Search Results

This chapter discusses the avenues for liquidating a failed business outside of bankruptcy. While liquidations involving companies of any significant size are typically accomplished through bankruptcy, state, and federal equity receiverships and assignments for the benefit of creditors provide alternatives for smaller more localized liquidations. These approaches are more informal and less restrictive than bankruptcy. The roles of the assignor and receiver as liquidator, including duties, costs, powers, and compensation are reviewed. The right of the assignor or receiver to pursue actions under the applicable state Uniform Fraudulent Transfer Act is also discussed.

The second half of the 19th century saw the high water mark for laissez-faire capitalism. Business people, politicians, and jurists were largely agreed that economic progress was best accomplished in free markets, supported by a minimal state. In this environment, investment banks were extremely important: they levered their reputations and their relationships to create the private laws that were needed to support large-scale financial capitalism. Technological advances forced the merchant banks mentioned in Chapter 5 to specialize in investment banking. This chapter discusses the role of the largest investment banks, and in particular of Kuhn Loeb and JP Morgan, in shaping modern corporate America. The investment banks invested investor activism, and they created the modern investment bank syndicate. In particular, their activist work with financially distressed corporations resulted in the development the ‘equity receivership’, the first coherent corporate bankruptcy law.

This chapter talks about how the United States could cajole and threaten foreign governments into protecting American property. It proved less capable, however, of fixing the problems that led to instability, default, and expropriation. The chapter recounts the failures of the early fiscal receiverships. The Dominican Republic fell back into civil war by 1912. In fact, the Dominican state entirely collapsed in 1916, forcing a full-scale American occupation to reestablish a modicum of order. Anti-imperialist Woodrow Wilson wound up presiding over a deepening of America's informal empire. His anti-interventionist administration continued the policies of Theodore Roosevelt and William Howard Taft. Wilson abhorred the notion that might makes right; respect for human rights and national integrity, not commercial or financial interests, should determine a nation's foreign policy.

This chapter considers the twin institutions of the floating charge and administrative receivership. It explains the distinctive role played by the floating charge by examining the empirical context in which it operates and by comparing the recoveries made by different classes of creditor in corporate liquidation. The analysis suggests that whereas the fixed charge in included in debentures so as to provide its holder with priority, the floating charge is a residual management displacement device. Its dominant role is to ensure the integrity of the debtor's estate when the latter becomes distressed and its management is displaced in favour of a specialist distress-oriented manager. This is where administrative receivership (‘receivership’) comes in. Traditionally, the replacement of the distressed company's management has been brought about by the appointment of a receiver (formerly, a receiver and manager). However, the chapter harnesses theory and evidence in favour of the argument that receivership is significantly destructive of social value, and that it is unfair and oppressive. Its virtual abolition by the Enterprise Act 2002 is therefore welcomed. However, the substitution of receivership with administration also, it is argued, signals the end of the usefulness of the floating charge. The chapter concludes by sketching out a case for the abolition of this type of charge.

Following the 1899 assassination of Dictator Ulíses Heureaux, political leaders in the Dominican Republic sought to pull the country out of devastating debt and internal division by balancing the benefits of foreign investment against the dangers of foreign interference. While anti-U.S. sentiment among Dominican voters grew, expansionist officers of the U.S. Navy who served as primary diplomatic representatives of the United States insisted that further U.S. involvement in Dominican politics was the only answer to improve U.S. security in the region. Theodore Roosevelt and U.S. investors agreed. The role of these officers in relations between the two countries from 1900-1912, strengthened over time by State Department concerns about the German presence in the Caribbean, included the extra-legal creation of a U.S.-officered Dominican customs border guard within the country, and perpetuated a chronic internal crisis that descended into a bloody civil war.

The orderly liquidation authority (OLA) contained in Title II of the Dodd–Frank Act, created a new regime for receivership of nonbank financial companies whose failures “would have serious adverse effects on the financial stability in the United States.” As such, OLA is intended to offer regulators an alternative to bankruptcy proceedings. Once the company is under OLA, the Federal Deposit Insurance Corporation (FDIC) has broad authority to resolve the insolvent firm. The FDIC, in conjunction with the Bank of England, has stated its preference for a “single-point-of-entry” (SPOE) approach to resolving failed financial companies. Under this approach the FDIC would be appointed as receiver to the top-tier parent of the failed holding company. This chapter discusses the general design of the OLA and the SPOE strategy; total loss absorption capacity (TLAC) to assure holding company recapitalization; recapitalization of operating subsidiaries; safe harbor for derivatives counterparties facing a failing institution; cross-border cooperation of regulators in the use of the SPOE approach.

This prologue recounts the merger of the Union Pacific Railroad and Central Pacific Railroad on May 10, 1869, a historic union that would allow Americans to travel from one end of the continent to the other by rail. By directly connecting the distant West Coast to the rest of the United States, the new entity brought a new era of progress and created the great national myth of the Golden Spike. The Union Pacific Railroad sank into bankruptcy in 1893 and languished in receivership for five years until the arrival of E. H. Harriman, who transformed Union Pacific into the strongest and most efficient railroad in the West.

This chapter examines how the exigencies of decades-long Habsburg rivalry with the Ottoman empire and France affected provincial revenue, fiscal practices, and flows of money. Special attention is paid to the interplay of innovative forms of taxation, new agreements between ruler and Estates known as “recesses” that fixed a minimum level of the diet’s annual grant over a number of years, and the increasing use of the Estates’ credit on the government’s behalf. In particular, it draws attention to the inherent and increasingly visible link between taxation and borrowing as manifested in the Estates’ financial intermediation. The profound change in the financial relations between government and Estates between the 1680s and 1710s helps explain Habsburg international staying power.

This chapter first explains how federal government bailouts during the subprime crisis increased the risk for more severe financial crises in the future. The government sent businesses the wrong message that they can pursue senseless strategies in search of higher yields because Uncle Sam will absorb any losses if firms are too big to fail. In other words, the result of the bailouts was moral hazard. The chapter then discusses three ways to rein in too-big-to-fail firms and evaluates the capacity of the Dodd-Frank Act to perform these tasks. First, the law should require federal regulators to put failing financial giants into receivership before stabilizing them with federal aid. Second, the nation needs a systemic risk regulator to track and address looming systemic risks. Finally, swaps need to be moved onto exchanges as much as possible, while swaps that bet on the performance of assets owned by others should be banned.