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Archive for the Bankruptcy Category

December 24 (December 24, 2012)

Posted in Bankruptcy, Banks and Banking System, Bernanke, Consumerism, Federal Reserve, Pogo Plight, Spending, Taxation on December 24, 2012 by e-commentary.org

. . .

TV “You need a new car, you really smell bad and need to do something about it, you really, really need to sport an expensive watch and you really, really, really need to acquire expensive jewelry for the woman in your life or you are a total loser.”

. . .

LTR

Dear Billy,

I would like a regular 9 to 5 gig, a change of threads, a new straight razor and a short vacation.

Your friend,

Santa

P.S. – I’ve been nice.

P.P.S. – I don’t need a new ride, any cologne or a chronometer. Ms. C. does not need any jewelry. She says ‘hello.’

. . .

[See the FBI documents that reveal secret nationwide monitoring of the Occupy Wall Street effort at http://www.justiceonline.org/commentary/fbi-files-ows.html.]

[See the research paper by the Congressional Research Service titled “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945” at http://graphics8.nytimes.com/news/business/0915taxesandeconomy.pdf.]

[See the “e-ssays” titled “Consume, Don’t Invest? (Nov. 9, 2009)” and Boxing Day (December 26, 2011).]

Bumper stickers of the week:

Can I pay my Visa bill with my MasterCard?

Today is the 99 year anniversary of the creation of the Federal Reserve – a semi-quasi-proto-government-like being – not understood by 99.999999999 % of Americans. To his (and our) credit, Bernanke is sharing the assumptions and strategy more transparently and considering the unemployment level because Congress directed the Federal Reserve to consider the unemployment level in its decision making. To his (and our) detriment, he is subsidizing Wall Street with vast amounts of free money and saddling ‘Main Street’ with debt and creating unhealthy conditions for the economy in the intermediate term.

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Eu-rope Is Mal-rope (May 7, 2012)

Posted in Bankruptcy, Banks and Banking System, Debt/Deficits, Entitlements, Europe, Foreign Policy on May 7, 2012 by e-commentary.org

. . .

1 “Putin is put in, Sarkozy is put out. The Dutch government is dissolved. The Greeks have had it with not having it. The Germans have had it with having to pay for others to have it. The Spanish have no realistic recovery plan to have it all or even to have it half.”

2 “The have-nots and even the haves have had it. The community described as ‘Socialist Europe’ is now moving to the right. Restrictive immigration policies are always a harbinger of hate on the horizon.”

1 “Generosity emerges when individuals meet their needs and have adequate resources to share with others. With diminishing resources and declining opportunities, Europeans with resources are protecting their piece of the crumbling pie.”

2 “After World War I, the victors imposed unworkable reparations on the Germans that were doomed to fail and set the stage for another war. After World War II, the victors implemented the workable ‘Marshal Plan’ that destined the economies to succeed and set the stage for an exceptional peace. The magnanimous approach was and is considered prudent, progressive, productive and profitable. Today, the Germans have reverted to the World War I model in a doomed effort to end the financial war raging in Europe.”

1 “After World War II, the Germans and the Japanese learned that it is easier to take by investment than by invasion, but that lesson is being lost. Today, a nation’s debt is really little more than a default deferred. The Europeans need to hit the ’ctr-alt-del’ button and build a better economy.”

2 “For some time, it has been just a matter of time.”

. . .

Bumper stickers of the week:

Eu-rope is Mal-rope . . . and on the ropes

Those who know the ropes realize that Eu-rope is on the ropes and at the end of their rope because they gave themselves too much rope and are now trying to rope in their excesses in a way that may only hang them all. They are at the bitter end and are getting bitter.

Make work not war

A nation’s debt is really little more than a default deferred

In Heaven, the mechanics are German, the police are British, the chefs are French, the lovers are Italian and the entire place is organized and run by the Swiss. In Hell, the police are German, the chefs are British, the mechanics are French, the lovers are Swiss and the entire place is organized and run by the Italians. In Purgatory, the debtors are Spanish, Portuguese, Irish, Icelandic, Italian . . . . and the entire place is disorganized and run by the ECB, IMF, FRD and GS.

