The Nation's Financial Condition

[Typical Lax Dad]

College graduates continue to command higher wages, but to combat falling enrollment, schools need to emphasize skills over credentials

By Jeffrey Selingo and Matt Sigelman
May 20, 2023 12:01 am ET

Can it be summed up as the dog chasing its tail with the exception of some STEM schools/programs?

In the end, those 4 years a student is in school (6-7 if you play lacrosse ) , are really a place for businesses to weed out wasting an investment in someone younger out of HS to mentor and apprentice them via OJT via immersion. And, if they go straight into the workforce, while they are working, they can take those micro certifications, like Microsoft database certs, or environmental certs, etc.

You can advise the kids that you know to not go to college….I will advise the kids that I know to go to college.

...you missed the entire point.

The point is you ain’t said nothing new. College isn’t for everyone but you better have something beyond a HS diploma. Data has shown that going to college pays. The ROI far exceeds equity market returns. I have mentioned a couple of times kids that I have advised kids to pursue a trade first. One kid was a HVAC technician before going to PWC…..guess which career offers him more upside? Again, college isn’t for everyone. Friends son played NEC lacrosse…worked for a financial service company out of college and didn’t like it….became a firefighter….now
Trying to get back into financial services…..Michigan recruiting him for lax but dad didn’t want him to go because he wouldn’t be able to get to as many games. An electrician and his weekend schedule isn’t flexible. I tried to convince him to send his kid to Michigan….I trained his kid growing up and coached him in hoops. Excellent defender, BTW.

Corporate jobs don’t pay as much when I left my last gig I got a job offer to be assistant treasurer at UPS a Fortune 500 company and the base was $105 with some modest stock and incentive target of 20-50%. Granted the work day is done after lunch mostly vs travel, weekends and long evenings later in life but you also have to wit forever to get the next step or look outside the company at that point. Basically the treasurer or CFO has to leave or f up so bad they get tossed.

I felt bad for the kid because a lot of his encouragement was due to his dad being a self proclaimed “blue collar” guy so it jaded his outlook. Kid wishes he had stayed the course in finance/accounting. Father is an electrician. Good friend of mine.

[Farfromgeneva]

College graduates continue to command higher wages, but to combat falling enrollment, schools need to emphasize skills over credentials

By Jeffrey Selingo and Matt Sigelman
May 20, 2023 12:01 am ET

Can it be summed up as the dog chasing its tail with the exception of some STEM schools/programs?

In the end, those 4 years a student is in school (6-7 if you play lacrosse ) , are really a place for businesses to weed out wasting an investment in someone younger out of HS to mentor and apprentice them via OJT via immersion. And, if they go straight into the workforce, while they are working, they can take those micro certifications, like Microsoft database certs, or environmental certs, etc.

You can advise the kids that you know to not go to college….I will advise the kids that I know to go to college.

...you missed the entire point.

The point is you ain’t said nothing new. College isn’t for everyone but you better have something beyond a HS diploma. Data has shown that going to college pays. The ROI far exceeds equity market returns. I have mentioned a couple of times kids that I have advised kids to pursue a trade first. One kid was a HVAC technician before going to PWC…..guess which career offers him more upside? Again, college isn’t for everyone. Friends son played NEC lacrosse…worked for a financial service company out of college and didn’t like it….became a firefighter….now
Trying to get back into financial services…..Michigan recruiting him for lax but dad didn’t want him to go because he wouldn’t be able to get to as many games. An electrician and his weekend schedule isn’t flexible. I tried to convince him to send his kid to Michigan….I trained his kid growing up and coached him in hoops. Excellent defender, BTW.

Corporate jobs don’t pay as much when I left my last gig I got a job offer to be assistant treasurer at UPS a Fortune 500 company and the base was $105 with some modest stock and incentive target of 20-50%. Granted the work day is done after lunch mostly vs travel, weekends and long evenings later in life but you also have to wit forever to get the next step or look outside the company at that point. Basically the treasurer or CFO has to leave or f up so bad they get tossed.

I felt bad for the kid because a lot of his encouragement was due to his dad being a self proclaimed “blue collar” guy so it jaded his outlook. Kid wishes he had stayed the course in finance/accounting. Father is an electrician. Good friend of mine.

The issue with trades, as you know, is breaking the labor/output curve. There’s virtually no scalability that benefits labor. Put and hour in get [ Rate x hour ] out and very hard to break/bend that curve upwards until you become capital and then aren’t labor anymore.

Why I gave up on continuing to build our business. The inability to have overlapping time and materials projects to support the month to month while working on the larger ticket transactional efforts. At least I made some money over the two year stretch but building such a business requires a lot of capital (or riding out personal expenses and carry which is investment if one isn’t taking a regular wage out but rather reinvesting)

[Farfromgeneva]

https://www.visualcapitalist.com/americ ... 00-people/

[Seacoaster(1)]

The GOP raised the debt ceiling:

- 3 times under Trump;
- 7 times under W. Bush; and
- 18 times under Reagan.

97% of all US debt was incurred prior to Biden's presidency.

25% of all US debt was incurred under Trump.

[Farfromgeneva]

California’s Port Dominance Is Slipping as Cargo Shifts East

Eastern US Ports Grew Market Share During L.A.-Long Beach’s Pandemic Woes

May 8, 2023 5:22 PM, EDT
Containers at the Port of L.A.
Shipping containers on a cargo ship at the Port of Los Angeles. (Lauren Justice/Bloomberg News)
[Stay on top of transportation news: Get TTNews in your inbox.]

California has suffered a series of economic blows this year, from torrential rains that inundated farmland to the failure of three regional banks. Now the state’s $2.8 trillion freight industry is under threat.

Southern California’s ports have grown up alongside China’s rise as a global trading power, moving almost 40% of containerized imports into the U.S. from Asia for the past two decades. But the pendulum is swinging east as the pandemic’s cargo crush pushed the Los Angeles and Long Beach complex close to the breaking point, allowing ports from New York-New Jersey to Houston to grow their market share.

A gradual shift was already underway. But it’s getting supercharged by simmering West Coast port labor talks, the near-shoring of factory production amid rising tensions with China, and U.S. population growth shifting to the Sunbelt states.

Some observers worry that the L.A.-Long Beach docks will struggle to stay the No. 1 U.S. ocean gateway over the long run.

“Now that pandemic cargo volumes have leveled off, the decline in market share has accelerated,” said Pacific Merchant Shipping Association President John McLaurin in his April trade report.

