Five clues in today’s New York Times crossword are "Short on Dough." Yes, that means you have to come up with five different expressions for "Short on Dough." Given the topics we cover on Credit Slips, our readers should be all over this puzzle. Even my St. Louis Cardinals get their props in the lower right-hand corner. More information and the answers are available at Rex Parker Does the NYT Crossword Puzzle.

LendingTree has just released a new debt survey showing that 48% of Americans are worried about their debt loads, and that 20% expect to be stuck with credit card and other non-mortgage debt for the rest of their lives. Lending Tree tries to put a happy face on some of the data (most people "perceive themselves as some day being debt free"), but I didn’t feel any better when I read it.

But overall the descriptions are quite reasonable, and LendingTree deserves kudos for their detailed reporting.  They give numerical responses on all their questions, broken out by age.  It is a treasure trove for all the data jocks who frequent this site. 

(more…)

Jack Ayer, who made a series of interesting posts here on literary explorations of credit and bankruptcy while he was a guest blogger, has a new post on his own blog (Underbelly) about Flaubert’s L’Education Sentimentale and its antagonist, Jacques Arnoux. Ayer calls Arnoux one of the most important literary bankrupts. Who are the most important literary bankrupts?

Recommended reading, and watching

Recently I was in court before Judge Jack Schmetterer.   In one of the cases that came before mine there was an issue about whether proper notice had been given.   The Judge used this occasion to recommend to the attorney for the movant, and no doubt to the other attorneys in attendance, that he should read The Trial, by Kafka.   The judge said that this recommendation was already included in his section of the bankruptcy court’s web site.  I had never seen a recommended reading list on the court’s web site, but when I went back to my office to check, it was there, in the part that describes the procedures for cases assigned to Judge Schmetterer.

"All motions to be called.

Because many debtors come to court without counsel on motions and some have defenses, all motions are heard in open court. (All counsel are advised to read “The Trial” by Franz Kaffa [sic] to understand how important the judge considers transparency in the Justice system.)…."

http://www.ilnb.uscourts.gov/JudgeSchmetterer/Schmetterer.htm 

Are there any other "official" reading suggestions from Judges?   

Earlier this year Jack Ayer’s posts gave us a wealth of bankrutpcy related literature to read.   I wouldn’t dare to offer a list of my own.   I do think that Bleak House should be added to his list of Dickens novels.   If you are an unsecured creditor in a heavily lawyered liquidation, or ever worse a shareholder, you would have sympathy for the wards in the famous case of Jarndyce v. Jarndyce. 

Professor Ayer also discussed bankruptcy and credit issues found in The Sopranos, which I take as license to start a discussion about  some movies that touch on these themes. 

Last week I finally saw the movie "Maxed Out" at a screening sponsored by various groups, including the Heartland Institute and my employer, the Legal Assistance Foundation of Metropolitan Chicago.   Interesting movie, which may be a sign of public concern about debt practices.  I’ll try to post something on this later this week.  But I’m going to exclude documentaries from this post.   

Surprisingly for a consumer advocate, two of my favorites in this category portray the other side sympathetically.  In Repo Man Harry Dean Stanton lives by the repo man’s code.  Definitely fiction.  In Breaking Away the son learns that everyone cheats – his favorite cycling team, and the privileged college students who patronize his father’s car dealership.   The used car dealer as the working class hero! 

Then there is the mini-series, The Pallisers, based on the novels of Anthony Trollope.  The take away lesson — never co-sign a loan.  Well, there was a lot more than that, but that’s still good advice, most of the time.

In
an earlier post, I offered a few acerb thoughts about William Dean
Howells and what I might perhaps have called the Jimmy Stewartization
of bankruptcy. I could have generalized here: one of the great themes of 19^th
Century American is what you might call the Response to
Commerce—together with a theme I did not mention before, namely the
relationship between the marketplace and women.

For my money, there are two great sources here—one, George Santayana in his seminal Genteel Tradition essays (link),  and the other, more directly relevant, Ann Douglas’ classic The Feminization of American Culture (1977) (link).

