American Bankruptcy Institute Update

April 19, 2005

In This Issue

Highlights

Legislation Update

Business Group Supports Specter's Asbestos Draft; Insurers and Some Unions Demand Changes

Large businesses facing asbestos lawsuits said yesterday they favor the latest draft of asbestos legislation crafted by Senate Judiciary Chairman Arlen Specter (R-Pa.). "We believe it brings us closer to a long-overdue resolution," the Asbestos Study Group wrote in a letter to Specter. Specter’s draft has the support of Judiciary ranking member Sen. Patrick Leahy (D-Vt.). It also has the support of the National Association of Manufacturers, several veterans' groups and the United Auto Workers.

But the AFL-CIO opposes the draft, saying it does not fairly compensate asbestos victims. An analysis of the bill by the Environmental Working Group (EWG) says the proposed $140 billion trust fund used to compensate asbestos victims is inadequate. In a study released today, EWG faulted the bill's provisions on pending asbestos cases, saying "many hundreds" of those with a fatal asbestos-caused cancer would die waiting for compensation.

Separately, Reuters reported today that U.S. insurers said they will not be able to support a $140 billion asbestos compensation fund without substantial modifications, according to a letter released today. The letter said this was a "unified insurance industry position" and was signed by the American Insurance Association, the National Association of Mutual Insurance Companies and the Reinsurance Association of America.

President Expected to Sign Bankruptcy Bill This Week

President Bush issued the following statement commending Congress for passing the bankruptcy bill: “I commend the House for acting in bipartisan fashion to curb abuses of the bankruptcy system. These common-sense reforms will make the system stronger and better so that more Americans -- especially lower-income Americans -- have greater access to credit. I look forward to signing the bill into law.” The president’s action could come tomorrow.

House Committee to Consider Predatory Lending Bill

The House Financial Services Committee might begin hearings next month on a bipartisan bill to curb predatory lending in the subprime mortgage market, its chief sponsor said today, CongressDaily reported. "I really expect the bill to have a chance to move through the [legislative] process," Financial Services Housing Subcommittee Chairman Bob Ney (R-Ohio) said during a Mortgage Bankers Association conference. But Ney said the lawmakers' "door is open" to mortgage lenders and other stakeholders seeking to modify provisions. Ney's bill would create uniform national standards that would pre-empt state predatory lending laws.

Rainbow/PUSH Coalition President Jesse Jackson and other critics of the Ney bill are supporting a competing measure offered by Reps. Brad Miller (D-N.C.) and Melvin Watt (D-N.C.) and House Financial Services ranking member Barney Frank
(D-Mass.). That bill would create a national standard modeled on North Carolina's anti-predatory lending statute, but it would allow states to enact stronger predatory lending laws.

GM Has $1.1 Billion Loss, Withdraws Forecast

General Motors Corp. today posted a first-quarter net loss of $1.10 billion, its worst result since the company neared bankruptcy in 1992, due to weaker U.S. sales and growing costs for employee health care and raw materials to build cars, Reuters reported. The company said its automotive operations lost $1.98 billion in the quarter, with a loss in North America alone of $1.56 billion. The automaker also withdrew its earnings and cash flow forecast for the 2005 calendar year.

Personal Bankruptcies to Rise 11 Percent by 2007

Global Insight Inc., an economic consulting firm in Waltham, Mass., predicts personal bankruptcy rates in the United States will rise a dramatic 11.3 percent between 2004 and 2007, the Westchester County Business Journal reported. Global Insights' new study, Predicting Personal Bankruptcies, projects that after a lull in recent years, annual bankruptcy filings will increase to more than 1.74 million in 2007. Global Insight cites rising interest rates and inflation combined with slower income growth and housing appreciation as the primary culprits behind the rise in bankruptcies.

Consumer Committee e-Newsletter Now Online

The April issue of ABI’s Consumer Committee e-newsletter is available online. Read the article on the status of the bankruptcy bill. At the 2005 Annual Spring Meeting the committee will provide further updates on the new law and address those provisions that may affect consumer debtors immediately upon enactment. It will also provide additional sources of information on the effects and operation of BAP/CPA 2005.

Federal Reserve Announces Redesign of Financial Education Web site

The Federal Reserve System has redesigned its financial education web site to promote financial education in the classroom. For more information, click here.

New OPINIONS POSTED ONLINE

District of Arizona
In re Shelley Mac Rollinson - April 2005

Central District of California
In re Roxanne Gordon - April 2005

Latest Job Postings at ABI Career Center

Check out the ABI Career Center. The Center is a one-stop site for job seekers and employers in the insolvency community. Career Center resources are available free to both employers and job seekers. New positions are featured daily. The latest listings include: