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Series

2009

Business Law, Public Responsibility, and Ethics

Financial crisis

Articles 1 - 2 of 2

Full-Text Articles in Law

Bankruptcy Phobia, David A. Skeel Jr. Jul 2009

Bankruptcy Phobia, David A. Skeel Jr.

Faculty Scholarship at Penn Law

As the recent economic crisis has unfolded, bankruptcy has offered possible solutions at several key junctures. The first of these solutions, often referred to as mortgage modification, was geared toward homeowners who faced the loss of their homes in the months—now several years—since the start of the subprime crisis On the corporate side, Chapter 11 was an obvious alternative when large nonbank financial institutions like Bear Stearns and AIG stumbled in 2008. But regulators repeatedly balked, and the one exception to the avoidance of bankruptcy at all costs—Lehman Brothers—was anomalous. This aversion to bankruptcy, which seems ...


Bankruptcy Or Bailouts?, Kenneth M. Ayotte, David A. Skeel Jr. Mar 2009

Bankruptcy Or Bailouts?, Kenneth M. Ayotte, David A. Skeel Jr.

Faculty Scholarship at Penn Law

The usual reaction if one mentions bankruptcy as a mechanism for addressing a financial institution’s default is incredulity. Those who favor the rescue of troubled financial institutions, and even those who prefer that their assets be promptly sold to a healthier institution, treat bankruptcy as anathema. Everyone seems to agree that nothing good can come from bankruptcy. Indeed, the Chapter 11 filing by Lehman Brothers has been singled out by many the primary cause of the severe economic and financial contraction that followed, and proof that bankruptcy is disorderly and ineffective. As a result, ad-hoc rescue lending to avoid ...