U.S. cargo shifts eastward
With negotiations between nearly 22,000 West Coast dockworkers and employers approaching the one-year mark this week, skittish logistics managers are taking action to avoid potential strikes and lockouts by realigning supply routes away from L.A.’s San Pedro Bay. Burned by pandemic-era bottlenecks, businesses are placing more of a premium on reliability.

Many recall contract talks in 2014 that dragged on for nine months and caused vessel backups and shortages for some consumer goods. Those talks finally ended when the U.S. government intervened, but it took most of 2015 for the shipping industry to return to normal.

This time around, operations at the 29 West Coast ports have been largely smooth since the International Longshore and Warehouse Union and Pacific Maritime Association’s contract expired on July 1, though recent disruptions at L.A.-Long Beach have renewed calls for the White House to get involved.

The standoff “could amount to an entirely avoidable, self-inflicted obstacle to the U.S. economy,” said Jessica Dankert, vice president of supply chain at the Retail Industry Leaders Association. “Retailers will continue working to insulate consumers from the impact.”

Several importers have made the costlier move to divert some, or all, of their cargo away from the West Coast and will stay away until an agreement is ratified, according to RILA, whose members include Home Depot Inc., Target Corp. and Best Buy Co.



This special "Inside the List" episode features the Transport Topics 2023 Top 100 largest logistics companies. Hear the program above and at RoadSigns.TTNews.com.

The U.S.’s shifting demographics are also a factor — California’s population has shrunk by about 500,000 since 2020, while places like Texas and Florida are growing faster than ever.

The big winner? Gulf Coast ports. An April Descartes report showed West Coast container volumes were down 10% in the first quarter of 2023 compared with the same period in 2019. But Gulf ports saw a 43% increase in goods over the same period, and much of the cargo arriving includes electronics, furniture and machinery — products usually imported from Asia.

L.A. and Long Beach sit at the nexus of a logistics system largely geared to deliver freight to both major population centers locally and to cities halfway across the country on trains and trucks — often through warehouses, distribution centers and store shelves stretching 2,000 miles to Chicago.

Able to take larger ships that ply the Panama and Suez canals, ports like those in Texas, Alabama, Georgia and New York have spent years and billions of dollars expanding capacity — deepening channels, adding warehousing, expanding rail links and even raising a major bridge — so cargo flows more efficiently to the Midwest and across the South.

Consider what the Georgia Ports Authority just announced: the opening of the Mason Mega Rail Terminal, a five-year, $220 million investment project billed as the largest port-based intermodal facility on the continent. It’s promising delivery to places as far away as Dallas or Chicago within three days — the average amount of time containers currently dwell on the docks at L.A.-Long Beach.

The Southern California ports still have major advantages: They offer the most direct route from Asia-Pacific and have twice the capacity of their closest rival, New York-New Jersey.

They also offer intermodal rail and a vast network of truckers who ferry cargo to the nation’s largest distribution hub in the Inland Empire. At $1.1 trillion, Los Angeles-Long Beach-Anaheim had the second-highest GDP of any U.S. city in 2021.

But a third of the San Pedro Bay’s containers are increasingly “up for grabs,” and the twin ports risk becoming more of a regional hub, according to maritime economist John Martin. This so-called discretionary cargo generated $19.3 billion in 2021, according to a Martin Associates report commissioned by the PMA.

Container import flows across the U.S.
The supply chain industry drives nearly a third of the state’s economy and supports one in five jobs in California. Even a small dip in cargo volume over the longer term could lead to a cascading loss of employment starting on the docks and spreading through tech, consulting, transportation, warehousing and retail.

“Anytime we see a slowdown in volumes this significant, every segment of the supply chain feels it,” according to Port of Long Beach Chief Operating Officer Noel Hacegaba.

Terminal operators at the L.A. and Long Beach ports paid out about 400,000 shifts to dockworkers in the first quarter of 2023, a drop of about 25% from the same quarter in 2019, according to data from the PMA.

On a recent trip to Washington, Port of L.A. Executive Director Gene Seroka lobbied for a share of the $17 billion in federal dollars designated to ports and waterways. He is seeking funds for digitalization measures “to make that cargo flow smoother,” cleaner equipment to help reach its zero-emission goals and support for a new workforce training facility.

Some port customers will return their goods to Southern California once contract talks have settled, which will be crucial for the region to remain a vibrant hub for supply chains. “Shippers aren’t contemplating a shift back yet, but are not saying never,” said Anne Reinke, CEO of the Transportation Intermediaries Association.

— With assistance from Ana Monteiro.

Want more news? Listen to today's daily briefing below or go here for more info:

[Farfromgeneva]

US regional banks swap $220bn in deposits to soothe insurance nerves

15 minutes ago
Reciprocal deposits spread customer cash among multiple lenders
Reciprocal deposits spread customer cash among multiple lenders, keeping accounts below a $250,000 federal insurance cap © FT montage/Bloomberg
US regional banks are rushing to exploit rules that allow depositors to hold tens of millions of dollars in insured accounts, offering security far exceeding government-backed insurance to soothe clients unnerved by the recent banking turmoil.

The move entails the use of reciprocal deposits, which funnel a portion of customer cash to other lenders, keeping the total amount in each account less than the Federal Deposit Insurance Corporation’s $250,000 cap on insurance coverage.

Deposits in so-called reciprocal accounts soared to a new record high of $221bn at the end of the first quarter, up from $158bn at the end of 2022, according to government records compiled by BankRegData. The increase was recorded after the March collapse of Silicon Valley Bank, where more than 90 per cent of deposits were not covered by federal insurance.
Column chart of US reciprocal deposits ($bn) showing banking turmoil leads to jump in swap arrangements
Among regional banks advertising high-balance insured accounts is PacWest Bancorp, which like the former SVB often lends to start-ups and their investors.
Beverly Hills, California-based PacWest’s website says clients can “rest assured” because the bank can offer up to $175mn in insurance coverage per depositor, or 700 times the FDIC cap.

Shares of PacWest have plunged by more than a third since mid-March. The bank said in its most recent financial filing that it was enrolling more of its customers in “reciprocal deposit networks”, over which hundreds, or in some cases thousands, of banks spread customers’ funds in order to stretch insurance limits.

The biggest of these networks is run by IntraFi, a little-known Virginia-based technology group. Founded by three top former bank regulators, it is now owned by private equity giants Blackstone and Warburg Pincus and contains about 3,000 banks.

