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Using OPM is how the vast majority of the wealthiest people gain their wealth. It's the key to leverage up so to speak, but it's not like it requires no talent or hard work to get people to invest in you/your company.
@clacy, The author isn't just talking about using other people's money to get rich. He's talking about Trump using OPM and then declaring bankruptcy when things don't go his way, leaving the other people on the hook for his losses while he walks away only with gains. In fact, Arends actually has some rather interesting advice for how ordinary people can stiff their creditors just like Trump. The interesting thing about the wealthy members of Trump's party is they like to call it a "moral hazard" when a poor person walks away from their mortgage or tuition bill scott-free. Somehow I don't think they see the moral hazard of Trump walking away from $9 billion in unpaid debt and then claiming he's a "successful businessman" and other people are lazy or losers for not being like him.
"Trump borrowed billions from bankers and used the money to put up buildings like Trump Tower and open casinos like the Taj Mahal. In his books, Trump says that by the early 1990s he owed more than $9 billion. When things turned sour his companies filed for bankruptcy. Twice. The lenders had to eat the losses. Too bad. What a bunch of losers!
He then raised more money from bankers, bondholders and even stockholders along the way. On two more occasions his companies filed for bankruptcy. Lenders and investors got hosed.
“Out of hundreds of deals & transactions, I have used the bankruptcy laws a few times to make deals better,” he said recently on Twitter. “Nothing personal, just business… It’s a very effective & commonly used business tool.”
@Clacy- hey, since you think this is so cool how come Greece can't do the same thing? Oh, no... Trump is using "the key to leverage up so to speak", but the Greeks are just plain lazy. Must be something with your glasses...
I read the article and didn't see ANY concrete examples of Trump's actions in the article. In the RE development world, bankruptcies occur all the time. M&A is basically built on acquiring BK or close to BK companies, then restoring some value and selling the company to another party.
There will always be winners and losers in all risk taking activities (development, businesses, etc), but overall you have to play by the rules that are given.
If he's not personally guaranteed on a project, then it's not him that's declaring bankruptcy. Just because a company that he started or was involved in goes BK doesn't mean it's his fault, and that is a risk that all involved know is possible. The lenders and investors are all in these projects together.
Some work out, and others probably don't, but the fact that our system is reasonably generous with its bankruptcy laws is actually good thing because it helps promote risk taking.
I think our current system has enough disincentive to punish those companies that declare bankruptcy, but not so much as to harm risk taking.
@Clacy, The problem is there is a double standard that now exists where companies can go bankrupt and their debt is forgiven while if a student or homeowner goes bankrupt on their loans, that debt is not forgiven but continues to follow them: prospect.org/article/age-double-standards Meanwhile banks are considered "too big to fail" and receive bailouts for their own greed and stupidity. Moreover, because of the limited liability structure of companies executives are not held accountable for corporate misdeeds. The double standard even exists for municipalities like Detroit which had to settle for much worse bankruptcy terms than the banks ever did: nytimes.com/2014/04/26/opinion/double-standards-in-bankruptcies.html So allowing a poor person off the hook is a "moral hazard" while for people like Trump it's just business as usual.
"In the RE development world, bankruptcies occur all the time."
How silly of me... I missed that. And here I thought that Greece was one large "RE development". As they say in internet engineering: "it's nice to have standards, especially when there are so many to choose from".
Personal BK laws are very generous in the US as well. This is a good thing as well. Again, it's painful enough for there not to be moral hazard. But forgiving enough for people to go on with their lives.
Of course a BK will follow you personally (for only 7 years). Clearly there will always be differences between corporate BK's and personal. A person doesn't cease to exist, but a BK company generally does.
Actually as long as your current on your house, most states have homestead protections in place that allow someone who is BK to keep their home.
Federal student loans are backed by the US government. And the US government doesn't allow debt forgiveness for taxes, loans, etc. They will always get their pound of flesh.
@Clacy, from the New York Times article I cited: "In Detroit, the judge has ruled that under Chapter 9 of the bankruptcy law, the city’s creditors include even municipal pensioners whose payouts are guaranteed under the Michigan Constitution. Accordingly, the pensioners have reached a tentative deal to reduce retiree benefits; along with concessions made by other creditors, the goal is to help the debtor, the city of Detroit, get a fresh start and move forward.
