Upcoming Public Events for Unjust Debts

More upcoming events open to the public - in person and virtual - for the new book Unjust Debts, including tonight in Washington DC. Join the conversation!

• Monday July 8, 7pm ET: Politics & Prose, with Vicki Shabo, Senior Fellow at New America
• Wednesday, July 17, 3pm ET VIRTUAL: Roosevelt Institute, with think tank director Hannah Kroch-Blegley
• Thursday, July 18, 5:30 PM: Fletcher Free Library, Burlington VT, with Vermont State Treasurer Mike Pieciak
• Sunday, July 21, 10:30 AM: Temple Beth Shalom, Brigantine NJ (contact me for registration information). 
• Friday August 16, 12pm PT/3pm ET VIRTUAL: Berkeley Judicial Institute/Berkeley Civil Justice Research Initiative, with Professor Abbye Atkinson

 

Unjust Debts on the Road

First, thanks to Bob Lawless for his post about my new book. It has been great to engage with people about Unjust Debts so far, and especially appreciated the book making a new Financial Times best books list (links to that and other coverage here). Wanted to note a few upcoming book events for Credit Slips readers:

• June 27 (TONIGHT): Greenlight Bookstore, Brooklyn NY, in conversation with Zephyr Teachout. Information and RSVP here. 
• July 1 (VIRTUAL): Commonwealth Club World Affairs, in conversation with Senator Elizabeth Warren. Information and registration here. 
• July 8: Politics & Prose, Washington DC, in conversation with Vicki Shabo. Information here. 

Unjust Debts -- A New Book from Melissa Jacoby

Today is the publication date for Unjust Debts: How Our Bankruptcy System Makes America More Unequal from University of North Carolina law professor and Slipster, Melissa Jacoby. This book will be the talk of the bankruptcy community. Be the first in your firm or organization to have a copy. The book is available on Amazon or (better yet) Bookshop.org. 

Bankruptcy touches most every aspect of modern-day financial life. Professor Jacoby questions whether bankruptcy works as an effective second chance for everyday Americans while documenting the many ways the system allows powerful individuals and corporations to escape commitments. As such, she shows how the bankruptcy system contributes to inequality. For those who work in the bankruptcy system, her thesis may be controversial. For those who are not immersed in that system, the book will be eye opening.

Five reasons to read Unsettled by Ryan Hampton

Ryan Hampton, author of a book about the Purdue Pharma bankruptcy published earlier this month, is a "national addiction recovery advocate, community organizer, author, and person in long-term recovery" who also was a member of the Purdue Pharma bankruptcy official unsecured creditors' committee. On Purdue's committee, Hampton and three other personal injury claimants sat alongside five institutional/corporate creditors, at least some of which were defendants in other opioid crisis lawsuits.  This is a quick post to recommend that the bankruptcy world read Unsettled for at least the five following reasons: 

Elliott, Apollo, Caesar's Palace and a Bunch of Bankruptcy Law Professors

One of the most dramatic stories in corporate finance and bankruptcy over the past decade has been the Caesar's Palace battle between a bunch of hard nosed distressed debt hedge funds and big bad private equity shops.  A bunch of masters of the universe types fighting it out to the death. (For my part: I'm interested in this because some of the big players from the Argentine pari passu battle are involved and there was a battle over the aggressive use of Exit Consents).

Turns out that this Caesar's story is going to be front and center at an upcoming bankruptcy conference that three good friends, Bob Rasmussen, Mike Simkovic and Samir Parikh are running, where one of the authors of "The Caesar's Palace Coup", the FT's Sujeet Indap, is going to be on a panel with the heavy hitters, Ken Liang, Bruce Bennett and Richard Davis. I always find it fascinating to hear how financial journalists and law professors, both of whom have dug deep into a set of events, tell the same story. 

The formal announcement, courtesy of Samir Parikh, is here:

David Graeber’s Debt, The First 5000 Years

I’m just getting around to reading a 2014 book some Creditslips readers may be familiar with, Debt: The First 5000 Years. In this utterly fascinating work, Anthropologist David Graeber exhaustively recounts the history of debt and money. He begins by debunking the myth of barter, the story told in introductory economics textbooks that money was spontaneously invented to permit merchants to exchange goods and services in imaginary markets, as an improvement over primitive market economies based on barter. In fact, early human societies all relied on central planning (by kings and high priests), communism, gift-giving, redistribution, and various forms of debt, notably in Mesopotamia, Egypt and Greece, the earliest western civilizations, and probably in India and China as well. Debts and their units of account (i.e. money) arose to compensate for injuries, to seal marriages and other relationships, and to tabulate taxes paid and owed to sovereigns. Kings invented coinage both to relieve the poverty of their subjects and to provision their armies by spending coins, and as a convenient means to collect taxes. Modern monetary theorists like to cite this research to make the essential point that money and markets are created by sovereigns and states, and rarely if ever arose spontaneously. The idealized construct of a free market based solely on exchange first arose much later in economic history, in mercantilist societies and then with the liberal philosophers (Bentham, Owen, Smith, Ricardo) of the Industrial Revolution. 

Bankruptcy has always been with us. From the earliest times debt-based money led to  periodic crises and debtor revolts, and wise rulers from the dawn of written history periodically decreed the cancellation of all debts, sometimes memorialized by the physical destruction of debt tokens. The biblical inscription on the Liberty Bell from Leviticus, “proclaim liberty throughout the land”, was the announcement of a debt jubilee including the liberation of debt slaves. The Rosetta Stone was a similar Ptolemaic royal decree announcing a tax and debt jubilee.

Capitalism had its origins not in the exchange of goods and services between free traders and workers but in slavery and debt peonage, not only in the United States but in every colonial empire.  After reminding us of Martin Luther King’s description of the founding documents as an unpaid debt to Black Americans, Graeber concludes by reminding us that the validity and morality of various debts can and should be determined democratically. Thought provoking in a moment when we hear calls for both payment of reparations and cancellation of student loan and housing debts.  

Liked Evicted? -- Read Maid

Stephanie Land recently tweeted this depressing statistic: "a single parent would have to work 140 hours a week at minimum wage to pay for basic necessities." And Land would know. Her new memoir -- Maid: Hard Work, Low Pay, and a Mother's Will to Survive -- chronicles her time as a single mother working as a house cleaner and just scraping by on the combination of her paycheck and various forms of government assistance. In telling her story of ending up a single mother living in a homeless shelter with effectively no family or friends to turn to for help, of figuring out how to make a little money working insanely hard, and of dealing with the stigma of asking for government "handouts," Land weaves a narrative about life on the financial precipice that sticks with you. And embedded in her story are glimpses into the lives of her clients, through which Land creates portraits of the trials of (usually) better off families who nonetheless struggle in different ways.

In short, read her memoir. It's fantastic. And if you're not totally convinced that you must read it right now, there's more after the jump.

Holiday Reading Recommendation and a Research Question on the 1MDB Case

The 1MDB case has been on the front pages of the financial papers on a number of occasions recently. The reason: The US justice system is investigating the scam and senior executives from everyone’s favorite ethical investment back, Goldman Sachs, including Lloyd Blankfein, have been caught up in it. And this leads me to my recommendation for holiday reading, if you like reading financial fraud books. The book is The Billion Dollar Whale, by Bradley Hope and Tom Wright of the WSJ. At first, I thought that the book was about the London Whale, but it turns out to be about the rise and fall of a Wharton educated Malaysian named Jho Low – a fascinating character who appears to have engineered one of the biggest financial frauds of the century, while also throwing the most ostentatious parties ever. If you want more background, there is a fun discussion of the book on my favorite financial podcast, Slate Money (Emily Peck, Anna Szymanski and Felix Salmon are a brilliant, and often hilarious, combination). Indeed, I picked up the book after listening to their podcast on it.  There is also a short, but on the money, review in the New Yorker by Sheelah Kolhatkar. Among the many colorful characters involved in the version of the story told in The Billion Dollar Whale are Gary Cohn (of Goldman and the Trump’s economic advisory team), Leo DiCaprio, and the Wolf of Wall Street (both the movie and the main character, Jordan Belfort).

