Illinois Bankruptcy Lawyer Blog

From The Heritage Foundation's blog The Foundry comes the text of the mortgage-rescue provision of the bailout plan currently under consideration in Congress

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY TO PURCHASE MORTGAGE-RELATED ASSETS

Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.—The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.—The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for—

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.—The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.—The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.—The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.—The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary"s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.—The term "mortgage-related assets" means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.—The term "Secretary" means the Secretary of the Treasury.

(3) United States.—The term "United States" means the States, territories, and possessions of the United States and the District of Columbia.

It"s 1 am on Sunday morning, and congressional negotiators have just announced a tentative deal on a bailout plan for the country"s troubled financial system — The Politico:

House and Senate negotiators have reached tentative agreement on a financial rescue plan after a marathon Capitol negotiating session that started Saturday afternoon and stretched into early Sunday morning.

House Speaker Nancy Pelosi (D-Calif.) and Sen. Majority Leader Harry Reid (D-Nev.) said their "breakthrough" still had to be "committed to paper," a process that was expected to continue through the night.

09-28 Sunday 08:00 AM to noon

10-03 Friday 4:30 PM through Saturday Evening (10-04): CM/ECF case information available for reference only - no new cases, documents, or claims can be filed.

10-10 Friday 04:30 PM though Sunday evening (10-12): CM/ECF case information available for reference only - no new cases, documents, or claims can be filed.

Note: outages may be longer or shorter than estimated in this notice.

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In Re: Schaefer Salt Recovery, Inc., 06-4574 [Sept. 9, 2008]

Petitioner accused of deliberately filing frivolous petition to forestall foreclosure; bankruptcy court's denial of sanctions and reconsideration is vacated and remanded. Reasoning: The bankruptcy court is a unit of the district court and therefore comes within the scope of sec. 451 - hence it had plenary authority to impose sanctions under 28 U.S.C. 1927.

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In the Matter of Soza, 06-21004 [Sept. 12, 2008]

Bankruptcy court's decision to exempt an annuity, purchased a day prior to filing, from the debtor's estate is reversed and remanded because 1) its purchase was not an intentional fraud but to decide whether the state-law based exemption should apply a lower standard should have been applied by the court; and 2) several "badges of fraud" were evident in the purchase so under a "totality of circumstances" test the transaction represented a payment made in fraud of a creditor.

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In Re: Willett, 07-1850 [Sept, 12, 2008]

Grant of debtor's sec. 522 motion to avoid a lien on their residence is reversed and remanded because, for purposes of ruling on such a motion, the bankruptcy court should have valued the ch. 13 debtor's interest in the real property as of the date that their interest became part of the bankruptcy estate.

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In re: M & S Grading, Inc., 07-3909 [September 09, 2008]

In a case arising out of the bankruptcy of an excavation company that participated in employee-benefit plans wherein the plans and their trustees claimed that debtor's bankruptcy trustee improperly made payments to a bank instead of the plans, various rulings are affirmed where: 1) unpaid contributions owed to the plans were not employee contributions because the contributions were not withheld from employees' paychecks; 2) thus, the unpaid contributions remained corporate assets and did not become assets of the plan; 3) trustee's failure to assert a claim against the bank was justified and the district court did not abuse its discretion in denying plans' motion to commence litigation against the bank; 4) there was no abuse of discretion in not granting an equitable subordination claim; and 5) plans' motion for removal of the bankruptcy trustee was properly denied without a hearing.

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In re: Sandoval, 07-5165 [Sept. 11, 2008]

In the context of bankruptcy law, sec. 523(a)(7) does not render non-dischargeable a debt incurred by a debtor who has guaranteed a bail bondsman to make the bondsman whole in the event a criminal defendant jumps bail.

Neil Irwin and Binyamin Appelbaum
Washington Post Staff Writers

The Federal Reserve approved the conversion last night of the two remaining investment titans on Wall Street, Goldman Sachs and Morgan Stanley, into bank holding companies, offering them broader government protection in exchange for tighter regulation and constraints on their once fabulously profitable business.

With the federal government continuing its rapid and radical reshaping of the U.S. financial system, the two investment banks agreed to transform themselves in an effort to escape the financial turmoil that last week put their existence in jeopardy.