Contrast that with what happened in the housing bust. The creditors in that fiasco — including powerful banks — did not have to cut deals in court with bankrupt homeowners. Under Chapter 13 of the bankruptcy law, a section heavily influenced by the financial industry, lenders cannot be forced to rework most residential mortgages in bankruptcy.
That is where the legal double standard comes in. In Detroit’s bust, even pensioners have to negotiate new terms; in the housing bust, big banks did not have to negotiate, leaving many homeowners in the dust.
That special treatment for banks may have helped them recover from the financial crisis. But it made things worse for borrowers and the economy. Today, 8.6 million homeowners still owe more on their mortgages than their homes are worth, for a total of $430 billion in negative equity, according to Moody’s Analytics. Some 2.1 million of the underwater homeowners are in or near foreclosure, on top of 9.6 million who have lost their homes since 2007."
Are you suggesting that the US force banks to renegotiate with mortgage holders who stopped paying on a secured asset?
The bank loans money (risk), but has a secured asset (home) that backstops the mortgage. If mortgage holders get behind or stop paying, the lender can take the secured asset (JUST AS THEY CAN DO WITH SECURED BUSINESS ASSETS THAT SECURE BUSINESS CREDIT), or renegotiate as they see fit.
@Clacy, I'm saying that Chapter 13 bankruptcy that applies to the average mortgage or student borrower is far more severe than Chapter 11 bankruptcy that applies to corporations and the banks themselves. It is a double standard that came into being with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, a law that was passed because of millions of dollars in lobbying from the financial services industry. Basically, it means lenders are saying "Do as I say not as I do." to ordinary people.
Chapter 7 is the more popular option for personal BK.
I'm not sure which particular double standard you're referring to.
If a consumer gets behind on their mortgage, they will lose their house. Just like a business mortgage holder would lose their commercial property if they get behind on their payment.
If you're talking about the non-forgiveness of student loans and such, that's a different matter worth debating.
@clacy If a company files chapter 11, first lien lenders will liquidate that company's assets and generally receive an average of 50 to 60 cents on the dollar of that debt and then the borrower is free and clear. Other contracts are void such as that with pensioners and former employees. With Chapter 13, once the house in the case of mortgage is sold by the bank, the borrower can still be on the hook for the entirety of the mortgage even if the house was under water. Instead of the debt being cleared like with a company, the debtor now has a repayment plan than can go on. From the American Prospect article I cited: " In 2005, Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act. Its key provisions made it more difficult for consumers to file under Chapter 7, under which most debts are paid out of only existing assets and then forgiven, and compelled more people to file under Chapter 13, which requires a partial repayment plan over three to five years. The act introduced for the first time a means test, in which only debtors with income below the state’s median are exempt from the more onerous provisions of the law. If a citizen has above-median income, there is a “presumption” of abuse, and future income is partly attached in order to satisfy past creditor claims, no matter what the circumstances. Many states have a “homestead exemption” protecting an owner-occupied home, up to a dollar limit, from creditor claims. This, too, is overridden by the 2005 federal act." Note how the homestead provision you mentioned is overridden by the federal law. It is a more stringent bankruptcy law. If it was applied to Trump and his companies, their "above average income" would no doubt still be paying the $9 billion he stiffed his creditors on. It is a double standard.
@Clacy According to NOLO: nolo.com/legal-encyclopedia/how-much-unsecured-debt-repaid-chapter-13-bankrutpcy.html "Chapter 13 bankruptcy divides debts into several categories. How much you must pay on each type of debt differs. General unsecured claims in Chapter 13 bankruptcy are those debts that are not secured (examples of secured debts include mortgages and car loans) and not deemed as "priority" by bankruptcy law (examples of priority debts include child support and certain incomes tax debts).
For the most part, you must pay 100% of your secured and priority debts (there are some exceptions). This is not the case with nonpriority, unsecured debts. How much you must pay to your general unsecured creditors in Chapter 13 bankruptcy depends on several factors.
