White House Is ‘Extremely Open’ to Student-Loan Debt Cancellation, Schumer Says

White House Is ‘Extremely Open’ to Student-Loan Debt Cancellation, Schumer Says

ABI Bankruptcy Brief

February 4, 2021

ABI Bankruptcy Brief

White House Is ‘Extremely Open’ to Student-Loan Debt Cancellation, Schumer Says

Congressional Democrats are ramping up pressure on the White House to cancel student debt, but the White House still appears to be kicking the issue to Congress, MarketWatch.com reported. Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Elizabeth Warren (D-Mass.) reintroduced a resolution today calling on the president to immediately cancel up to $50,000 in student debt for each borrower. Schumer and Warren were speaking at a press conference where they were joined by Democratic representatives Ilhan Omar, Ayanna Pressley and other lawmakers who introduced a companion resolution in the House. Calls for Biden to use his executive authority to cancel student debt have grown since his election in November. Amid the pandemic-induced downturn, cancelling student debt has emerged among progressives and some mainstream Democrats as an attractive option because it may not require Congressional wrangling. “Cancelling student-loan debt is the single most effective executive action that President Biden can take to kick start this economy,” Warren said at the press conference. However, despite the pressure from lawmakers, it appears Biden still may be hesitant to use his authority to cancel student loans. During the White House press briefing Thursday, Jen Psaki, the White House press secretary, reiterated Biden’s support for Congress to cancel $10,000 in student debt per person as a response to the COVID crisis. Still, Psaki acknowledged the President’s power to deal with the issue through his authority, noting that Biden directed the Department of Education to extend the payments and collections pause on federal student loans when he took office. Schumer, Warren and other supporters of cancelling student debt through executive action are relying on a reading of the Higher Education Act, backed by legal experts, which says Congress has granted the Secretary of Education the power to cancel student debt. Other supporters of student-debt cancellation disagree, saying that using executive authority raises legal questions that could draw lawsuits from student-loan servicers, lenders and other entities involved in the loan process.

Federal Aid for Closed Cultural Venues Will Be a Race for Cash

In December, Congress created a $15 billion grant fund for clubs and performance spaces, recognizing that thousands of cultural institutions were at risk of closing permanently because there is no safe way to attend a rock concert or Broadway musical in a pandemic. Now comes the hard part: doling out the cash, the New York Times reported. The list of eligible recipients is large, and the Small Business Administration — the agency in charge of creating rules and systems for the initiative, the Shuttered Venue Operators Grant — has never run a major grant program. Its biggest pandemic relief effort, the $800 billion Paycheck Protection Program, was an extension of a long-running loan program, and even then it was plagued by confusion, complexity and inequities. “People are cautiously optimistic and excited, but there’s also so much anxiety,” said Liz Tallent, the marketing and special events director at the Orange Peel, an 18-year-old music club in Asheville, N.C. The shuttered-venue grant program was the result of a nearly yearlong effort by the National Independent Venue Association, a grass-roots group that formed in April. Lobbyists and activists argued that live-events businesses needed grants on top of Paycheck Protection Program loans — which weren’t designed for long-term shutdowns — because their entire business model had been destroyed. Small Business Administration officials have not yet determined when the grant program will begin, but three people familiar with the preparations said the agency was likely to circulate rules and guidance as early as this week and start taking applications a few weeks later. Unlike the Paycheck Protection Program, which relied on banks to vet applicants and has disbursed nearly $600 billion in loans so far, the venue program will be run directly by the Small Business Administration’s Office of Disaster Assistance. That unit has been swamped managing another pandemic relief effort, the Economic Injury Disaster Loan system, which distributed $194 billion in a hasty and problem-plagued effort that the agency’s inspector general warned might have lost tens of billions of dollars to ineligible or fraudulent takers. Those who fought for the venue program are imploring the Small Business Administration to create strict safeguards to ensure that the $15 billion gets to the independent venues, arts groups and producers that most need it. (Publicly traded companies like Live Nation and AEG are ineligible.)

Subsiding Layoffs Raise Cautious Optimism for U.S. Labor Market

The number of Americans filing new applications for unemployment benefits decreased further last week, suggesting the labor market was stabilizing as authorities started to loosen pandemic-related restrictions on businesses, Reuters reported. Despite the signs that layoffs are abating, the weekly jobless claims report from the Labor Department today showed at least 17.8 million Americans were on benefits in mid-January, indicating that long-term unemployment was likely becoming entrenched. That could boost President Joe Biden’s push for the U.S. Congress to pass his $1.9 trillion recovery plan. Treasury Secretary Janet Yellen told ABC’s Good Morning America that the massive stimulus plan was needed to overcome the economic pain caused by the COVID-19 pandemic. “It’s too early to predict that this begins a strong reversal of excruciatingly high layoffs,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “Another round of stimulus is important.” Initial claims for state unemployment benefits fell 33,000 to a seasonally adjusted 779,000 for the week ended Jan. 30. That was the third straight weekly decline. Economists polled by Reuters had forecast 830,000 applications for the latest week. Unadjusted claims decreased 23,525 to 816,247 last week. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs, 1.165 million people filed claims last week, down from 1.243 million in the prior period.

