Student Loan Debt Is Now as Big as the U.S. Junk Market - Bloomberg

U.S. student loan debt now equals the size of the $1.3 trillion U.S. high-yield corporate bond market, presenting investors with a whole different range of risks, Bloomberg News reported. “Delinquency rates on student loans are much higher than those on auto loans or mortgages, due to loose student loan underwriting standards, the unsecured nature of student debt, and the inability to charge off non-performing student loans in bankruptcy,” Goldman Sachs Group Inc. analysts Marty Young and Lotfi Karoui wrote in a note on Tuesday. “The substantial majority of student loan default risk is borne by the U.S. Treasury.” While the trend of rising defaults on student loans doesn’t pose “systemic financial risks,” it does impact household behavior, as the debt load itself hurts home ownership rates, Young and Karoui said. The share of student loan debt that is securitized, meaning it’s backed by assets and known as asset-backed securities, is about $190 billion, according to Goldman Sachs. Of that, about $150 billion is linked to loans where the repayment of the principal is guaranteed by the U.S. government.

Bitcoin Futures Set to Start Trading as Regulator Gives Thumbs Up - ABI

The U.S. Commodity Futures Trading Commission said it would allow two major Chicago exchanges to launch bitcoin futures, the Wall Street Journal reported. The announcement on Friday paves the way for the start of bitcoin futures on CME Group Inc. and Cboe Global Markets Inc. in the coming weeks — a potentially huge step in the evolution of the digital currency, making trading bitcoin easier for Wall Street banks and small investors alike. CME said its bitcoin futures would launch Dec. 18. Cboe said that it would shortly announce the start date for its new bitcoin contract. After “extensive discussions” in recent weeks, the two exchanges made significant changes to their proposals at the regulator’s request, the CFTC said.

Attorney General Appoints U.S. Trustee and Acting U.S. Trustees to Cover Six U.S. Trustee Program

Attorney General Jeff Sessions has appointed one interim U.S. Trustee and five Acting U.S. Trustees to cover six U.S. Trustee Program (USTP or Program) regions, according to an Executive Office for U.S. Trustees (EOUST) press release last week. The effective date of each appointment correlates with the upcoming retirements of Judy A. Robbins, U.S. Trustee for Regions 4 and 7, and Guy G. Gebhardt, Acting U.S. Trustee for Region 21, and the detail of Gail B. Geiger, Acting U.S. Trustee for Region 18, to a leadership position in the EOUST.

Trump to Nominate Jelena McWilliams as FDIC Chief - ABI

President Donald Trump will nominate regional bank executive Jelena McWilliams to lead the Federal Deposit Insurance Corp., the White House said Thursday, the Wall Street Journal reported yesterday. Ms. McWilliams has worked as a lawyer at the Federal Reserve and on the Republican staff of the Senate Banking Committee. She is currently chief legal officer of Cincinnati-based Fifth Third Bancorp. The nomination moves Trump closer to rounding out a team that can carry out his promise to revisit financial regulations adopted under President Barack Obama. The FDIC is currently led by an Obama nominee, Martin Gruenberg, who has pushed for strict rules on large Wall Street banks and warned against deregulation in a Nov. 14 speech. Mr. Gruenberg’s term as chairman ended Nov. 29. The White House said Ms. McWilliams has political science and law degrees from the University of California at Berkeley, and practiced corporate and securities law before entering public service in 2007, serving three years at the Fed and then six years in the Senate. At the Senate banking panel, she worked for Sens. Richard Shelby (R-Ala.) and Mike Crapo (R-Idaho), both of whom are skeptical of the 2010 Dodd-Frank financial-overhaul law and the resulting rules implemented under the Obama administration.

Trump Team to Recommend Keeping Dodd-Frank Liquidation Power - ABI

The Trump administration doesn’t plan to recommend stripping regulators of their power to seize and unwind a failing financial firm in a crisis, the Wall Street Journal reported. The Treasury Department, in a coming report on the Dodd-Frank provision known as the orderly liquidation authority (OLA), plans to propose changes to the policy without scrapping it wholesale, these people said. Repealing OLA would require an act of Congress. A recommendation from the Treasury to scrap the provision would have added firepower to Republican lawmakers’ calls to do so. Several senior Trump administration officials questioned OLA earlier this year, and House Republicans in June voted to scrap it as part of the Financial Choice Act, a broad deregulatory bill. That has fueled concerns among big banks and financial regulators who say the provision is a crucial alternative to taxpayer-funded bailouts. The Dodd-Frank provision empowered regulators to seize and liquidate a failing financial firm if it posed a threat to U.S. financial stability. It has never been put into practice. Instead of injecting taxpayer dollars into the company, as with the 2008 bailouts, officials would instead have the power to impose losses on shareholders, wipe out management, and liquidate toxic assets. They could use those powers only if bankruptcy wasn’t a viable option.