Disposable income. You must devote all of your disposable income to your plan -- so what your unsecured creditors get depends on how much money you have left over each month after paying expenses, secured debts, and priority claims. Best interest of the creditors. In addition, at a minimum, your unsecured creditors must get what they would have received had you filed for Chapter 7 bankruptcy."
Since even secured first-lien lenders in a corporate bankruptcy only get 60 cents on the dollar generally and sometimes less, they get a 40% discount on bankruptcy filings from the average person. That is a double standard.
Again, Trump is not going BK, companies are. If all corporate BK's ended up with personal BK, then there would be much less risk taking and entrepreneurism.
You're comparing apples and oranges.
A company is a company and can re-structure or cease to exist. With a personal BK, the person continues to exist, and the only problem is it's harder to get credit going forward.
As to the homestead exemption, I think there is a misunderstanding. The exemption is very solid, assuming the mortgage is current or paid off. If you owe a credit card company $100k, and file Chapter 7, they cannot force the sale of your home in states with homestead exclusions.
If your mortgage is underwater, then of course the bank can foreclose in order to sell the secure asset.
@Clacy I am talking about going beyond foreclosure in Chapter 13. After foreclosure the bank can enforce a repayment plan on the borrower for years after their house has been liquidated to recover the entirety of its loan. And your saying "there'd be much less risk taking and entrepreneurism" if the standards were the same is the double standard in a nutshell. It is that old ridiculous argument that somehow the same laws shouldn't apply to wealthier people and entities in the case of corporations as everyone else.
@Clacy- Well, that changes everything! So what families need to do is form a small business, and what Greece needs to do is incorporate. Then if they go BK it's OK.
@Clacy- Well, that changes everything! So what families need to do is form a small business, and what Greece needs to do is incorporate. Then if they go BK it's OK.
What a joke.
Now you're conflating the country of Greece, business debt, and personal consumer debt. Not very helpful to the discussion, IMO, but carry on with your one-liners.
Anyone in the US can form a small business. But you have to have a reasonable plan of productive revenue generation in order to obtain credit.
@Clacy I am talking about going beyond foreclosure in Chapter 13. After foreclosure the bank can enforce a repayment plan on the borrower for years after their house has been liquidated to recover the entirety of its loan. And your saying "there'd be much less risk taking and entrepreneurism" if the standards were the same is the double standard in a nutshell. It is that old ridiculous argument that somehow the same laws shouldn't apply to wealthier people and entities in the case of corporations as everyone else.
So in that case, I would suggest the person/household file Chapter 7, in which case they lose the house, and walk away with no recourse and the bank gets their secured asset.
Again, you're equating businesses with households, which are apples and oranges.
Households are not businesses. They have totally different functions, protections, laws, tax codes, purposes, etc.
@Clacy, You say "So in that case, I would suggest the person/household file Chapter 7, in which case they lose the house, and walk away with no recourse and the bank gets their secured asset." This is not a matter of choice for most Chapter 13 filers. That is the whole point of the 2005 bankruptcy law, to enforce a means test on filers, giving them no choice but to file chapter 13. I understand that households, i.e., people are not businesses, but apparently businesses are people when it is beneficial for them to be so. That's how the whole idea of limited liability came about, right? Companies are people when it suits their purposes, enabling them to absorb potential lawsuits so that their executives and shareholders don't see any civil or criminal penalties. Or when they need to express their first amendment rights of free speech to give unlimited sums to political campaigns. Then companies are people just like everybody else. Only when it comes to filing bankruptcy, then companies are not people and deserve different rules. Sounds fair to me.
"people are not businesses, but apparently businesses are people when it is beneficial for them to be so"
@Clacy: I'm conflating nothing. But I am observing that for the same intrinsic mechanism of financial failure, business has very conveniently written itself a wonderful "get out of jail free" card, which is not available to individuals or even an entire country of individuals. You can quote chapter this and paragraph that, but your lame attempt at misdirection changes nothing. The deck is stacked in favor of the Trumps of the world, and against the Greek fishermen and farmers. QED.
"But you have to have a reasonable plan of productive revenue generation in order to obtain credit."
One would hope so. But tell me, did Greece have such a plan? If they did, then when it didn't work out as expected, why are they being crucified? Why not extend to them the same consideration that we extend to business? If they didn't, then who were the stupid asses who lent them all that money, and why should we even care if they get it back?