Swindlers and Crooks Doing Backflips: New Balleisen Book on Fraud

Not a moment too soon, Princeton University Press has just released Fraud: An American History from Barnum to Madoff by historian & Duke University Vice Provost Ed Balleisen. (Some readers might be familiar with his earlier book on bankruptcy in Antibellum America).

As I learned when reviewing an earlier draft, Fraud is meticulously researched and completely fascinating, with plenty of careful attention to law and regulatory structures. The book's other virtues are well encapsulated by Kirkus:

"Balleisen casts a gimlet eye on the passing parade of hucksters and charlatans, peppering a narrative long on theory with juicy asides that build toward a comprehensive catalog of ‘Old Swindles in New Jargon’. . . . Ranging among the disciplines of history, economics, and psychology, Balleisen constructs a sturdy narrative of the many ways in which we have fallen prey to the swindler, and continue to do so, as well as of how American society and its institutions have tried to build protections against the con. But these protections eventually run up against accusations of violating ‘longstanding principles of due process,’ since the bigger the con, the more lawyers arrayed behind it."--Kirkus

Although it starts in the 19th Century, the book's breadth includes our recent "deregulatory" decades and the impact of that approach on fraud containment.  A book for our life and times for sure.

 

Recommended Reading: Empire of the Fund

It's that time of year again! Time to revisit and perhaps rebalance the investments in your retirement portfolio. While it is a sad fact that many people lack significant retirement savings, it is nonetheless useful for those interested in consumer finance (and investment companies, pensions, etc.) to think about how retirement savings plans work and to be able to offer some advice, for example, to debtors emerging from bankruptcy with their clean slate. William Birdthistle, of Chicago-Kent law school, has recently released Empire of the Fund, a magnificent new work on the most common vehicle that carries individuals' retirement savings in the US: mutual funds.

I have heard that Birdthistle, who teaches across town from me, is legendary in the classroom. Having read his new book, I'm not at all surprised. While his fairly esoteric subject matter made me hesitate to nominate his book in response to Katie's post, Birdthistle has really pulled one off here by managing to make a book about the structure and pitfalls of mutual funds and retirement savings ... extremely entertaining! It is masterfully written, with both erudite references to relevant comments by literary and historical figures, along with laugh-out-loud allusions to modern culture ("OMG! Friends, right! Mutual funds are lame!"). This book is an absolutely brilliant example of how to make a work on an otherwise dry financial subject not only accessible to the general public, but a real pleasure to read. It is no wonder the New York Times calls this "a lively new book."

Book of the Year

Credit Slips readers are invited to share the best credit/finance book of this year. The book can be a monograph, fiction, textbook, anything. It doesn't have to be published this year; just that you found it this year.

My nomination is Evicted by Matthew Desmond. It's an ethnography of evictions in Milwaukee and compellingly describes the problems of financial distress. The book describes how tenants struggle to make rent, and the strategies used by landlords, with the help of the courts and sheriff's department, to collect if they cannot. The site for the book contains amazing photographs-- check it out.

While the book focuses on evictions for nonpayment of rent, the foreclosure crisis also wreaked havoc on millions of lower-income Americans who may never own a home. When the property owner was foreclosed upon, the tenants found themselves on the street. The scarce and uneven protections available led to the enactment of the Protecting Tenant at Foreclosure Act. That law expired two years ago, leaving at-will tenants in about half of states vulnerable to eviction immediately after foreclosure.

Evicted describes the heartache that comes with home loss: the strain on family relationships, the mental anguish, the physical illness, and other harms. These problems are all too familiar to those who study consumer bankruptcy, but Desmond's work is a powerful story of financial distress that ensnares families who cannot make ends meet.

John Oliver and Consumer Law YouTube Videos

I'm trying something new this year. My consumer bankruptcy policy seminar students will read many great articles by many wonderful academics on this blog, as well as others, but this year, their "reading" will also include a great deal of YouTube.

90% of the videos are John Oliver segments from his excellent show on HBO, Last Week Tonight. They cover particular "products" (student loans, credit reports, debt buying, payday loans, auto loans, retirement plans and financial advisors) and middle class issues (minimum wage, wage gap, wealth gap, paid family leave).

I thought Credit Slips readers might enjoy seeing them all in one place. Here they are in no particular order. Let me know if I've missed any!

Are we poor?

If you have kids who talk as much as mine (gee, wonder where they picked up loquacity as a trait), conversations can go nearly anywhere. My boys, ages 9 and 6, are quite interested in money lately, a phenomenon driven in part by the tooth fairy and their discovery of gift cards at a recent birthday party. Here is a recent excerpt:

"Mom, is the reason that I can't have the Lego Batman DC set because we are poor?

"We are not poor."

"Well, if are rich, then why can't I have it?"

"I didn't say we were rich. We aren't rich."

"Mom . . . . [big sigh of frustration] . . . Are we rich or are we poor?"

I recently read the Opposite of Spoiled by Ron Leiber, a NY Times money reporter. He provides straightforward advice on how to handle these questions and more. Even if one takes a slightly different tact with their kids, I completely agree with his main point:  parents should not avoid these conversations because they are uncomfortable or inconvenient or difficult. Kids talk about this stuff and draw conclusions. Creating a conversation is a way to share your values and learn about your children.

Scarcity of Money? Or Time?

How is it that I never find the time to blog? My answer would be that I simply do not have the time. But of course I have the same hours in a day as my co-bloggers. I could argue that I have more demands on my time, but I know very well that we are all busy. Scarcity, a book by Sendhil Mullainathan and Eldar Shafir, has many lessons for busy people, including those of us who are busy thinking about the difficulties faced by people who have a scarcity of income or disposable income after debt. 

The book looks at scarcity in varied contexts such as time, money, food, friendship. It argues that there is a common logic to situations of scarcity: a mindset that captures our attention and changes how we think. At an optimal level, scarcity can create positive focus. But the same capture of the mind can preoccupy us and make us vulnerable to poor thinking and impulse control. The authors find, for example, that being poor reduces a person's cognitive capacity more than going one full night without sleep.

The implications for those in financial scarcity are powerful, particularly in terms of policy intervention. The authors focus on the need for "slack" in program design; for example, job training programs with modular classes that can be taken out of order so if a person misses a class, they can more easily make up the class rather than falling behind on linear content and having to drop out.

My thinking went to chapter 13 and the debate about a "cushion" in chapter 13 plans. While some judges and trustees permit this (or even insist on it), others see it as an indication of weakness. If you deserve a discharge, you need to learn within limits. The scarcity of a confirmed chapter 13 plan, with its 100% draw on all disposable income, creates a mindset that can itself be harmful. People with some financial slack may, in fact, be better able to build the financial habits and position themselves for the rehabilitation that is bankruptcy's goal. Building financial savings into chapter 13 as a necessary expense would reduce the cognitive burden of bankruptcy and insulate people from the harms of financial scarcity after bankruptcy. The result, according to the research of Mullainathan and Shafir, would be debtors emerging from bankruptcy with better self-control, more focus, and stronger decisionmaking.

