Author: Mechele Dickerson

  • Hasta La Vista

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    Mechele Dickerson

    Let me (again) thank the Credit Slips bloggers generally, and Bob Lawless specifically, for inviting me to be a guest blogger. I have never done this before and, and quite honestly the thought of blogging terrified me. But, had I not been so fearful of having nothing to say this week, I might not have listened as intently to the talks at the Debt conference. Periodically zoning out would have been a grave error as the conference was one of the best I’ve attended in my academic career.

    So, let me also take the opportunity to thank Professor Lawless, Deans Ralph Brubaker and Charles Tabb, and Sam Gerdano (ABI) for organizing that event and for asking me to attend it.

    With that, I bid you a fond farewell.

  • Why People Should Be Allowed to Walk Away from Their Debts

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    Mechele Dickerson

    Professor Heidi M. Hurd, a law and philosophy professor at the University of Illinois, ended the conference by discussing first principles in The Jurisprudence of Bankruptcy. Why should we forgive people who break contracts and harm others?

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  • Where Do All the Corporate Debtors Go During Reform Time?

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    Mechele Dickerson

    Dr. Terrence Halliday, a sociologist at the American Bar Foundation, shifted us back to corporate insolvencies. His paper, Missing Debtors: National Lawmaking and Global Norm-Making of Corporate Bankruptcy Regimes, discusses the systems that are created to regulate corporate debt and corporate debtors. He notes that some debtors who have a keen interest in corporate bankruptcy regimes are missing from the table when those regimes are being discussed at UNCITRAL meetings, in World Bank or IMF discussions. Why are they absent?

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  • Gathering Your Private Information for Private Gain

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    Mechele Dickerson

    Professor Elizabeth Warren’s (Harvard) paper, Balance of Knowledge, questions why academics do interdisciplinary work at all. But, she easily answered that question.

    She noted the role that empirical data played during the BAPCPA discussions. She mentioned both the influence of the now-discredited $400 bankruptcy tax and also the study conducted by Creighton Law School Professors Marianne Culhane and Michaela White and how the Culhane/White study caused Congress to narrow the scope of the means test. She also discussed the way data has been used in the current mortgage policy debates. Professor Warren mentioned as well that Congress appears to be warming to the idea that empirical data has value, since credit card bills currently pending in Congress all have provisions that require credit card companies to make more data publicly available.

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  • When Agencies Get it Wrong, They Reeeeeeeeeeeeeeeeeealy Get it Wrong

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    Mechele Dickerson

    We ended the first day of the conference with management professors, Professor Gerry McNamara (Michigan State University) and Professor Paul M. Vaaler (University of Minnesota). They discussed How and Why Credit Assessors "Get It Wrong" when Judging the Risk of Borrowers: Past and Present Evidence at Home and Abroad. Professor Vaaler observed that the subprime meltdown is just one of the latest mistakes the rating agencies have made in recent times (he also points to the S&L crisis, Asian financial crisis). He argues, however, that private, credit rating agencies are at the center of the current housing crisis.

    Professor Vaaler stressed that the agencies almost always get it right when assessing the risk posed by individual securities. But, when they get it wrong they get it wrong in a spectacular way.

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  • How did Lenders Get it So Wrong?

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    Mechele Dickerson

    An economist, Professor Amir Sufi (University of Chicago), shifted our focus in the afternoon session from debtor, to lender, behavior. In discussing his paper, Lender Incentives, Credit Risk, and Securitization: Evidence from the Subprime Mortgage Crisis, Professor Sufi asks why lenders made such bad decisions when making subprime mortgages. He concludes that securitization reduced lender incentives to scrutinize borrowers, because lenders knew they would sell virtually all the subprime loans they originated and, thus, knew they would shed the credit risk associated with those loans. Professor Sufi argues that this is to be expected, since financial intermediaries overcome information frictions only if they have an incentive to properly screen and monitor borrowers.

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  • Should We Not Disclose Credit Card Information?

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    Mechele Dickerson

    The paper Professor Richard Wiener (Univ. of Nebraska), a psychology professor, discussed presents findings that are completely contrary to economic predictions. Standard economic theory would predict that if consumers are given complete information, they will act rationally and not overspend where the costs of spending outweigh the benefits of consuming. However, the preliminary conclusions he and his co-authors reach in Limits of Enhanced Disclosure suggest that giving consumers additional credit card disclosures does not reduce consumer spending and, in some instances, may make consumers spend even more.

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  • The Heady Conversation

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    Mechele Dickerson

    After the lunch at the Debt conference on Friday, Professor Brian Knutson, a professor of Psychology & Neuroscience at Stanford, presented a paper on Brain, Decision, and Debt. The field of neuroeconomics (which has been around for about a decade) examines how the brain reacts when a person makes a decision, and how the brain causes individuals to make decisions. His research attempts to link the brain to debt – which he characterizes as a risk problem – and to show how people get into debt.

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  • Maxed Out

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    Mechele Dickerson

    The luncheon speaker for the conference was James. D. Scurlock, the director and producer of Maxed Out, which airs this month on Showtime. For those of you who haven’t seen the documentary, it’s a scathing, eye-opening depiction of how the financial services industry (most notably, credit card issuers, debt collection agencies) treats ordinary, hardworking Americans and how people are seduced into debt. He expressed his gratitude to the sponsors for inviting him to a conference where he was sure his talk wouldn’t be the most depressing.

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  • The Very Big Men Who Sort Out Debt

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    Mechele Dickerson

    During the last session this morning, Professor Stephen Lea (University of Exeter) provided a psychological perspective on debt in poor households in Britain. He initially listed the people he believes to be the cast of characters involved in debt. First, there are consumers, and their friends and families. On the creditor side, he made a distinction between business creditors (like utilities) and credit businesses (banks, debt collection agencies – whom he labels "the very big men who are left to sort out the mess"). Because of England’s long tradition of credit counseling, he also included credit counselors in the cast.

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