How about today, right now? Do you think that Greece has "a reasonable plan of productive revenue generation"? I don't. I think that they are being "lent" even more money that will be impossible to repay. So how is this supposed to turn out in your universe? Maybe simply evict all of the Greeks from their own country, and auction off everything there to the highest bidder? You suppose Chapter 7 would work for that? Sounds right to me.
With respect to "one-liners", more is not necessarily better, as I've been known to observe. Sometimes getting pithy isn't a bad way to go.
"people are not businesses, but apparently businesses are people when it is beneficial for them to be so"
@Clacy: I'm conflating nothing. But I am observing that for the same intrinsic mechanism of financial failure, business has very conveniently written itself a wonderful "get out of jail free" card, which is not available to individuals or even an entire country of individuals. You can quote chapter this and paragraph that, but your lame attempt at misdirection changes nothing. The deck is stacked in favor of the Trumps of the world, and against the Greek fishermen and farmers. QED.
"But you have to have a reasonable plan of productive revenue generation in order to obtain credit."
One would hope so. But tell me, did Greece have such a plan? If they did, then when it didn't work out as expected, why are they being crucified? Why not extend to them the same consideration that we extend to business? If they didn't, then who were the stupid asses who lent them all that money, and why should we even care if they get it back?
How about today, right now? Do you think that Greece has "a reasonable plan of productive revenue generation"? I don't. I think that they are being "lent" even more money that will be impossible to repay. So how is this supposed to turn out in your universe? Maybe simply evict all of the Greeks from their own country, and auction off everything there to the highest bidder? You suppose Chapter 7 would work for that? Sounds right to me.
With respect to "one-liners", more is not necessarily better, as I've been known to observe. Sometimes getting pithy isn't a bad way to go.
Joe, you're the one bringing Greece into the conversation. I'm not here to advocate for the Greeks. I frankly couldn't care less.
They can leave the EU or stay. That's their call. They are the ones that have to deal with the fall out from either choice.
Also, I would imagine that the vast majority of business BK's are tied to businesses with people that certainly wouldn't fall into the "rich"/Donald Trump category.
@Clacy: The underlying issue is the inherent unfairness of a system which, as Lewis stated up at the top, is a double standard where companies can go bankrupt and their debt is forgiven while for anyone else, it's a "moral hazard", so debt is not forgiven but continues to follow them.
You've said that "you have to have a reasonable plan of productive revenue generation in order to obtain credit", which I would also hope is true. But it's unarguable that lenders, out of pure greed, lend to parties who obviously do not meet that test. Additionally, situations arise where borrowers did meet that test, but fall into evil times through no major fault of their own.
In your universe, it's OK: just shift the entire burden of the agreement to those least able to defend themselves, and as a last-ditch fallback, to the taxpayers. It isn't a matter of Greece, or Trump: they are only symbols of the underlying issue, which you are deliberately refusing to engage, hiding instead behind citations of various bankruptcy chapters.
@Clacy, Actually further research of mine indicates that the changes to the bankruptcy code from the 2005 law made it more difficult to discharge student loan debt for either chapter 7 or chapter 13 bankruptcy. These loans were primarily owed to private lenders who were making a handsome profit off students. It is not like you said: "And the US government doesn't allow debt forgiveness for taxes, loans, etc. They will always get their pound of flesh." The government was actually fighting for some debt forgiveness for these loans with these private lenders:consumerfinance.gov/newsroom/cfpb-report-finds-distressed-private-student-loan-borrowers-driven-into-default/It is the lenders themselves who lobbied for their pound of flesh. Again there is this double standard for ordinary people.
"It is the lenders themselves who lobbied for their pound of flesh"
Yes indeed Lewis, and if you dig a little more you will likely find the lender's fingerprints all over the intense pressure that they focused on a gutless, purchasable Congress.
The following is a distillation of this UPenn Journal of Business Law paper pp. 176-180:
A necessary component of a crime is mens rea - intent to commit the act. Since corporations (though they are "people") don't think, there are a few substitutes for that. The most familiar is respondent superior. A superior (the corporation) is held liable for actions of others doing its bidding. For a corporation, that means an employee acting in the scope of employment, for the benefit of the corporation, and with culpability.
