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With the upheaval of the American economic and financial system, a large number of banks and firms are forced to declare bankruptcy while private markets and key industries have collapse as well. These reflect not only an unsustainable collection of government administrative practices and capacities but also question the legitimacy of the American state as a representative of democracy as well. In this chapter, the primary strains surrounding the American state are discussed. It also points out the deep-rooted dysfunctionalism in the operation of the American state's administrative institutions. To be able to understand current financial and economic turmoil occurring, the nature of unsustainability is presented in detail. Situated functionalism value in studying state sustainability is also illustrated.

This chapter argues that that the IMF's sovereign debt restructuring mechanism (SDRM) is misguided in several ways. Most importantly, the SDRM proposal leaves the IMF itself in the position of having to make two crucial decisions: whether to endorse a stay of payments to creditors, and what amount of debt is “sustainable”, i.e., how much debt should be written off. This decision-making capacity creates a conflict of interest, as the IMF itself is almost always a creditor to countries experiencing debt crises. As an alternative to the IMF's SDRM, a mechanism modeled on Chapter 9 of the US bankruptcy code is proposed, which applies to municipalities and resolves some of the knotty problems of dealing with public (as compared with private) insolvency. This approach would rely on ad hoc panels formed by the debtor and creditor committees and therefore would not require that the IMF serve as arbitrator.

This chapter looks at the ethical aspects of globalization during the 1990s. It argues that in the way that they have sought to shape globalization, the advanced industrial countries and some of the multilateral institutions that they control have violated some basic ethical norms. Three central issues in the context of global finance are analyzed: the design of debt contracts between developed and developing countries and other aspects of lending behavior; the consequences of excessive debt; and broader issues associated with the global reserve system. Three types of ethical problems are discussed: (1) where markets (or international institutions) take advantage of their “power” and the weaknesses of the developing country to pursue their own interests at the expense of or risk to those in the developing countries; (2) where international financial institutions provide advice that works to the disadvantage of the developing countries; and (3) where the markets, and especially the international financial institutions, have not done as much as they could for the well-being of the developed countries.

The chapter compares emergence of minimills in Germany, Japan and the US, along with the recomposition of the Integrated Steel Mill sector. Steel production as an industrial activity in each of the societies, especially in the United States, is radically reconceived, but continues to be successful in each country. Again, in contrast to the claims of Varieties of Capitalism, the American steel industry proves adept at both gradual and radical innovation, as do the German and Japanese industries.

This chapter provides the mathematical foundations for stochastic intensity, on which most of the methodology is based. The intensity of an event such as default is its conditional mean arrival rate, measured in events per year, given all information currently available to the observer. The chapter also presents the multi-firm version of the doubly-stochastic hypothesis, under which the sole source of default correlation between two firms is the dependence of their default intensities on common or correlated observable risk factors. The doubly-stochastic property rules out contagion as well as correlation induced by unobservable risk factors. The chapter includes a mathematical device for testing a model of the default intensity processes of a large number of borrowers.

This chapter presents the theory underlying the maximum likelihood estimation of term structures of survival probabilities, for example the dependence of default probability on time horizon. The methodology allows the events of concern to be censored by disappearance of corporations from the data, due for instance to merger or acquisition. The idea is to estimate the parameter vector determining the default intensity as well as the parameter vector determining the transition probabilities of the covariate process, and then to use the maximum likelihood estimator of these parameters to estimate the survival probabilities of the corporations, for a range of choices of the survival horizon. The results show that the joint estimation of the parameters is relatively tractable under the doubly-stochastic property.

This chapter presents evidence on recent bankruptcy resolution and bankruptcy reform in Japan. Prior to bankruptcy, bank lenders are less likely to intervene than they did before bankruptcy. Most bankrupt firms experience abnormal president turnover around bankruptcy filings. Civil Rehabilitation firm expenditure in bankruptcy is substantially shorter than that in a Corporate Reorganization firm. Also, Corporate Reorganization firms have proven to emerge quicker after the 2000 bankruptcy reform. The main difference between rehabilitation duration and reorganization duration is that leverage only prolongs Civil Rehabilitation duration.

This chapter explores the dramatic growth of corporate revival funds in Japan. These funds are made up of private equity and represent an alternative to main bank intervention in promoting corporate restructuring. Moreover, corporate revival funds have contributed to the reduction of non-performing loans in the banking sector. These funds now play an active role in promoting M&A activities. Many of these emerging funds specialized on corporate revival are, in fact, closely related to Japanese banks. While revival funds were nearly all managed by foreign companies before 2000, new government related funds have also emerged, such as the Industrial Revitalization Corporation fund. This development raises questions as to how bank funds' activities are distinct and may complement traditional forms of bank monitoring over client firms. The chapter argues that a potential merit of bank related funds is to diminish moral hazard problems by separating rehabilitation activities from the banks.

This chapter sets out the process for finding and evaluating the liquid assets, illiquid assets, disputed assets, wasting assets, and contingent assets of the business. To describe what to do with them, the standard asset valuation and sale methods are discussed. The bankruptcy sale procedure guidelines and the guidelines for employing investment bankers, art dealers, appraisers, auctioneers, and the like to assist in the sale process are set forth. The aim is to understand the appropriate disposition methods for particular assets (i.e., sale options), determine the price of each asset to be liquidated, and understand the abandonment option if circumstances so warrant.

This chapter explores the process for determining the validity and priority of claims and for making distributions on those claims. This includes the liquidator's role in investigating and, if circumstances warrant, filing a claim objection to reduce or disallow the claim. Various bankruptcy concepts involved in this process such as administrative claims, the absolute priority rule, and substantive consolidation are discussed along with the mechanics of making distributions. The chapter concludes with an example of the resolution of a contested IRS tax claim through the negotiation of a reduction.

Did the immense investment in the French Navy in the context of the crisis of the monarchy outstrip the financial resources of the État royal, thus being a major cause or even the principal cause of the Revolution? Financially the critical period was not the War of American Independence but the years following the return of peace. The decisions made by those in charge of the French navy to maintain its expansion, while the costs of construction were doubling and while the state-funded budget was shrinking, were heavy with troublesome consequences as the monarchy was plunged into political crisis after the summoning of the Assembly of Notables.

This chapter on bankruptcy and insolvency in the 19th century discusses the system of bankruptcy in 1820, bankruptcy law reform from 1825-31, the law of insolvency, reforming bankruptcy and insolvency from 1838-49, bankruptcy law from 1849-61, reforming bankruptcy and insolvency from 1861-83, and the law of bankruptcy from 1883-1914.

This chapter on consumer credit and debt in the 19th century covers imprisonment for debt, the poor man's bankruptcy, pawnbroking, money lenders, and the purchase of goods through hire purchase agreements.