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US farmers are filing for bankruptcy at the highest rate since 2011 - Markets Insider

An increasing number of American farmers struggled to make ends meet in 2019 as trade tensions added to a range of growing challenges in the sector, from severe weather to low commodity prices.    There were 595 Chapter 12 farm bankruptcies filed last year, according to court filings reviewed by the American Farm Bureau, a 20% increase from 2018. That was the highest level since 2011 when the nation was still in recovery following the Great Recession. Markets Insider


Fed Expected to Keep Rates Unchanged - ABI

The Fed is not expected to change interest rates, and Chair Jerome H. Powell is widely expected to stick to the same script he used in December that the U.S. economy is doing pretty well and interest rates are in a “good place," the Washington Post reported. Recession fears have faded, unemployment is at a 50-year low, inflation is tame and the stock market remains high. However, President Trump is threatening a trade war with Europe now that tensions have subsided with China. Inequality remains high. And no one knows how deadly the coronavirus outbreak will be for the United States — or anywhere else in the world. After the Fed’s expected statement at 2 p.m. EDT today about keeping interest rates the same (the current level is just below 1.75 percent), Powell is likely to say at a news conference that the central bank is monitoring these risks closely but the impact on the U.S. economy remains tiny. Almost all the signs indicate that American consumers remain upbeat and continue to spend. ABI


Lesser-Known Restaurants File Bankruptcy as Competition Heats Up - ABI

Restaurant chains including McDonald’s, Olive Garden and Popeyes are battling to get customers through the door as more Americans choose to eat at home. Meanwhile, a growing number of lesser-known brands that can’t attract new diners are facing bankruptcy and restructuring, Bloomberg News reported. American Blue Ribbon Holdings LLC, the owner of Village Inn and Bakers Square, and Bar Louie Restaurants, a chain of gastropubs, both filed for bankruptcy on Monday. Each cited declining foot traffic in the U.S. as reason for the need to seek chapter 11 protection. “The business is just over-built, especially casual dining and full-service dining,” said Michael Halen a senior restaurant analyst at Bloomberg Intelligence. “There are too many restaurants.” In addition to declining store traffic, American Blue Ribbon attributed its restructuring to increased competition, rising labor costs and a growing number of unprofitable restaurant locations, Chief Financial Officer Kurt Schnaubelt said in court papers. The Denver-based company currently owns and operates 97 restaurants. It closed 33 stores prior to the filing. Bar Louie, based in Addison, Texas, said that opening new locations over the last few years helped increase sales, but the growth was funded by debt that has restricted the company’s liquidity, according to a declaration from Chief Restructuring Officer Howard Meitiner. Without sufficient cash to fund store refreshes and equipment maintenance, the brand experience was inconsistent across locations, Meitiner said. ABI


Growing Up During Recessionary Times Does Not Suppress Gen Z’s Appetite for Credit - TransUnion

Generation Z consumers—those born in or after 1995—are actively seeking credit despite many of them growing up during severe economic recessions in their respective global markets. A new global TransUnion (NYSE: TRU) study revealed this broad desire to engage with lenders, although the prevalence of activity and type of credit they are pursuing differs when comparing established and emerging markets. TransUnion


House passes legislation to overhaul consumer credit reporting - The Hill

The House on Wednesday passed legislation aimed at overhauling consumer credit reporting and providing additional protections and opportunities to rebuild credit.    The measure, which consisted of a package of six bills, passed along party lines. It includes language calling for the Consumer Financial Protection Bureau (CFPB) to establish a credit rehabilitation process, bar credit rating agencies from including delinquent or defaulted student loans on credit reports after the borrower makes nine monthly payments on time and require private lenders to offer repayment plans to those facing economic hardship who are looking to rehabilitate their credit scores. The Hill


The student loan debt is $1.6 trillion and people are struggling to pay it down - CNN

The student loan burden in the US is about $1.6 trillion and rising, mostly because people have barely made a dent in paying down their loans.   That’s according to a report released Thursday from credit rating agency Moody’s Investors Service. While higher college enrollment rates and rising tuition costs used to the main reason for growing student loan balances, the report states that slow loan repayments have recently become the primary driver. CNN


After Bankruptcy, Nearly Half of Retailers Close All Stores - ABI

Fitch Ratings research found that secured creditors are recovering all or most of their investments when retailers file for bankruptcy protection, even as nearly half these companies don’t survive with a physical presence, the Wall Street Journal reported. Among large retail and supermarket chains that filed for bankruptcy protection over the past 15 years, 45 percent closed all of their stores, the ratings firm said in a new report. Fitch found that the bankruptcies of 25 out of 55 retail and supermarket companies ended in liquidations. High debt balances and lease and interest payments are some of the headwinds driving retailers into bankruptcy, Fitch said. They can also suffer from insufficient investments in operations and problems with cash flows and liquidity. At the same time, some troubled big retailers had a hard time accessing trade credit, such as Sears Holdings Corp., Toys “R” Us Inc. and Gordmans Stores Inc. Inventory suppliers demanded cash on delivery, cash in advance or a letter of credit to guarantee payment for goods. ABI