Ah, now you're thinking that the corporation cannot be liable if no single individual can be shown to have knowledge and intent (i.e. is not legally culpable). Here's where Lewis' statement comes into play. Quoting from the paper: :
As a partial response to to this shortcoming, courts have in some cases imputed intent under the willful blindness or the collective knowledge doctrines.
Under the willful blindness doctrine, a corporation can be found liable where it is found to have deliberately disregarded the occurrence of criminal conduct. ...
The collective knowledge doctrine is similar. Here the aggregate knowledge of all or some of the employees is imputed to the corporation. In other words, various agents’ actions and states of mind are aggregated and imputed to the corporation. This allows the corporation to face liability where no single employee is at fault ...
I'll add - or can be shown to be at fault; I view the problem described above as an evidentiary one. That it's easier to show that a corporation did a bad act than it is to show that a particular individual was intentionally responsible for that act. The individuals hide behind the corporation.
Lewis also mentioned civil penalties. Perhaps you didn't question this aspect of the statement because it's much easier to address. Delaware law (Delaware General Corporation Law [DGCL] § 145) gives corporations the ability to indemnify directors and officers for a wide variety of things, including their legal defenses, and more importantly here, civil fines. An exec gets fined, the corp pays the fine.
As it turns out, Delaware even allows corporations to indemnify execs for criminal acts, so long as the exec didn't believe the act was criminal at the time it was committed.
(This means that an exec can even be indemnified for some crimes! See, e.g. p. 6 in this outline of D&O indemnification.)
Comments
When things turned sour his companies filed for bankruptcy. Twice. The lenders had to eat the losses. Too bad. What a bunch of losers!
He then raised more money from bankers, bondholders and even stockholders along the way. On two more occasions his companies filed for bankruptcy. Lenders and investors got hosed.
“Out of hundreds of deals & transactions, I have used the bankruptcy laws a few times to make deals better,” he said recently on Twitter. “Nothing personal, just business… It’s a very effective & commonly used business tool.”
@Clacy- hey, since you think this is so cool how come Greece can't do the same thing? Oh, no... Trump is using "the key to leverage up so to speak", but the Greeks are just plain lazy. Must be something with your glasses...
I read the article and didn't see ANY concrete examples of Trump's actions in the article. In the RE development world, bankruptcies occur all the time. M&A is basically built on acquiring BK or close to BK companies, then restoring some value and selling the company to another party.
There will always be winners and losers in all risk taking activities (development, businesses, etc), but overall you have to play by the rules that are given.
If he's not personally guaranteed on a project, then it's not him that's declaring bankruptcy. Just because a company that he started or was involved in goes BK doesn't mean it's his fault, and that is a risk that all involved know is possible. The lenders and investors are all in these projects together.
Some work out, and others probably don't, but the fact that our system is reasonably generous with its bankruptcy laws is actually good thing because it helps promote risk taking.
I think our current system has enough disincentive to punish those companies that declare bankruptcy, but not so much as to harm risk taking.
prospect.org/article/age-double-standards
Meanwhile banks are considered "too big to fail" and receive bailouts for their own greed and stupidity. Moreover, because of the limited liability structure of companies executives are not held accountable for corporate misdeeds. The double standard even exists for municipalities like Detroit which had to settle for much worse bankruptcy terms than the banks ever did: nytimes.com/2014/04/26/opinion/double-standards-in-bankruptcies.html So allowing a poor person off the hook is a "moral hazard" while for people like Trump it's just business as usual.
How silly of me... I missed that. And here I thought that Greece was one large "RE development". As they say in internet engineering: "it's nice to have standards, especially when there are so many to choose from".
Personal BK laws are very generous in the US as well. This is a good thing as well. Again, it's painful enough for there not to be moral hazard. But forgiving enough for people to go on with their lives.
Of course a BK will follow you personally (for only 7 years). Clearly there will always be differences between corporate BK's and personal. A person doesn't cease to exist, but a BK company generally does.
Actually as long as your current on your house, most states have homestead protections in place that allow someone who is BK to keep their home.
Federal student loans are backed by the US government. And the US government doesn't allow debt forgiveness for taxes, loans, etc. They will always get their pound of flesh.
