CreditSlips

Lessons for Puerto Rico from ... Arkansas?

03/24/16

I did not realize that a US state had defaulted on its bonds, offering a historical comparative example of the difficulties facing Puerto Rico, its creditors, and mostly its citizens if the mess there is not subjected to an orderly, judicially supervised debt cleanup process of some kind. In a new working paper from the Cleveland Fed, O.

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Puerto Rico: Further Supreme Court Thoughts

03/23/16

So Noah Feldman has a column up on Bloomberg that suggests that section 903(1) of the Code should clearly apply to the Commonwealth. It's a sensible argument, if you read that section entirely in isolation and know nothing about the overall structure of the Bankruptcy Code.

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Puerto Rico: Supreme Court Argument

03/22/16

The transcript can be found here.  Based on my initial read, it seems like the First Circuit might be reversed, which opens up all the issues Jacoby noted earlier (namely, will the statute pass Contracts Clause review – assuming the Clause even applies to the Commonwealth).

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Does the White House Stand for Consumer Protection or for Predatory Lending?

03/21/16

Does the Obama White House truly stand for consumer financial protection, or will it support Wall Street when it thinks no one is looking?  That's the question that the Supreme Court served up today.  The Supreme Court is considering whether to hear an appeal in a critical consumer protection case called Midland Funding v. Madden. This is one of the most important consumer financial protection case the Supreme Court has considered in years.

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Recheck the Math on Reverse Mortgages

03/17/16

Tara Twomey is just a keen observer of the consumer finance world, and she recently alerted me to a trend. Reverse mortgages are being aggressively hawked as a valuable financial planning tool, and the media is picking up the story. Even the reverse mortgage industry rag is excited at its publicity rash.

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Lessons on Puerto Rico Bonds from the Financial Crisis

03/16/16

With a fiasco as big as the financial crisis, one of the only positive outcomes is there are a lot of lessons for the future. As Credit Slips thinks about how the administration might influence the resolution of Puerto Rico's bond problems, I think there are a few points from the financial crisis to consider.

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And Now for Something Nutty on Puerto Rico

03/16/16

I know nothing about the statutes delegating "home rule" authority to the Commonwealth, but do they have any reversionary clauses?  For example, if there's crisis, war, etc., can the federal government revest in any power?  Leaving aside the political unpalatability, wouldn't that leave the executive branch with a freer hand?  Building, can the President (temporarily) draft the island's residents, then issue an order taking (for fair/discounted value) any debts related to providing services for this vital military installation?  Or how about declaring it a giant national monument?  OK, feel

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Puerto Rico Bondholders: Fact and Fantasy

03/16/16

When I think about "bondholders," I tend to think about their lawyers. (That probably says a lot about the crowds that I run in). In the case of Puerto Rico, we've seen affable, whip smart, expensively dressed New York lawyers make cogent arguments against many of the bond restructuring proposals. But these lawyers are not the bondholders themselves, who are a much more diverse lot.

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