The move, approved by the Fed with unusual haste, gives Goldman Sachs and Morgan Stanley greater latitude to borrow from the Fed and access to stable sources of funding -- namely, deposits from ordinary people and businesses. But the firms are also accepting regulation by the Fed that will make it far more expensive for them to borrow huge sums of money -- long an essential ingredient in their investment strategy -- and restrict what sorts of business activities they can engage in.

This development completes a sweeping transformation of Wall Street. Now extinct are the specialized trading houses that broke off from larger financial companies during the Great Depression, enterprises that once prized their independence of regulation and exploited their agility to make fortunes. Over the past 30 years, these firms even surpassed commercial banks as the prime funding source for corporate America.

The conversion of investment banks into the kind of banking companies that once were their rivals will have profound and long-lasting implications for the economy. [Read the Full Story]

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In Re Weaver, 08-8046 [Sep. 17, 2008]
In a decision involving an attempted appeal from a decision under the BAPCPA, a petition for leave to appeal is denied and appeal is terminated where 1) without resolving the jurisdictional question the court exercised its discretion under section 158(d)(2)(A) to deny leave to appeal; and 2) allowing the appeal to proceed may not have served the purposes of section 158(d)(2), i.e. a rapid and definitive resolution of the underlying legal question.

Richmond v. NH S.Ct. Comm. on Prof. Conduct, 07-2671 [Sep. 19, 2008]
In a bankruptcy case involving an underlying obligation relating to attorney disciplinary proceedings, the holding that an order to pay costs of bringing disciplinary proceedings cannot be discharged in Chapter 7 bankruptcy is affirmed because the award of costs qualified as a non-dischargeable discretionary penalty under the terms of 523(a)(7).

7th Cir

Freeland Enodis Corp., 06-4178 [Sep. 2, 2008]

In ruling on multiple appeals arising out of bankruptcy Court holds that plaintiff trustee may avoid certain transfers by the debtor as fraudulent, but further findings are required with respect to the solvency of the debtor afterward (i.e. did the transfers render the debtor insolvent). Accordingly, summary judgment for trustee on the 547 and 548 claims is reversed and the matter is remanded for further findings on the trustee's claims that the transferee entity was merely an 'alter ego' of the debtor.

8th Cir

Milavetz, Gallop & Milavetz v. US, 07-2405 [Sep. 4, 2008]

In a case challenging application of the BAPCPA, summary judgment for the plaintiff is affirmed in part and reversed in part where the Court found that while attorneys providing bankruptcy assistance are "debt relief agencies" under the BAPCPA, 526(a)(4) is unconstitutional as applied to them; nonetheless 528(a)(4) and (b)(2) are constitutional so the result is to restore the effect of the amended law (at least in part).

9th Cir

Burkhart v. Coleman, 06-15411 [Sep. 4, 2008]

In an action to quiet title, rulings that federal bankruptcy law does not preempt California protection of bona fide purchasers and that unauthorized post-bankruptcy sale of real property causes title to rest with the purchaser, not the bankruptcy estate, are affirmed where: 1) the bankruptcy estate failed to record title in the property; and 2) a bona fide purchaser bought and recorded title in the property.

America's increasingly unaffordable cities

By Matt Woolsey, Forbes

Seattle and Dallas tied for the highest inflation rates in the country at 5.8%. Detroit rated the lowest of all cities studied, but that"s hardly a silver lining as its unemployment rate stands at 8%.

If you live in Seattle, it might be time to ask for a cost-of-living increase. The city has the highest inflation rate in the country.

"Seattle household income is fairly high, and that helps to maintain a high rate of inflation since higher income areas can afford price increases," says Steve Cochrane, an economist with Moody's Economy.com. "Some of it is fuel, but housing prices have also been more stable than anywhere else on the West Coast, which adds to inflation."

Normally, Seattle's 3.7% unemployment rate, well under the national average of 5.5%, would be a good thing. But a growing economy with low unemployment drives up wages and costs. The Emerald City's consumer prices are up 5.8% from this time last year, which ties for the highest inflation rate in the country with Dallas, where high energy costs for home cooling and driving are eating up incomes.

Other hard-hit cities include Los Angeles, Phoenix, Ariz., and Milwaukee. [read the full article here]

Bankruptcy Filings Nearing Million

From the Bankruptcy Law Network

Posted Aug 28 by Jill Michaux

Almost a million bankruptcy cases were filed since last June according to UST statistics.

The Highlights

Consumer +28.4%

Business +41.6%

Ch. 7 +36.7%

Ch. 13 +16.9%

Ch. 11 +30.6%