Douglas catches the essence of her own work in this discussion of the first great domestic potboiler, the Uncle Tom’s Cabin of commercial law– The Wide, Wide World (link), by Susan Warner:  

The
story apparently turns on the unwillingness of the old-fashioned little
girl, Ellen Montgomery, to participate in the ‘wide, wide world’ of
masculine competition and business into which a cruel fate thrust her. All Ellen’s miseries begin when her father is clumsy enough to lose a vital lawsuit, and with it, his income. Mr.Montgomery’s
surly incompetence and insecure aggressiveness threaten the idyll of
feminine sensibility shared by his wife and daughter. Ellen makes a rather unfilial point of evading her father, but she cannot long escape the forces which he represents. When
her ailing mother ends her off alone on her first adult mission to
select some material at a store, a rude and busy clerk cheats,
humiliates, and dismisses her because she is unused to the chicanery of
commerce, because she is a child and a girl. Although a benevolent elderly gentleman indignantly intervenes and Ellen accomplishes her errand, Warner has made her point.

Douglas, at least, has no doubt as to what that point is: 

Ellen
is completely dislocated from her economic past; those who control the
production of her apparel are utterly foreign to her. It is Ellen’s distinction that she must be rescued from the world. She never requests or wishes in any way actually to function within her society. Brewing consolatory cups of tea for her several beloved and diseased lady friends is the full extent of her productive effort. Her
undeclared hostility to her culture’s competitive forces is too
enormous to allow her to contribute to its economic life. The Bible and
those who love it are Ellen’s only business.

Douglas embroiders this sketch into a larger theme: a more general conspiracy
of (otherwise powerless) women and clergymen into a general posture of
clucking disapproval over the heart of American economic life.   

It
would be fascinating but, lucky for me, beyond the scope of this blog
entry, to trace the cultural history that links the feminization of
culture to the feminization of bankruptcy.

Personal Aside: my
mother and her siblings were orphaned in childhood, in the respect that
their father was carried off in a bout of pneumonia, not litigation.

Their mother held the family together in a prodigy of heroism and good luck that I can only begin to fathom. The sisters—there were five of them—cut their literary teeth on The Wide Wide World. Years later in adulthood, they had come to recognize that it was trash. Yet the old appeal remained, and they could reduce themselves to rueful hysterics by remembering its mawkish energy.

Since we are (I am) on the subject of literary bankruptcy, I can’t resist a reprint of a passage from John Dos Passos’ USA, which, for my money, really is the great American novel. Dos Passos interweaves his fictional trilogy with semi-documentary historical vignettes. Here, in "Tin Lizzie," from 1919 (the second volume), he tells how Henry Ford survived the collapse that followed World War I:

…In 1918 [Ford] had borrowed on notes to buy out his minority stockholders for the picayune sum of seventyfive million dollars.

In February, 1920, he needed cash to pay off some of those notes that
were coming due. A banker is supposed to have called him and offered
him every facility if the bankers’ representative could be made a
member of the board of directors. Henry Ford handed the banker his hat,
and went about raising money his own way:

he shipped every car and part he had in his plant to his dealers and
demanded immediate cash payment. Let the other fellow do the borrowing
had always been a cardinal principle. He shut down production and
canceled all orders from the supplyfirms. Many dealers were ruined,
many supplyfirms failed, but when he reopened his plant, he owned it
absolutely, the way a man owns an unmortgaged farm with the taxes paid
up.

…in 1922 Henry Ford had sold one million three hundred and thirty-two
thousand two hundred and nine tin lizzies; he was the richest man in
the world.   

My dad managed credit bureaus back in the 30s and 40s, when it was still a small-town drugstore counter kind of business. I remember him telling me the story of how Henry solved his own problem by making it somebody else’s problem. I don’t think my dad ever read Dos Passos; maybe he saw it at first hand.

Bankruptcy scholars mostly know that Daniel Defoe, author of
Robinson Crusoe, was himself a
merchant, sometimes a bankrupt, and a commentator on bankruptcy law. It  seems to me that most literary students of
Defoe miss this point; they don’t understand it, or they simply aren’t
interested.

