6 ms·

Swamped bankruptcy courts threaten US recovery

65 points by hhs 7y ago

joncrane 7y ago
This looks like it's paywalled, does someone need to provide a non-paywalled version for it to stay?
- techdevangelist 7y ago
  Googling the url of the story is typically a god way around most paywalls, in this case the story seems available over amp: https://www.google.com/amp/s/amp.ft.com/content/14b07c0e-95e3-11ea-af4b-499244625ac4 https://www.google.com/amp/s/amp.ft.com/content/14b07c0e-95e...
  - Sevaris 7y ago
    No need to use something as cancerous as AMP: http://archive.is/Da3iS http://archive.is/Da3iS
    - mindslight 7y ago
      CAPTCHA is less cancerous?
nrclark 7y ago
Link is paywalled, and should be removed.
dannyw 7y ago
Stock markets: Down just 15% from ATH.
- tomrod 7y ago
  What is ATH?
  - jjoonathan 7y ago
    All Time High
  - deleted 7y ago
    [deleted]
- lucozade 7y ago
  Which stock markets are you referring to? I can't see any that are 15% off of all time high though I only checked half a dozen.
  - nostrademons 7y ago
    Depending on when he checked his data, the S&P 500 was down 15.8% from its ATH of 3386 at 10:15 EDT this morning (2851). It's since dropped a bit today and is now down more like 16.5%.
- TheCoelacanth 6y ago
  That 15% is very unequally spread. Many are down 0% and many are down 50%+. The 50%+ crowd are very much in danger of bankruptcy.
hhs 7y ago
> What happened next was odd — and symbolic. In the last two months, courts have repeatedly frozen Modell’s bankruptcy process, citing the pandemic. The company is now a zombie, neither dead nor alive. Its status could soon proliferate across corporate America, further confusing the economic outlook. Is there a database on companies that are zombies?
- deleted 7y ago
  [deleted]
deleted 7y ago
[deleted]
jamespitts 7y ago
During the 2008-9 crisis I learned that the failures and responses could be understood in the context of mass computational problems. Before a crisis, the system moves along w/o having to fully process everything; this is because a low-fidelity understanding of value and status of securities and agreements is sufficient for participants to operate. However once the crisis has begun, new dire weaknesses and new structures require much higher fidelity to guarantee safety. The participants find that there is much more to compute than can be computed in any reasonable timeframe. This is why the monster-sized purchasing programs by lenders of last resort are somewhat effective; the are enabling everyone to function by delaying the difficult financial computations.
- esoterica 7y ago
  The problem was uncertainty about the inputs, not insufficient computational power to crunch those inputs. If computational power were the bottleneck there would have been a mass spike in server purchases and a run on compute capacity, but clearly there wan't.
nostrademons 7y ago
My wife has also been seeing an increase in strategic defaults. These are cases where the company could easily make its loan payments, could in fact pay off the loan entirely with the cash it has in the bank - but chooses not to. The court systems are overloaded and oftentimes closed right now, the lawyers all have to work over Zoom, so what's the lender gonna do? The company views it as more important to hold cash in the bank right now than to service existing loan obligations that its creditors can't enforce anyway. The entrepreneur in me is saying that the biggest start-up opportunity in America right now is a government. We're on the verge of a cascading failure in the legal and political system, and few people realize how much of civilization rests on having a functioning legal system.
- Spivak 7y ago
  Naive/uninformed question, is this something that shouldn't be allowed? Do business loan contracts not have provisions/penalties in the case of missed payments that apply outside of a court? Why shouldn't the business take the penalty if cash on hand is more valuable to them? The courts aren't going to be tied up forever, your borrowers have the money to meet their obligations, and presumably they'll eventually make payments. Outside of the pain of having to ride out the storm is there any real risk? Like it doesn't sound super weird to me that a family will "strategically default" on their mortgage despite technically literally having the cash to pay it because they're scared of not being able to buy food in a month.
  - sandworm101 7y ago
    >> in the case of missed payments that apply outside of a court? When someone owes you money you have two choices: The courts, or rounding up some people with guns and taking the money yourself. It is either the courts or anarchy. Businesses know this. When they don't pay their debts they know the options for creditors are very limited. Getting money out of a business that really doesn't want to pay takes many trips to the courthouse. Eventually you end up foreclosing on some asset, a process that takes many months. Banks don't just hand over their client's cash because a court says they own money. Banks require court orders naming specific accounts. A business trying to avoid creditors can easily move money around faster than the creditor can get court orders.
gpsx 7y ago
The article talks about how few companies have filed for bankruptcy so far. I have heard it predicted that companies will wait until businesses are open so they can liquidate. And, at the same time there would be a race then because companies would want to be at the start of the liquidation wave. When I heard this they didn't talk about the difficulty in overwhelming the courts, which is another interesting factor.
- rdtwo 7y ago
  There is probably some sort of consideration about If you want to get it done quick or drag it out. If you think you can restructure and bounce back you want the quick option if you think your want to drag it out you wait till the last possible moment. Really though last possible moment is best because it maximizes pain on the creditor and therefore increases settlement value