A Three-Hour Tour and Other Distractions

The City of Detroit has proposed a three-hour bus tour of the City to start its chapter 9 plan confirmation hearing. Some creditors object. The City's motion says "[i]f any case ever warranted a Site Visit, this one does." I don't agree, for reasons explored below, but in any event, the eligibility trial would have been a more logical place for it. And even Gilligan and the Skipper too couldn't cover 139 square miles in three hours. So what is going on here?

A step back. In the earliest days of my bankruptcy court clerkship, the United States Trustee sought to dismiss or convert the chapter 11 of a small nonprofit on the south side of Chicago. The debtor and the U.S. Trustee parties presented starkly contrasting depictions of this debtor - I remember the dueling photographs - with neither more obviously credible than the other. The case, like most in the bankruptcy court, had a starkly human element: the debtor was a rehabilitation center of sorts. The U.S. Trustee essentially was alleging that the residents lived in deplorable conditions, and the debtor strongly disagreed. To resolve the discrete factual dispute between two parties about the property's condition, Judge Ginsberg decided to schedule a time to leave the modernist skysraping box that was the Dirksen Federal Courthouse and visit the premises, in a van, with law clerk, court reporter, and others in tow. No easy way to verify -  the name of the case is lost to me now - but my strong recollection is that the site visit idea prompted no objections. The case cratered for an unrelated reason, mooting the trip. No other case during my clerkship prompted Judge Ginsberg to make a similar proposal.

Over the years, I have learned of other judges' experiences with site visits, revealing similar characteristics: cases with limited parties in interest, specific factual disagreement, the resolution of which could be accomplished efficiently by visiting circumscribed sites. 

Consumer Finance Movie: Spent: Looking for Change

I just saw Spent: Looking for Change, a documentary about the financial challenges of the unbanked. The film was funded by American Express, but there is no marketing of Amex products in the film. (Amex does offer one of the best non-DDA account options for the unbanked, however.) You can watch the movie for free on YouTube. The movie really puts a human face on the problems of the unbanked. It doesn't get into solutions (that would take a Peter Jackson trilogy), but it does a great job of setting forth what life is like for the unbanked. Highly recommended.

Working and Living in the Shadow of Economic Fragility

Credit Slips readers, please note the publication of a new book edited by Marion Crain and Michael Sherraden. The New America Foundation is hosting an event on the book tomorrow, Wednesday, May 28, 2014 at 12:15 EST. Not in Washington, D.C.? The event will be webcast live. 

The book project developed out of a stimulating multi-disciplinary conference at Washington University in St. Louis. Participants had great interest in considering how bankruptcy scholarship fits within the larger universe of research on financial insecurity and inequality. My chapter with Mirya Holman synthesizes the literature on medical problems among bankruptcy filers and presents new results from the 2007 Consumer Bankruptcy Project on coping mechanisms for medical bills, looking more closely at the one in four respondents who reported accepting a payment plan from a medical provider. Not surprisingly, these filers are far more likely than most others to bring identifiable medical debt, and therefore their medical providers, into their bankruptcy cases. We examine how payment plan users employ strategies - including but not limited to fringe and informal borrowing - to manage financial distress before resorting to bankruptcy, and (quite briefly) speculate on the future of medical-related financial distress in an Affordable Care Act world.

American Hustle

If you want to understand credit and its abuses, you have to delve into the human heart, in all its weakness and strength, and literature and film are powerful ways to do so.  In this observation, I join the growing backlash (see, for example, here and here) against the philistine notion that the humanities are a waste of time.  Literature and history can teach us at least as much as the social sciences and often are better written and more insightful about the nuances of our psyches.

Arguably the most fertile period of American cultural production was the mid-19^th century, when  Edgar Allan Poe, one of America’s first professional authors, examined closely the techniques of scamming, quickly joined by other literary greats such as Herman Melville and Mark Twain.  See here for my paper on this subject. Poe was also the first to link scammers’ motivations to the spirit of Wall Street.  Defining a scammer as working on a small scale, Poe also connected the dots to grand predators: “Should he ever be tempted into magnificent speculation, he then, at once, loses his distinctive features, and becomes what we term ‘financier.’”  See here for source.

David O. Russell provides a fresh take on this point in a must-see new movie—just in time for the holidays.  American Hustle’s dark wit speaks to the loss of any remaining American innocence in the lingering wake of the Great Bubble and Pop.

Set in the seedy late 1970s, the film lushly renders the world of runaway inflation, terrible clothes, shaggy hair (and comb-overs), disco fever, rising divorce rates, and rundown real estate for which the decade is remembered.   But it tells a timeless tale of raw ambition for riches and status turning every human interaction into a con.

Living down the Lattes

Credit Slips is a virtual community so very few of you know that I go to Starbucks at least once a day, although a small detail in the pic here was a hint in that direction. It's not a cheap habit, as personal finance writers have observed here and here. But does it drive people to financial ruin, or even indicate a failure of sound financial habits?

I've never thought so. The decades of research on consumer bankruptcy show that the big 3--job problems, medical problems, and family changes--are underlying structural problems. My thoughts on the "latte problem" are now enshrined in print in Helaine Olen's new book, Pound Foolish. It's tone is largely that of an expose, which makes for fun reading, although academics may find some of the research a bit light. But part of the problem that the book reveals is the lack of innovative solutions to improve financial advice. Certainly the CFPB has undertaken this as a major part of its mission. I'd love to hear readers' suggestions for innovative (not more junior high financial education, please) ways to get people to be more critical "consumers" of financial advice and to take the time and effort to make strides toward their financial goals. In the meantime, I'll enjoy my latte and procrastinate on rebalancing my retirement portfolio!

Crisis books

I recently stumbled on this excellent compendium of more than 300 books on the financial crisis.  It also includes a list of 25 or so books that predicted the crisis, as well as a useful link to an annotated list of individuals who can be given credit for predicting various aspects of the crisis.

The Stakes Of Design

That 99% invisible is a vibrant architecture and design podcast might have been beside the point in Credit Slips land -- but for the fact that its current show (Episode 78) focuses on the design and technology of casino slot machines, and the particular profitability of penny slot machines. The short piece is built on the work of M.I.T. professor and anthropologist Natasha Dow Schüll. Lots on the consumer finance and cognitive behavioral side of things; don't expect any mention of bankrupt casinos.

Slot photo courtesy of Shutterstock.

Brains for Hire

Posting again on fiction so soon? Not the original intention, but I recently read a story that skirts around the substantive core of Credit Slips, as well as the fabulous work of sociologist Viviana Zelizer, a past Credit Slips guest. Blame or gratitude can be sent c.o.d. to Charles Yu, a lawyer when he is not writing things like Standard Loneliness Package (also in Yu's recently published collection). The thirty-nine year old narrator receives 12/hour to absorb the pain and bad feelings from wealthy customers who pay 100, 200, 2,000/hour to be devoid of such pain and bad feelings. The price varies for watching a loved one die, a funeral, surgeries, root canal, breakups, firings, quittings, nose dives in the stock market (priced higher than some deaths). The company will not quote a price for death of a child.

The Entertainment and Sports Programming Network Looks at Bankrupt Athletes

In its acclaimed "30 for 30" series, ESPN is airing a show about professional athletes who go bust after leaving their sport. From ESPN's web site (which also has a trailer for the show):

According to a 2009 Sports Illustrated article, 60 percent of NBA players are broke within five years of retirement. For 78 percent of NFL players, it takes only three years. Sucked into bad investments, stalked by freeloaders, saddled with medical problems, and naturally prone to showing off, many pro athletes get shocked by harsh economic realities after years of living the high life. Drawing surprisingly vulnerable confessions from retired stars like Keith McCants, Bernie Kosar and Andre Rison, as well as Marvin Miller, the former executive director of the MLB Players Association, this fascinating documentary digs into the psychology of men whose competitive nature can carry them to victory on the field and ruin off it.