PacWest’s reciprocal deposits rose 60 per cent in the first quarter to $6.7bn and now make up 23 per cent of its overall deposits. The bank recently reported that its percentage of deposits not covered by FDIC insurance had dropped to 25 per cent, down from more than half at the end of 2022.

“Banks are using reciprocal deposits aggressively, as they should,” says Christopher McGratty, an analyst who follows regional banks for Keefe, Bruyette & Woods. He said that in the wake of SVB’s collapse, investors wanted banks to reduce their use of uninsured deposits. “It’s a bit of window dressing, but it’s legit,” he said.

How reciprocal deposits work
PacWest did not respond to requests for comment, while the FDIC declined to comment. IntraFi said, “Bipartisan laws and regulations have long recognised the value of reciprocal deposits as a stable source of funding that supports local banks and community lending.”

The cap on federal deposit insurance is applied on a per-customer, per-bank basis, meaning that wealthy people can still benefit from protection if they spread their money around multiple financial institutions. Reciprocal deposit networks perform the same function automatically.

Banks can divert large accounts into the networks, where they are parcelled up into $250,000 chunks and sent off to other FDIC-insured banks. The networks match up the parcels so that any bank sending a customer’s deposits into the system immediately receives a similarly sized parcel from another bank.

Crucially, the networks allow banks to increase their level of insured deposits while giving large customers seamless access to their money. Banks pay the network operators a small management fee.

Reciprocal deposits still make up just 2 per cent of the $10.4tn in deposits insured by the FDIC. But they made up a notable 15 per cent of the growth in insured deposits in the first quarter. The share of deposits covered by the federal Deposit Insurance Fund was highest in at least a decade at 56 per cent.
Regulators have largely blessed banks’ use of reciprocal deposits. In late 2018, Congress changed rules to allow banks to consider most reciprocal deposits the same as any other insured account. This status exempts them from the special levy on uninsured deposits the FDIC has proposed to pay for SVB and other recent bank failures.
“Some people have been talking about raising deposit insurance,” said Brian Brooks, a banking lawyer and former board member of the FDIC, who co-authored a recent Wall Street Journal column calling for, among other things, greater use of reciprocal banking networks. “Our point is there’s no need to do something like that because there is already a mechanism for significantly increasing the amount of insured deposits.”

Others have been more sceptical. “To the extent that these deposit exchange programs help weak banks attract deposits, it creates instability,” said Sheila Bair, who headed the FDIC during the global financial crisis. She has called out the deposit exchanges for “gaming the system,” in the past. “It increases moral hazard. There are many good banks that use these exchanges but the exchanges also allow weak banks to attract large uninsured depositors who wouldn’t otherwise bank with them.”

IntraFi is one of the winners of the recent regional banking crisis. Transactions for IntraFi’s main deposit swap business increased in the first three months of the year, according to a person close to the company.

“Turmoil in the banking sector has been a big driver of the demand”, said Tom Ormseth, an executive vice-president at R&T Deposit Solutions, one of IntraFi’s competitors. “It is going to significantly add to our growth over the long-term.”

[Brooklyn]

The GOP raised the debt ceiling:

- 3 times under Trump;
- 7 times under W. Bush; and
- 18 times under Reagan.

97% of all US debt was incurred prior to Biden's presidency.

25% of all US debt was incurred under Trump.

But it is very convenient for the GOPee to blame Democrats for the debt.

[Farfromgeneva]

Repeat Bankruptcies Are Piling Up at Fastest Rate Since 2009
Billions in debt is restructured again, proving first failed
US courts saw at least 11 so-called Chapter 22s through April
A David's Bridal store in New York.
A David's Bridal store in New York.Photographer: Jeenah Moon/Bloomberg
ByJeremy Hill and Jonathan Randles+Follow
May 10, 2023, 2:35 PM EDT
Updated onMay 10, 2023, 4:53 PM EDT
In October 2020, Akorn Operating Company LLC announced its emergence from Chapter 11 bankruptcy as the beginning of “an exciting new chapter.”

Less than three years later, the generic US drugmaker ran out of money and laid everyone off. Akorn is back in bankruptcy court — this time to be sold for parts.

It’s one of 12 firms this year to seek bankruptcy protection for a second or even third time after initial attempts at court-supervised rehabilitation failed. So-called Chapter 22 filings — industry slang for repeat bankruptcies — are piling up at the fastest rate since the Great Recession, according to BankruptcyData.

Corporate distress and turnaround stories.
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The trend is both a sign of how fragile the US economy has become and a failure of the bankruptcy system, considered among the best in the world. Its focus on rehabilitating troubled companies rather than quickly winding them down saves thousands of jobs each year — but it assumes that pausing debt collection, tearing up costly contracts and forcing losses on creditors is more than just a way to delay inevitable liquidation.


“Judges aren’t thrilled to see a debtor come back, nobody wants it to happen,” said Lindsey Simon, a law professor at the University of Georgia who studies bankruptcies. “It means bankruptcy failed.”

Chapter 22

Repeat bankruptcy filings accrue at fastest pace since 2009

Source: BankruptcyData
Note: Filings are companies with $10m+ in liabilities
The 11 repeat bankruptcies filed through April already tops the tally for all of 2021 or 2022 and the spate of Chapter 22 filings through the first four months of the year has been eclipsed only once since 2000, according to BankruptcyData.

David’s Bridal LLC, the biggest wedding retailer in the US, and Catalina Marketing — maker of well-known coupons — discount retailer Tuesday Morning, telecommunications company Avaya and data firm Inap — all fell back into bankruptcy this year. Home security and alarm company Monitronics International Inc. plans to file a second bankruptcy by mid-May, after an earlier Chapter 11 in 2019.

Such relapses follow common threads. Sometimes a company did not get enough debt off its balance sheet the first time. Or it didn’t shed unprofitable parts of the business when it had the chance, dooming its prospects when interest rates rose, or inflation forced costs higher.

Bridal Mess

David’s Bridal slashed about $450 million of debt from its balance sheet during a late 2018 bankruptcy. But it failed to reject burdensome leases and close underperforming stores.


Filing for bankruptcy during peak bridal season tarnished its image among spouses-to-be, according to court papers. Plus, David’s was hampered by the pandemic, which upended the wedding industry.

Now, less than five years later, David’s has embarked on a last-ditch sale effort, but will disappear for good if no buyer emerges.

Failing Faster

Serial bankruptcy filers are more quickly returning to insolvency court

Source: BankruptcyData
Note: Filings are companies with $10m+ in liabilities
Situations like David’s are embarrassing for restructuring advisers and judges because bankruptcy exit plans can only win approval if the court concludes a restructuring plan has a better chance of succeeding than failing. There’s a debate among bankruptcy specialists about whether Chapter 22 is merely an unfortunate but necessary extension of a government safety net — or a sign Chapter 11 is too forgiving to large companies and needs to be stricter.

