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 The Wall Street Journal has run several stories over the past few years about how Indian Tribes are getting rich off payday lending. These stories always tell a fraction of this story, leaving readers with the misperception that all tribes do this lending and that those who do, get rich. The reality is that only a small percentage of Native people do payday lending, and the only people getting rich off these operations are non-tribal lenders that use tribes to get around state laws. A week or two ago, it happened again. The Wall Street Journal published Payday Loans Have Brought Jobs and Revenue, but Tribal Leaders Say Government Crackdown Jeopardizes Business, once again claiming that tribes are getting rich off this business.



Posted 11 weeks 2 days ago

Former Virginia Congressman M. Caldwell Butler died last week. He is widely known for his role in the Nixon impeachment proceedings, his efforts to limit extensions of the Voting Rights Act, and his support for ensuring legal representation for low-income individuals. But Congressman Butler is also a major figure in the history of bankruptcy law. He was a principal co-sponsor of the Bankruptcy Reform Act of 1978 that serves as the foundation of the modern bankruptcy system. Professor and lawyer Kenneth N. Klee worked closely with Congressman Butler on the House Judiciary Committee in the 1970s. I asked Professor Klee to share a few words of remembrance with us, which I repeat in their entirety here:



Posted 11 weeks 2 days ago

Long overdue, in my opinion, HR 5305 has been introducted by Resident Commissioner Pedro Pierluisi.  The one-sentence law would allow the territory of Puerto Rico to join the definition of "State" and hence provide access to chapter 9 for its municipal and other entities.  (And no, the territory itself can't file chapter 9, so don't get your hopes up for that solution to its finances.)
It seems archaic and patronizing not to let the people of Puerto Rico authorize (or forbid) their public entities from using chapter 9.  In terms of the policy decisions involved -- some states refuse their entities to access chapter 9 -- it strikes me at least as eminently more sensible to let the government of that territory make that call rather than Congress.  Here's hoping to swift passage on what should be a non-contentious error correction in the Code.
 
 
 
 



Posted 11 weeks 5 days ago

From today's Washington Post editorial:
And the battle between Argentina and the hedgies has certainly clarified U.S. law, to wit: If you borrow money, sooner or later, you have to pay it back.

Wait. No one got paid back. In fact, the debt going unpaid has just gone waay up. In fact, it is all looking increasingly embarrassing precisely because despite the best exertions of the legal system and zillions of dollars in costs to innocent bystanders, no one is getting paid.



Posted 11 weeks 5 days ago

Axl Rose may have said it best, but "where do we go now" was the theme of today's Argentina hearing. There wasn't really any official business to conduct. Unless you count all those pending motions about whether Bank of New York Mellon should keep or return the money, the Euro bondholders should get paid, etc. But such mundane matters were not on today's agenda. The judge had issued an order scheduling a hearing "regarding the recent default" by the country. (Wait, was it a default? ISDA's determinations committee thinks so.) When everyone was assembled in the courtroom (and the overflow room) the judge announced that the hearing's purpose was "to clarify where we go from here." And then... not much of substance happened, but there were plenty of fireworks. Recap follows. The transcript isn't ready yet, so I'm relying on my notes for both the substance and the quotations.



Posted 11 weeks 5 days ago

If some or all of Argentina's Exchange Bond holders accelerate their bonds after last night's default, the amount Argentina owes NML et al. under the terms of Judge Griesa's injunction could plummet.
Here is the relevant language:
Such "Ratable Payment" that the Republic is ORDERED to make to NML shall be an amount equal to the "Payment Percentage" (as defined below) multiplied by the total amount currently due to NML in respect of the bonds at issue in these cases (08 Civ. 6978, 09 Civ. 1707, and 09 Civ. 1708), including pre-judgment interest (the "NML Bonds").
Such "Payment Percentage" shall be the fraction calculated by dividing the amount actually paid or which the Republic intends to pay under the terms of the Exchange Bonds by the total amount then due under the terms of the Exchange Bonds.
Before acceleration, the total amount due from Argentina on the Exchange Bonds is the total unpaid coupon (little x). If Argentina pays the Exchange Bond holders their full coupon before acceleration, the Payment Percentage it owes NML et al. is x/x=1, or 100% of the $1.5 billion or so currently due NML.



Posted 11 weeks 6 days ago

The phrase "it depends" was invented 130 year ago by a small group of drunk lawyers from London and New York for the sole purpose of annoying first-year law students, nonlawyers, and people from civil law jurisdictions. Like all things annoying, "it depends" is enjoying a surge in popularity as tensions spike in the Argentine debt saga."It depends" is a magically useful phrase because it can cover up ignorance, describe uncertainty, or assign probabilities in a risky situation. If you are camping out in front of the Special Master's office in New York and hear "it depends" in response to a basic question, you might reasonably wonder which one it is. Here is a mini-guide: 
Q1: Will Argentina default?
A: It depends.*
*Of course it depends on whether the arch-enemies reach a deal. It also depends on whether they reach it in time for the Judge to stay his injunction so that the money sitting at Bank of New York Mellon (BNYM) is released into the relevant payment systems and sent on its way to the bondholders.
Q2: When do you know that Argentina is in default?
A: It depends.*



Posted 12 weeks 10 hours ago

Yesterday the Consumer Financial Protection Bureau, along with 13 state attorneys general (including from my new home state of Indiana), announced a $92 million settlement and issued an enforcement action against Colfax Capital Corporation and Culver Capital, LLC, known as Rome Finance, for targeting military families (and other consumers) with predatory loans to buy electronics, such as computers and televisions.
Rome Finance would offer credit to consumers for the purchase of such electronics primarily at mall kiosks near military bases, promising instant financing and no money down. Rome Finance then jacked up the price of the electronics, thereby masking true finance charges and APRs, withheld information on bills about balances and payments, and violated various states' laws in collecting the debts. In some instances, service members would receive statements indicating that the APR on their loan was 16% when the APR really was over 100%. The scheme is a reminder of the endless variations that companies peddling alternative financing / high-cost credit may use, and how broad laws against predatory lending need to be in order to be effective.



Posted 12 weeks 15 hours ago

Never let it be said that the wheels of international justice spin quickly, but, with the pace of a Siberian jail sentence, the Permanent Court of Arbitration finally handed down its merits award in the Yukos litigation.  (For those of you not in the know, Yukos was dismantled by the Russian government, nominally as seizure for back taxes -- some levied ex post -- purportedly as an attempt to stymie the political aspirations of its principal, Mikhail Khodorkovsky.)  The decision is a doozy: a unanimous and stinging denunciation of the Russian government in this series of transactions, with such zingers as "calculated expropriation" and accusations that the governmental scheme was "devious."  The award of a cool $50 billion was far less than the plaintiffs wanted but was a record-setter for the Court.
Russia, of course, is vowing "appeal" (not quite sure to where -- strongly worded letter?), but this really means the fight now enters the collection phase.  Maybe Russia has some frigates to grab?
Here's a link to the ruling.



Posted 12 weeks 1 day ago

Unless the plaintiffs request a stay (and quick!), this will probably be the last request for Judge Griesa to stay the injunction before Argentina defaults officially fails to put money into the bank accounts of exchange bondholders. It is an emergency motion to stay filed by Knighthead Capital Management and other holders of euro-denominated bonds. They want the judge to stay the injunction for at least 90 days, so that they can try to round up votes to waive the RUFO clause, or through the end of the year, when the RUFO clause expires. They add that "a stay would not affect the plaintiffs at all, since they have not been paid since 2001..."



Posted 12 weeks 1 day ago