"Randy Babbitt" by Sinclair Lewis (1922): Chapter
XII

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CHAPTER XII
CHAPTER XII

I

ALL THE WAY HOME FROM MAINE, BABBITT WAS CERTAIN THAT HE WAS A CHANGED MAN. HE WAS CONVERTED TO SERENITY. HE WAS GOING TO CEASE WORRYING ABOUT BUSINESS. HE WAS GOING TO HAVE MORE ?INTERESTS?--THEATERS, PUBLIC AFFAIRS, READING. AND SUDDENLY, AS HE FINISHED AN ESPECIALLY HEAVY CIGAR, HE WAS GOING TO STOP SMOKING.

He invented a new and perfect method. He would buy no tobacco; he would depend on borrowing it; and, of course, he would be ashamed to borrow often. In a spasm of righteousness he flung his cigar-case out of the smoking-compartment window. He went back and was kind to his wife about nothing in particular; he admired his own purity, and decided, ?Absolutely simple. Just a matter of will-power?. He started a magazine serial about a scientific detective. Ten miles on, he was conscious that he desired to smoke. He ducked his head, like a turtle going into its shell; he appeared uneasy; he skipped two pages in his story and didn?t know it. Five miles later, he leaped up and sought the porter. ?Say, uh, George, have you got a--? The porter looked patient. ?Have you got a time-table?? Babbitt finished. At the next stop he went out and bought a cigar. Since it was to be his last before he reached Zenith, he finished it down to an inch stub.

Four days later he again remembered that he had stopped smoking, but he was too busy catching up with his office-work to keep it remembered.

II

Baseball, he determined, would be an excellent hobby. ?No sense a man?s working his fool head off. I?m going out to the Game three times a week. Besides, fellow ought to support the home team?.

He did go and support the team, and enhance the glory of Zenith, by yelling ?Attaboy!? and ?Rotten!? He performed the rite scrupulously. He wore a cotton handkerchief about his collar; he became sweaty; he opened his mouth in a wide loose grin; and drank lemon soda out of a bottle. He went to the Game three times a week, for one week. Then he compromised on watching the Advocate-Times bulletin-board. He stood in the thickest and steamiest of the crowd, and as the boy up on the lofty platform recorded the achievements of Big Bill Bostwick, the pitcher, Babbitt remarked to complete strangers, ?Pretty nice! Good work!? and hastened back to the office.

He honestly believed that he loved baseball. It is true that he hadn?t, in twenty-five years, himself played any baseball except back-lot catch with Ted--very gentle, and strictly limited to ten minutes. But the game was a custom of his clan, and it gave outlet for the homicidal and sides-taking instincts which Babbitt called ?patriotism? and ?love of sport?.

As he approached the office he walked faster and faster, muttering, ?Guess better hustle?. All about him the city was hustling, for hustling?s sake. Men in motors were hustling to pass one another in the hustling traffic. Men were hustling to catch trolleys, with another trolley a minute behind, and to leap from the trolleys, to gallop across the sidewalk, to hurl themselves into buildings, into hustling express elevators. Men in dairy lunches were hustling to gulp down the food which cooks had hustled to fry. Men in barber shops were snapping, ?Jus? shave me once over. Gotta hustle?. Men were feverishly getting rid of visitors in offices adorned with the signs, ?This Is My Busy Day? and ?The Lord Created the World in Six Days--You Can Spiel All You Got to Say in Six Minutes?. Men who had made five thousand, year before last, and ten thousand last year, were urging on nerve-yelping bodies and parched brains so that they might make twenty thousand this year; and the men who had broken down immediately after making their twenty thousand dollars were hustling to catch trains, to hustle through the vacations which the hustling doctors had ordered.

AMONG THEM BABBITT HUSTLED BACK TO HIS OFFICE, TO SIT DOWN WITH NOTHING MUCH TO DO EXCEPT SEE THAT THE STAFF LOOKED AS THOUGH THEY WERE HUSTLING.

III

Every Saturday afternoon he hustled out to his country club and hustled through nine holes of golf as a rest after the week?s hustle.

In Zenith it was as necessary for a Successful Man to belong to a country club as it was to wear a linen collar. Babbitt?s was the Outing Golf and Country Club, a pleasant gray-shingled building with a broad porch, on a daisy-starred cliff above Lake Kennepoose. There was another, the Tonawanda Country Club, to which belonged Charles McKelvey, Horace Updike, and the other rich men who lunched not at the Athletic but at the Union Club. Babbitt explained with frequency, ?You couldn?t hire me to join the Tonawanda, even if I did have a hundred and eighty bucks to throw away on the initiation fee. At the Outing we?ve got a bunch of real human fellows, and the finest lot of little women in town--just as good at joshing as the men--but at the Tonawanda there?s nothing but these would-be?s in New York get-ups, drinking tea! Too much dog altogether. Why, I wouldn?t join the Tonawanda even if they--I wouldn?t join it on a bet!?