The episode, simply titled "Broke," airs in the U.S. at 8:00 PM (ET) on October 2 on ESPN.

Hat tip to my former student and current Chicago bankruptcy lawyer, Frank Venis, for drawing this to my attention. And, yeah, I know it has not really been the "Entertainment and Sports Programming Network" since 1985, but the full name has been seared into my brain ever since a moment of personal ignominy in a college sports trivia contest.

Financial Failure Fiction (and Poetry)

If I am not mistaken, it has been a while since Credit Slips has featured discussions of "bankruptcy literature." So I thought I would report that I just finished The Financial Lives of the Poets by Jess Walter, whom Janet Maslin called a "deft humorist and catastrophist" back in 2009. The book is a powerful reminder that literary writers and others in the art and culture worlds have amazing tools to capture the spiral downward and the third-party effects. And behold a writer who dares to use not only the term bankruptcy, but to distinguish between its constituent chapters. Disclosure: this book would not be rated PG (at least in my naive world) and it is deliberately outlandish. Taking it literally could produce extreme lack of sympathy for the indebted financial reporter-poet protagonist. You might like this book if you are a fan of, say, The Information by Martin Amis, The Ask by Sam Lipsyte, or Straight Man by Richard Russo. Readers out there, feel free to share your take on Walter's book (and name any other recent works of fiction that you think do it as well or better). Apparently, the book is being turned into a movie with Jack Black, directed by Michael Winterbottom. 

Regardless of the outcome in the book, let's not give up on the idea of online financial reporting and advice in the form of poetry (making a living on it is a different story). Perhaps one of the Credit Slips gang will be inspired to give it a try on this site? Stay tuned.  

Storage Wars and the Credit Practices Rule

A few times I have caught Storage Wars, a television show on A&E. When storage units customers do not pay their fees, the contents are auctioned off by the storage unit company. The show follows professional treasure hunters who bid at these auctions. The catch is that the treasure hunters are purchasing the unit without full knowledge of the unit's contents. With all the drama of finding out what was behind door number three on Let's Make a Deal, viewers get to watch these treasure hunters paw through the storage unit's contents and try to profit by finding items of real value. Every now and then, an item of tremendous value might be uncovered. A few days ago, I started wondering how this was legal.

Must-read Crisis Book

Today's mail brought my hot-off-the-press copy of the essential crisis reference, The Subprime Virus by Kathleen Engel and Patricia McCoy.  Subprime Virus chronicles the rise and fall of the subprime market and the regulatory (non) response, from the Clinton Administration through the 2007/2008 financial crisis, the bailout and the Dodd-Frank reform legislation.  The most vital contribution comes in Part III, where the authors relentlessly catalog the missed opportunities, systematic capture and complete failure of one regulatory agency after another, including the Federal Reserve, the banking regulators and the SEC.  The authors, of course, enjoy a unique credibility for having warned us early and often about the dangers of subprime lending and securitization, for both homeowners and investors. For those looking for an authoritative, scholarly and accessible account of the subprime crisis from its origins in the predatory lending of the 90's through the bubble, blow-up and bailouts, look no further.

Subprime Crisis Books

As the subprime crisis enters its fourth or fifth year, depending on when your version of the story begins, there is an ever-expanding menu of crisis books to choose from.  I have particularly enjoyed the less scholarly and more journalistic tales set in the boiler rooms of Orange County California (the Monster, by Michael Hudson) and the towers of Wall Street (Griftopia, by Matt Taibbi).  Others on my list include Dan Immergluck’s Foreclosed, and Thirteen Bankers, by Simon Johnson and James Kwak, which tell the stories of mortgage regulation/deregulation and the financial-regulatory complex, respectively, less colorfully but more exhaustively.  Next on my list:  The Big Short and Too Big to Fail.  The bookshelves are also bulging with chronicles of collapsed (or nearly collapsed) companies—Lehman Brothers, AIG, General Motors, etc… So gentle readers, which are your favorite crisis books?

Credit Crunch

For virtually every hobby, interest or passion, there are bumper stickers, posters, Christmas tree ornaments, and desk knick-knacks. I like golf; I like to knit; I like basset hounds, and I have a haphazard and modest-sized collection of stuff that represent those hobbies. But for those of us who give the term "credit junkie" a different spin, it's pretty slim pickings. What am I supposed to do, collect discarded credit cards?

So I was delighted to find the "Credit Crunch" t-shirt, advertising "Crispy Sugar Coated Nuggets of Nothingness." It's sized just right for my sons, one of whom models it below. I dutifully explained to my children that this shirt is about what Mommy teaches. They nodded politely. Later my 4-year old told the grocery store clerk that his mom is a Professor of Cereal!

p.s. I have categorized this post under "Fine Arts and Credit & Bankruptcy" because I have no idea why we have that category as a blog!    

Some Thoughts from Ray

While consumer credit was booming a couple of years back, I posted about one of my favorite tunes, "Master Charge," by blues legend Albert Collins. This evening, I've been sitting here writing with my iTunes list going, and a different tune hit my ears as more appropriate for today. It's "Busted" by the great Ray Charles:

Bankruptcy Bill, the Cartoon

For those of you who have not found it, take a peak at Bankruptcy Bill, a comic strip by Gideon Kendall and Steven Horowitz. Five strips have appeared so far. You'll have to click through to read them. I won't post any of them here because I don't want to be forced to proofread every Excel file that has been filed in the Lehman bankruptcy (the bottom of this post explains). I especially recommend Bankruptcy Bill's bankruptcy haiku page, which builds on a literary tradition from the contract-law focused Raintree County Memorial Library Occasional Paper Series. By the way, thanks to Bankruptcy Bill for the shout out to Credit Slips on its blog roll.

(For the uninitiated, the Raintree County Memorial Library Occasional Paper Series can be found at the following citations: Douglass G. Boshkoff, Selected Poems on the Law of Contracts, Raintree County Memorial Library Occasional Paper No. 1, 66 N.Y.U. L. Rev. 1533 (1991); Douglass G. Boshkoff, More Selected Poems on the Law of Contracts, Raintree County Memorial Library Occasional Paper No. 2, 91 Nw. U.L. Rev. 295 (1996); and Douglass G. Boshkoff, Constructive Haiku and the Law of Contracts: Raintree County Memorial Library Occasional Paper No. 3, 39 Ariz. St. L.J. 135 (2007).)

Contracts in Crisis: Variations in Z and S

Luigi Zingales of Chicago GSB put out a mortgage modification proposal about a month ago that got a bit of attention, but deserves more even if it has no political prayer.  It is one of a genre -- advocating across-the-board contract change in response to a macro shock -- that has at least two other prominent exponents, Randall Kroszner and Joseph Stiglitz.  I am noodling this literature for a U. Conn. symposium paper.

Zingales proposes legislation to allow homeowners to reduce the loan principal in line with the drop in home prices in their zip code from the time of purchase (as measured by Case-Shiller).  Creditors would get an equity kicker TBD.

Maxed Out

The luncheon speaker for the conference was James. D. Scurlock, the director and producer of Maxed Out, which airs this month on Showtime. For those of you who haven’t seen the documentary, it’s a scathing, eye-opening depiction of how the financial services industry (most notably, credit card issuers, debt collection agencies) treats ordinary, hardworking Americans and how people are seduced into debt. He expressed his gratitude to the sponsors for inviting him to a conference where he was sure his talk wouldn’t be the most depressing.