“I don’t want the decision makers of the company going forward to ever forget that for them to survive as an entity, somebody paid a price,” David R. Jones, chief bankruptcy judge in Houston, said in an interview. “You don’t magically write off debts. There’s a cost.”

When a repeat bankruptcy filing lands on his desk, Jones spends considerable time analyzing what went wrong, he said. He sees reorganization as “extremely fragile,” and something that should not be abused. Chapter 11 bankruptcy imposes costs on society, he said: shareholders get wiped out, and small businesses lose receivables, for example.

Not all legal specialists view Chapter 22 as a failure of the bankruptcy system. Even if a Chapter 11 doesn’t work out, creditors can often recover more if a company stays in business longer.

Ed Altman, a New York University finance professor and inventor of a popular default prediction metric, the Z-score, said firms too often leave Chapter 11 “looking like a failing company” when it would be better for creditors to get paid in a liquidation. A second bankruptcy is a sign the first was a waste of capital, Altman said.

“Those resources are plowed into a company that will eventually fail when they could have been invested in more productive enterprises,” he said.


Representatives for David’s Bridal, Catalina Marketing, Tuesday Morning, Avaya, Inap, Monitronics and Akorn either declined to comment for this story or didn’t immediately respond to requests.

[Farfromgeneva]

Periodical I like, part on valid when made in CO

https://fintechbusinessweekly.substack. ... dium=email

Colorado Bill Could Block High APR Fintech Lenders

The Colorado General Assembly has passed a bill that makes several changes to the state’s Uniform Consumer Credit Code, including opting the state out of certain amendments to the Federal Deposit Insurance Act. Jared Polis, the governor of Colorado, is expected to sign the measure.

Opting out of Sections 521-523 of the Depository Institutions Deregulation and Monetary Control Act (“DIDMCA”) is likely to lead to questions about the legality of loans above Colorado’s usury limit originated by out-of-state state-chartered banks to Colorado borrowers.

DIDMCA sought to normalize home-state interest exportation privileges between national banks and state-chartered banks. However, the act permits states to opt out of this provision.

And, while initially a handful of jurisdictions chose to do so, all but Iowa and Puerto Rico eventually allowed these opt-outs to expire. Iowa’s attorney general recently pursued a case against EasyPay, a BNPL provider, and its Utah-chartered partner bank, TAB, for violating the state’s 21% usury cap.

EasyPay and TAB ceased making loans in the state, and TAB subsequently saw its Community Reinvestment Act rating downgraded to “needs to improve” because of discriminatory or other illegal credit practices.

Now, it seems possible we’ll see similar cases in Colorado.

Legal analysts note that litigation on the topic is likely to hinge on whether or not loans are considered to be made “in” Colorado.

While much of the relevant legislation was written pre-internet, when it was substantially easier to determine where a loan was made, the question becomes somewhat murkier in the age of online lending.

Per a 1998 FDIC opinion, where a loan is made depends on the choice of law stated in the loan agreement and where the credit application approval, the extension of credit, and the disbursal of funds occurs.

While this certainly gives out-of-state lenders a robust argument that their loans aren’t made “in” Colorado, the state’s decision to opt out significantly increases uncertainty for fintech/bank partnerships offering loans above Colorado’s usury limit.

[Brooklyn]

Some right wingers believe Biden has "ruined" the economy. But the facts show otherwise:


Hiring at US Companies Tops All Forecasts, ADP Data Show
Private payrolls increased by 278,000 in May, led by leisure
Wage growth slowed, including for people changing jobs


https://www.bloomberg.com/news/articles ... -data-show


Employment growth at US companies last month exceeded all projections, highlighting a durable labor market that continues to buttress the economy.

Private payrolls increased 278,000 following a revised 291,000 gain in April, according to figures published Thursday by the ADP Research Institute in collaboration with Stanford Digital Economy Lab. The median estimate in a Bloomberg survey of economists called for an increase of 170,000.


The economy is looking so much better under Biden and the Democrats.

[MDlaxfan76]

Yes, the economy remains surprisingly robust.

Good to see the EU's inflation rate dropping, as ours has done.
Still "high", but more of the supply chain disruptions have been getting cleared up, so I'm expecting continued downward albeit slowly. The easy money supply days have a long lag effect...hope we don't overshoot with contraction. But that's Fed not fiscal nor regulatory.

We do have a problem with shortage of labor supply that is likely long lasting...the right answer is more legally managed immigration. Work registration permits for immigrants on path to citizenship or ultimate return. Regardless of how initially got into US. Register, work, pay taxes, stay out of trouble...eventually offered citizenship, at a minimum for kids.

What I'm most pleased by is that there's a 10 year runway of infrastructure that will contribute to growth and productivity over an extended period of time. We're barely beginning to see those benefits.

[PizzaSnake]

Yes, the economy remains surprisingly robust.

Good to see the EU's inflation rate dropping, as ours has done.
Still "high", but more of the supply chain disruptions have been getting cleared up, so I'm expecting continued downward albeit slowly. The easy money supply days have a long lag effect...hope we don't overshoot with contraction. But that's Fed not fiscal nor regulatory.

We do have a problem with shortage of labor supply that is likely long lasting...the right answer is more legally managed immigration. Work registration permits for immigrants on path to citizenship or ultimate return. Regardless of how initially got into US. Register, work, pay taxes, stay out of trouble...eventually offered citizenship, at a minimum for kids.

What I'm most pleased by is that there's a 10 year runway of infrastructure that will contribute to growth and productivity over an extended period of time. We're barely beginning to see those benefits.

“the right answer is more legally managed immigration. ”

Not child labor?

I know your feelings on sarcasm. How about irony?

[MDlaxfan76]

Yes, the economy remains surprisingly robust.

Good to see the EU's inflation rate dropping, as ours has done.
Still "high", but more of the supply chain disruptions have been getting cleared up, so I'm expecting continued downward albeit slowly. The easy money supply days have a long lag effect...hope we don't overshoot with contraction. But that's Fed not fiscal nor regulatory.

We do have a problem with shortage of labor supply that is likely long lasting...the right answer is more legally managed immigration. Work registration permits for immigrants on path to citizenship or ultimate return. Regardless of how initially got into US. Register, work, pay taxes, stay out of trouble...eventually offered citizenship, at a minimum for kids.