When he had played four or five holes, he relaxed a bit, his tobacco-fluttering heart beat more normally, and his voice slowed to the drawling of his hundred generations of peasant ancestors.

IV

At least once a week Mr. and Mrs. Babbitt and Tinka went to the movies. Their favorite motion-picture theater was the Chateau, which held three thousand spectators and had an orchestra of fifty pieces which played Arrangements from the Operas and suites portraying a Day on the Farm, or a Four-alarm Fire. In the stone rotunda, decorated with crown-embroidered velvet chairs and almost medieval tapestries, parrakeets sat on gilded lotos columns.

With exclamations of ?Well, by golly!? and ?You got to go some to beat this dump!? Babbitt admired the Chateau. As he stared across the thousands of heads, a gray plain in the dimness, as he smelled good clothes and mild perfume and chewing-gum, he felt as when he had first seen a mountain and realized how very, very much earth and rock there was in it.

He liked three kinds of films: pretty bathing girls with bare legs; policemen or cowboys and an industrious shooting of revolvers; and funny fat men who ate spaghetti. He chuckled with immense, moist-eyed sentimentality at interludes portraying puppies, kittens, and chubby babies; and he wept at deathbeds and old mothers being patient in mortgaged cottages. Mrs. Babbitt preferred the pictures in which handsome young women in elaborate frocks moved through sets ticketed as the drawing-rooms of New York millionaires. As for Tinka, she preferred, or was believed to prefer, whatever her parents told her to.

ALL HIS RELAXATIONS--BASEBALL, GOLF, MOVIES, BRIDGE, MOTORING, LONG TALKS WITH PAUL AT THE ATHLETIC CLUB, OR AT THE GOOD RED BEEF AND OLD ENGLISH CHOP HOUSE--WERE NECESSARY TO BABBITT, FOR HE WAS ENTERING A YEAR OF SUCH ACTIVITY AS HE HAD NEVER KNOWN.

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New ad targets Senator Mary Landrieu, who has had
taxpayer financed health insurance for most of her adult life, on the public option

A couple weeks ago, I wrote about Senator Mary Landrieu's history of health insurance. From what I could piece together, the Senator from Louisiana has spent a good part of her life receiving taxpayer financed health care. You know she doesn't spend a lot of time haggling with insurance companies. No, but from all the money Landrieu gets from the health insurance lobby, it's pretty clear she does spend a lot of time talking to insurance company lobbyists at fundraisers.

Landrieu is opposed to including a public option in health care reform legislation. She's siding with her pals in the insurance industry. How would she know what it's like not to have health insurance? Taxpayers have taken care of that for her.

MoveOn is running ads in Louisiana on this very issue with a very compelling constituent of Landrieu doing the talking:


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The bill introduced in the Senate HELP Committee by Senators Kennedy and Dodd includes the public option. In a statement applauding that bill, Obama explained why that's important:

Among the choices that would be available in the exchange would be a public health insurance option. The public option would make health care affordable by increasing competition, providing more choices and keeping the insurance companies honest.

More affordable and more choices for consumers. More accountability from insurance companies. And, Mary Landrieu is opposed to the public option.

Just hope Landrieu is listening to her constituents at least as much as she listens to the titans of the insurance companies. Senator Landrieu needs to hear from more of her constituents. In DC, her number is 202-224-5824. But, if you're from Louisiana, call her local offices, too. The numbers are here. Let her know you want the public option in the health care reform package.

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Bolton: ‘Targeted force’ is the
‘only option’ for Iran.

In his third op-ed on Iran in a major newspaper in the last month, former U.N. Ambassador John Bolton wrote in the Washington Post today that the time is right for Israel to launch an attack on Iranian nuclear facilities:

Iran’s nuclear threat was never in doubt during its presidential campaign, but the post-election resistance raised the possibility of some sort of regime change. That prospect seems lost for the near future or for at least as long as it will take Iran to finalize a deliverable nuclear weapons capability.

Accordingly, with no other timely option, the already compelling logic for an Israeli strike is nearly inexorable. [...]

Those who oppose Iran acquiring nuclear weapons are left in the near term with only the option of targeted military force against its weapons facilities. Significantly, the uprising in Iran also makes it more likely that an effective public diplomacy campaign could be waged in the country to explain to Iranians that such an attack is directed against the regime, not against the Iranian people.

Despite his suggestion that now is time for an attack, in reality, it’s always a great time to attack Iran if you’re John Bolton, considering he never passes up an opportunity to use turmoil in the Middle East to suggest war with Iran.

- Kyle Schmidt

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Rep. Barton: Obama Should Be Worried About
"Carbongate"

Yesterday we wrote about Environmental Protection Agency economist Al Carlin, the author of a report that casts doubt on climate change. Carlin's study wasn't taken as seriously by the agency as he'd been hoping -- perhaps because he's not a scientist, and because his bosses never asked him to produce it.