Judge Rules in Favor of Mulvaney as Interim Head of CFPB - InsideARM

This afternoon a federal judge ruled against Leandra English, former Consumer Financial Protection Bureau (CFPB) Director Richard Cordray's pick to be the bureau's interim director. English had filed a lawsuit to stop Mick Mulvaney, President Trump's pick for the job, from assuming the role.  The high drama kicked off last Friday during the Thanksgiving weekend, when Cordray announced it would be his last day, and that he was naming his chief of staff as deputy director. Since then, because of two conflicting laws governing how to fill the vacancy, it was unclear who was actually in charge. Mulvaney showed up on Monday, occupied Cordray's old office, and began work. English emailed the staff, but reportedly spent the day on Capitol Hill.  Mulvaney held a 20-minute press conference yesterday afternoon from the bureau, and took quite a few questions. He made it clear he intended to come to work until the President or a judge said otherwise.  A few hours ago, Judge Timothy Berry of the U.S. District Court of the District of Columbia settled the matter; he denied Leandra English's request for a restraining order to bar Mulvaney from serving as the CFPB’s acting director.  Now Mulvaney is free to do as he described in the press briefing - he will spend three days a week at the CFPB and three days a week at the Office of Management and Budget (OMB), his "full time" job. He acknowledged that added up to more than a regular workweek, but that he was perfectly prepared to do it as long as he is needed.
He also promised that a CFPB under his leadership will look very different than a CFPB under Cordray's leadership. While he didn't spell out specifics, he said he is in the process of receiving briefings on enforcement actions and regulations that are in play. And he has imposed a 30 day hold on, basically, any new activity. He said he was impressed with the professionalism of those he has met so far at the CFPB, and he imagined that they appreciated his candor in expressing his intentions.

CFPB’s Deputy Director Sues Trump to Shut Out Pick for Interim Leader - The National Law

A top Consumer Financial Protection Bureau official on Sunday sued the Trump administration to block the appointment of Mick Mulvaney as the temporary director of the independent agency, the National Law Journal reported. The lawsuit forces a judge to confront a clash over who should rightfully lead the agency as the White House looks to nominate a permanent replacement for Richard Cordray. Leandra English, named deputy director of the consumer bureau last week, asked a federal judge to declare that Mulvaney, director of Office of Management and Budget, is not the agency’s acting director and order the Trump administration to “refrain from appointing any individual to the position of Acting Director of the Consumer Financial Protection Bureau.” The lawsuit comes just days after Cordray elevated English, his chief of staff, to the deputy role — a promotion that was meant to put her in line to become acting director. Hours after Cordray announced his resignation, effective Nov. 24, Trump appointed Mulvaney to lead the CFPB, setting the stage for a battle over the leadership of an agency Republicans and financial services advocates have assailed and supporters have applauded as a champion for consumers. “The talented and hard-working CFPB staff stand up for consumers every day. As acting director, I am filing this lawsuit to stand up for the CFPB,” English said in a statement Sunday.

Tax Bill’s Fine Print: Making It Tougher for Cities, States to Refinance Debt - ABI

The Republican tax plan being considered in Congress would eliminate a tax exemption on some types of bonds issued by state and local governments to refinance their old debt, the Wall Street Journal reported. The GOP proposal targets the exemption for so-called advanced refunding bonds, which allow governments to refinance old bonds earlier to take advantage of low interest rates and, occasionally, to postpone upcoming debt payments. The House approved its version of the tax measure last week, and the GOP has said that it aims to get agreement on the bill by year’s end. It is one of several municipal-market exemptions that could be phased out under the legislation. The nonpartisan Joint Committee on Taxation estimates that ending advance refundings would mean an additional $17.3 billion in revenue to the federal government over the next decade.

“Bankruptcy Tourists” Battle for Assets from Caymans to Marshall Islands - ABI

A battle of “bankruptcy tourists” has erupted in New York court, with unclear consequences for global companies and their bondholders, Bloomberg News reported. Bankruptcy Judge Martin Glenn yesterday refused to issue a ruling on a request by Ocean Rig UDW Inc. to block a lawsuit in the Marshall Islands that it said threatens a $3.7 billion restructuring approved in Cayman Islands Courts. Judge Glenn said he would think about the “extraordinary” issues the case raised, possibly ruling later. "You want me to stop litigation in another sovereign country," Glenn said in court Thursday, adding that he had never seen such a request and that there was no clear precedent. If Highland wanted to try to recover Ocean Rig’s U.S. assets in U.S. court, then the issue would be in his jurisdiction, he said. Any decision in the case could have wider implications for what restructuring experts call "bankruptcy tourism." In the past, bankruptcy participants wrangled over the merits of Delaware versus New York courts, and sometimes drew criticism about "forum shopping" for a venue that favored their case. Now companies and creditors are engaged in international battles over where they can best win their debt wars. "This is the next phase of the restructuring business,” said William Brandt Jr., chief of a New York-based restructuring advisory firm Development Specialists.  "Bankruptcy tourism will come into the fore." Brandt cited his work as a trustee in the international case of China Fishery Group Ltd., where he regularly travels from Lima to Hong Kong. Another example, he said, is Oi SA, a Brazilian telecom company, in which Aurelius Capital Management is fighting a battle that involves jurisdiction of Dutch, U.S. and Brazilian law.

Checks on Trump’s Court Picks Fall Away - ABI

The Republican head of the Senate Judiciary Committee has curtailed one of the last legislative limits on a president’s power to shape the federal courts, giving Donald Trump more freedom than any U.S. president in modern times to install his judges of choice, legal experts said, the Wall Street Journal reported. Last week, Sen. Chuck Grassley (R-Iowa) reined in a tradition that empowered senators to block federal appeals-court nominees from their home state. His decision came about four years after Democrats, citing Republican filibusters of President Barack Obama’s circuit-court nominees, eliminated a Senate rule that required the majority party to mount 60 votes to advance a nominee to a confirmation vote. Together, the threat of a filibuster — or delaying tactic — and use of “blue slips” — so-named because senators indicate support or opposition to nominees on blue slips of paper — guarded against lifetime appointments for nominees deemed far outside the mainstream, court experts said. Others said the changes were part of a natural progression away from Senate traditions that allowed the minority party to stall nominations for partisan reasons.