What I'm most pleased by is that there's a 10 year runway of infrastructure that will contribute to growth and productivity over an extended period of time. We're barely beginning to see those benefits.

“the right answer is more legally managed immigration. ”

Not child labor?

I know your feelings on sarcasm. How about irony?

pained grimace grin emoji ?

[MDlaxfan76]

well, 3.7% unemployment, with job growth of 339K blowing away consensus predictions...EDIT, plus upward revisions of earlier months. Steady labor force participation.

So, expect some more interest rate hikes?

[Farfromgeneva]

well, 3.7% unemployment, with job growth of 339K blowing away consensus predictions...EDIT, plus upward revisions of earlier months. Steady labor force participation.

So, expect some more interest rate hikes?

Yes. And declaring anything now is not serious people talking. There’s going to be a CRE overhang for a while. Student loan repayments start next month-easy to help things pumping another round of stimulus Q2 of 21 and continue extraordinary benefits. They took the fed playbook and blew it out on the other side. Unwinding leverage is nasty and we aren’t even in the 2nd inning of that.

[Farfromgeneva]

Sharing some of an exchange from a FinTech exec at a series B near profitability venture backed company (B is considered pretty early stage to behave profitability in the horizon):

(Mostly regarding Greenlight and Kabbage)

Greenlight:

-They’ve raise a turd load of money from andreesen in this last round. I always thought the market opp was super small and they’ve got no margins

-A16Z may be the ultimate low rate phenomenon

-They were talking about exiting to one of the big four Banks a couple years back to be a feature/acquisition tool. The problem is their liquidation pref > current exit potential, and there is nothing unique about what they’ve built

-I bet you’d be shocked by the lack of structure - I bet it’s just 1x, they’ve just raised $600MM

(Kabbage)

-They raise > 1bn in equity and 1.5bn in debt

(Third party banker friend in Convo after I mentioned even after the sale to Amex they had a massive PPP fraud - not relevant but absurd and funny if not sad)

-I really wish I had committed PPP fraud, in retrospect

(Back to Kabbage business, money raised)

-(about reinventing credit analysis they pitched). that was a headline thing, their underwriting got very traditional, fast

-They got laughed out of the room by ares and SoftBank gave the $500M. They knew their audience

-(About VCs between pre rev/super early and late stage): The mid stage bezel only works if the public or one of the late stage crossover funds (tiger, sb) are willing to hold the bag. Everybodys exits got wiped out and John Curtis heck off to Brazil.

-You know times are good when capital tourists show up

[Farfromgeneva]

I can’t think of a CFO or CEO Ive talked to in the last six months who believes remote work is great. Most assume the worst and have evidence of it from Teams/slack type systems.

https://www.wsj.com/articles/get-ready- ... a5?mod=mhp

Employment Recession

Job growth is soaring yet output is falling, by one measure. Blame a historic slump in productivity.

Gwynn GuilfordJune 3, 2023 8:00 am ET

You would think from May’s blowout jobs report the economy was booming.

Here’s the puzzle: Other recent data suggest it is in recession.

The dichotomy emerges from the divergent behavior of employment and output, two key indicators of economic activity.

Advertisement - Scroll to Continue

In May, employers added 339,000 jobs, bringing the total number of jobs added this year to nearly 1.6 million, a gain of 2.5% annualized.

But real gross domestic income, a measure of total economic activity, shrank in both the fourth quarter and the first quarter. Two negative quarters of output growth are one indicator of a recession.

The economy has gone through periods where output has expanded faster than employment, but seldom the other way around, said Ryan Sweet, chief U.S. economist at Oxford Economics.

What explains these dissonant signals is productivity, or output per hour worked: It is cratering. That raises questions about whether the much-hyped technology adoption during the pandemic and, more recently, artificial intelligence are making a difference. It also raises the risk that the Federal Reserve will have to raise interest rates more to tame inflation.

Advertisement - Scroll to Continue

Labor productivity fell 2.1% in the first quarter from the fourth at an annual rate, and was down 0.8% in the first quarter from a year earlier, the Labor Department said Thursday. That is the fifth-straight quarter of negative year-over-year productivity growth—the longest such run since records began in 1948.

Those calculations are derived from gross domestic product, which shows output rising at a 1.3% annualized rate in the first quarter. But another key measure—gross domestic income—declined, implying an even bigger productivity collapse.

GDI is the yin to GDP’s yang, measuring incomes earned in wages and profits, while GDP tallies up purchases of goods and services produced. In theory, the two should be equal, since someone’s spending is another’s income.

They never exactly match because of statistical challenges. Lately, though, the divergence is dramatic. “Over the past two quarters, real GDP shows the economy expanding by 1.0%, not far off potential growth, whereas GDI shows it contracting by 1.4%, which amounts to a decent-sized recession,” said Paul Ashworth, chief U.S. economist at Capital Economics. The divergence is ominous: GDI previously undershot GDP dramatically during the 2007-09 financial crisis and in the early 1990s recession, Ashworth said.

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The second quarter is also shaping up to be weak. S&P Global Market Intelligence sees second-quarter real GDP expanding at a 0.8% annual rate; Morgan Stanley projects 0.3%. The Atlanta Fed’s GDPNow model estimates 2%. Most economists don’t forecast GDI.

Usually, employment plummets during recessions because as factories, offices and restaurants produce less, they need fewer workers. That clearly isn’t happening. “If you look at the early 2000s, that was what was called a ‘jobless recovery,’ because employment took a long time to come back even though the economy was growing,” said Sweet. “This time around it could be the opposite—the economy could be contracting, but you’re not seeing job losses.”

One reason could be labor hoarding. After struggling to hire and train workers during the pandemic-induced labor crunch, employers are now balking at letting them go, even as sales slip, given the labor market’s unusual tightness. There were 10.1 million vacant jobs in April, well above the 5.7 million people looking for work that month. Some firms—particularly services such as restaurants and travel-related businesses—ran short-staffed for the past couple of years and are still catching up.

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A possible sign of this is hours worked per week, which in May fell slightly below the 2019 average, after having surged during the pandemic. This drop has been particularly sharp in retail and leisure-and-hospitality—industries that have been especially strapped for workers. The unemployment rate also rose in May, one sign of a potential cooling in the labor market.

It’s “not that technology got worse in the last year, but that businesses were selling less stuff and they’re nervous about their ability to attract employees, so they’re holding on to their employees,” said Jason Furman, an economist at Harvard University who served in the Obama administration. It is also plausible, he said, that the shift to working from home generated a hit to productivity, whose impact grows with the cumulative loss of creative exchange and mentoring.