But his cause has become a favorite of right-wingers, who suddenly believe science to be sacred, and are charging that the Obama administration is "suppressing" a report whose conclusions it dislikes. The anti-regulatory Competitive Enterprise Institute first publicized Carlin's report last week. Since then, Carlin has discussed his "findings" with Glenn Beck on Fox News, and on Monday, Sen. James Inhofe (R-OK) called for a criminal investigation into the issue.

Now, Rep. Joe Barton is taking the outrage to a new level. This morning on America's Newsroom, the industry-friendly Texas Republican accused the EPA of suppressing the report, and declared that "just as Nixon had Watergate, Obama now has Carbongate to deal with."

Watch:

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(Note that Barton called Carlin "a scientist at the EPA." In fact, Carlin has worked for the agency since months after its founding in 1971, but he does not hold an advanced degree in any natural science, and he has always worked as an economist.)

So just to compare: Watergate involved the cover-up of a criminal enterprise directed from the Oval Office. "Carbongate" involves the EPA ignoring a scientific study by a non-scientist that it never commissioned and which hasn't been published in any scientific journal. There may be better comparisons.

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Smokin' In The Boys Room

?Smokin? In The Boys Room? ? Brownsville Station
(Spoken)
How You Doin? Out There?
Y?ever Seem To Have One Of Those Days
Where It Just Seems Like Everybody?s Gettin? On Your Case,
From Your Teacher All The Way Down To Your Best Girlfriend?
Well, Y?know, I Used To Have ?Em Just About All The Time.
But I Found A Way To Get Out Of ?Em.
Let Me Tell You About It!
(Sung)
Sitting In The Classroom Thinking It?s A Drag
Listening To The Teacher Rap Just Ain?t My Bag
The Noon Bells Ring You Know That?s My Cue
I?m Gonna Meet The Boys On Floor Number Two!

Smokin? In The Boys? Room
Smokin? In The Boys? Room
Now, Teacher, Don?t You Fill Me Up With Your Rules
But Everybody Knows That Smokin? Ain?t Allowed In School.

A-Checkin? Out The Halls Makin? Sure The Coast Is Clear
Lookin? In The Stalls No, There Ain?t Nobody Here
Oh, My Buddy Fang, And Me And Paul
To Get Caught Would Surely Be The D***** Of Us All Smokin? In The Boys? Room
Smokin? In The Boys? Room
Now, Teacher, Don?t You Fill Me Up With Your Rules
But Everybody Knows That Smokin? Ain?t Allowed In School.
All Right!

Oh, Put Me To Work In The School Book Store
Check Out Counter And I Got Bored
Teacher Was Lookin? For Me All Around
Two Hours Later You Know Where I Was Found
Smokin? In The Boys? Room (Yes Indeed, I Was)
Smokin? In The Boys? Room
Now, Teacher, Don?t You Fill Me Up With Your Rules
But Everybody Knows That Smokin? Ain?t Allowed In School.
One Mo?!
Smokin? In The Boys? Room
Oh, Smokin? In The Boys? Room
Now, Teacher, I Am Fully Aware Of The Rules
But Everybody Knows That Smokin? Ain?t Allowed In School!


?Smokin? By Boston
We?re Gonna Play You A Song, A Little Bit Of Rock And Roll
You?ve Gotta Let Yourself Go, The Band?s Gonna Take Control
We?re Getting? High Today
We?ll Pick You Up And Take You Away
Get Down Tonight

Chorus:
Smokin? - Smokin?
We?re Cookin? Tonight Just Keep On Tokin?
Smokin? Smokin?
I Feel Alright Mamma I?m Not Jokin?

Get Your Feet To The Floor Everybody Rock And Roll
You?ve Got Nothing? To Lose It?s Just
Rhythm And Blues That?s All
You?re Gonna Feel Okay
We?ll Pick You Up And Take You Away
Get Down Tonight

Smokin? - Smokin?
We?re Cookin? Tonight Just Keep On Tokin?
Smokin? Smokin?
I Feel Alright Mamma I?m Not Jokin?
Everyone?s Jumpin?, Dancin? To A Boogie Tonight
Clap You Hands, Move Your Feet,
If You Don?t Know It Won?t See Right
We?re Getting? High Today
We?ll Pick You Up And Take You Away
Get Down Tonight

Yea You Know We?re Getting High Today
We?ll Pick You Up And Take You Way Get Down Tonight Alright!