"In Detroit, the judge has ruled that under Chapter 9 of the bankruptcy law, the city’s creditors include even municipal pensioners whose payouts are guaranteed under the Michigan Constitution. Accordingly, the pensioners have reached a tentative deal to reduce retiree benefits; along with concessions made by other creditors, the goal is to help the debtor, the city of Detroit, get a fresh start and move forward.
Contrast that with what happened in the housing bust. The creditors in that fiasco — including powerful banks — did not have to cut deals in court with bankrupt homeowners. Under Chapter 13 of the bankruptcy law, a section heavily influenced by the financial industry, lenders cannot be forced to rework most residential mortgages in bankruptcy.
That is where the legal double standard comes in. In Detroit’s bust, even pensioners have to negotiate new terms; in the housing bust, big banks did not have to negotiate, leaving many homeowners in the dust.
That special treatment for banks may have helped them recover from the financial crisis. But it made things worse for borrowers and the economy. Today, 8.6 million homeowners still owe more on their mortgages than their homes are worth, for a total of $430 billion in negative equity, according to Moody’s Analytics. Some 2.1 million of the underwater homeowners are in or near foreclosure, on top of 9.6 million who have lost their homes since 2007."
Groucho Marx
Are you suggesting that the US force banks to renegotiate with mortgage holders who stopped paying on a secured asset?
The bank loans money (risk), but has a secured asset (home) that backstops the mortgage. If mortgage holders get behind or stop paying, the lender can take the secured asset (JUST AS THEY CAN DO WITH SECURED BUSINESS ASSETS THAT SECURE BUSINESS CREDIT), or renegotiate as they see fit.
I'm not sure which particular double standard you're referring to.
If a consumer gets behind on their mortgage, they will lose their house. Just like a business mortgage holder would lose their commercial property if they get behind on their payment.
If you're talking about the non-forgiveness of student loans and such, that's a different matter worth debating.
" In 2005, Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act. Its key provisions made it more difficult for consumers to file under Chapter 7, under which most debts are paid out of only existing assets and then forgiven, and compelled more people to file under Chapter 13, which requires a partial repayment plan over three to five years. The act introduced for the first time a means test, in which only debtors with income below the state’s median are exempt from the more onerous provisions of the law. If a citizen has above-median income, there is a “presumption” of abuse, and future income is partly attached in order to satisfy past creditor claims, no matter what the circumstances. Many states have a “homestead exemption” protecting an owner-occupied home, up to a dollar limit, from creditor claims. This, too, is overridden by the 2005 federal act."
Note how the homestead provision you mentioned is overridden by the federal law. It is a more stringent bankruptcy law. If it was applied to Trump and his companies, their "above average income" would no doubt still be paying the $9 billion he stiffed his creditors on. It is a double standard.
"Chapter 13 bankruptcy divides debts into several categories. How much you must pay on each type of debt differs. General unsecured claims in Chapter 13 bankruptcy are those debts that are not secured (examples of secured debts include mortgages and car loans) and not deemed as "priority" by bankruptcy law (examples of priority debts include child support and certain incomes tax debts).
For the most part, you must pay 100% of your secured and priority debts (there are some exceptions). This is not the case with nonpriority, unsecured debts. How much you must pay to your general unsecured creditors in Chapter 13 bankruptcy depends on several factors.
Disposable income. You must devote all of your disposable income to your plan -- so what your unsecured creditors get depends on how much money you have left over each month after paying expenses, secured debts, and priority claims.
Best interest of the creditors. In addition, at a minimum, your unsecured creditors must get what they would have received had you filed for Chapter 7 bankruptcy."
Since even secured first-lien lenders in a corporate bankruptcy only get 60 cents on the dollar generally and sometimes less, they get a 40% discount on bankruptcy filings from the average person. That is a double standard.
You're comparing apples and oranges.
A company is a company and can re-structure or cease to exist. With a personal BK, the person continues to exist, and the only problem is it's harder to get credit going forward.
As to the homestead exemption, I think there is a misunderstanding. The exemption is very solid, assuming the mortgage is current or paid off. If you owe a credit card company $100k, and file Chapter 7, they cannot force the sale of your home in states with homestead exclusions.