Sen. Romney Proposes Monthly Payments for Families with Children

Sen. Mitt Romney (R-Utah) today unveiled a proposal to provide monthly payments to families with children, The Hill reported. The proposal comes as many Democrats have similarly expressed interest in providing payments to families with children on a monthly basis. "This proposal offers a path toward greater security for America’s families by consolidating the many complicated programs to create a monthly cash benefit for them, without adding to the deficit,” Romney said. Under Romney's proposal, the existing child tax credit would be replaced with monthly payments of $350 for children ages 5 and under and $250 for children ages 6 to 17. Families would be capped at monthly payments of $1,250. All children with Social Security numbers would be eligible for the payments, and parents would also be eligible to apply to start getting the benefit four months before a child's due date. The payment amounts phase out for single tax filers with income above $200,000 and married couples with income above $400,000 — the same income phaseout thresholds for the current child tax credit. The Social Security Administration would administer the monthly payments, and people would reconcile any overpayments or underpayments with the IRS when they filed their tax returns.

Poll: One-third Say Financial Struggles Made Them Relocate During Pandemic

One in three Americans who relocated during the coronavirus pandemic said they did so due to related financial issues, according to polling from Pew Research Center released today, The Hill reported. In a November survey, a total of 32 percent of adults who moved last year cited monetary hardships, including 17 percent who named the loss of their jobs and another 15 percent who said it was due to another financial reason. Comparatively, in June 2020, 18 percent of people who had relocated cited financial reasons, either a job loss or otherwise. Meanwhile, 17 percent said they had moved to be closer to a relative or partner, down slightly from 20 percent in June, while 14 percent said they relocated due to particular risk from the virus where they lived. This represented a major drop from June, when 28 percent of those relocating did so due to the risk of the virus in their area. A similar percentage of Americans who had someone else move in with them cited financial difficulties. Thirty-six percent of that group cited money trouble, compared to 18 percent who said closer proximity to a relative or partner and 14 percent who cited the risk of the virus where the person who moved in had lived.

U.S. Factory Orders Beat Expectations in December

New orders for U.S.-made goods rose more than expected in December and business spending on equipment was solid, pointing to continued strength in the manufacturing industry in the near term, Reuters reported. The Commerce Department said today that factory orders increased 1.1% after surging 1.3% in November. Economists polled by Reuters had forecast factory orders gaining 0.7% in December. Orders dropped 6.6% year-on-year. Manufacturing, which accounts for 11.9% of the U.S. economy, has been driven by strong demand for goods such as electronics and furniture as 23.7% of the labor force works from home because of the COVID-19 pandemic. But spending on long-lasting manufactured goods declined for a second straight month in December, government data showed last week.

Next Tuesday: Don’t Miss ABI’s Virtual Caribbean Insolvency Symposium! Examine Landlord and Tenant Dilemmas, Subchapter V, Cross-Border Issues and More

ABI’s 2021 Caribbean Insolvency Symposium returns in a virtual format to bring together regional judges and top practitioners for a half-day of interactive and informative programming examining the top issues facing the industry. In addition to concurrent sessions, the Symposium will also feature session tracks tailored specifically for business and consumer practitioners. Attendees have the opportunity to earn up to 12.6/12.5 hours of CLE/CPE credit, including up to 1.8/1.5 hours of ethics, from the comfort of their home or office with 30 days of access to conference session recordings!

Concurrent Sessions:

• Welcome and Judicial Round & Round Plenary
• Subchapter V in the COVID-19 Era

Business Track:

• Landlord and Tenant Dilemmas in a COVID and Post-COVID Environment
• Cross-Border Rescue and Failure: Temas Candentes (Hot Topics)

Consumer Track:

• Counseling the Client During the Post-COVID Period
• Recent Consumer Case Law Developments with Bill Rochelle

Click here to register.

Submissions for Asset Sales Committee’s “Asset Sale of the Year” Award Now Being Accepted!

ABI’s Asset Sales Committee has opened the application period for its 3rd Annual Asset Sale of the Year Award. Submissions are due by Friday, March 5, 2021. Please see below for more information regarding the contest as well as previous winners. Criteria for submissions include:

• Completion of a sale that was strategic and provided stakeholders with value;
• A display of excellence across the full spectrum of the sale process, from the initial targeting through pursuit, structuring and financing to complete a transaction;
• A sale that reflects a high level of professional expertise in the design of the transaction, and that tested creativity and skill in completing the transaction; or
• A sale of strategic or legal significance and impact (winning entries might focus on overcoming challenges to complete the sale, innovative financial engineering, and motivating agreement across multiple stakeholders)

A bankruptcy sale (via either § 363 or a plan) that closed between January 1 and December 31, 2020.

At least one professional involved in the sale must be a member of the Asset Sales Committee as of the nomination deadline. Self-nominations are permitted.

Click here for more information.

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New on ABI’s Bankruptcy Blog Exchange: Small Businesses Give Fintechs Low Marks for Pandemic Relief

Only 18% of businesses that received a Paycheck Protection Program or other loan from an online lender were satisfied with customer service, while 42% said they were dissatisfied, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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