?Panama Red? By New Riders Of The Purple Sage
Panama Red, Panama Red
He?ll Steal Your Woman Then He?ll Rob Your Head
Panama Red, Panama Red
His White Horse Mescalino, Comes Breezin? Thru Town
Bet His Woman?s Off In Bed With Ol? Panama Red

You Just Don?t Know When Red?s In Town
He Keeps Well Hidden Underground
Everybody?s Gettin? Crazy Fallin? Out ?N? Hangin? Round
My Woman Said, ?Hey Pedro, You?re Actin? Crazy Like A Clown?
Nobody Feels Like Workin? Panama Red Is Back In Town
Everybody?s Lookin? Out For Him Cause They Know Red Satisfies
Little Girls Love To Listen To Him Sing & Tell Sweet Lies
But When Things Get Confusin? Honey, You?re Better Off In Bed
Cause I?ll Be Searchin? All The Joints In Town For Panama Red


?Double Vision? By Foreigner
Feeling Down ?N? Dirty, Feeling Kinda Mean
I?ve Been From One To Another Extreme
This Time I Had A Good Time, Ain?t Got Time To Wait
I Wanna Stick Around ?Till I Can?t See Straight

Fill My Eyes With That Double Vision
No Disguise For That Double Vision
Ooh, When It Gets Through To Me, It?s Always New To Me
My Double Vision Gets The Best Of Me

Never Do More Than I, I Really Need
My Mind Is Racing, But My Body?s In The Lead
Tonight?s The Night, I?m Gonna Push It To The Limit
I Live All Of My Years In A Single Minute

Fill My Eyes With That Double Vision
No Disguise For That Double Vision
Ooh, When It Gets Through To Me, It?s Always New To Me
My Double Vision Always Seems To Get The Best Of Me
The Best Of Me, Yeah-Eah Eah-Eah-Hey

Ooh-Ooh (Oooh) Ooh-Ooh, Double Vision
(Oooh) I Need Double Vision
(Oooh, Double Vision) It Takes Me Out Of My Head, Takin? Me Out Of My Head
(Oooh, Double Vision) I Get My Double Vision, Woa-Oah
(Oooh, Double Vision) Seeing Double Double, Double Vision
(Oooh, Double Vision) Oh-Oh My My Double Vision
(Oooh, Double Vision) Double Vision, Yeah-Ah-Ah Eah-Eah Eah-Eah Ah
(Oooh, Double Vision) I Get Double Vision, Oooh
How, How?


?Don?t Bogart That Joint, My Friend? By Country Joe And The Fish
Don?t Bogart That Joint, My Friend
Pass It Over To Me
Don?t Bogart That Joint, My Friend
Pass It Over To Me

Roll Another One
Just Like The Other One
This One?s Burnt To The End
Come On And Be A Friend

Don?t Bogart That Joint, My Friend
Pass It Over To Me
Don?t Bogart That Joint, My Friend
Pass It Over To Me

Ro-O-O-O-O-O-O-O-O-O-O-O-O-O-O-Oll Another One
Just Like The Other One.
You?ve Been Hanging On To It
And I Sure Would Like A Hit

Don?t Bogart That Joint, My Friend
Pass It Over To Me
Don?t Bogart That Joint, My Friend
Pass It Over To Me

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Wash. Times publishes op-ed promoting
discredited "global cooling" claim

On July 2, The Washington Times published a "commentary" by Cato Institute senior fellow Richard Rahn criticizing Congress for passing "the largest tax increase in American history this past Friday, under the claim it was a vote to save the climate." In the op-ed -- which was referring to the cap-and-trade energy bill recently passed by the House -- Rahn stated that "proponents claim this tax bill will reduce U.S. carbon dioxide emissions, which are purported to cause global warming" and then responded to that claim, in part, by asserting: "None of the climate models predicted the unexpected global cooling of the last decade." However, climate experts reject the idea that relatively cooler global temperatures during the past decade are any indication that global warming is slowing.

As Media Matters for America has noted, annual global average temperatures have both risen and fallen over the past 11 years, and there have been some relatively cooler years during that period -- including a decline in each of the past three years relative to the year before. But climate scientists have identified a long-term warming trend spanning several decades that is independent from the normal climate variability -- which includes relatively short-term changes in climate due to events like El Niño and La Niña -- to which they attribute the recent relatively cooler temperatures.

From Rahn's July 2 Washington Times op-ed:

Why did a bare majority (219-212) of the members of the U.S. Congress vote for the largest tax increase in American history this past Friday, under the claim it was a vote to save the climate?

Before you answer the question, consider the following facts. The proponents claim this tax bill will reduce U.S. carbon dioxide emissions, which are purported to cause global warming. First, despite the claims of President Obama, House Speaker Nancy Pelosi and many in the media, there is no consensus in the scientific community about how much climate change, other than the normal cycles, is taking place, nor how severe it will be, and how much man-made CO2 is responsible. None of the climate models predicted the unexpected global cooling of the last decade.

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Health Care: HELP Bill Released During Public
Option Call With Sens. Dodd, Brown and Whitehouse

Impatience via mdezemery.Just got off a call with Sens. Dodd, Whitehouse and Brown on the HELP committee health care bill. They have finally released a full copy of the proposed bill along with the most recent CBO scoring of it:CBO?s new score of the[...]

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ed-during-public-option-call-with-sens-dodd-brown-and-whitehouse/

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Tempting Fate

The buzz this morning is that former Sen. Norm Coleman (R-MN) may now be mulling a run for governor in his home state of Minnesota. But does he really want to go there? Think about it. Coleman has put together quite a record over the last decade. [...]