The Daily Show on Subprime Lending

On last night's The Daily Show with Jon Stewart, the hilarious Larry Wilmore explored the racial link to subprime lending. The show bills Wilmore as its "senior black correspondent," and his appearances are always a highlight of the show. Watch the video here and learn the difference between "ghetto judo" and "judo ghetto."

Rembrandt, the Bankrupt

Among the list of famous persons who have declared bankruptcy is Rembrandt van Rijn. A book by Washington University's Paul Crenshaw, Rembrandt's Bankruptcy, explores the reasons and effects of Rembrandt's financial troubles. The book was first published in February 2006, but it just came to my attention today. Thus, I have not had a chance to read it, but the comments are open for those who have and want to offer their own thumbnail review.

As with any literary or other of my posts that even remotely have a touch of the fine arts, thanks to Buce over at Underbelly for the tip.

D'Oh, I've Filed in the Wrong Chapter!

On June 10, Fox rebroadcast an episode of The Simpsons called "Rome-old and Juli-eh." We had a DVR malfunction back in early March, and somehow I missed this episode when it first aired.  It wasn't the end of the world, but it was close to it. I watched the rebroadcast last night and discovered what I had missed. Two of my favorite topics--The Simpsons and bankruptcy law united at last. Those of you who neglected to point this out to me on the original air date--and you know who you are--have severely let me down.

After building a new rec room in the basement, Marge asks how Homer could afford it. It goes from there:

If You're Reading This, Today's NYT Crossword Is For You

Five clues in today's New York Times crossword are "Short on Dough." Yes, that means you have to come up with five different expressions for "Short on Dough." Given the topics we cover on Credit Slips, our readers should be all over this puzzle. Even my St. Louis Cardinals get their props in the lower right-hand corner. More information and the answers are available at Rex Parker Does the NYT Crossword Puzzle.

Debt Burden

LendingTree has just released a new debt survey showing that 48% of Americans are worried about their debt loads, and that 20% expect to be stuck with credit card and other non-mortgage debt for the rest of their lives. Lending Tree tries to put a happy face on some of the data (most people "perceive themselves as some day being debt free"), but I didn't feel any better when I read it.

But overall the descriptions are quite reasonable, and LendingTree deserves kudos for their detailed reporting.  They give numerical responses on all their questions, broken out by age.  It is a treasure trove for all the data jocks who frequent this site. 

Ayer on Flaubert on Arnoux

Jack Ayer, who made a series of interesting posts here on literary explorations of credit and bankruptcy while he was a guest blogger, has a new post on his own blog (Underbelly) about Flaubert's L'Education Sentimentale and its antagonist, Jacques Arnoux. Ayer calls Arnoux one of the most important literary bankrupts. Who are the most important literary bankrupts?

Reading Recommendation from a Judge's Web Site

Recommended reading, and watching

Recently I was in court before Judge Jack Schmetterer.   In one of the cases that came before mine there was an issue about whether proper notice had been given.   The Judge used this occasion to recommend to the attorney for the movant, and no doubt to the other attorneys in attendance, that he should read The Trial, by Kafka.   The judge said that this recommendation was already included in his section of the bankruptcy court's web site.  I had never seen a recommended reading list on the court's web site, but when I went back to my office to check, it was there, in the part that describes the procedures for cases assigned to Judge Schmetterer.

"All motions to be called.

Because many debtors come to court without counsel on motions and some have defenses, all motions are heard in open court. (All counsel are advised to read “The Trial” by Franz Kaffa [sic] to understand how important the judge considers transparency in the Justice system.)...."

http://www.ilnb.uscourts.gov/JudgeSchmetterer/Schmetterer.htm 

Are there any other "official" reading suggestions from Judges?   

Earlier this year Jack Ayer's posts gave us a wealth of bankrutpcy related literature to read.   I wouldn't dare to offer a list of my own.   I do think that Bleak House should be added to his list of Dickens novels.   If you are an unsecured creditor in a heavily lawyered liquidation, or ever worse a shareholder, you would have sympathy for the wards in the famous case of Jarndyce v. Jarndyce. 

Professor Ayer also discussed bankruptcy and credit issues found in The Sopranos, which I take as license to start a discussion about  some movies that touch on these themes. 

Last week I finally saw the movie "Maxed Out" at a screening sponsored by various groups, including the Heartland Institute and my employer, the Legal Assistance Foundation of Metropolitan Chicago.   Interesting movie, which may be a sign of public concern about debt practices.  I'll try to post something on this later this week.  But I'm going to exclude documentaries from this post.   

Surprisingly for a consumer advocate, two of my favorites in this category portray the other side sympathetically.  In Repo Man Harry Dean Stanton lives by the repo man's code.  Definitely fiction.  In Breaking Away the son learns that everyone cheats - his favorite cycling team, and the privileged college students who patronize his father's car dealership.   The used car dealer as the working class hero! 

Then there is the mini-series, The Pallisers, based on the novels of Anthony Trollope.  The take away lesson -- never co-sign a loan.  Well, there was a lot more than that, but that's still good advice, most of the time.

The Uncle Tom's Cabin of Commercial Law

In an earlier post, I offered a few acerb thoughts about William Dean Howells and what I might perhaps have called the Jimmy Stewartization of bankruptcy. I could have generalized here: one of the great themes of 19^th Century American is what you might call the Response to Commerce—together with a theme I did not mention before, namely the relationship between the marketplace and women.

For my money, there are two great sources here—one, George Santayana in his seminal Genteel Tradition essays (link),  and the other, more directly relevant, Ann Douglas’ classic The Feminization of American Culture (1977) (link).

Douglas catches the essence of her own work in this discussion of the first great domestic potboiler, the Uncle Tom's Cabin of commercial law-- The Wide, Wide World (link), by Susan Warner:  

The story apparently turns on the unwillingness of the old-fashioned little girl, Ellen Montgomery, to participate in the ‘wide, wide world’ of masculine competition and business into which a cruel fate thrust her. All Ellen’s miseries begin when her father is clumsy enough to lose a vital lawsuit, and with it, his income. Mr.Montgomery’s surly incompetence and insecure aggressiveness threaten the idyll of feminine sensibility shared by his wife and daughter. Ellen makes a rather unfilial point of evading her father, but she cannot long escape the forces which he represents. When her ailing mother ends her off alone on her first adult mission to select some material at a store, a rude and busy clerk cheats, humiliates, and dismisses her because she is unused to the chicanery of commerce, because she is a child and a girl. Although a benevolent elderly gentleman indignantly intervenes and Ellen accomplishes her errand, Warner has made her point.

Douglas, at least, has no doubt as to what that point is: 

Ellen is completely dislocated from her economic past; those who control the production of her apparel are utterly foreign to her. It is Ellen’s distinction that she must be rescued from the world. She never requests or wishes in any way actually to function within her society. Brewing consolatory cups of tea for her several beloved and diseased lady friends is the full extent of her productive effort. Her undeclared hostility to her culture’s competitive forces is too enormous to allow her to contribute to its economic life. The Bible and those who love it are Ellen’s only business.

Douglas embroiders this sketch into a larger theme: a more general conspiracy of (otherwise powerless) women and clergymen into a general posture of clucking disapproval over the heart of American economic life.   

It would be fascinating but, lucky for me, beyond the scope of this blog entry, to trace the cultural history that links the feminization of culture to the feminization of bankruptcy.

Personal Aside: my mother and her siblings were orphaned in childhood, in the respect that their father was carried off in a bout of pneumonia, not litigation.

Their mother held the family together in a prodigy of heroism and good luck that I can only begin to fathom. The sisters—there were five of them—cut their literary teeth on The Wide Wide World. Years later in adulthood, they had come to recognize that it was trash. Yet the old appeal remained, and they could reduce themselves to rueful hysterics by remembering its mawkish energy.

