quarter credit card grew at a rapid 9.3%. For...
Creditor Calls Debtor Excrement
Posted on February 08, 2008Under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692d(2), creditors are prohibited from using "obscene or profane" language in collecting debts. Would this count? Or is truth an absolute defense? (Thanks to students in my bankruptcy class for...
Thanks to Jean Braucher
Posted on February 07, 2008Although the caption of this post is self-explanatory, we just wanted to emphasize how much we enjoyed having Jean Braucher post for us this past week and hope you did so too. Jean's intellectual travels from Canada to Australia show...
A Bankruptcy Passing
Posted on February 06, 2008My colleague here at Michigan, Emeritus Professor Frank R. Kennedy, passed away. My other colleauge (and recent guest blogger) James J. White had nice things to say about him back in 1982: here. Readers old enough to remember his role...
Bankruptcies Continue Their Slow, Upward Pace
Posted on February 06, 2008We ended the year 2007 with 826,665 total bankruptcy filings, according to the data from Automated Access to Court Electronic Records (AACER). This figure represents a 39.9% increase over 2006, but the 2006 figures were affected by the huge surge...
Treatment and the European Perspective: Why Don't We Ask Whether US Debtors in Bankruptcy Have Other Social Problems?
Posted on February 04, 2008European debt adjustment systems have built in an assumption that people with debt problems also have higher incidence of other social problems?substance abuse, family dysfunction, weak impulse control, and perhaps also mental health problems such as depression and anxiety...
The Power of Numbers
Posted on February 01, 2008When the credit industry lobbied Congress for adoption of the bankruptcy amendments, they made a powerful claim: Bankruptcy costs every American family $400. The number was pure fabrication, but the number was repeatedly quoted in newspapers, magazines and in Congress...
Even the US Trustee Has an Occasional "Credit Crunch"
Posted on February 01, 2008On January 14, 2008, the US Trustee announced that it has suspended audits of consumer debtors. While consumer advocates have criticized the audits as overzealous and unnecessary, the temporary end of audits occured for a simple (if somewhat, ironic, reason)--the...
Is Greed Good? The Professor vs. The Senator
Posted on January 31, 2008This is going to be really big picture. It's about the differences between formal economic theory, on the one hand, and ordinary thought about economic questions, on the other. It pits the views of an anonymous college professor (as reported...
Mortgages at the Dem's Debate
Posted on January 31, 2008Hilary and Barack focus on mortgages on at the Los Angeles debate.
Credit Card Rewards Down Under
Posted on January 31, 2008The Sydney Morning Herald (Australia) was kind enough to feature my article about the social costs of credit card merchant restraints. (Sorry for the shameless self-plug...) It's worth noting that when the Reserve Bank of Australia forced credit card networks...
Worth Reading--Moral Responsibility to Pay
Posted on January 30, 2008Two very thoughtful posts by Buce at Underbelly are worth reading. Both get at the question of whether "can pay" debtors are acting wrongfully when they don't pay. The first post looks at the issue generally. The second post is...
House Judiciary Cramdown Hearing
Posted on January 30, 2008Highlights of the House Judiciary subcommittee hearing on the cramdown bill.
Homeowners in Trouble--Don't be an industry statistic
Posted on January 30, 2008The Mortgage Bankers Association released a study this month that touts the efforts of mortgage servicers and lenders to assist borrowers. The industry asserts that it "took major steps" to "help those borrowers who could be helped." Therein, lies the...
Good Government (Under Threat) Down Under
Posted on January 29, 2008Australia has a bankruptcy system worth studying. Among other merits, it collects and publishes more facts about its system on line than any other. http://www.itsa.gov.au/dir228/itsaweb.nsf/docindex/about+us-%3Epublications-%3Epublications?opendocument Prior to 1996, Australia probably had the most sensible bankruptcy system in the world...
More Bogus Numbers from the Mortgage Industry
Posted on January 28, 2008The Mortgage Bankers Association's claim that permitting bankruptcy cramdown will result in interest rates rising 1.5%-2% is demonstrably false and based on cherry-picked statistics. When the full statistical picture is considered, our study finds that cramdown is likely to have little or no impact on mortgage interest rates.
Is Financial Education a Good Idea and Whose Idea Is It Anyway?