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Howard Goodall's Great Dates - 1874 (Richard
Wagner)

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Bankrupt, How the 2005 Bankruptcy Law Fuels the
Current Economic Crisis

Not long ago I found a disconcerting message on my answering machine. It said simply, "Don't send me any more emails. We went bankrupt." It is a message that has been reverberating through towns in America mostly below the radar screen of the mainstream media.

The businesses filing for bankruptcy range from manufacturers to auto dealers. Some of them are national, many of them are regional, and quite a few are local, the anchors of many small towns. A lot of them are niche businesses. By that I mean they operate in specialized markets often as suppliers to larger firms.
How Bad Is It?

The increase in bankruptcies has skyrocketed in the past year. Despite all the optimistic reports about this economic crisis having turned the corner, that is not the case when it comes to bankruptcy. Last year recorded the highest number ever since the law was changed in 2005 and this year will probably exceed that.  Currently we are experiencing a daily filing rate of over 5,000!

As usual a graph tells the story:

Note the precipitous climb of the graph from a little over a thousand a day in 2006 to over five times that many per day in less than two years!

But it is not just the number of bankruptcies that is disconcerting but the size of them.  A chart of the largest bankruptcies from 1980 until the present reveals that most of them have occurred in the last few years--the latest and most notorious being General Motors.

To put this in a soundbite, notice that of the top ten, five have occurred in the last year.

While it is difficult to compare total bankruptcies in  the current crisis with those during the Great Depression because of changes in the bankruptcy laws along with monumental social changes (in the 1930s significantly more people lived in rural America making a living as farmers), the size issue does point towards an important and unsettling difference between our own times and the 1930s.

This crisis is notable in that not even during the Great Depression were such large and important corporations forced into bankruptcy proceedings. A glance at this list shows  today's crisis has hit multiple sections of our economy including auto manufacturing (two of the so-called Big Three), finance, telecommunications, energy, and transportation. Only two of these failures--Enron and World Com--are directly attributable to criminal corporate malfeasance.

In a paper on bankruptcy during the Great Depression authors Bradley and Nary Hansen point out:

As a proxy for unemployment among wage earners, we use the bankruptcy rate among manufacturers. We expect a positive correlation between manufacturing bankruptcies and wage earner bankruptcies.

The Hansens found that positive correlation in their examination of data from the Great Depression which suggests that the other shoe has yet to drop in terms of the impact of thus depression.

The Statistics

The definitive bankruptcy statistics come from the place where  bankruptcies end up--the U.S. Courts. Their June 28 report contained a chart that tells the story:

Note the dramatic increase in business bankruptcies over the last year--61%.Think about this statistic for a minute. It tells us that in the last year almost 50,000 businesses went under, which means an average of 1,000 per state.  If you use the Census Bureau statistic of an average of 16 employees per business that would mean 16,000 people per state and 800,000 nationally no longer have a place to work.

The problem with these data is that according to an influential paper by Robert Lawless and Elizabeth Warren, they dramatically undercount the percentage and number of business bankruptcies. The two point out:

Based on new research from the Consumer Bankruptcy Project, if historical measures were used, we estimate as many as 17.4% of all current bankruptcy filings involve the failure of a business. Extrapolating to all filings, we estimate that rather than the 37,000 business filings reported by the Administrative Office of the U.S. Courts (AO) for 2003, there were between 260,000 and 315,000 bankruptcies that historically would have been counted as business filings but that in 2003 were not

If we extrapolate these findings to this past year that means the number of business bankruptcies would have been in the hundreds of thousands, rather than a "mere" 50,000. Lawless and Warren point out the implications of this for public policy which:

Has set the stage for legislators and policymakers to recast bankrupt debtors from unfortunates caught up in the caprices of unforgiving market changes to overspenders responsible for their own misfortunes.

If you are a systems thinker you realize that this unemployment and bankruptcy will reverberate through the economy. The companies that went under will no longer pay taxes in their communities, lowering the tax base. The companies that they purchased supplies and materials from will have to find other customers.  The communities in which these businesses once were important institutions now must somehow find other businesses to replace those they lost.  In this economic climate that is a daunting task, which will inevitably lead communities to bend over backwards to attract these replacements, further increasing the property tax burden on those very same homeowners caught in the subprime crisis.

Meanwhile those who are unemployed will have to find other work or collect unemployment. It is doubtful many of them will find work at the same salary that they enjoyed before, so their purchasing power will decline and some of them will default on mortgage, car or credit card payments.

For corporations bankruptcy is essentially a credit crunch.  Corporations file for Chapter 11 or Chapter 7 because their debt has increased to the point where their creditors call in their loans.  It is the corporate equivalent of the mortgage crisis and like the mortgage crisis sorting out who is at fault becomes a critical policy issue.   Is there an equivalent to the subprime scandal in the rash of corporate bankruptcies?  Is there a legislative action parallel to the repeal of the Glass-Steagall Banking Act that played a role in the crisis?