How Henry Made it Somebody Else's Problem

Since we are (I am) on the subject of literary bankruptcy, I can't resist a reprint of a passage from John Dos Passos' USA, which, for my money, really is the great American novel. Dos Passos interweaves his fictional trilogy with semi-documentary historical vignettes. Here, in "Tin Lizzie," from 1919 (the second volume), he tells how Henry Ford survived the collapse that followed World War I:

…In 1918 [Ford] had borrowed on notes to buy out his minority stockholders for the picayune sum of seventyfive million dollars.

In February, 1920, he needed cash to pay off some of those notes that were coming due. A banker is supposed to have called him and offered him every facility if the bankers' representative could be made a member of the board of directors. Henry Ford handed the banker his hat, and went about raising money his own way:

he shipped every car and part he had in his plant to his dealers and demanded immediate cash payment. Let the other fellow do the borrowing had always been a cardinal principle. He shut down production and canceled all orders from the supplyfirms. Many dealers were ruined, many supplyfirms failed, but when he reopened his plant, he owned it absolutely, the way a man owns an unmortgaged farm with the taxes paid up.

…in 1922 Henry Ford had sold one million three hundred and thirty-two thousand two hundred and nine tin lizzies; he was the richest man in the world.   

My dad managed credit bureaus back in the 30s and 40s, when it was still a small-town drugstore counter kind of business. I remember him telling me the story of how Henry solved his own problem by making it somebody else’s problem. I don't think my dad ever read Dos Passos; maybe he saw it at first hand.

Novak on Defoe on 'Trade-Murther'

Bankruptcy scholars mostly know that Daniel Defoe, author of Robinson Crusoe, was himself a merchant, sometimes a bankrupt, and a commentator on bankruptcy law. It  seems to me that most literary students of Defoe miss this point; they don’t understand it, or they simply aren’t interested.

One honorable exception is Maximillian A. Novak, whose Daniel Defoe: Master of Fictions (2001) gives respectful attention to the bankruptcy issues. In particular, he addresses role in the runup to the "Statute of Anne," the progenitor of all modern bankruptcy law. In 1705-6, Novak writes, "Defoe had been supporting a new bill to regulate the laws of bankruptcy. He devoted a month and a half of the Review [his personal proto-weblog—ed.] to the subject…and eventually published a pamphlet on the subject …"  This pamphlet, he continues:

was mainly devoted to arguing the irrationality of a system that imjprisoned the debtor in a way that made paying back the creditors impossible. … [He also] drew attention to the horror of prison conditions and the families ruined. In addition he maintained that the nation itself loses by driving the bankrupt, with his potential skills, abroad, thereby forfeiting the wealth that might accrue to the nation by his and his family's consumption of goods. Defoe argued for a bill to force all the creditors to agree to the decision of the committees of bankruptcy. 'Otherwise, the bankrupt becomes a victim of a 'sort of Trade-Murther. He is driven to despair, flees, commmits suicide, or joins the army and dies that way.'  … 

As to the particular legislation Defoe

wondered if the law would do any good at all. In his pamphlet on this subject…he regretted that the bill did not reform the worst parts of the system. The bankrupt might still be sent to jail, to perpetual imprisonment; this meant that he would struggle to avoid punishment and be forced to desparate measures. Defoe concluded 'That to make men desperate was the way to make them Knaves; and as there never was any law but some way or other might be evaded or avoided, this would put Men’s Inventions upon the rack for new Methods to defraud their Creditors.' At least the new bill allowed the bankrupt 5 percent of his holdings to try to start anew. Defoe allowed himself some irony over the resulting loss of jobs among gaolers and those involved in arresting debtors, and 'As to the Attorneys, Sollicitors, etc., they may turn their Hands to the more Laudable practice of picking pockets, according to the letter of it, and then in time may meet with the reward of their former Merit, by a way they have often deserv'd it'. In short, he hoped they would be hanged.

Defoe had, of course, his personal experience with debtor distress: he went bankrupt twice and spent most of his adult life in the toils of creditor pressure. He shows amazing resilience, repeatedly coming up with new schemes and devices to make himself prosperous. Only in his final months does he appear "old, sick, and perhaps for the first time in his life in a state of despair." He died at last "of a lethargy," still in hiding from his creditors.

--Quotes from Maximillian E. Novak, Daniel Defoe: Master of Fictions (2001).

The Rise and Fall and Rise of Yerkes/Cowperwood

Whether or not there really is an American bankruptcy Balzac (cf. this discussion), still one contender who deserves a respectful mention is Theodore Dreiser—in particular, the Dreiser who wrote the Trilogy of Desire, a fictional chronicle that closely tracks the real-life career of Charles Yerkes, financier and scoundrel. A possible complaint about Dickens’ “commercial” writing is that he really doesn’t understand the details all that well: the sentiments are clear enough but the events leading up to the comedy are left pretty vague. A possible complaint about Dreiser is that he understands them to well. In the supposed fictionalization of Yerkes, he sometimes veers dangerously close to straight biography. One has to care about this sort of thing (although the chances of finding an audience are perhaps greater among readers of this website than in the general population).    

The real Yerkes made a fortune in Philadelphia in and after the Civil War, failed, went to prison—and then set off to Chicago, where he made a second fortune, and thence to London where he began anew. All this is convenient for a novelist who wants to turn his life into a three-parter.  Dreiser’s hero, Frank A. Cowperwood, performs the same trajectory. For sheer story-telling, the best of the three novels is probably the first, The Financier, available in print for purchase, but also free for download at Project Gutenberg (link). A manuscript search of the Gutenberg text will make it clear that Dreiser has plenty to say about bankruptcy, much of it in detail. “In these days also, he [was] constantly to be met with in courts of law, for he was constantly being reexamined in some petition in bankruptcy.” “His worst anxiety was that if he were sent to the penitentiary, or adjudged a bankrupt, or both, he would probably lose the privilege of a seat on 'change…” “[H]e hit upon the idea that in order to forfend against the event of his being put into prison or thrown into bankruptcy, or both, he ought to form a subsidiary silent partnership with some man who was or would be well liked on 'change, and whom he could use as a cat's-paw and a dummy.” 

And so forth.  But perhaps the most interesting thing about Dreiser’s account is the way he shows Cowperwood using bankruptcy as a business planning technique:

The suspension of the banking house of Frank A. Cowperwood & Co. created a great stir on 'change and in Philadelphia generally. It was so unexpected, and the amount involved was comparatively so large. Actually he failed for one million two hundred and fifty thousand dollars; and his assets, under the depressed condition of stock values, barely totaled seven hundred and fifty thousand dollars. There had been considerable work done on the matter of his balance-sheet before it was finally given to the public; but when it was, stocks dropped an additional three points generally, and the papers the next day devoted notable headlines to it. Cowperwood had no idea of failing permanently; he merely wished to suspend temporarily, and later, if possible, to persuade his creditors to allow him to resume. There were only two things which stood in the way of this: the matter of the five hundred thousand dollars borrowed from the city treasury at a ridiculously low rate of interest, which showed plainer than words what had been going on, and the other, the matter of the sixty-thousand-dollar check. His financial wit had told him there were ways to assign his holdings in favor of his largest creditors, which would tend to help him later to resume; and he had been swift to act. Indeed, Harper Steger had drawn up documents which named Jay Cooke & Co., Edward Clark & Co., Drexel & Co., and others as preferred. He knew that even though dissatisfied holders of smaller shares in his company brought suit and compelled readjustment or bankruptcy later, the intention shown to prefer some of his most influential aids was important. They would like it, and might help him later when all this was over. Besides, suits in plenty are an excellent way of tiding over a crisis of this kind until stocks and common sense are restored, and he was for many suits. Harper Steger smiled once rather grimly, even in the whirl of the financial chaos where smiles were few, as they were figuring it out.   

