Bankruptcy

Dysfunction of the corporate bankruptcy system in the US is, I feel certain, a good part of what ails us inboth micro and macro terms.

In a recent reveiw of Alan Greenspan's memoir, which I contributed to The Federal Lawyer, I said that debtor/creditor relations are a central theme in US history. That was the issue behind the fights over the first and second national banks. Regional disputes over debt and credit helped ignite a civil war, and the subsequent west-versus-east character of American populism. This was the issue behind the Bretton Woods negotiations of 1944, the subsequent unravelling of the system created there, and Greenspan's own present notoriety.

I didn't reference bankruptcy law in that review, but it is a branch on the same conceptual tree.

The kerfuffle over Bear Stearns last month renewed my interest in the whole subject. I suspect that the reason Bear melted down as quickly and unexpectedly as it did has a lot to do with contemporary bankruptcy laws, and the fact that Bear's counter-parties had to act in anticipation of the very possibility, even the mere rumor, that Bear might make such a filing.

I discussed related points in a blog entry here last August, and for today I'll just link you to that.

On a personal note: I'm going to be doing some travelling. You probably won't see another entry here for a week. I hope to see lots of comments when I return.