One honorable exception is Maximillian A. Novak, whose Daniel Defoe: Master of Fictions (2001) gives respectful attention to the
bankruptcy issues. In particular, he
addresses role in the runup to the "Statute of Anne," the progenitor of all
modern bankruptcy law. In 1705-6, Novak
writes, "Defoe had been supporting a new
bill to regulate the laws of bankruptcy. He devoted a month and a half of the Review
[his personal proto-weblog—ed.] to the subject…and eventually published a
pamphlet on the subject …"  This pamphlet, he continues:

was mainly devoted to arguing the
irrationality of a system that imjprisoned the debtor in a way that made paying
back the creditors impossible. … [He also] drew attention to the horror of
prison conditions and the families ruined. In addition he maintained that the nation itself loses by driving the
bankrupt, with his potential skills, abroad, thereby forfeiting the wealth that
might accrue to the nation by his and his family’s consumption of goods. Defoe argued for a bill to force all the
creditors to agree to the decision of the committees of bankruptcy. ‘Otherwise, the bankrupt becomes a victim of
a ‘sort of Trade-Murther. He is driven to despair, flees, commmits
suicide, or joins the army and dies that way.’  … 

As to the particular legislation Defoe

wondered if the law would do any
good at all. In his pamphlet on this
subject…he regretted that the bill did not reform the worst parts of the
system. The bankrupt might still be sent
to jail, to perpetual imprisonment; this meant that he would struggle to avoid
punishment and be forced to desparate measures. Defoe concluded ‘That to make men desperate was the way to make them
Knaves; and as there never was any law but some way or other might be evaded or
avoided, this would put Men’s Inventions upon the rack for new Methods to
defraud their Creditors.’ At least the
new bill allowed the bankrupt 5 percent of his holdings to try to start
anew. Defoe allowed himself some irony
over the resulting loss of jobs among gaolers and those involved in arresting
debtors, and ‘As to the Attorneys, Sollicitors, etc., they may turn their Hands
to the more Laudable practice of picking pockets, according to the letter of it, and then in time may meet with the
reward of their former Merit, by a
way they have often deserv’d it’. In
short, he hoped they would be hanged.

Defoe had, of course, his personal experience with debtor
distress: he went bankrupt twice and spent most of his adult life in the toils
of creditor pressure. He shows amazing
resilience, repeatedly coming up with new schemes and devices to make himself
prosperous. Only in his final months
does he appear "old, sick, and perhaps for the first time in his life in a
state of despair." He died at last "of a
lethargy," still in hiding from his creditors.

–Quotes from Maximillian E. Novak, Daniel Defoe: Master of Fictions (2001).

Whether or not there really is an American bankruptcy Balzac (cf. this discussion),
still one contender who deserves a respectful mention is Theodore
Dreiser—in particular, the Dreiser who wrote the Trilogy of Desire, a
fictional chronicle that closely tracks the real-life career of Charles
Yerkes, financier and scoundrel. A possible
complaint about Dickens’ “commercial” writing is that he really doesn’t
understand the details all that well: the sentiments are clear enough
but the events leading up to the comedy are left pretty vague. A possible complaint about Dreiser is that he understands them to well. In the supposed fictionalization of Yerkes, he sometimes veers dangerously close to straight biography. One
has to care about this sort of thing (although the chances of finding
an audience are perhaps greater among readers of this website than in
the general population).    

The real Yerkes
made a fortune in Philadelphia in and after the Civil War, failed, went
to prison—and then set off to Chicago, where he made a second fortune,
and thence to London where he began anew. All this is convenient for a novelist who wants to turn his life into a three-parter.  Dreiser’s
hero, Frank A. Cowperwood, performs the same trajectory. For sheer
story-telling, the best of the three novels is probably the first, The Financier, available in print for purchase, but also free for download at Project Gutenberg (link). A
manuscript search of the Gutenberg text will make it clear that Dreiser
has plenty to say about bankruptcy, much of it in detail. “In
these days also, he [was] constantly to be met with in courts of law,
for he was constantly being reexamined in some petition in bankruptcy.” “His
worst anxiety was that if he were sent to the penitentiary, or adjudged
a bankrupt, or both, he would probably lose the privilege of a seat on
‘change…” “[H]e hit upon the idea that in order
to forfend against the event of his being put into prison or thrown
into bankruptcy, or both, he ought to form a subsidiary silent
partnership with some man who was or would be well liked on ‘change,
and whom he could use as a cat’s-paw and a dummy.” 