The Swiss are adequate lovers . . . really

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Happy Birthday Earth Day (April 23, 2012)

Posted in Bankruptcy, Environment, Global Climate Change, Global Warming, Pensions on April 23, 2012 by e-commentary.org

. . .

CC1 “I remain surprised that Nixon signed the ‘Environmental Protection Act’ shortly after the first Earth Day in 1969.”

CC2 “Time to give some thought to passing the ‘Carbon Rebate and Climate Protection Act’ or some similar legislation.”

CC1 “You need a sexier name.”

CC2 “Sex Save Sex The Sex Planet Sex Act Sex.”

. . .

[The proposed ‘Carbon Rebate and Climate Protection Act’ or ‘Save Our Climate Act’ is discussed at http://www.citizensclimatelobby.org/ and some optimistic future scenarios are discussed at http://io9.com/5903810/optimistic-visions-of-the-world-after-the-oil-runs-out.]

[The Northern Mariana Islands Retirement Fund filed for Chapter 11 bankruptcy protection on April 17. Stay tuned.]

Bumper stickers of the week:

A good planet is hard to find

“To declare national policy which will encourage productive and enjoyable harmony between man and his environment; to promote efforts which will prevent or eliminate damage to the environment and biosphere and stimulate the health and welfare of man; to enrich the understanding of the ecological systems and natural resources important to the Nation . . . .”

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Losing Faith: MF Global and Kodak (January 9, 2012)

Posted in Bankruptcy, Banks and Banking System, Economics, Housing, Judges on January 9, 2012 by e-commentary.org

. . .

K “With each passing day, the American dream is being stolen from more and more proverbial hard-working and law-abiding Americans. When enough ordinary Americans lose their few investments, there will not be enough Americans who are invested in America.”

J “MF Global and Jon Corzine stole money and did the American thing. They fraudulently filed Chapter 7 of Title 11, the Bankruptcy Code, as a securities dealer rather than a commodities broker to provide powerful creditors access to the company’s cash before its ordinary citizen clients.”

K “The picture at Kodak is not pretty. The retirees will discover that the pensions they worked a lifetime to build are vaporized or at least reduced in a moment via Section 365 of Title 11. Even the Bankruptcy Code is economically and morally bankrupt.”

J “And distorted and prostituted at every opportunity by bankruptcy lawyers and judges. For so many other ordinary Americans, their house is a cage, a prison and a leg-hold trap. The owners are drowning and can neither fight nor flee, neither tread water nor swim away. Housing prices still must drop substantially to achieve market clearing prices.”

K “If everyone acknowledged the real market value of houses, the house of cards would collapse. Big Banks and most homeowners would be forced to admit that everyone is hopelessly insolvent. Local governments would not be able to raise enough tax revenue unless they raised the mill rate to a crippling percentage of purported market value. The only way for the Republic to survive the day is to nourish a collective national delusion that everything really is alright.”

J “Is it better to nourish a collective national delusion?”

. . .

Bumper sticker of the week:

When you ain’t got nothin’, you ain’t got nothin’ to lose.

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Is The American Consumer Irrelevant? (December 12, 2011)

Posted in Bankruptcy, China, Consumerism, Pogo Plight, Society on December 12, 2011 by e-commentary.org

. . .

P “Another holiday season and consumers are consumed with consumption. They say that seventy percent of our economy is or has been driven by consumer spending. They also say that something that cannot go on forever will not go on forever. And it can’t go on forever.”

L “It can’t. The consumers have not paid for their past consumption. The Chinese have provided the goods and the money to get the goods and deferred payment but not forgiven the debt. The American consumer is becoming an afterthought in the world market.”

P “They say that saving is up in the aggregate, yet only very slim sliver of individuals who actually have money, distrust the stock market and seek to protect principle are saving.”

L “Consumption is an addiction. Advertising provides the shallow inducements and exploits deep fears and anxieties. Economic health warnings should be added to all advertisements. ‘Purchasing this product may be dangerous to your economic health.’”

P “For so many today, keeping up with the Jones is not adequate. Vanquishing the Jones is the goal.”