There seems little question, if any, from a business point of view, that in response to the current crisis creditors have tightened their lending practices.  As financial institutions have faced their own potential demise, they have called in their loans to stay afloat.  Bankruptcies, like mortgage foreclosures, are a manifestation of an economic collapse.

Bankruptcy Law

Bankruptcy law is a formidable thicket of definitions and procedures that requires a special personality who not only knows all the nuances of the law but who also is part psychologist.  Chapter 11 aims to restructure a company so it can continue to function. If all goes according to the plan filed with the bankruptcy judge, when the bankrupt company's obligations are discharged it can emerge from the process as a survivor who has lived through some tough times.

Chapter 11 requires attorneys to apply some tough love to clients who  sometimes land in court because of profligate spending, questionable decision-making and incompetent management.  Like someone working with an addict or alcoholic you have to get a client to see the error of their ways while convincing them to undergo and stick to a treatment program that is emotionally, physically and psychologically daunting.

On the other hand for Chapter 7, which is essentially the complete liquidation of a company, the task is more for akin to that of a funeral director who must oversee the burial of companies that suffered the equivalent of a fatal accident or terminal illness. Unlike Chapter 11, Chapter 7 is The End with all the suffering and grief that entails.

Sharp legal minds will recognize that  for businesses bankruptcy is exactly the opposite as it is for consumers. For individuals Chapter 7 once was a good way to escape from under burdensome debt. People could declare bankruptcy and walk away from whatever debts they had. College students, for example, could use bankruptcy as a way of liquidating all their student loans.  Credit card addicts use it as a way of wiping clean  sometimes profligate spending. On the other hand, for businesses Chapter 11 was preferable to Chapter 7 because it at least allowed them to restructure and continue operating.

All that changed with the 2005 revision to the bankruptcy code, which received a great deal of attention for making it more difficult for individuals to file for Chapter 7. It is important to note the changes enacted in 2005 were driven by creditors, which is why the debate over its passage was sometimes bitter and controversial.

Less well known are the changes the 2005 law made in business bankruptcies. In a paper on the 2005 law in the Southern Illinois University Law Journal, Robert Lawless stated its impact on small business in no uncertain terms, arguing that changes in small business bankruptcy in the 2005 law:

Are unprecedented developments in American law. Never before has Congress singled out small businesses for harsher treatment than large corporations.

Lawless' paper is an excellent discussion of the major changes in the law, changes that slipped under the radar screen of most Americans. First, the law defined a small business as any firm with more than $2,000,000 in noncontingent liquidated secured and unsecured debt. As Lawless points out:

Empirical studies of business bankruptcies suggest this definition will cover most business filers.

What the law did to small businesses is one of the best-kept secrets of this entire economic crisis, with virtually no one in the press even calling attention to it. Because it is written for lawyers and scholars, Lawless' article can be daunting, but it certainly should be required reading for anyone researching the current crisis. Among its key findings:

• A small business debtor loses the protection of the automatic stay (1) if it is a debtor in a pending small business case, (2) if it was a debtor in a small business case that was dismissed in the previous two years, or (3) if it was a debtor in a small business case that was confirmed in the previous two years.
• By denying the automatic stay only to small businesses filing a second chapter 11, Congress expressed hostility to small businesses reorganization alone.
• The expanded reporting requirements are onerous and many are unnecessary.
• What makes the expanded disclosure requirements perhaps most worrisome is that each becomes grounds to seek possible dismissal of a chapter 11 case.
• Together, the new disclosure provisions and the tighter dismissal rules make chapter 11 much more hostile to reorganizing small businesses than the pre-2005 law.
• We can expect entrepreneurial activity in the United States to decline.

In essence Lawless tells us that in the midst of the worst financial crisis since the Great Depression, a majority of American businesses are frantically trying to keep from drowning with the weighty anchor of the 2005 bankruptcy law changes tied to their waists. It has also pushed more businesses into Chapter 7.

Curiously this was predicted back in 2002 when Baird and Rasmussen wrote about the impending demise of Chapter 11:

To the extent we understand the law of corporate reorganizations as providing a collective forum in which creditors and their common debtor fashion a future for a firm that would otherwise be torn apart by financial distress, we may safely conclude that its era has come to an end.

The Real Estate Shell Game and the Demise of Circuit City

After allowing financial institutions to engage in all sorts of shenanigans that helped to bring about the mortgage crisis and today's economic woes by repealing the Glass-Steagall Act in 1999, Congress and the Bush Administration proceeded to bestow another gift on financial institutions  with a little-known addition to the 2005 bankruptcy law rewrite.  Among those pushing for the changes was Citi, the same firm that played a huge role in the repeal of Glass-Steagall.

In the new economic world created by the repeal of Glass-Steagall, Citi, the company that began as a loan-sharking business, was now heavily involved in the credit card business, so it had two reasons to push for the 2005 changes. Most of us know about the changes in credit card debt, but few know that the law essentially  limits the ability of businesses to restructure real estate debt.  Of course, this hits retailers especially hard because most of them rent space or are paying off the costs of building  new stores.