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Productivity growth is important in the long run because it is one of two engines of economic growth, the other being an expanding workforce. Sweet, the Oxford Economics economist, notes businesses have been spending on equipment, software and intellectual property, investments that should eventually raise productivity. Though it may take many years, so should recent advances in artificial intelligence.

A more imminent concern is that when workers produce more, companies can raise wages without increasing prices. When productivity falls, it is harder to keep inflation in check.

This could make things even more challenging for the Fed. “Companies probably have the ability to pass on higher prices to consumers if they want to,” said Neil Dutta, head of economic research at Renaissance Macro Research. “That would be problematic for the Fed.”

Moreover, if GDI is a better indicator of output than GDP, “it would mean that the economy has slowed more than we had thought, without bringing down inflation that much,” Furman said. That might mean it will ultimately take an even bigger economic pullback “to bring inflation down.”

Hiring remained strong in May as the U.S. added 339,000 jobs. The unemployment rate remains at a historic low, but increased slightly from April. Photo: Joe Raedle/Getty Images
Write to Gwynn Guilford at [email protected]

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[Farfromgeneva]

Much more in link than pasted. Here’s why RE/CRE is important. Other than US Treasuries it is the most leveraged asset which means the most nominal dollars of debt at risk and also leverage amplifies gains and losses - which way do you think most are heading?

https://www.trepp.com/hubfs/Trepp%20Del ... e48fbfd339

CMBS Delinquency Rate Sees Largest Jump Since June 2020 in May
2023
Overall Rate Hits 14-Month High, Offices Delinquencies Top 4% – First Time Since 2018
CMBS investors and market participants have been waiting for months for delinquencies to spike. Since last summer, higher rates and lagging office demand have led to expectations of substantially higher delinquency levels.
It appears that the tipping point came this month.
In May 2023, the overall CMBS delinquency rate shot up 53 basis points to 3.62%. The rate is the highest level since March 2022.
The 53 basis point increase is the largest since June 2020 when delinquencies surged more than 3%.
The increase in May 2023 was driven by a huge spike in office delinquencies. The office rate jumped 125 basis points to 4.02%. The last time the office rate was above 4% was 2018. At that time, many loans originated in 2006 and 2007 were still outstanding accounting for the high level. That is not the case currently.
Office has been the most heavily watched part of the market as firms look to aggressively reduce space. Sublease space is at or near record highs in many markets as demand from big tech firms has eroded sharply. In addition, many companies are letting leases expire or are renewing with smaller footprints.
At the end of May, Google announced it was offering up 1.4 million square feet in Northern California for sublease.
As noted, the Trepp CMBS Delinquency Rate jumped 53 basis points in May to 3.62%.
Since the advent of the calculation, Trepp has not included delinquent loans that are past their maturity date but are current in interest payments. That is because many of those loans are ones for which borrowers are in the process of finalizing extension options that are embedded in the loan. However, now borrowers are more and more foregoing those extension options.
If Trepp included loans that are beyond their maturity date but current on interest, the delinquency rate would
be 4.99%. For CMBS 2.0+ loans, the rate would be 4.80%.
The percentage of loans in the 30 days delinquent bucket is 0.24% – up four basis points for the month.

[Farfromgeneva]

Good blog piece I’m passing along on financial innovation

https://www.netinterest.co/p/creating-a ... dium=email


Creating a Monster

When innovation goes wrong

Marc Rubinstein
Financial innovation gets a bad press. In 2009, former Fed chairman Paul Volcker quipped that “the ATM has been the only useful innovation in banking for the past 20 years”. Sadly, the industry hasn’t helped itself. This week’s Net Interest looks at three cases of financial innovation gone wrong. In all three, the inventor came to rue his contribution to finance.

The Model

Dennis Weatherstone needed a number. He’d just been appointed chairman and chief executive officer of JPMorgan and was in the process of reorienting the bank away from traditional lending towards trading. One of his first acts in charge was lobbying the Federal Reserve to give his firm authority to trade and sell corporate stocks – making it the first bank-related securities firm with a full range of securities powers. By 1994, three-quarters of JPMorgan’s revenue came from investment-banking activities such as trading and securities issuance.

A currency trader by background, Weatherstone understood the risks inherent in such businesses. According to colleagues, he maintained “a steely insistence on evaluating the downside risk” of any trading decision. It was an insistence he imposed on the overall firm. Every afternoon, at 4.15pm New York time, JPMorgan held a treasury meeting to go through its various risk exposures. As risks proliferated, Weatherstone thought it would be useful for the risk management team to present a single number at the meeting, representing the amount of money the bank might lose over the next twenty-four hours. “At the end of the day, I want one number,” he instructed staff.

In 1990, JPMorgan introduced a new model, Value-at-Risk (VaR), to satisfy Weatherstone’s request. Volatility had long been used to measure fluctuations in a security’s price; Value-at-Risk took this further, using volatility as an input to estimate the minimum loss that might be expected on a day where the firm suffers large losses.

To illustrate, let’s say you own a portfolio of stocks worth $10,000. If the portfolio’s 99% daily Value-at-Risk is $200, it means that one day out of a hundred, you would expect to lose $200 or more; the other ninety-nine days, you would expect either to make money or suffer losses lower than $200.

The measure was a useful way for JPMorgan to keep track of firmwide risk and became the basis for risk budgets. Years later, JPMorgan would use it to measure risk on 2.1 million positions and 240,000 pricing series. But rather than keep it private, JPMorgan opened this valuable intellectual property to the world. In October 1994, it published full details of the model under the name Riskmetrics. Other banks and trading firms swiftly adopted it.

It’s unusual for banks to share proprietary knowledge that gives them an edge. JPMorgan wasn’t being altruistic; the bank’s motivation lay in regulation. Several years earlier, authorities had introduced the Basel Accords to harmonise capital treatment of credit risk. With market risk growing as a key component of a bank’s overall risk profile, regulators wanted to incorporate that, too. Jacques Longerstaey, one of the developers of the model, recalls (emphasis added):

“The regulators at the time were starting to think about moving on from the Basel I framework and impose capital requirements on trading books. The first incarnations were very simplistic and didn’t take into account any diversification, and therefore would have been very punitive for the bank. So Riskmetrics was more than a client tool, it was a way to popularise these methodologies so that all the banks would go to the regulators and ask to be allowed to use internal models to lower their capital requirements. This is one of those things that may have had positives and negatives.”