L “And the Jones cannot afford to keep up with let alone vanquish their neighbors. From another perspective, the parvenu of the last few decades are a sign of a society with upward economic mobility. The economic mobility has reversed direction and is rapidly moving down. Few are arriving.”

P “Too many individuals are gullible. There are too many iPhones, iPads, iPeds, iPods, iBooks, iMacs, iMeMines.”

L “Individuals must take more responsibility. If you circumnavigate the grocery store and only acquire goods from the shelves and refrigerated cases along the outside perimeter, you will find a variety of tasty and nutritional foods. The junk food is piled in the middle of the store. The market works if you understand the layout of the market.”

. . .

[See the “e-ssay” titled “Consume, Don’t Invest? (Nov. 9, 2009)”]

Bumper stickers of the week:

He who dies (having played in a responsible way) with the most toys wins

Live simply so that others may simply live

Trade in a credit card for a library card

Bernays was right on the money

Plan B Is Part Of Plan A

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From e-con-omics to eco-nomics? (August 1, 2011)

Posted in Bankruptcy, China, Economics, Economics Nobel, Education, Energy, Environment, Pensions, Schooling on August 1, 2011 by e-commentary.org

. . .

( “The Keynesians are using a screwdriver to hammer a nail. The monetarists are using a hammer to drive a screw. The wrong tool is selected because the challenge is not understood.”

) “So we are screwed and hammered?”

( “E-con-omists do not even recall the central tenet of economics. Resources are scarce. Not enough resources are available today to provide the growth needed to provide everyone with a first-world life style.”

) “You know that observation is politically unacceptable.”

( “The department of e-con-omics today should be merged with the department of religion. The e-con-omists are marketing voodoo.”

) “What about the department of psychology? Or the department of environmental sciences.”

( “What about creating a department of 3Es – energy, economics, and the environment? What about adding a class in Mega-eco-nomics to the traditional classes in Microeconomics and Macroeconomics?”

. . .

( “Economics is laden with rich irony. The use of the word ‘gross’ in ‘gross domestic product.’ The products and services often are gross.”

) “Look at the felicitous term ‘trickle down’ in ‘trickle down economic policies.’ The theory posits that all the money should be given to the wealthy and very little will trickle down to the populace. Should anyone be surprised that very little trickles down to the populace.”

( “And the Laffer Curve was worth a laugh but not much more.”

) “We need more eco-nomists who recognize and accommodate limits to growth even though the realization is anathema in today’s political climate.”

( “Very few are going to go quietly.”

. . .

Bumper stickers of the week:

You are stronger than the tool; the tool is smarter than you are.

Central Falls falls

The Senate confirmed Gary Locke as Ambassador to China by unanimous consent on July 27, 2011

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Bankrupt Auto Companies? (December 8, 2008)

Posted in Automobile Bailout, Automobiles/Automobile Industry, Bailout/Bribe, Bankruptcy on December 8, 2008 by e-commentary.org

Congress recently rejected the request by the “Big 3” (GM, Chrysler and Ford) auto companies who came in with their palms out and instead asked them to go out and come back with a plan in hand. Congress already passed a Plan. The Plan is part of Chapter 11 of Title 11, the reorganization chapter of the Bankruptcy Code. The Code, in particular Section 365, provides the debtor with the power to avoid contracts and leases when necessary. This provision is discussed in previous “e-ssays.”

Roam an auto show. Kick the tires. Open the doors. Sit on the seats. Turn the buttons. Toggle the switches. Slam the doors. Look under the hood. Peek in the trunk. Check the workmanship. Read the specs. Scrutinize the consumer reviews. Check recall notices. Repeat.

Georgetown, Princeton and Cambridge make better cars. In Kentucky, Indiana and Ontario (Canada), three of the Toyota plants in North America. The management in Detroit has designed and manufactured lousy and energy-inefficient vehicles for decades and made Detroit irrelevant. The trio from Detroit did not propose real compensation concessions to match the pay packages of their far more successful counterparts in Tokyo and Munich and elsewhere.

