Posts tagged with: bankruptcy

Blog author: jcarter
posted by on Friday, June 6, 2014

bankruptcyThe Bible has a lot to say about the principles behind bankruptcy law, says T. Kyle Bryant. In the Old Testament, God gave Moses various laws concerning the poor, lenders, borrowers, and debt forgiveness.

From these passages, we get a glimpse of how God makes provision for people who cannot pay their debt after a certain number of years. Beside discouraging lenders from making “bad” loans (ones that could not be repaid in seven years), the law prevented overwhelming debt from ruining a person’s life forever. In this way, God’s law provided for a type of bankruptcy protection every seven years (and every 50 years for land).

The United States bankruptcy scheme is complex, but the similarities between it and the biblical system are striking. Both systems served to protect the relatively powerless consumers and give predictability and stability to the creditors. For example, in the Israelite law, debtors could be released from their debts every seven years—no matter the amount of the debt, it was gone. This prevented common debtors from having to sell themselves into slavery in perpetuity to pay for their debts. On the other hand, it gave a stable and predictable risk profile to creditors seeking repayment of those debts. Lenders could temper their desire to make risky loans with the knowledge that any chance of repayment after the seventh year was uncertain.

In a similar way, the Bankruptcy Code allows a person freedom from their debt every eight years. Chapter 7 of the Bankruptcy Code governs (in large part) individual debtors and the discharge of a person’s debt. If someone has received a discharge of their debt under Chapter 7, they must wait eight years before they can file for bankruptcy again. This echoes the biblical pattern of debt being wiped away every seven years. (But whether this tempers creditors’ risky lending practices is another question).

Read more . . .

250px-Bankruptcy_monopolyAaron M. Renn’s reflections on the implications of Detroit’s bankruptcy are worth reading, especially as relate to the DIA, a topic of some previous interest over the last year or so:

In the case of the DIA, the city owns the museum and the collection. Hence the question of whether or not art should be sold to satisfy debts. If it were typical separately chartered non-profit institution, this wouldn’t even be a question.

At this point, I’d suggest cities ought to be taking a hard look at whether they own assets like museums, zoos, etc. that should be spun off into a separate non-profit entity. Keep in mind, the tax dollars that support the institutions can continue flowing to it. But this does protect the assets in the event of a bankruptcy.

I think Renn’s advice is spot on, but I would also caution that Detroit’s experience might not be replicable elsewhere. As DIA director Graham Beal put it previously, the DIA’s dilemma is “singular and highly complicated.”

How many cities own art collections worth potentially billions of dollars? Not too many, I’d suspect. And just what would the motivation be for city governments to reduce assets that could be leveraged in bankruptcy negotiations? What is in the best interest of the institution may not be in the interests of the city government and pensioners.

The DIA might be something like Detroit’s “Get out of Bankruptcy Free” card. (Or if not “free,” then less scathed than otherwise. And that’s not counting the loss of cultural treasures, of course!) But even so it’s a card that can only be played once, and it’s a card that other cities might not have.

Blog author: jballor
posted by on Monday, December 16, 2013

Detroit Institute of Arts - IMG 8923

Christians often talk a big game about “redeeming” the culture.

I think the current dilemma facing the Detroit Institute of Arts (DIA) amid the city of Detroit’s bankruptcy provides a great opportunity to back up that talk with something concrete. And there’s perhaps no more concrete way of redeeming something, buying it back, than from the threat of bankruptcy.

That’s why I’ve started a crowdfunding campaign to redeem the DIA. The federal judge overseeing the proceedings wants to raise $500 million to privatize the DIA and keep it in Detroit. He’s gathered together a number of charitable foundations. But individuals have a role to play, too. A former Wayne State University professor has donated $5 million. That leaves $495 million to go by my count. And that’s the goal for the “Redeem the DIA” campaign at Razoo.

For more on the need to privatize the DIA, read my Acton Commentary from last July.

Blog author: jballor
posted by on Tuesday, December 10, 2013

Most commentators, apart from Virginia Postrel and the like, seem to think that it would be tragic for the city of Detroit to lose the art collection at the Detroit Institute of Arts (DIA) in the city’s bankruptcy proceedings. I agree that liquidating or “monetizing” the collection and shipping the works off to parts unknown like the spare pieces on a totaled car would be tragic.

Diego Rivera - Detroit Industry MuralsBut at the same time, there’s something about the relationship between the DIA collection and the city government (not to be confused with the people of the city itself) that would seem to warrant the city government’s loss of this asset. When you are a bad steward, even what little you have will be taken from you.

Now one could argue about the details of the DIA’s day-to-day operations, the compensation package for its director, and so on. But apart from these details of stewardship of the DIA itself, the real object lesson in bad stewardship has to do with the city government. Rife with structural corruption, cronyism, and incompetence, the city has been unable to provide the basic services and protection that it is responsible for, despite the best efforts of so many individuals working within the city government. So when the city cannot do the primary things it needs to do, it should lose the privilege of overseeing the secondary things, at the very least until it proves itself to be a responsible steward.
(more…)

Blog author: jballor
posted by on Monday, August 19, 2013

La nouvelle JérusalemDarryl Hart has a bit of a go at “the hyperventilation that goes on in some neo-Calvinist circles when folks talk about the power of the gospel to redeem all of life,” using the woes of the city of Detroit as a trump card.