65 points by hhs 7y ago

joncrane 7y ago

This looks like it's paywalled, does someone need to provide a non-paywalled version for it to stay?

techdevangelist 7y ago
Googling the url of the story is typically a god way around most paywalls, in this case the story seems available over amp: https://www.google.com/amp/s/amp.ft.com/content/14b07c0e-95e3-11ea-af4b-499244625ac4 https://www.google.com/amp/s/amp.ft.com/content/14b07c0e-95e...
- Sevaris 7y ago
  No need to use something as cancerous as AMP: http://archive.is/Da3iS http://archive.is/Da3iS
  - mindslight 7y ago
    CAPTCHA is less cancerous?

nrclark 7y ago

Link is paywalled, and should be removed.

dannyw 7y ago

Stock markets: Down just 15% from ATH.

tomrod 7y ago
What is ATH?
- jjoonathan 7y ago
  All Time High
- deleted 7y ago
  [deleted]
lucozade 7y ago
Which stock markets are you referring to? I can't see any that are 15% off of all time high though I only checked half a dozen.
- nostrademons 7y ago
  Depending on when he checked his data, the S&P 500 was down 15.8% from its ATH of 3386 at 10:15 EDT this morning (2851). It's since dropped a bit today and is now down more like 16.5%.
TheCoelacanth 6y ago
That 15% is very unequally spread. Many are down 0% and many are down 50%+. The 50%+ crowd are very much in danger of bankruptcy.

hhs 7y ago

> What happened next was odd — and symbolic. In the last two months, courts have repeatedly frozen Modell’s bankruptcy process, citing the pandemic. The company is now a zombie, neither dead nor alive. Its status could soon proliferate across corporate America, further confusing the economic outlook. Is there a database on companies that are zombies?

deleted 7y ago
[deleted]

deleted 7y ago

[deleted]

jamespitts 7y ago

During the 2008-9 crisis I learned that the failures and responses could be understood in the context of mass computational problems. Before a crisis, the system moves along w/o having to fully process everything; this is because a low-fidelity understanding of value and status of securities and agreements is sufficient for participants to operate. However once the crisis has begun, new dire weaknesses and new structures require much higher fidelity to guarantee safety. The participants find that there is much more to compute than can be computed in any reasonable timeframe. This is why the monster-sized purchasing programs by lenders of last resort are somewhat effective; the are enabling everyone to function by delaying the difficult financial computations.

esoterica 7y ago
The problem was uncertainty about the inputs, not insufficient computational power to crunch those inputs. If computational power were the bottleneck there would have been a mass spike in server purchases and a run on compute capacity, but clearly there wan't.

nostrademons 7y ago

My wife has also been seeing an increase in strategic defaults. These are cases where the company could easily make its loan payments, could in fact pay off the loan entirely with the cash it has in the bank - but chooses not to. The court systems are overloaded and oftentimes closed right now, the lawyers all have to work over Zoom, so what's the lender gonna do? The company views it as more important to hold cash in the bank right now than to service existing loan obligations that its creditors can't enforce anyway. The entrepreneur in me is saying that the biggest start-up opportunity in America right now is a government. We're on the verge of a cascading failure in the legal and political system, and few people realize how much of civilization rests on having a functioning legal system.

Spivak 7y ago
Naive/uninformed question, is this something that shouldn't be allowed? Do business loan contracts not have provisions/penalties in the case of missed payments that apply outside of a court? Why shouldn't the business take the penalty if cash on hand is more valuable to them? The courts aren't going to be tied up forever, your borrowers have the money to meet their obligations, and presumably they'll eventually make payments. Outside of the pain of having to ride out the storm is there any real risk? Like it doesn't sound super weird to me that a family will "strategically default" on their mortgage despite technically literally having the cash to pay it because they're scared of not being able to buy food in a month.
- sandworm101 7y ago
  >> in the case of missed payments that apply outside of a court? When someone owes you money you have two choices: The courts, or rounding up some people with guns and taking the money yourself. It is either the courts or anarchy. Businesses know this. When they don't pay their debts they know the options for creditors are very limited. Getting money out of a business that really doesn't want to pay takes many trips to the courthouse. Eventually you end up foreclosing on some asset, a process that takes many months. Banks don't just hand over their client's cash because a court says they own money. Banks require court orders naming specific accounts. A business trying to avoid creditors can easily move money around faster than the creditor can get court orders.

gpsx 7y ago

The article talks about how few companies have filed for bankruptcy so far. I have heard it predicted that companies will wait until businesses are open so they can liquidate. And, at the same time there would be a race then because companies would want to be at the start of the liquidation wave. When I heard this they didn't talk about the difficulty in overwhelming the courts, which is another interesting factor.

rdtwo 7y ago
There is probably some sort of consideration about If you want to get it done quick or drag it out. If you think you can restructure and bounce back you want the quick option if you think your want to drag it out you wait till the last possible moment. Really though last possible moment is best because it maximizes pain on the creditor and therefore increases settlement value