"Frank," he said, "you're a wonder. You'll have a network of suits spread here shortly, which no one can break through. They'll all be suing each other."

In fact, things don’t work out quite that way—there wouldn’t be enough novel if it did. But Dreiser does seem to have a feel for a certain kind of dealer in a certain kind of deal.

"It's Over for the Little Guy!"

I get my Sopranos fix only in DVD, so just now got round to Episoide #73, where Patsy and Burt find that big corporate is ruining the collection business. The kid at the upscale coffee store tells them that there is no slippage because Seattle counts every bean and anyway, they won’t care about vandalism—to the store, or to him.  Later, the boys find that Jamba Juice has just bought the building  that houses Caputo’s poultry store (from Tony!).  “It’s over for the little guy,” laments Patsy. "What the f$#% is happening to this neighborhood?"

 It occurs to me that my friend Michael the collection lawyer has the same problem. “Used to be,” says Michael, “that there was a little hardware store in every town. They were always past due to somebody, and you could always kick them around a little. These days, it’s all Wal-Mart. One, Wal-Mart pays and two, if they don’t what are you going to do about it?”

Memories: Back during the Carter inflation, Sears decided they were getting killed on interest costs, so they notified all their suppliers they would no longer pay in 30 days but would pay in. Thank you and have a nice day. This was good for the business of bankrupting small Sears suppliers, I can tell you, sort of like what happens when the old lady swings onto the expressway and 28 miles an hour.

More Sopranos: Come to think of it, there is a good deal of collection law in the Sopranos. Setting aside the routine savage beatings, I recall Episode #72, where credit card pretty much pushes Artie over the brink.  I guess the best bankruptcy/Sopranos tie-in since Episode #23, where the merry pranksters take over Davey Scatino’s sporting goods store to use it as a bust-out joint. As Tony told Davey when he tried to join the executive poker game, "this game isn't for you." Am I forgetting anything?

Still More Sopranos:  For some general thoughts on how the Sopranos has lost its Mojo, see Underbelly.

Bankruptcy Postscript:  I think this is one more piece of the puzzle.    Teaser--the headline reads: "Bankruptcy Work Falls, but Megacases Still Provide Hefty Fees."

The Great American Bankruptcy Novel, Maybe

I guess you would have to say there is one great American bankruptcy novel. That would be William Dean Howells, The Rise of Silas Lapham (1885). I’m hesitant because I find it unreadable: it’s too much high-minded Victorian social critic for me. Worse, perhaps, with Howells as with Dickens, I think he doesn’t understand the capitalist economy he is trying to criticize. Dickens saved himself with cyclonic energy and inventiveness. With Howells, a more telling comparison is Trollope—perhaps no more inventive or energetic a writer than Howells, but far better attuned to his subject matter. Howells’ Indian Summer (lately resuscitated in the New York Review of Books Classics (link)) is a gentle romantic comedy that shows his skills to better advantage.

The “Rise” of the title is, of course, a heavy-handed irony: Lapham falls when he rises and rises as he falls, just as Oedipus can see only when he is blind--perhaps this is the case also with Balzac’s grandeur et de la décadence de César Birotteau,, although the point is less stressed there. About the best Howells can do with it is the conventional good-man-in-a-bad-business model (the script cries out for Jimmy Stewart):

Perhaps because the process of his ruin had been so gradual, perhaps because the excitement of preceding events had exhausted their capacity for emotion, the actual consummation of his bankruptcy brought a relief, a repose to Lapham and his family, rather than a fresh sensation of calamity. In the shadow of his disaster they returned to something like their old, united life; they were at least all together again; and it will be intelligible to those whom life has blessed with vicissitude, that Lapham should come home the evening after he had given up everything, to his creditors, and should sit down to his supper so cheerful that Penelope could joke him in the old way, and tell him that she thought from his looks they had concluded to pay him a hundred cents on every dollar he owed them. . . . 

All those who were concerned in his affairs said he behaved well, and even more than well, when it came to the worst. The prudence, the good sense, which he had shown in the first years of his success, and of which his great prosperity seemed to have bereft him, came back, and these qualities, used in his own behalf, commended him as much to his creditors as the anxiety he showed that no one should suffer by him; this even made some of them doubtful of his sincerity. They gave him time, and there would have been no trouble in his resuming on the old basis, if the ground had not been cut from under him by the competition of the West Virginia company. He saw himself that it was useless to try to go on in the old way, and he preferred to go back and begin the world anew where he had first begun it, in the hills at Lapham.

 

--W. D. Howells, The Rise of Silas Lapham 351-2 (Penguin Paperback ed. Reprinted 1985)

Shakespeare on Bankruptcy Reform

Sir, I am a true labourer: I earn that I eat, get
that I wear, owe no man hate, envy no man's
happiness, glad of other men's good, content
with my harm, and the greatest of my pride
is to see my ewes graze and my lambs suck.

Every law professor believes that every other subject is a subset of his own. I agree: there is a bankruptcy angle to everything.

Example:  I’ve been spending some happy hours with James Shapiro’s A Year in the Life of William Shakespeare (link), in particular Shapiro's instructive discussion of Shakespeare's As You Like It. Readers (and viewers) will remember this play as the one in which the boys and girls all go to the woods and discover the equivocal ironies of the pastoral life. But as Wood makes clear, there is a not-so-gentle back-story rooted in Shakespeare’s own past, and in the world around him.

Shakespeare calls his locale “The Forest of Arden.” It’s fictional, but in fact, Shakespeare himself grew up in “The Forest of Arden,”—more precisely, Shakespeare's mother was an “Arden,” and he spent a good deal of his own spare time trying to traffick in his distinguished family connections. Shapiro expands on the point:

Writing about [Arden] in As You Like It must have stirred conflicting feelings in Shakespeare, for the play, in its disorienting shifts between woodland and pastoral landscapes, juxtaposes the romanticized Arden that stirred his imagination as a child with the realistic Arden that Shakespeare, sharp observer of land and people, witnessed as an adult. This helps explain the radically different Arden settings in the play. Four scenes in the play are set in the woods … the forest of ancient oak, streams, caves, and herds of deer, of men dressed as outlaws and “the old Robin Hood of England” (I.1.112). Twelve other scenes set in the Forest of Arden offer an alternative landscape, a world of enclosure, of sheep and shepherds, landlords and farmers, landed peasants and the less fortunate wage-earners, where “green cornfield” and “acres of the rye” are now established (5.3.17, 21)

Consider Corin the shepherd, above. As Shapiro says, Shakespeare “could have represented [him as] a successful tenant farmer who made a living tending to his landlord’s sheep and tilling the land adjoining his rented cottage. What we get instead is the grim fate, unexpected in a comedy, of a character so impoverished that he can’t even feed or lodge his guests.

But I am shepherd to another man
And do not shear the fleeces that I graze:
My master is of churlish disposition
And little recks to find the way to heaven
By doing deeds of hospitality...

But the master, aside from being “churlish,” has his own problems:

Besides, his cote, his flocks and bounds of feed
Are now on sale, and at our sheepcote now,
By reason of his absence, there is nothing
That you will feed on...

Indeed, the offer of another character “to buy the farm and mend Corin’s wages is the all that stands between him and the highway.”

Granted, this is not, strictly speaking, a bankruptcy story—bankruptcy, for all practical purposes, not yet having been invented. Still, Shapiro continues:

Shakespeare knew that there were more Corins around than ever before, left, as the historian Victor Skipp puts it, “with no alternative but to take to the road and ultimately to die on it.”