If you wonder why so many stores in suburban malls now lie empty and why big box retailers such as Circuit City have gone under you need only read the following paragraph from testimony delivered last October to the House Subcommittee on Commercial and Administrative Law by Professor Jay Westbrook of the University of Texas Law School, Professor Barry Adler of the New York University School of Law and Lawrence Gottlieb, the Chair of the Bankruptcy & Restructuring Group at Cooley Godward Kronish LLP.

[The 2005 Law] has left retailers without adequate time and money to effectuate operational initiatives and cost cutting measures needed to resuscitate their businesses. Retailers now enter the Chapter 11 arena with little choice but to narrowly tailor their strategy to ensure that their lenders are not deprived of the substantial benefits and protections conferred by section 363(b) of the Bankruptcy Code, which authorizes the use, sale or lease of estate property outside the ordinary course of business upon court approval.

BAPCPA's constrictive liquidity provisions and the enormous leverage handed to secured lenders as a result thereof have eliminated the ability of retailers to control the Chapter 11 process as a "debtor-in-possession." Rather, the process is now controlled almost exclusively by prepetition lenders, who have essentially assumed the role of  "creditor-in-possession."

What this means is that real estate debt now is one of the "first in line" when a company gets in financial trouble. This helps to explain why the demise of companies like Circuit City came on the heels of the mortgage crisis, for their financial difficulties constituted a kind of retail business mortgage crisis.

Bankruptcy attorney Lawrence Gottlieb testified:

Today, retailers almost invariably begin the Chapter 11 process with little hope of emergence. Numerous economic factors - the credit crunch, the subprime lending crisis, the slowdown of the housing market and eroding value of retail commercial leases - have clearly contributed to this downward spiral.

Data confirm his fears:

Since the enactment of BAPCPA in late 2005, no more than two retailers have successfully emerged from Chapter 11 as reorganized entities.

With this in mind it puts the May retail statistics in some perspective. The press widely reported that May was the first time in three months that retail sales rose--this time by a paltry .5%.  Reports attributed this to auto dealers steeply discounting prices for new cars to try to deal with the bankruptcy of General Motors, the lower price of gasoline and the impact of federal stimulus funds.

Yet behind these seemingly optimistic reports lay some grim realities:

The International Council of Shopping Centers last week said May same-store sales dropped 4.6 percent from the same month last year, more than double its forecast of a 2 percent decline. Macy's Inc., Dillard's Inc. and Saks Inc. were among merchants that reported steeper declines than analysts estimated as Americans focused on buying essentials rather than discretionary items.

Note that the names of some of these retailers routinely pop up in discussions of who will be the next big retail firm to go under.

The Opposition

While he was still alive, the last politician who proudly wore the label liberal--Minnesota Senator Paul Wellstone-- almost single-handedly fought off these changes, according to the PIRG Bankruptcy Campaign.  In much the same way John Quincy Adams used the rules of the House to argue against slavery, Wellstone used the rules of the Senate to throw roadblocks in front of attempts to rewrite American's bankruptcy laws. Wellstone's objections have a certain prophetic quality about them, for he seemed to sense the economic storm that was brewing on the horizon.

In his book, The Conscience of a Liberal, (which is probably the last book in which a politician openly claimed that title), Wellstone wrote about why he opposed attempts to change the bankruptcy laws.

The vast majority of bankruptcies were caused by major medical bills, loss of job, or divorce. Current bankruptcy law was a major safety net for the middle class in America.

In a letter to then Majority Leader Trent Lott detailing his opposition he stated:

I continue to be puzzled by the false urgency for this bill.  As bankruptcy  rates fell steadily in the past two years, the rhetoric about the "crisis" in  filings became even more shrill.  But even more perversely, projected increases  in bankruptcy filings for the coming year - as a result of layoffs and falling  income due to a cooling economy - is now being used to justify rolling back the  bankruptcy safety net.  In other words, now that more working Americans will be  forced to file for bankruptcy because of circumstances beyond their control, we  should make it harder for them to do so.  I for one will have difficulty making  that argument to the newly unemployed steelworkers in my state.

Unfortunately for businesses and consumers, Paul Wellstone died before the passage of the 2005 law. It is one of history's great ifs whether that bill would have emerged from the Hill in its present form.

Instead in the Senate eighteen Democrats and one Independent voted with 55 Republicans to change the law. Only 25 Democrats voted no. Among them were Barack Obama, Charles Schumer, and Chris Dodd. Hilary Clinton was not present for the vote because her husband was undergoing open heart surgery. Joe Biden voted in favor if it as did John McCain and current majority leader Harry Reid.

The Big Picture

The repeal of the Glass-Steagall Act allowed banks and other financial institutions to engage in the shenanigans that helped to cause this crisis. The 2005 bankruptcy law changes, which were also a gift to those financial institutions, now make it more difficult for financially strapped businesses to reorganize.