CFPB Moves to Eliminate Mortgage Debt-to-Income Rule for Borrowers - ABI

Heeding the call of some of the largest mortgage lenders in the industry, the Consumer Financial Protection Bureau (CFPB) is moving to back the elimination of debt-to-income (DTI) requirements in mortgage underwriting, Bankrate.com reported. In a letter CFPB Director Kathy Kraninger sent to Congress yesterday, the CFPB asked to amend the Ability to Repay/Qualified Mortgage rule (ATR/QM rule) in order to remove DTI as a qualifying factor in mortgage underwriting. This rule was created in response to the financial crisis of a decade ago as a way to prevent lending money to borrowers who might not be able to afford the loan. The ATR/QM rules includes eight separate borrower qualifications that lenders must examine when approving a loan. The rule includes things like verification of income, credit history and DTI, among others. The only portion the CFPB is asking to amend is the DTI requirement as a powerful coalition of lenders deems the rule unfair and constraining. ABI


Hospital Bankruptcies Leave Sick and Injured Nowhere to Go - ABI

A quiet crisis is unfolding for U.S. hospitals, with bankruptcies and closures threatening to leave some of the country’s most vulnerable citizens without care, Bloomberg reported. As a gauge of distress in the health care sector has soared, at least 30 hospitals entered bankruptcy in 2019. They range from Hahnemann University Hospital in Philadelphia to De Queen Medical Center in Sevier County, Ark., and Americore Health LLC, a company built on preserving rural hospitals. There’s more distress to come. Already this week, the bankrupt owner of St. Vincent Medical Center in Los Angeles said it plans to shut the facility after a failed sale attempt. Americans are fleeing rural areas in favor of urban centers, reducing the demand for hospital services in already struggling communities. In both cities and towns, many hospitals that care for impoverished citizens often rely heavily on government payments that reimburse less than private insurers and may fail to cover rising costs. The American Hospital Association calculated that payments from Medicare and Medicaid lagged costs by $76.6 billion in 2018. Hospitals are also losing key income as more profitable procedures move to lower-cost outpatient centers. If that weren’t enough, with both Republicans and Democrats making a political football out of health care ahead of the 2020 presidential election, significant policy change could be near. “How are you supposed to craft a business plan if you don’t know if you’re going to have an America with Medicare for all, or a complete repeal of the Affordable Care Act, or a million options in the middle?” said Samuel R. Maizel, a partner with the Dentons US LLP. “If you knew Elizabeth Warren was going to get elected, you’d be writing a very different business plan.” Even before the election, the current system is being challenged. The Trump administration is trying to tighten eligibility rules for Medicaid, while a rule proposed late last year could also cut billions of dollars in supplemental payments to hospitals. In a closely watched case, a district judge in Fort Worth, Texas, is weighing whether Obamacare can survive after an appeals court ruled that its broad mandate requiring people to have health insurance was unconstitutional. The usual playbook for managing distress doesn’t readily apply, as shutting down a hospital isn’t the same as boarding up a storefront. ABI


Liberals’ Wealth Tax Would Ripple through U.S. Economy, GOP Economist Says - ABI

Wealth tax proposals pushed by two leading Democratic presidential candidates would cost American workers more than $1 trillion, according to a study released by a conservative economist, as reported by The Washington Post. The wealth tax plans would raise trillions of dollars in new federal revenue, but would lead to lower pay by depleting business investment and therefore worker productivity, said Douglas Holtz-Eakin, who has served as director of the Congressional Budget Office. The wealth tax has emerged as a defining issue in the 2020 Democratic presidential campaign, as Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) have called for using versions of it to fund large new government programs. Some of the tax proposals have elicited outrage from the wealthiest Americans, but supporters say the proposals are meant to address record levels of income inequality that continue to worsen. Conservatives have primarily criticized the wealth tax ideas as confiscatory and impractical, but the new paper makes the claim that it could have more far-reaching consequences in the American economy. “The tax constitutes a reduction in the supply of capital, and as a result it will reduce investment in innovation, lower productivity growth, and thus reduce wage growth,” Holtz-Eakin said. Several economists disputed Holtz-Eakin’s findings, arguing that he overstates, among other things, the wealth tax’s impact on business investment. Business investment has fallen in the past year after the Trump administration cut taxes, muddying assumptions over how changes in tax policy spur new investment. ABI