Southern Republican senators smell an opportunity to bust a union, the United Autoworkers of America (UAW), and support the non-union plants in their states. However, the employees in the non-union states only receive the wages they receive because they can point to the higher wages possible if they were to unionize like their brethren in the North. Cripple the UAW and undermine wages. The Civil War, the War Between the States, the War between the Red States and the Blue States, the War between the North and the South continues unabated.

The Bankruptcy Code still provides the most promising legal mechanism to reorganize (organize?) the automobile companies. The logic of Chapter 11 is that a going concern has additional value that should be preserved. The problem seems to be that Chapter 11 may be inadequate under the circumstances. The amount of the proposed bailout is squandered by the U.S. in a few days in Iraq.

The Trillion Dollar Bailout/Bribe of Wall Street was and is a travesty. Is a bailout of the Big 3 necessary or appropriate?

Bumper sticker of the week:

See the USA owning Chevrolet?

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Pensions and Other Entitlements: Pt. 2 (April 28, 2008)

Posted in Bankruptcy, Congress, Constitution, Courts, Law, Pensions, Social Security on April 28, 2008 by e-commentary.org

Constitutional law in America is neither consistent nor coherent. The United States Bankruptcy Courts may be the only forum to adjust pensions and other obligations. A business can file a petition pursuant to the United States Bankruptcy Code in Title 11 and apply Section 365 to reject pension and other obligations. Many corporations have rejected pension and other obligations for decades and in recent publicized cases. Chapter 9 of the Bankruptcy Code allows a municipality to file a petition in bankruptcy and resort to the relief in Section 365. Orange County, California did it in 1994; Desert Hot Springs, California in 2001; Vallejo, California may do it in 2008; watch San Diego in the next few years.

A separate state of the union is not now afforded an opportunity to file a petition under the Bankruptcy Code even if it is not able to afford to pay its bills. A new chapter of the Bankruptcy Code, Chapter 15, may need to be added allowing a state to utilize the provisions of Section 365. The big public policy development will come when everyone realizes that another new chapter of the Bankruptcy Code, perhaps Chapter 17, may need to be added to allow the United States government itself to file a petition under the Bankruptcy Code to utilize the provisions of Section 365. [See the e-ssay dated January 17, 2005 entitled “America the Bankrupt: Economics 210 in the Land of the Freeway and the Home of the Brave”.]

Using the Bankruptcy Code is problematic at best. In effect, the Congress (a legislative body) would pass legislation to allow a Bankruptcy Court (the judicial branch) to make a decision that Congress may be prevented from making itself by another twig of the judicial branch. Section 365 is binary and only allows a debtor to accept or reject a contract; there is no ready provision to allow a Bankruptcy Court to accept sixty percent (60%) of the pension and other obligations. Where to file the petition is not clear, the Southern District of New York; the Northern District of Alaska, or elsewhere? The Bankruptcy Judge has less discretion under the Bankruptcy Code to recognize the decision of the debtor to accept or reject, although he or she may be unwilling to recognize a decision that could threaten his or her pension.

The unfunded and unfounded promises we have made to each other will stagger those who were never consulted. Or even born. All government entities in the intermediate term will need to dispense with or limit pension and other obligations. Addressing the matter in the Bankruptcy Code and in the Bankruptcy Courts is cumbersome and incomplete, yet the approach more easily overcomes the constitutional infirmities that other courts have mistakenly imposed. At core, as noted previously, the rejection really is not a rejection of pension obligations, it is a refusal to accept obligations the Younger Generation never agreed to undertake nor can reasonably be expected to perform.

Some say: “If we were just informed that our pension and other obligations could disappear or be reduced, we could modify our behavior and decisions now.” What if someone said: “Your pension and other obligations could disappear or be reduced.” Despite their protestations, the populace, even when informed, likely will not modify its behavior and decisions. The answers admittedly are not easy.

Bumper sticker of the week:

There Is No Such Thing As A Free Snack.

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Pensions and Other Entitlements: Pt. 1 (April 14, 2008)

Posted in Bankruptcy, Conflicts of Interest, Law, Pensions, Social Security on April 14, 2008 by e-commentary.org

Today’s adults have “discounted” and now disregard the Bush Wars. After all, the wars are being fought by the children of the underclass and will be paid for by the children of all classes in the future. Everything is very tidy and antiseptic, except that this belief is a delusion. Today’s adults likely will pay for some of the cost of the Crusades.