Two years after VaR entered the public domain, the Basel committee amended its rules to allow banks to use VaR models to calculate their trading book capital. Banks were required to set aside capital equivalent to the greater of the previous day’s VaR or the average VaR over the previous six days, multiplied by three. Importantly, banks were allowed to use their own VaR measures to compute capital requirements. By giving bankers and regulators confidence that trading risks were measurable and could be controlled, such risks were allowed to grow. The number demanded by Weatherstone went on to underpin large, complex balance sheets.

But VaR is no panacea. While good at quantifying the potential loss within its level of confidence, it gives no indication of the size of losses in the tail of the probability distribution outside the confidence interval. The one-in-a-hundred day event may be a lot more debilitating than the $200 loss in the example above. In addition, correlations between asset classes can be difficult to ascertain, particularly when banks begin to act in unison. The diversification benefits that VaR supposedly captures in a portfolio of different asset classes falls away when crisis hits and correlations surge.

In 2008, the year Weatherstone died, the complex balance sheets his number facilitated unravelled spectacularly. Citigroup took $32 billion of mark-to-market losses on assets that year, an order of magnitude greater than the $163 million of VaR it reported at the end of 2007. Value-at-Risk didn’t cause the crisis, but it certainly cultivated a false sense of security leading up to it.

“Dennis, you created a monster by asking for that one number,” says Jacques Longerstaey.

The Measure

At its peak, Libor underpinned hundreds of trillions of dollars of financial contracts globally. But its inventor didn’t start with such lofty ambitions.

In 1969, banker Minos Zombanakis was working on a problem at his office on Upper Brook Street in London’s Mayfair. Born in Crete and educated at Harvard, Zombanakis spent ten years in Rome before convincing his employer, Manufacturers Hanover Trust (now part of JPMorgan), to establish a presence in the United Kingdom. The eurodollar market – the vast pool of US dollars held by banks outside the US – was already well developed: the first eurobond had been issued in 1963 for Autostrade of Italy. But Zombanakis saw an opportunity to channel eurodollars into loans as well as bonds.

One of Zombanakis’ clients was the state of Iran. The country, under the leadership of the shah, needed a loan of $80 million. No single bank would lend that amount of money to a developing country with insufficient foreign currency reserves, so Zombanakis put together a syndicate. The problem was that with UK interest rates at 8% and inflation rising, banks did not want to commit to lending at a fixed rate for a long time.

Zombanakis came up with an innovative solution to offer a variable rate linked to banks’ funding costs. Banks in the syndicate would report their funding costs just ­before a loan-rollover date. The weighted average, rounded to the nearest eighth of a percentage point plus a spread for profit, became the price of the loan for the next period. Zombanakis called it the London interbank offered rate.

The Iranians were happy and the idea took off. By 1982, virtually all loans in the $46 billion syndicated-loan market used Libor to calculate the interest charged.

Soon the rate was adopted by bankers outside the loan market, looking for a measure of bank borrowing costs that was simple, fair and independent. In 1970, the first bond linked to Libor was issued, known as a floating-rate note. When derivatives tied to interest rates became popular, many used Libor as their benchmark.

As Libor became more central to the global financial system, pressure grew to codify the setting of the rate. In 1986, responsibility for administering it passed to the British Bankers Association (BBA). Each day, the BBA would go out and ask a panel of banks the rate at which they thought they could borrow from other banks across a series of maturities and currencies. At its height, Libor was published across ten different currencies and fifteen maturities. The base panel comprised 16 banks. The BBA would lop off the four highest rates and the four lowest rates and publish as its benchmark an average of the remaining eight rates.

While Libor had been used first in syndicated lending markets and then in other loan markets, its use really took off in 1997 when the Chicago Mercantile Exchange (CME) adopted it as the reference rate for eurodollar futures contracts. The rate became “the most important number in the world”, as it grew to provide the benchmark underpinning hundreds of trillions of dollars of financial contracts globally.

But it was still based on a survey. Unlike other benchmarks prevalent in financial markets, Libor didn’t reflect actual prices visible in a market. Rather, it reflected a hypothetical aggregate. Given the size of markets it went on to support, it wasn’t an ideal benchmark but once it had burrowed its way into those markets, the cost of switching became very high. Meanwhile, the BBA was heavily incentivised to sustain it: the organisation made money selling licenses allowing others to incorporate the benchmark into their products.

Perhaps reflecting its legacy as an informal average, or its home in London, where regulation was traditionally crafted around principles rather than rigid rules, Libor was loosely policed. As long as banks didn’t collude to move the rate in unison, they had a broad degree of discretion as to how they answered the Libor question. On any given day, there would have been a range of rates at which banks could borrow funds – they were free to set their rate within that range.

Traders took advantage of that discretion to attempt to influence the outcome of Libor, and the lack of Chinese walls between rate-setters and traders made that easy. The size of banks’ derivatives books meant that even a single basis point shift in Libor could potentially be very profitable. In 2012, authorities spotted what was going on and came down heavily on them. Banks were fined a total of around $9 billion and 38 individual traders were prosecuted.

But it has since transpired that authorities themselves sought to influence Libor to stave off the stigma that a higher funding rate would create around banks in their jurisdictions during the 2008 financial crisis. In a new book, Rigged, journalist Andy Verity outlines the events.

An instruction from Downing Street to lower Libor, a measure of the price at which banks lend to each other, on October 29, 2008 wasn’t the only thing that no one was supposed to know about. It was much bigger than that… The evidence suggested it wasn’t just the UK government and Bank of England, but Banque de France, Banco de España, Banca d’Italia and other central banks and governments around the world, all co-ordinating to get Libor and Euribor down.

Libor didn’t survive its crisis of confidence. The BBA gave up responsibility for calculating Libor in 2014 and in June this year the panel will be disbanded altogether.

“When you start these things, you never know how they are going to end up, how they are going to be used,” said Minos Zombanakis in an interview shortly before his death. He died in 2019 but not before distancing himself from the market he created, calling it a “monster” and a “prostitution racket run by pimps”.

The Merger

For most of the twentieth century, banks and securities firms were kept separate. The Glass Steagall Act of 1933, passed at the height of the Great Depression, drove a wedge between the two industries. Companies had to choose between commercial banking – the business of taking deposits and making loans – and investment banking – the business of underwriting and dealing in securities.

Lenders like National City Bank were forced to dissolve their securities business, and securities firms like Lehman Brothers had to dissolve their depository business. JPMorgan elected to be a commercial bank, but a number of managers including Henry Sturgis Morgan (a grandson of J.P. Morgan) and Harold Stanley departed to set up Morgan Stanley.