Posted on January 28, 2008Educators find it hard to be against education, and I am no exception to that rule. But some evidence from JumpStart Coalition, which promotes financial education for young people, is cause for pause. Its last survey of high school students,...
Thank you to Jim White and Welcome to Jean Braucher
Posted on January 28, 2008It's Monday, and we have a changing of the guard. We wanted to thank Professor James J. White of the University of Michigan Law School for joining us last week. Professor White now holds the Credit Slips record for most...
Same Solutions, Different Problems
Posted on January 27, 2008Economists teach that if the economy is going into a recession, lower interest rates and give people money. That wisdom is so conventional that the only quibbling seems to be over timing, amount, and who gets the money. But this...
Discussions of the Kind That I Stimulated By My First Post
Posted on January 25, 2008Discussions of the kind that I stimulated by my suggestions on Monday (about what Congress might do) reveal widely different assumptions about the number and type of debtors that will default. Shouldn't we look for the data? The data might...
Servicing Kickbacks Alleged in Class Action
Posted on January 24, 2008Last week, a class action lawsuit (Harris v. Fidelity National) was filed against Fidelity National Information Services, a huge player in the billion dollar world of mortgage servicing. "What? I've never heard of them," you say. Fidelity is the company...
NYT Topic Page on Bankruptcy
Posted on January 23, 2008One of my friends--and you know who you are--gave me some serious stick for not putting up a post on Jane Birnbaum's January 12 New York Times article on the state of the bankruptcy system. It took me a while...
Congress' Response to the Mortgage Mess
Posted on January 21, 2008Eric Sevareid once remarked that a "chief cause of problems is solutions." From a libertarian perspective at least, I suspect that we will find "problems" in the "solutions" that Congress will enact to solve the sub prime mortgage mess. At...
Welcome to Jim White
Posted on January 21, 2008Does your employer (like mine) not give you MLK Day off? Well, then Credit Slips has just the solution to your woes: reading the musings of our newest guest blogger, Prof. James J. White. Good law nerds will be well...
Thank You to Nathalie Martin
Posted on January 18, 2008The Credit Slips crew wants to thank Professor Nathalie Martin, of the University of New Mexico School of Law for joining us a guest blogger. Professor Martin attracted some attention around the blogosphere with her post on the reality of...
Between Life and Death, Bankruptcy Style
Posted on January 17, 2008The Brits, in their understated way, are on the fast track to revolutionizing the balance between debtors and creditors. With no public fanfare, the Ministry of Justice announced a plan for debtors to stop making payments on credit cards for...
Will the "Real" Anti-Foreclosure Mr. Paulson Please Stand Up?
Posted on January 16, 2008Yesterday's front page story in the Wall Street Journal was not the usual Paulson story about subprime mortgages---blah, blah Treasury Secretary Henry Paulson has organized mortgage companies to make blah, blah, blah unenforceable promises to offer short-term help to blah,...
Nifong Files Bankruptcy
Posted on January 16, 2008Courtesy of the Law Blog over at WSJ.com, I learned that Michael Nifong has filed bankruptcy. Nifong was the district attorney in the rape case against the three Duke lacrosse players. After Nifong was removed from the case, the charges...
Clinton, Edwards, and Obama on 2005 Bankruptcy Law
Posted on January 16, 2008Adam Levitin's post and Katie Porter's comment on about last night's Democratic debate and the candidates' discussion of the 2005 bankruptcy prompted me to start writing a comment about the Democratic candidates' stand on the 2005 bankruptcy law. It started...
Bankruptcy at the Dem's Debate
Posted on January 15, 2008Bankruptcy got a surprising amount of attention at tonight's Democratic primary debate in Las Vegas.
Consumer Spending
Posted on January 15, 2008As the country contemplates a recession, economists are wringing their hands over a slow-down in consumer buying. About two-thirds of the economy is driven by consumer purchasing. Without that engine, economists fear that the economy will be in serious trouble...
Mortgage Magic--Recreating Servicing Documents
Posted on January 11, 2008The latest uproar about mortgage servicing in bankruptcy is an admission by Countrywide that it "recreated" documents related to the servicing of a consumer's home loan. The short story is that Countrywide says a debtor's monthly mortgage payment changed during...
European Commission Rules MasterCard's Interchange Fees Are Illegal
Posted on January 10, 2008The European Commission rules that MasterCard's interchange fees are illegal.