And so forth.  But
perhaps the most interesting thing about Dreiser’s account is the way
he shows Cowperwood using bankruptcy as a business planning technique:

The suspension of the banking house of Frank A. Cowperwood & Co. created a great stir on ‘change and in Philadelphia generally. It was so unexpected, and the amount involved was
comparatively so large. Actually he failed for one million two hundred
and fifty thousand dollars; and his assets, under the depressed
condition of stock values, barely totaled seven hundred and fifty
thousand dollars. There had been considerable work done on the matter
of his balance-sheet before it was finally given to the public; but
when it was, stocks dropped an additional three points generally, and
the papers the next day devoted notable headlines to it. Cowperwood had
no idea of failing permanently; he merely wished to suspend
temporarily, and later, if possible, to persuade his creditors to allow
him to resume. There were only two things which stood in the way of
this: the matter of the five hundred thousand dollars borrowed from the
city treasury at a ridiculously low rate of interest, which showed
plainer than words what had been going on, and the other, the matter of
the sixty-thousand-dollar check. His financial wit had told him there
were ways to assign his holdings in favor of his largest creditors,
which would tend to help him later to resume; and he had been swift to
act. Indeed, Harper Steger had drawn up documents which named Jay Cooke
& Co., Edward Clark & Co., Drexel & Co., and others as
preferred. He knew that even though dissatisfied holders of smaller
shares in his company brought suit and compelled readjustment or
bankruptcy later, the intention shown to prefer some of his most
influential aids was important. They would like it, and might help him
later when all this was over. Besides, suits in plenty are an excellent
way of tiding over a crisis of this kind until stocks and common sense
are restored, and he was for many suits. Harper Steger smiled once
rather grimly, even in the whirl of the financial chaos where smiles
were few, as they were figuring it out.   

"Frank,"
he said, "you’re a wonder. You’ll have a network of suits spread here
shortly, which no one can break through. They’ll all be suing each
other."

In fact, things don’t work out quite that way—there wouldn’t be enough novel if it did. But Dreiser does seem to have a feel for a certain kind of dealer in a certain kind of deal.

I get my Sopranos fix only in DVD, so just now got round to Episoide #73,
where Patsy and Burt find that big corporate is ruining the collection
business. The kid at the upscale coffee store tells them that there is
no slippage because Seattle counts every bean and anyway, they won’t
care about vandalism—to the store, or to him.  Later, the boys find that Jamba Juice has just bought the building  that houses Caputo’s poultry store (from Tony!).  “It’s over for the little guy,” laments Patsy. "What the f$#% is happening to this neighborhood?"

 It occurs to me that my friend Michael the collection lawyer has the same problem. “Used to be,” says Michael, “that there was a little hardware store in every town. They were always past due to somebody, and you could always kick them around a little. These days, it’s all Wal-Mart. One, Wal-Mart pays and two, if they don’t what are you going to do about it?”

Memories: Back
during the Carter inflation, Sears decided they were getting killed on
interest costs, so they notified all their suppliers they would no
longer pay in 30 days but would pay in. Thank you and have a nice day. This
was good for the business of bankrupting small Sears suppliers, I can
tell you, sort of like what happens when the old lady swings onto the
expressway and 28 miles an hour.

More Sopranos: Come
to think of it, there is a good deal of collection law in the Sopranos.
Setting aside the routine savage beatings, I recall Episode #72, where credit card pretty much pushes Artie over the brink.  I guess the best bankruptcy/Sopranos tie-in since Episode #23,
where the merry pranksters take over Davey Scatino’s sporting goods
store to use it as a bust-out joint. As Tony told Davey when he tried
to join the executive poker game, "this game isn’t for you." Am I
forgetting anything?

Still More Sopranos:  For some general thoughts on how the Sopranos has lost its Mojo, see Underbelly.

Bankruptcy Postscript:  I think this is one more piece of the puzzle.    Teaser–the headline reads: "Bankruptcy Work Falls, but Megacases Still Provide Hefty Fees."