Over time, market developments weakened the separation of the two business activities. Glass-Steagall did not prevent commercial banks from engaging in securities activities overseas and by the mid 1980s, US commercial banks such as Chase Manhattan, Citicorp and JPMorgan had built up thriving international securities operations. Glass-Steagall also carved out a category of exempt securities that commercial banks were permitted to deal in and it allowed them to engage in limited brokerage activities for banking customers; as time went on, those authorisations expanded. And when Glass-Steagall was drafted in 1933, futures markets were small, over-the-counter derivatives didn’t trade and currencies didn’t float. As those features changed, each of these asset classes became fair game for commercial banks.

These trends accelerated through the 1980s, and by the mid-1990s, many of the restrictions had been relaxed. The Federal Reserve was charged with ensuring compliance of Glass-Steagall and as part of that placed a limit on the share of revenue a bank could derive from underwriting and dealing in ineligible securities. Historically 10%, it was raised to 25% in December 1996.

But it was a merger that would lead to the ultimate repeal of the Glass-Steagall Act. In April 1998, Citibank, led by banker John Reed, and insurance and securities brokerage business Travelers Group, led by Sandy Weill, agreed to merge in the largest corporate combination to date.

Citicorp had a unique global position and strengths in credit cards, foreign exchange, private banking, derivatives, and relationships with multinational companies. Travelers Group had leading franchises in consumer finance, insurance and asset management, and – as owner of Salomon Brothers – in investment banking and capital markets, as well as an array of distribution platforms. “Undoubtedly, putting together such giants would propel us into a universe of our own,” Weill said. In particular, the merger would allow the group to make investment products such as stocks and bonds available to banking customers around the world.

The merger did not initially breach the 25% revenue test but to allow the combined business to grow unfettered, its architects knew that Glass-Steagall would need to be repealed. The new Citigroup pushed hard for legislative change. In the year the merger was announced, the company spent around $100 million on lobbying and public relations efforts. The following year, Congress passed the Financial Modernization Act, dismantling many of the restrictions of Glass-Steagall.

Citigroup went on to grow rapidly. Total assets increased from $800 billion in 1999 to $2.2 trillion by 2007. And then it all collapsed.

Even before the denouement with Citigroup forced to seek government aid, John Reed suffered buyer’s remorse. In April 2008, shortly after the failure of Bear Stearns, he told a reporter from the Financial Times that the merger of Citibank with Traveler’s Group that created Citigroup had been a mistake, saying:

“The stockholders have not benefited; the employees certainly have not benefited, and I don’t think the customers have benefited because our franchises are weaker than they have been.”

Testifying before the Senate Banking Committee in 2010, he went further. “There is no question that when we put Travelers and Citi together, we created a monster,” he said. In Reed’s view, the corporate culture that thrives in firms operating in capital markets, like Travelers did with Salomon Brothers, should not be allowed at depository institutions and that the banking and financial systems would be stronger if those functions were separated.

Citigroup hasn’t gone so far as to unwind the merger but it has spent the past 15 years slimming down and, under its fifth CEO since John Reed, now promotes a “simplification agenda”. Its balance sheet and Value-at-Risk are broadly at 2007 levels in spite of considerable asset price inflation along the way and today its Value-at-Risk “is conservatively calibrated to incorporate fat-tail scaling.”

The mid to late 1990s environment that nourished innovations that grew into monsters is no more. But the conditions that characterise it – lax regulation, misaligned incentives, narrow thinking – are timeless. In finance, as in other fields, innovations can and do go wrong. A new breed of monsters is always being grown.

1
The CME made this clear in a letter to the BBA: “A contributor panelist who can borrow ‘in reasonable market size’ at any one of a wide range of offered rates commits no falsehood if she bases her response to the daily Libor survey upon the lowest of these (or the highest, or any other arbitrary selection from among them).” For more on Libor, see last year’s piece, Freeing the Scapegoat.

[Farfromgeneva]

Commercial Chapter 11 Filings Double Over Same Period Last Year
June 05, 2023, 08:00 AM
Filed Under: Bankruptcy
Related: American Bankruptcy Institute, Amy Quackenboss, Bankruptcy, Chapter 11, Commercial Bankruptcy, Economy, Epiq Systems, Subchapter V

Commercial Chapter 11 filings increased 105 percent in May 2023 to 680 versus the 332 filings in May 2022, according to data provided by Epiq Bankruptcy, the leading provider of U.S. bankruptcy filing data. Nearly half of the Chapter 11 filings were made by corporate subsidiaries.

Overall commercial filings increased 31 percent in May 2023 to 2,324 versus the 1,771 registered in May 2022. Small business filings, captured as subchapter V elections within Chapter 11, registered a 31 percent increase to 149 in May 2023 versus 114 in May 2022.

Total and individual bankruptcies also continue to increase from the reduced volumes experienced during the three years of the COVID-19 pandemic. The 38,669 total filings in May 2023 represented a 23 percent increase from the May 2022 total of 31,330. Individual bankruptcy filings totaled 36,345 in May 2023, also registering a 23 percent increase from the May 2022 individual total of 29,559. Individual Chapter 13 filings increased 25 percent to 14,644 and individual Chapter 7 filings increased 22 percent to 21,625 from May 2022.

“Rising interest rates, inflation and elevated costs of borrowing can represent a daunting economic challenge to struggling families and businesses,” said ABI Executive Director Amy Quackenboss. “Amid these sustained economic pressures, bankruptcy provides financially distressed companies and households with access to a release valve.”

May’s total bankruptcy filings represented a nine percent increase over the 35,485 total filings recorded the previous month. May’s commercial Chapter 11 filings increased 76 percent from the 387 filings in April 2023. The total commercial filing represented a 27 percent increase over the April 2023 commercial filing total of 1,835. All Chapter 11 subchapter V elections increased 12 percent from the 158 filed in April 2023. Total May individual filings represented an eight percent increase from the April 2023 individual filing total of 33,650.

"We have been diligently monitoring the ongoing trend of monthly new filings versus cases closed and it serves as another indicator for the direction of the bankruptcy market," said Gregg Morin, Vice President of Business Development and Revenue for Epiq Bankruptcy. "After 35 consecutive months (April 2020 – February 2023) of more closed cases than new filings each month, the market had two consecutive months (March and April) of more new filings than closed cases. However, once again in May, 413 more cases closed than opened and year-to-date there are still 5,014 more closed cases than new filings."