the third man and ual
As many know, I'm a big fan of the film The Third Man, and not just because of the haunting but incredibly simple guitar soundrack (sort of a precursor to The Long Goodbye but even simpler) - Well Ben "anyone" Stein has a great piece on the UAL bankruptcy which develops a thought I've had for some time: wasn't UAL employee owned? And since the answer was yes, then what happens during bankruptcy where the equity position is eliminated - the answer is of course, VERY BAD THINGS. We saw this in PG&E's bankruptcy here in CA, but that was a strategic move on the part of a generally well to do company trying to finagle its way out of regulations it found less than incredibly profitable (sure 20% ROE is something most companies only dream of but once you've had that forever it's not good enough) - UAL on the other hand was the parent company. And it's employees were the owners, pinched on the pensions and pinched on the bankruptcy, they're left with nothing, litterally. Problem is, the ones running the company for them made out like bandits.
What we see here is a major flaw with the bankruptcy process in the US. It's not, as some would have us believe, hilljacks and farmers trying to get out of some bad loans or a year wasted on crystal meth purchases instead of seeking gainful employment, it's essentially turned into a trump card for the strategically aware and well prepared to radically reallocate real old fashioned capital, yes, the kind marx wrote about and in theory what we've based our economy on.
I'm fascinated by the games played in bankruptcy courts, by the jurisdictional BS that goes on, the turning on the head of standard law etc. Contract? Only if we want it to be. Jurisdiction? nope. not profitable for us over there any more, we want to be over here...
Clearly, there are lots of very confusing games to be played, states of incorporation, interstate commerce, etc. The joke is, and Stein hits this on the money, that the people that run these companies into the ground frequently end up with significant equity stakes in what they have "miraculously" ridden from the ashes of what they have destroyed.
I for one feel that Congress needs to act. Enough of this BS on class action lawsuits ruining our country, I believe the role of tort is legitimate, what I'm not convinced has a place in the American economy is an equity role for management in a bankruptcy proceeding - that's what debters in possession are for.
What we see here is a major flaw with the bankruptcy process in the US. It's not, as some would have us believe, hilljacks and farmers trying to get out of some bad loans or a year wasted on crystal meth purchases instead of seeking gainful employment, it's essentially turned into a trump card for the strategically aware and well prepared to radically reallocate real old fashioned capital, yes, the kind marx wrote about and in theory what we've based our economy on.
I'm fascinated by the games played in bankruptcy courts, by the jurisdictional BS that goes on, the turning on the head of standard law etc. Contract? Only if we want it to be. Jurisdiction? nope. not profitable for us over there any more, we want to be over here...
Clearly, there are lots of very confusing games to be played, states of incorporation, interstate commerce, etc. The joke is, and Stein hits this on the money, that the people that run these companies into the ground frequently end up with significant equity stakes in what they have "miraculously" ridden from the ashes of what they have destroyed.
I for one feel that Congress needs to act. Enough of this BS on class action lawsuits ruining our country, I believe the role of tort is legitimate, what I'm not convinced has a place in the American economy is an equity role for management in a bankruptcy proceeding - that's what debters in possession are for.
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