Bankruptcy Laws and the Corporate Takeover of the American Government

Robert ReichDuring my lifetime, I’ve seen the laws change to make personal bankruptcy get harder and harder. At the same time, corporate bankruptcy has gotten easier. It’s kind of like how the banks were bailed out in 2008, but not the homeowners. The banks just had to sign a two page document to get billions of dollars in low interest loans. There was a program to help homeowners, of course; but it was incredibly difficult to qualify for. Most people didn’t. And those who did spent years doing it.

That’s the thing. As far as the government is concerned, there are the right kind of people and the wrong kind of people. The right kind of people are the rich and they are lavished with money because they always land on their feet. Of course, it’s a bizarre kind of self-fulfilling prophecy where the government “knows” the rich are good for any help they get because the government makes sure that they get help whenever they get in trouble. Meanwhile, if you are poor, you’re screwed. I once thought about applying for food stamps in the relatively liberal state of California, and I was handed a packed of about 50 pages of forms to fill out. If I had done it, I would have received about $20 per week in food.

Robert Reich wrote a very interesting article the other day, Donald Trump Proves What’s Wrong with Bankruptcy Laws in America. And he provided a way of looking at corporate bankruptcy and the economy at large that I had never thought about:

People with lots of money can easily avoid the consequences of bad bets and big losses by cashing out at the first sign of trouble. Bankruptcy laws protect them. But workers who move to a place like Atlantic City for a job, invest in a home there, and build their skills have no such protection. Jobs vanish, skills are suddenly irrelevant, and home values plummet. They’re stuck with the mess.

Think about about. When an individual goes bankrupt, it doesn’t affect the rest of the economy that much. Yes, some creditors end up with less money. But no individual is going to make or break a credit card company. But when corporations are allowed to go bankrupt, they can destroy the lives of thousands of works — sometimes far more. Yet our government has decided that the far more destabilizing kind of bankruptcy is the one that should be encouraged. Obviously, such policies have little to do with what is best for the nation as a whole.

Most of Reich’s article is about how the finance industry has warped the law for its own gain and against the people of the nation. Long ago, there was this idea that what’s good for General Motors is good for America. That certainly wasn’t true — even when it provided really good union jobs for tens of thousands of workers. But now we operate as though what is good for Goldman Sachs is good for America. And that’s simply a bizarre notion.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

2 thoughts on “Bankruptcy Laws and the Corporate Takeover of the American Government

  1. When Joe Biden was selected to be Obama’s running mate my best friend’s mother and I had a completely opposite reaction to it. She is a city court judge and has been a mainstay in helping deal with the scourge of domestic violence. I was a county court judge and dealt with some of the DV cases but more of my caseload at the time was HOA and credit card default cases.

    She was delighted that he was picked because the VAWA. I was horrified because of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The fact he was so strong on DV was fantastic but he also was part of the reason Americans were so hurt in the 2008 meltdown. And ironically probably did not help with getting rid of DV. Corporate masters must be appeased.

    It also matches up with what Jacob Hacker wrote in The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream on how risk is being shifted from institutions to people. With the predicable devastating consequences.

    • I’m not too keen on Biden regarding mandatory minimums and all the “get tough” legislation. But no politician on the national stage is perfect. But I’m fine with him staying out of the presidential race (which I’m sure he would lose anyway).

      The book sounds interesting, but the library doesn’t have it. I did read Winner-Take-All Politics, which he co-wrote, which as I recall, had a big effect on my political thinking.

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