Analysis: History Not a Guide for Possible Chicago Public Schools Bankruptcy
Only four school districts have declared chapter 9 bankruptcy in the past 62 years, and two of those abandoned the process, says a municipal bankruptcy expert asked about the possibility of Chicago Public Schools (CPS) doing the same, according to an analysis in Forbes today. CPS, the nation’s third-largest school district, faces a nearly $1 billion budget deficit and the possibility of staying closed in the fall if the state fails to pass a budget. Rather than compromise with legislators over education funding, Gov. Bruce Rauner has publicly supported a bill introduced by Rep. Ron Sandack that would allow Illinois school districts and other local units of government access to chapter 9. James Spiotto, managing director of municipal finance consulting firm Chapman Strategic Advisors LLC in Chicago, points out that the two school districts that dismissed their cases in favor of other resolutions did so because “there are better methods that states have developed to deal with troubled school districts.”

Why Some Banks Are Hurt More than Others by Falling Rates
Bank stocks have taken a beating as long-term interest rates sink ever lower. But not all lenders are equally exposed, the Wall Street Journal reported today. A cocktail of global anxieties, from the Chinese economy to the U.K.’s potential exit from the European Union, has driven long-term rates down in recent weeks. Yesterday, the Federal Reserve pushed them down further by lowering its projections for where rates are headed years from now. This is unwelcome news for banks. But just how bad the news is depends on the specific mix of assets on their balance sheets. Banks with more long-term loans will feel a bigger impact. Among large and mid-size lenders, these include U.S. Bancorp and Wells Fargo. Each has long-term loans worth over one-fifth of total assets, according to analysts at Keefe, Bruyette & Woods. The more immediate hit will be to banks with large holdings of securities backed by residential mortgages. Lower long-term rates incentivize mortgage-holders to refinance. This means investors in mortgage-backed securities will get paid back sooner, reducing the value of those notes and forcing them to reinvest at lower rates.

Allianz CEA: Fed Lacks Vision on Economy, Is Overly 'Data-Dependent'
Federal Reserve policymakers “don't have a vision” for where the U.S. economy is going, Allianz Chief Economic Adviser Mohamed El-Erian said today after central bankers decided not to increase interest rates yesterday, CNBC reported today. “The collateral damage and unintended consequences of this prolonged experiment with very low interest rates [and] very big balance sheets are starting to have a meaningful [negative] effect on the economy,” said El-Erian. Without a clear idea for the future of growth, the Fed has become “overly data-dependent,” he added, arguing that such an approach has been sending “conflicting signals over time.” The former co-CEO of Pimco said investors are left wondering whether the Fed is “being totally inconsistent or the Fed [is] being a slave of the markets.” The Fed raised rates in December for the first time in more than nine years. At the time, central bankers projected four more rate hikes in 2016. But the new year market turmoil scaled back those expectations. The futures market now sees less than a 50 percent chance of even one hike by year-end.

Legislation Calls for Updates to CFPB Consumer Complaint Database
U.S. Rep. Matt Salmon (R-Ariz.) has introduced legislation that would require changes to the Consumer Financial Protection Bureau’s online consumer complaint database, including additional verification of consumer complaint information and reporting on details of complaint percentages, the Association of Credit and Collection Professionals (ACA) International reported Tuesday. The CFPB Data Accountability Act, introduced this month, requires the CFPB to “verify and put into context the consumer complaints they are presenting,” says Salmon. The CFPB launched the public Consumer Complaint Database in 2012 and added debt-collection complaints to the public database in November 2013. In June 2015, the CFPB also added consumer complaint narratives to the public database, allowing consumers to share their experience in the financial marketplace in their own words. According to the bill text, the information presented in an aggregated format may only be posted on the website after the CFPB takes steps “to ensure that proprietary, personal or confidential consumer information is not made public on such website.” It also states that the CFPB must verify consumer complaint information if it alleges a violation of law, regulation or contractual agreement between a consumer and service provider.


What should bankruptcy practitioners know about the CFPB? Free abiLIVE webinar on June 22 to provide information and perspectives from a CFPB official. Click here to register.

Latest ABI Podcast Discusses the Corinthian Chapter 11 Case
ABI Spring 2016 Resident Scholar Melissa Jacoby discusses the Corinthian chapter 11 case with Scott F. Gautier of Robins Kaplan LLP in Los Angeles and Christopher A. Ward of Polsinelli in Wilmington, Del. Both were counsel for a committee of former students of what was once one of the largest for-profit post-secondary educational companies in the U.S. and Canada. The case involves the unusual step of seeking to have the outstanding student loan debt of up to 500,000 former students forgiven.

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