Your Free Lottery Ticket: Credit Card Truncation and Identity Theft
Posted on January 10, 2008Credit card truncation statutes, which forbid the printing of more than 5 digits of a credit card number on a receipt, are meant to protect against identity theft, but miss the point. The problem is not the number of digits on a receipt, but the very fact that card technology permits relatively easy fraud--just by copying 16 digits...
Forget the "Foreclosure Investigator"--File a Lawsuit!
Posted on January 09, 2008Elizabeth Warren's recent post asked "What Can a City Do?" about subprime lending. The post prompted many thoughtful comments, both on Credit Slips and on the Calculated Risk blog. While readers were discussing the merits of various ideas, including a...
Is Cheaper Better?
Posted on January 09, 2008As part of the 2005 amendments, consumer bankruptcy debtors must complete a financial education course to receive a bankruptcy discharge. The requirement was controversial among law professors, with some seeing the requirement as one of very few reforms that could...
Financial Education: Money Talk Hits a Sore Spot
Posted on January 08, 2008Money is a touchy subject. No matter how much you try to make discussions about how to preserve it, how much importance to place on it, etc, value neutral and nonjudgmental, people have issues. I spend most of my free...
Call for Banking and Consumer Financial Services Papers
Posted on January 07, 2008The University of Connecticut School of Law is hosting a Junior Scholar Workshop on Banking and Cosnumer Financial Services Law on May 28-29th. Consumer Financial Services is certainly a hot area of policymaking right now, and this academic conference promises...
What Can a City Do?
Posted on January 07, 2008Because subprime lending was not evenly spread around the country (or even around a state or city), individual neighborhoods are bearing the brunt of the meltdown. When several homes in one community go into foreclosure, a neighborhood can rapidly shift...
Think Public Benefits are Exempt from Execution? Think Again.
Posted on January 05, 2008I have been telling my students this for years. Perhaps you have too. 42 U.S.C. § 407(a) says social security and other public benefits are free from the claims of executing creditors, but for many people that is true only...
News from the Law Professors? Conference
Posted on January 05, 2008I thought I could channel techno-guru Bob Lawless and blog live from the AALS program on Creditors' and Debtors' Rights, but I couldn't so here's what went on at our conference yesterday. Our own Katie Porter (Iowa) organized this year?s...
The Social Security Prepaid Debit Card
Posted on January 04, 2008Social Security is switching from checks to prepaid debit for its disbursement. This has redistributional effects and represents the federal government's most major outsourcing of its payments, which raises the specter of abusive monopoly fees being imposed on a captive market of Social Security benefit recipients.
Illinois State Treasurer Shilling for Barclays Bank
Posted on January 03, 2008Well, I won't sleep so well tonight knowing the same masterminds that came up with the following idea are also in charge of our state funds. Today's State-Journal Register (full article here) reports the following: Moms, dads and other adults...
It's All Academic
Posted on January 03, 2008A long-standing academic divide now separates two presidential candidates. For nearly three decades, legal scholarship has been dominated a deductive, theoretical approach that analyzes incentives and assumes outcomes, with the rational actor playing the starring role...
Debt Slavery? Correlation of Slavery with Chapter 13 Filing Patterns
Posted on January 02, 2008There is a strong correlation between high chapter 13 filing rates and former slave states. But what is the explanation?
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My fiance's check is DD into a local credit union. Bank seems to have a pattern of "invisibly holding" charges from the debit card until just HOURS before his DD is processed (and this is after hours, of course). Over th
Have your fiance take the information you've collected and go into the bank...
My father died and left my mother $200,000 (life insurance) My Mother died 2 years later leaving my sister and I with both about $75,000 each. (including house/vehicles/belongings which I never got). We were supposed to
File a police report. Two police reports, one for you and one for your sister. G...
Must I refinance my house aftering taking full ownership after a divorce via a quit claim?
When financing there are at least two documents...the mortgage and the note. The...
Should I return a phone call from a collection agency that doesn't name their client in the message?
In the county of the state where I live in the US, I am able to go to the websit...
My house has bee sold at a sheriff sale the proceeds of the sale covered the first mortgage. Am i still required to pay the second mortgage?
You are indeed still responsible for the home loan that was not paid through the...
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