As a general proposition, the Constitution protects “life,” “liberty,” and “property.” The United States Supreme Court has often recognized: “[p]roperty interests are not created by the Constitution, ‘they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law . . . .’” Cleveland Bd. Of Educ. v. Loudermill, 470 U.S. 532, 538 (1985). There are many adults who believe they have been promised payments in the future for their efforts today. The funds to make the future payments are not being provided today, so there is no binding social contract. The Older Generation offers to provide a pension; the Older Generation accepts the offer; however, if the Older Generation does not fund the promise, there is no legal “consideration” for the contract. The Younger Generation can note simply that they were not a party to the contract and did not make any promises or representations to the Older Generation. The pensions and other obligations are nudum pactum, a naked contract.

These issues wander into the courts. That is where things get curious. An individual takes a judgeship for a variety of reasons—a steady pay check, prestige, power, the possibility of doing good and making a difference, they look good in black, and, of course, the promise of the almighty pension. For that reason, courts have an inherent conflict of interest whenever they are presented with any challenge involving pensions of any kind. Courts often make very public displays of some usually minor or irrelevant conflict of interest, yet on the fundamental economic issues they address cases and protect their economic interests. Most of the courts today have protected pensions in cases before them to protect their own pensions without even obliquely noting in a passing footnote a clear and blatant conflict of interest. They contend that the pension is a binding contract and/or a property right. It is neither.

In Flemming v. Nestor, 363 U.S. 603 (1960), the United States Supreme Court upheld a provision in the Social Security Act of 1935 in which Congress reserved to itself the power to amend and revise the schedule of benefits. The Court held that a social security recipient does not have a property interest in a social security payment. “We must conclude that a person covered by the Act has not such a right in benefit payments as would make every defeasance of ’accrued’ interests violative of the Due Process Clause of the Fifth Amendment.” Id. at 611. Justice Hugo Black in dissent observes that the decision represent an anti-communist bias by the members of the Court. Id. at 628-28. In addition and of more insight, the Justices were not entitled to participate in Social Security, so the decision is not surprising.

Bumper sticker of the week:

Social Security?

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Greed on Steroids (October 22, 2007)

Posted in Bankruptcy, Economics, Society on October 22, 2007 by e-commentary.org

One score years ago, Greed was just good. Now Greed is God. God is Greed. Those who embrace one seem to embrace the other. Greed is now on steroids.

In theory, Chapter 11 of the Bankruptcy Code addressing business reorganization exists because of an assumption that a “going concern” business is synergistic and provides positive public externalities such as steady jobs, established customer networks, etc. In other words, the business provides some value beyond the price of the individual assets. Liquidating the business rather than rehabilitating it, the argument goes, expunges the possible public benefits. In practice, however, Chapter 11 often is like a second marriage, the triumph of hope over experience.

Today, the hedge fund managers and private equity boys pursue an opposite tack. They take a going concern, sell the assets and vaporize the “going concern” value. They finance the disintegration with OPM (Other People’s Money) and pay reduced taxes for their assault on the public weal. Instead of an “invisible hand” promoting the common weal, we are allowing others to cut off our hands.

America now rewards the destruction rather than the creation of wealth. Once upon a time, risk was the handmaiden of reward. Envy–the desire for something that someone else has–can be a positive incentive particularly if the owner of the coveted item seeks something owned by someone else. Markets develop. In a properly functioning capitalist system, an individual presses his nose against a showroom window and then goes out and puts the same nose to the grindstone to acquire the wherewithal to acquire the good. However, those accumulating money today are not taking any personal risk or making a sacrifice, although their actions risk the stability of a precarious Economy.

In a short time, the hedge fund managers and private equity boys also have managed a non-hostile takeover of both the Democratic and Republican Parties with little resistance. They own C. Schumer and H. Reid and H. Clinton. No one is protecting the public. The SEC (Securities and Exchange Commission) is now a wholly-owned subsidiary of the NYSE (New York Stock Exchange).

Bumper sticker of the week:

Feed The Homeless To The Hungry

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