No flippancy here: another character faced with “vagrancy and hunger,” asks:

What, wouldst thou have me go and beg my food?
Or with a base and boist’rous sword enforce
A thievish living on the common road?

Fortunately, this is a comedy, so the fates are not so severe.

Micawber on Insolvency

For lawyers, the big Dickens novel is supposed to be Bleak House, but for bankruptcy lawyers, I think the choice should be Little Dorrit. You will remember: that is the one about William Dorrit, the “Father of the Marshelsea,” famous for being famous, in debtor’s prison for longer than anyone can remember.

But in fact, debt was a recurrent theme for Dickens; it pops up throughout his novels. Indeed, perhaps the most famous Dickensian debtor is not William Dorrit but Mr. Micawber, great friend of the eponymous author of David Copperfield.  Even people who have never cracked a Dickens novel will remember W. C. Fields saying   

Annual income twenty pounds,

annual expenditure

nineteen nineteen six,

result happiness.

Annual income twenty pounds,

annual expenditure

twenty pounds ought and six,

result misery.

 

It’s an imperishable scene and a priceless bit of character comedy but it overlooks a hard fact: Micawber is a calamity. He’s a drifter and a dreamer. He has a wife to support, and a disastrous knack for fathering children. David, first their tenant, becomes their protector, adult before his time. Micawber is always waiting for something to turn up. For the most part, nothing does turn up; Micawber winds up in debtor’s prison, and the best thing he can find to do with his time is to compose “a petition to the House of Commons, praying for an alteration in the law of imprisonment for debt.” Copperfield explains:      

There was a club in the prison, in which Mr. Micawber, as a gentleman, was a great authority. Mr. Micawber had stated his idea of this petition to the club, and the club had strongly approved of the same. Wherefore Mr. Micawber (who was a thoroughly good-natured man, and as active a creature about everything but his own affairs as ever existed, and never so happy as when he was busy about something that could never be of any profit to him) set to work at the petition, invented it, engrossed it on an immense sheet of paper, spread it out on a table., and appointed a time for all the club, and all within the walls if they chose, to come up to his room and sign it. 

Dickens readers apparently find this all touching and loveable: apparently the book remains about the best-selling of all Dickens novels. It is not entirely clear just what Dickens himself thinks. It is he who sketches out all this sunny innocence; yet it is he who lays out the evidence that Micawber, for those around him, is pretty much of a train wreck. Dickens does also mention “the boot-maker” who

had declared in open court that he bore [Micawber] no malice, but that when money was owing to him he liked to be paid. He said he thought it was human nature. 

Human nature indeed. Compare with Micawber’s human nature at work as he undertakes to discharge an obligation to his young friend Traddles:

'One thing more I have to do, before this separation is complete, and that is to perform an act of justice. My friend Mr. Thomas Traddles has, on two several occasions, ‘put his name,’ if I may use a common expression, to bills of exchange for my accommodation. On the first occasion Mr. Thomas Traddles was left—let me say, in short, in the lurch. The fulfillment of the second has not yet arrived. The amount of the first obligation,’ here Mr. Micawber carefully referred to papers, ‘was, I believe, twenty-three, four, nine and a half; of the second, according to my entry of that transactions, eighteen, six, two. These sums, united, make a total, if my calculation is correct, amounting to forty-one, ten, eleven and a half. My friend Copperfield will perhaps do me the favour to check that total?’

I did so and found it correct. 

‘To leave this metropolis,’ said Mr. Micawber, ‘and my friend Mr. Thomas Traddles, and I now hold in my hand, a document, which accomplishes the desired object.  I beg to hand to my friend Mr. Thomas Traddles my I O U for forty-one, ten, eleven and a half, and I am happy to recover my moral dignity, and to know that I can once more walk erect before my fellow man!’ 

With this introduction (which greatly affected him), Mr. Micawber placed his I O U in the hands of Traddles, and said he wished him will in every relation of life. I am persuaded, not only that this was quite the same to Mr. Micawber as paying the money, but that Traddles himself hardly knew the difference until he had time to think about it. 

 It’s something to reflect that Micawber’s cheerful, calamitous innocence who has more to do with public attitudes towards debt than any other character in literature.

Fn.: Dickens never was much good at endings. After carrying him through one scrape after another, there wasn’t much to do with Micawber, so (in desperation?) Dickens sent him to the antipodes and made him a judge. The reader is left to draw whatever moral he sees fit.

Bankruptcy's Balzac

Well, hey.  thanks for the intro.    Now this:

I’ve always argued that bankruptcy law needs its Balzac, except that it has its Balzac, and his name is Balzac. In a broad sense, you could say that everything he wrote is about bankruptcy—or at least about commerce, and usury, and rapacity, and greed, and wild speculation, and all the things that made him Marx’s favorite novelist. He had first-hand experience—it is said that he equipped his house with a special back door, for the escape from creditors (he also took a mistress more than 20 years his senior who was the mother of nine children, go figure). He did write one explicit “bankruptcy” novel, Histoire de la grandeur et de la décadence de César Birotteau, about a guileless parfumiere, undone by an unworthy servant, but particular references are scattered through any number of other novels. One of the best bits may be the passage in Eugénie Grandet, where the Old Grandet, the miserly cooper, undertakes to de-besmirch the name of his late brother, the speculator and suicide:

Presently des Grasssins called a meeting of creditors, who unanimously appointerd the Saumur banker and François Keller, the head of a large business firm and one of the principal creditors, as joint trustees; and empowered them to do anything they thought necessary to prevent any doubt being cast on the good name of the family, or the bills. The credit Grandet of Saumur enjoyed, the hopes des Grassins roused in the hearts of the creditors as his agent, made this go smoothly. There was not a single dissident voice among the creditors. Nobody dreamed of passing his bills to his profit and loss account, and each man said to himself, ‘Grandet of Saumur will pay!’

Six months went by. The Parisians had withdrawn the bills from circulation, and had put them away underneath all their other business papers. This was the first result the cooper was looking for. Nine months after the first meeting the two trustees distributed forty-seven per cent of the amount owing to each creditor. This sum had been raised by the sale of valuables, property, goods and chattels belonging to the late Guillaume Grandet, a sale made with most scrupulous honesty. The delighted creditors acknowledged the undeniable and admirable integrity of the Grandet brothers. Having praised them and circulated their praises for a suitably decorous length of time, the creditors began to ask when the remainder of their money would be forthcoming. It became necessary to write a collective letter to Grandet.

‘Now we’re getting somewhere,’ said the old cooper, throwing the letter into the fire.  ‘Have patience, my little friends.’

In reply to the propositions put forward in the letter, Grandet of Saumur asked that all the documents involving claims against his late brother’s estate should be deposited with a notary, together with receipts for payments already made, in order, so he said, that the accounts might be audited and to establish correctly just how much money was owed by the estate.

This all goes on for another page or so.  Then:

Twenty-three months after Guillaume Grandet’s death, many of the merchants, in the rush of business life in Paris, had forgotten their claims against his estate, or thought of them only to say,

‘I’m beginning to think that the forty-seven percent is all I’ll see of that debt.’

And so it goes.  Earlier, young Eugénie had asked the old cooper:  ‘What is a bankrupt, father?’

‘A bankrupt,’ answered her father, ‘has committed the most dishonorable deed that a man can dishonour his name by being guilty of. … A bankrupt,’ he went on, ‘is a thief that the law unfortunately takes under its protection.’

--Balzac, Eugénie Grandet (
Marion Ayton Crawford trans. 1955)