Mad Glee-actica: The Virtues of Extreme Recycling
posted by Jonathan Lipson
I don’t watch much TV. So, I am hardly the person to make strong claims about its quality or trends. That said, I find it fascinating that three of the best shows of the past few years—Battlestar Galactica, Madmen, and Glee—share a really odd structural feature: They have all taken ridiculously bad ideas from cringe-able eras and turned them around completely, made them not only fresh, but evocative, disturbing, intriguing.
They are, in short, evidence of the virtues of extreme recycling.
Just imagine the pitch meeting for Galactica: We’ll take what has to have been one of the dumbest pop-culture packing peanuts ever and make it stronger, faster, better: How about an allegory about civil liberties and faith after 9/11 using Cylons and vats of goo?
Or what about Madmen: Let’s explore the most virulent cancers on our culture with lovingly pornographic attention to detail, to demonstrate the complex symbiosis among banality, beauty, evil and exculpation. Madmen is the money shot of commodity fetishism, proving once again the truth of Chomsky’s admonition that if you want to learn what’s wrong with capitalism, don’t read The Nation, read the Wall Street Journal.
And Glee? Well, all I can say is: Don’t Stop Believing.
Which may lead you to this question: No one really takes the “and everything else” part of CoOps’s desktop mantra seriously, so what the frak does this have to do with law?
Two things. First, it is a way to understand what’s wrong with the system-salvation provisions of Dodd-Frank. Second, it describes what (imho) courts will have to do with the likely coming wave of lender liability (and similar) claims falling out from the credit crisis.
Dodd-Frank has already seen more than its fair share of attention, much of it centered on the instability built into the resolution powers given to the executive branch for systemically important (TBTF) firms. No doubt, these powers might be threatening to capital market participants long accustomed to profound (and in some cases profoundly expensive) government obeisance. Not only do we now know that the federal government, through the Financial Stability Oversight Council, really has the power to do what it said it couldn’t do (but sort of did anyway with Bear Stearns, AIG, GM, and, depending on your version of the story, Washington Mutual): we also know that the scope and use of these powers is almost entirely unpredictable ex ante.
What is extreme here is the failure to recycle, the failure to learn from history that lasting, effective regulatory restructuring requires years of investigation, analysis and horse-trading. The Dodd-Frank Congress has tried to do in about a year what it took Roosevelt and his Congresses nearly a decade to do. We may be faster, but I am not sure that we are that much smarter. (I note, here, the one important exception to this criticism: the creation of the Consumer Financial Protection Bureau. While it was not based on massive, multi-year studies of the sort William O Douglas developed to support securities and bankruptcy reform, it nevertheless was backed by outstanding empirical and normative legal scholarship from two people (Warren and Bar Gill) who—while they may have an axe to grind—understand how properly to hone blades).
A form of extreme legal recycling I think we may see will involve the rebirth of the lender liability lawsuit. During the 1970s and ‘80s—you know, when we had proto-Galactica and Journey—courts occasionally held lenders liable to borrowers or their creditors for enforcing their rights too aggressively (e.g., foreclosing for mere technical defaults), actions that may have been within the four walls of the contract, but nevertheless lacked “good faith.”
These cases largely collapsed under the convulsive contractarian logic of Frank Easterbrook in Kham & Nate’s No. 2: Lender liability, Easterbrook told us, is an oxymoron, and courts have no business policing aggressive, but contractually contemplated, collection practices.
This may have made sense in the early 1990s, when lenders were banks trying to collect loans from borrowers whose technical defaults may (or may not) have signaled serious risk of payment default. Today, I have argued to anyone who will listen, the world is fundamentally different: We have a Shadow Bankruptcy System, which means, in part, that we have sophisticated, aggressive (largely) unregulated investors (hedge funds, etc) trading in a (largely) unregulated secondary market for distressed debt. With credit derivatives, equity short sales, and a variety of important gaps in securities, bankruptcy and commercial law, opportunities for opportunistic behavior, I have argued here, appear to be rich and alluring.
Since Dodd-Frank won’t deal with this–Too Small To Matter?–the solution, I have also argued, is another kind of recycling: build a newer, faster, better form of good faith review of distress investor behavior. I don’t need to get into the details here. Suffice to say, if you didn’t like “good faith” in the lender liability cases of the 1970s and 1980s, I’ve got something else you might want to think about.
To paraphrase Faulkner: The past isn’t prologue—it isn’t even past.
Extremely Recycled Cylon courtesy of Wikimedia
November 2, 2010 at 10:25 am Tags: Bankruptcy, battlestar galactica, Corporate Finance, Corporate Law, dodd-frank, glee, good faith, lender liability, madmen, shadow bankruptcy Posted in: Bankruptcy, Contract Law & Beyond, Corporate Finance, Just for Fun, Movies & Television Print This Post