If your mortgage is underwater, then of course the bank can foreclose in order to sell the secure asset.
@Clacy- Well, that changes everything! So what families need to do is form a small business, and what Greece needs to do is incorporate. Then if they go BK it's OK.
What a joke.
Anyone in the US can form a small business. But you have to have a reasonable plan of productive revenue generation in order to obtain credit.
Again, you're equating businesses with households, which are apples and oranges.
Households are not businesses. They have totally different functions, protections, laws, tax codes, purposes, etc.
@Clacy: I'm conflating nothing. But I am observing that for the same intrinsic mechanism of financial failure, business has very conveniently written itself a wonderful "get out of jail free" card, which is not available to individuals or even an entire country of individuals. You can quote chapter this and paragraph that, but your lame attempt at misdirection changes nothing. The deck is stacked in favor of the Trumps of the world, and against the Greek fishermen and farmers. QED.
"But you have to have a reasonable plan of productive revenue generation in order to obtain credit."
One would hope so. But tell me, did Greece have such a plan? If they did, then when it didn't work out as expected, why are they being crucified? Why not extend to them the same consideration that we extend to business? If they didn't, then who were the stupid asses who lent them all that money, and why should we even care if they get it back?
How about today, right now? Do you think that Greece has "a reasonable plan of productive revenue generation"? I don't. I think that they are being "lent" even more money that will be impossible to repay. So how is this supposed to turn out in your universe? Maybe simply evict all of the Greeks from their own country, and auction off everything there to the highest bidder? You suppose Chapter 7 would work for that? Sounds right to me.
With respect to "one-liners", more is not necessarily better, as I've been known to observe. Sometimes getting pithy isn't a bad way to go.
Joe, you're the one bringing Greece into the conversation. I'm not here to advocate for the Greeks. I frankly couldn't care less.
They can leave the EU or stay. That's their call. They are the ones that have to deal with the fall out from either choice.
70% of personal BK's are Chapter 7.
Also, I would imagine that the vast majority of business BK's are tied to businesses with people that certainly wouldn't fall into the "rich"/Donald Trump category.
You've said that "you have to have a reasonable plan of productive revenue generation in order to obtain credit", which I would also hope is true. But it's unarguable that lenders, out of pure greed, lend to parties who obviously do not meet that test. Additionally, situations arise where borrowers did meet that test, but fall into evil times through no major fault of their own.
In your universe, it's OK: just shift the entire burden of the agreement to those least able to defend themselves, and as a last-ditch fallback, to the taxpayers. It isn't a matter of Greece, or Trump: they are only symbols of the underlying issue, which you are deliberately refusing to engage, hiding instead behind citations of various bankruptcy chapters.
Yes indeed Lewis, and if you dig a little more you will likely find the lender's fingerprints all over the intense pressure that they focused on a gutless, purchasable Congress.
A necessary component of a crime is mens rea - intent to commit the act. Since corporations (though they are "people") don't think, there are a few substitutes for that. The most familiar is respondent superior. A superior (the corporation) is held liable for actions of others doing its bidding. For a corporation, that means an employee acting in the scope of employment, for the benefit of the corporation, and with culpability.
Ah, now you're thinking that the corporation cannot be liable if no single individual can be shown to have knowledge and intent (i.e. is not legally culpable). Here's where Lewis' statement comes into play. Quoting from the paper:
: I'll add - or can be shown to be at fault; I view the problem described above as an evidentiary one. That it's easier to show that a corporation did a bad act than it is to show that a particular individual was intentionally responsible for that act. The individuals hide behind the corporation.
Lewis also mentioned civil penalties. Perhaps you didn't question this aspect of the statement because it's much easier to address. Delaware law (Delaware General Corporation Law [DGCL] § 145) gives corporations the ability to indemnify directors and officers for a wide variety of things, including their legal defenses, and more importantly here, civil fines. An exec gets fined, the corp pays the fine.
As it turns out, Delaware even allows corporations to indemnify execs for criminal acts, so long as the exec didn't believe the act was criminal at the time it was committed.
(This means that an exec can even be indemnified for some crimes! See, e.g. p. 6 in this outline of D&O indemnification.)