Barney Frank

Compare this to the United States Constitution, Article I, Section 8:  ”The Congress shall have Power To … establish … uniform Laws on the subject of Bankruptcies throughout the United States.”

Let me suggest that it is, very much, the American way to let people go bankrupt.  Bankruptcy law isn’t a mean law; it is a kind one.  It allows people to be forgiven for their debts.  If Barney Frank thinks letting people go bankrupt is mean, he’s through the looking glass.

(via jeffmiller)

Agreed.  You can’t offer reward for wanton risk without offering corresponding consequences.  As it happens, bankruptcy is a very just and kind consequence.  Debt forgiveness.  Not so bad.  I often like Barney Frank, but he’s off the deep end on this one.

(via mikehudack)

I don’t think Frank is making a philosophical point about the instution of bankruptcy, and I don’t think the alternative he had in mind in making this comment was debtor’s prison. What he’s saying is that it is prosperity that we think of as the American dream, not destitution. This is implied in his comparison between the factory workers impacted by the auto industry bailout and the farmers we’ve been propping up for decades.

Furthermore, Frank says specifically “it’s hardly the American way to just let people go bankrupt” (emphasis mine). He’s talking more about the implications of the failure of the big 3 on people rather than about the bankruptcy procedure’s impact on the corporate abstraction.Really, it’s not the bankruptcy, it’s what will go along with that bankruptcy:

Frank: “But there are workers. There are retirees. There are small companies that have sold [the automakers] things. There are auto dealers with their salespeople. It’s having them thrown out of work through a bankruptcy and not getting paid that would be the problem.”

It’s hastily put, but I think it’s clear that’s where he was going. Just as we used agriculgure and trade policy to intervene in market dynamics in an attempt to preserve the American dream for generations of farmers, Frank thinks this is an instance of there being a priority greater than the insurance of moral hazard. It isn’t the pursuing of bankruptcy which Frank is worried about, it’s these companies purusing bankruptcy at this point in this econimc crisis that sounds the alarm bells for him.

It’s not that letting a company go bankrupt is “hardly American”; it’s sending hundreds of thousands to the unemployment lines that is. This is a very debatable argument to be sure, but not one that is as radical as you all make it out to be.

(via southpol)

Isn’t the debate implicitly whether or not the millions of jobs in the automobile industry are somehow more valuable than the millions of jobs that have already been lost? Again, is the demand side of the equation going to drastically improve for the auto industry if a bailout happens? If not, aren’t the jobs of the suppliers and dealers and going to be lost anyway? Demand for cars has dropped off a cliff. It seems that we’re going to put taxpayer money up to support hundreds of thousands of jobs under the pretense of saving millions of jobs.

This is for an industry comprised of some of the worst corporate citizens. At the same time, millions of jobs have been lost, and there isn’t any debate on shoveling taxpayer money out to resurrect those jobs. Do you really think that the employees that lost their jobs when CompUSA shuttered their stores are going to magically become employed on an infrastructure project building bridges? When we debate that we should bail out the auto industry, we are implicitly debating that the Big 3 are somehow more worthy of saving than the companies that have failed. We are debating that the auto workers are more worthy of having jobs than the millions who’ve lost their jobs. We’re implicitly debating that those that work directly for the Big 3 are more worthy of having jobs than those that work for the dealers and suppliers. Otherwise, why aren’t we bailing them out too? Why aren’t we drawing a line in the sand and saying, “No More?” Where do we draw the line? If we can’t issue such a decree, which job is the first job not worth saving? Is it a biotech research job? Where do we draw that line?

There’s no clear evidence that a pre-packaged Chapter 11 bankruptcy would result in more job losses than anything being proposed in the bailout. The anecdotal evidence is that nobody would buy a car from a bankrupt company because of worries about warranties. Maybe it’s because I drive a pseudo-Japanese car (Mazda, partly owned by Ford) that I don’t understand this point of view. My car went more than 6 years before it had its first problem, which was an O2 sensor that needed replacing. It’s had a few problems since, but the long-expired warranty was never an issue. Perhaps if the Big 3 made cars that didn’t need warranties, such things wouldn’t be a big problem. Furthermore, it’s not like third-party warranty companies don’t exist. If it’s just an issue of public perception, maybe the car companies can spend some effort fixing it. Maybe it would take half the effort spent to convince the public they are necessary.