It doesn't take a Harvard economist to envision the scenario.  Banks get out of control after the repeal of Glass-Steagall. To stave off financial collapse they start calling in loans.  The 2005 law makes it more difficult for businesses to restructure that debt.  The result: a thousand bankruptcies per state in the last year.  But because of the law these are not your usual bankruptcies. The new law pushes more firms into Chapter 7.

I know just such a business.  It had been in the same family for three generations, having survived the Great Depression in part because one generation essentially defied New Deal regulations.  The company did not manufacture anything that would have benefited from World War II, yet it found a way to land a few key contracts.  After the war it prospered along with the rest of the country.  The company continued to survive because of the high quality of its products and the loyalty of its customers, but it found itself trying to compete in a market that had become dominated by a few giant corporations.

The town where this business was located could be any rural Midwestern city with plowed fields extending right to the city limits. In the summer you can see the corn stalks waving in the breeze and hear the cries of pheasants from between the rows. In this flat landscape the horizon seems to extend forever, promising endless possibility and a limitless future.  The heart of Main Street still consists of brick buildings with ornate stone fa?ades sporting dates that hearken back to the 19th century carved into imposing gray granite blocks

Many of the businesses located behind the glass display windows that look out onto the wide streets are as old as the buildings themselves, having been in the same family for over a century. These people are survivors, for they weathered the dust clouds and stark realities of the Great Depression without ever closing their doors.  For people living in these towns, these old family business provide a solid foundation as massive as the stones that were used to build those stores.

These businesses are literally the heart and soul of these towns so when one of them fails it is not only the death of a business but a loss felt keenly by everyone living in those towns as keenly as if someone in their families had died. In these towns an empty storefront on Main Street stares back like a grim tombstone reminding all of their community's mortality.

Clearly this business and the others that have failed testify that  we do not yet truly understand the full dimensions of what this country faces. However there is a cultural and historical parallel that most analysts have overlooked.

A Parallel
In terms of large-scale corporate bankruptcies the closer parallel to our time is the so-called Long Depression that covered the last three decades of the nineteenth century, encompassing the famous 1893 Depression.  An article from the New York Times during those years sounds eerily familiar:

The year 1893 began in doubt and ended in disaster...Its opening found the financial community in a state of serious concern about the currency issue...Banks began to be rapidly drawn upon; contraction of loans followed; and then came the panic...The whole country seemed to be calling on New York for money...How far the decline will go, or how long it will continue, it is no use to try to guess. [December 31, 1893]

The article named the firms that had already gone down like a bell tolling the dead: National Cordage, the Reading Railroad, the Union Pacific and Great Northern. For the nineteenth century the railroads meant as much to the economy as automakers meant to the twentieth, so the parallels extend even deeper.

A second parallel is the degree of corporate concentration. In Democracy in Desperation, a history of the 1890s Depression, Douglas Steeples and David Whitten observed:

Nowhere was consolidation more rampant than in the railroad industry...By the early 1890s, the Pennsylvania, Reading, Santa Fe, Great Northern and New York Central; the Union, the Southern, and the Northern Pacific; and a few others controlled thousands of miles of track and millions in capital each. [p. 19]

A Cultural Implosion

The Long Depression of the last half of the 19th century was above all a cultural phenomenon in which America's economic, social, and political arenas simultaneously underwent a fundamental shift in values. The nation experienced a change in its collective mindset as profound as the one which led their ancestors to sever their ties with Great Britain.  Historians have labeled this shift as a transition from a rural to an industrial society.

But it involved far more than merely changing the way the nation did business. No institution, no community, no individual was immune to the change. It altered everything that they did from the way they built their houses and raised their crops to the ways they  schooled their children. In a famous 1855 painting The  Lackawanna Valley, artist George Inness captured that shift in a single image. It shows a massive smoke- belching locomotive traveling across the pristine rural landscape of the Hudson River Valley.

Note still standing amidst the stumps remains  scraggly tree visually blocking the path of the train that has emerged from the smoking roundhouse  dominating the desert-like background.

Were I to be forced to select a single contemporary cultural document that forms the equivalent of that painting I would choose the Matrix movies with their stark  vision of a future in which the differences between humans and robots have evaporated and all is under the control of a single massive computer.

Today the changes of the late 19th century are seen as historically inevitable.  But to the people of those times, they were far from that.  In fact opposition to the most dramatic of these changes in the form of the Progressive and Populist movements helped to lessen their more dramatic impacts and laid the groundwork for what I term the Second American Revolution in which  this nation  found a way to maintain its democratic commitment to the level playing field in the face of industrialization.

Today this economic crisis and asks whether we can maintain that principle as we confront the massive changes our society is undergoing.  Whether we can create the equivalents of the Progressive and Populist movements of a century ago may well determine whether our society survives. Paul Wellstone  believed that America had in its soul the ability to weather this crisis. Let us hope that he was correct.

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