Hart wonders why he hasn’t “seen too many posts from the transformers about Detroit’s decline and bankruptcy.” I don’t know if The Gospel Coalition is going to have anything say about Detroit’s bankruptcy, but Tim Keller does reflect more generally on the future of cities in America:

Some of the most troubled, such as Detroit, are going to have to make drastic changes, essentially shrinking their urban footprint deliberately and redesigning themselves as a smaller municipality. But that will not be the norm in the U.S. I believe that immigration and broader cultural factors still make cities highly desirable destinations for the most ambitious and innovative people, and that will be crucial in continuing the rise of cities.

(more…)

Blog author: jballor
posted by on Monday, August 12, 2013

Visigoths sack RomeThe travails of Detroit’s bankruptcy and the implications for the Detroit Institute of Arts (DIA) continue to garner speculation about the place of art in society and the value of the DIA to the city, both now and in the future.

Emergency manager Kevin Orr has “formally engaged Christie’s to appraise a portion of the city-owned multibillion dollar collection at the DIA.” John Fund at NRO has advised that even a limited number of paintings could be sold, keeping the remainder of the collection intact. This would allow for a reformation of the institution itself, “to make the art in the DIA more relevant to the people who actually live near it.”

Meanwhile, Graham Beal, the director of the DIA, plays a dangerous game of brinksmanship in the media. By Beal’s account, any change to the DIA would result in the shuttering of the institution: “If works of art are sold by anybody, that breaks the operating agreement — then that money ceases to come from the three counties, then the DIA will effectively be closed down.” Such claims continue to be made despite the real danger of liquidation by order of a federal judge and regardless of the realities of the institution’s operating budget. For fiscal year 2011, the DIA had an operating excess of nearly $22 million.

But Beal doesn’t seem inclined to give any quarter to talk about changes to the DIA. Thus he’s called suggestions like mine to “privatize” the DIA “a bit of a fairy tale.” But if anyone is living in a fantasy land, it’s those who think the DIA will be immune to the political turmoil surrounding Detroit. Rather than galvanizing around efforts to save the DIA, political and civic leaders in Detroit seem increasingly intent on looting the collection: “The Van Gogh must go,” said Mark Young, president of the Detroit Lieutenants and Sergeants Association. “We don’t need Monet – we need money.” The combined interests of the city’s creditors and pensioners might just be enough to sink the DIA. As Philip Terzian writes, “the financial claims of creditors might well have greater weight than the principle of a distinguished art collection in Motown.”

Barbarians are at the gates of the DIA, and the director fiddles. The best thing for a thriving DIA would be to become fully independent, but by all accounts Beal is uninterested in pursuing such options. Having gained a spot at the public trough, the DIA seems loathe to give it up, even if it means endangering the future of the institution.

First they came for the Picasso. Then they came for the Van Gogh. Then they came for the Rivera…

Blog author: jballor
posted by on Tuesday, August 6, 2013

4109902429_491e5d15d3Photo Credit: Patrick Hoesly via Compfight cc

Following up on last week’s proposal and discussion about the future of the Detroit Institute of Arts in the midst of the city of Detroit’s ongoing budgetary woes, arts commentator Terry Teachout penned a piece for the WSJ about the need for Detroit’s leaders to step up: “Protecting Detroit’s Artwork Is a Job for Detroit.”

Among other things, Teachout writes, “Any argument to keep Detroit’s masterpieces in Detroit has got to make sense to Detroiters who think that pensions are more important than paintings.” Teachout goes on to explore a couple such arguments, but the most salient point is that Detroiters themselves are the best ones to make such arguments.
(more…)

Blog author: jballor
posted by on Wednesday, July 31, 2013

DetroitInstituteoftheArts2010B

In today’s Acton Commentary, “It’s Time to Privatize the Detroit Institute of Arts,” I look at the case of the DIA in the context of Detroit’s bankruptcy proceedings.

One of my basic points is that it is not necessary for art to be owned by the government in order for art to serve the public. Art needn’t be publicly-funded in order to contribute to the common good.

In the piece I criticize Hrag Vartanian for this conflation, but this view is in fact pretty common and well established. In the Journal of Markets & Morality, David Michael Phelps reviews Art in Public: Politics, Economics, and a Democratic Culture by Lambert Zuidervaart (Cambridge, 2011), which as Phelps puts it, concludes that “direct subsidies are warranted both in terms of the government’s responsibilities and society’s needs.” Phelps ably dissects the numerous problems and complications with such a view.

The case of the DIA and the various responsibilities of public and private entities certainly is complex. As Graham W. J. Beal, the DIA’s director, put it in the NYT yesterday, the DIA’s situation is “singular and highly complicated.”

(more…)

Blog author: jcouretas
posted by on Friday, July 19, 2013

In an interview with Vatican Radio, Acton Rome office director Kishore Jayabalan offers perspective on the bankruptcy filing yesterday by the city of Detroit. Jayabalan told the network that Detroit is “really a city that’s on its knees.” Failing to fix its fundamental problems, he continued, the city must now change its “political and economic” infrastructure to come back from the brink, and that right now, much of the population has “given up.”

Listen to the interview by clicking on the media player below:

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Blog author: jwitt
posted by on Wednesday, September 16, 2009

Memo to documentary filmmaker Michael Moore: Free markets didn’t cause the financial crisis. The biggest culprits were government planners meddling with the market. That’s the message of Acton’s newest video short.



So why on earth is Michael Moore (Capitalism: A Love Story, Sicko) so eager to route even more power and money through Washington? Centralized planning is economic poison. Doubling down isn’t the cure.

(Also, Acton’s resource page on the economic crisis is here.)