Promoting entrepreneurship through bankruptcy laws and Justice Scalia
Can bankruptcy ever be considered a good thing? If you subscribe to United States Republican presidential candidate Donald Trump's take on business, bankruptcy is always a good thing. The topic of filing for bankruptcy was again brought up in the latest Republican Party debate among potential U.S. presidential candidates. In nearly every debate, front-runner Trump's firms and its multiple bankruptcies have been used by his opponents to score points. Trump has, most successfully on Saturday, reminded the electorate that the four bankruptcies his companies filed for were within their legal rights. In previous debates he said, "I used the law four times and made a tremendous thing. I'm in business. I did a very good job."
Trump has argued that the law allows for him to declare bankruptcy under "chapter 11," named for its place in U.S. federal bankruptcy law, and actions taken within the bounds of the law are all fair game. Opponents argue that if Trump has been forced to file bankruptcy four different times in the past 25 years as chief executive of his companies, the American people may not want to "hire" him as the chief executive of the United States.
To be fair, Trump's bankruptcies have all been "reorganization bankruptcies," meaning they were taken as a last resort to stave off shuttering the companies in question. In each instance the companies reemerged from bankruptcy, albeit with Trump losing major ownership stakes in each firm. The ability of U.S. companies to easily file for bankruptcy is actually one of the cornerstones of the U.S. economy. It allows for entrepreneurs to take risks. If those risks pay off, a new business emerges, hires new employees and ultimately adds to the tax base. If the risks do not pay off, the company is unable to pay its vendors and lenders, all of whom either renegotiate their initial terms or write-off the losses altogether.
Turkey's bankruptcy laws are far more stringent than those of the United States. Not only does it take several years for corporations to file for bankruptcy in Turkey, the debts of the companies often follow directors, sometimes for decades. Another obstacle for business owners in Turkey is that most companies are sole proprietorships. Personal bankruptcies are even more difficult to emerge from, leaving business owners riddled with debt and preventing the launch of new ventures.
This is one of the reasons why Turkish banks are so profitable. Banks are able to more quickly garnish wages and repossess personal property to collect on debt. Bad debt collection rates in Turkey, while currently lower than in the past, are among the highest among Organisation for Economic Co-operation and Development (OECD) countries. Debt is a matter of personal pride among many, making purchasing of bad debt a lucrative business for secondary owners of the debt.
Perhaps one of Trump's inadvertent contributions to the Turkish economy and broader global economy may be his unabashed defense of bankruptcy laws and the debate it has spurred among legislators. Although it pains me to say it, Trump may have a point.
Another important take-away from the Republican debate on Saturday was the winner of the Iowa caucuses, Ted Cruz, reminding the American people that the employment rate in the U.S. is at near 40-year lows. While headlines tout the miraculous recovery of the U.S. economy, Cruz highlighted the dire straits the "working class" find themselves now forced to navigate. As the South Carolina primary draws closer, the number of candidates continues to dwindle. Last week I had predicted New Jersey Governor Chris Christie would drop out following the New Hampshire primary and he did. At this point, Dr. Ben Carson, who received only 2 percent of the vote in New Hampshire should drop out, but will not. Carson appears to be using the primaries as a spring board on the paid-speech circuit, and will only drop out once he is no longer invited to the upcoming debates.
U.S. Supreme Court Justice Antonin Scalia passed away Saturday afternoon prompting speculation as to who will fill Scalia's seat on the high court. The "champion of conservatism," Scalia will be remembered for many major opinions, most notably the "Citizens United" case. "Citizens United" effectively lifted all restrictions and limits on campaign spending by corporations. Scalia wrote a concurring opinion and joined the majority in lifting said restrictions. It will be interesting to see whether or not an objection to the case will be brought now and how it will impact the current election.
I want to leave you with a Scalia quote, which if sincere, may absolve him of many of the sins his retractors indict him with: "The judge who always likes the results he reaches is a bad judge."
Trump has argued that the law allows for him to declare bankruptcy under "chapter 11," named for its place in U.S. federal bankruptcy law, and actions taken within the bounds of the law are all fair game. Opponents argue that if Trump has been forced to file bankruptcy four different times in the past 25 years as chief executive of his companies, the American people may not want to "hire" him as the chief executive of the United States.
To be fair, Trump's bankruptcies have all been "reorganization bankruptcies," meaning they were taken as a last resort to stave off shuttering the companies in question. In each instance the companies reemerged from bankruptcy, albeit with Trump losing major ownership stakes in each firm. The ability of U.S. companies to easily file for bankruptcy is actually one of the cornerstones of the U.S. economy. It allows for entrepreneurs to take risks. If those risks pay off, a new business emerges, hires new employees and ultimately adds to the tax base. If the risks do not pay off, the company is unable to pay its vendors and lenders, all of whom either renegotiate their initial terms or write-off the losses altogether.
Turkey's bankruptcy laws are far more stringent than those of the United States. Not only does it take several years for corporations to file for bankruptcy in Turkey, the debts of the companies often follow directors, sometimes for decades. Another obstacle for business owners in Turkey is that most companies are sole proprietorships. Personal bankruptcies are even more difficult to emerge from, leaving business owners riddled with debt and preventing the launch of new ventures.
This is one of the reasons why Turkish banks are so profitable. Banks are able to more quickly garnish wages and repossess personal property to collect on debt. Bad debt collection rates in Turkey, while currently lower than in the past, are among the highest among Organisation for Economic Co-operation and Development (OECD) countries. Debt is a matter of personal pride among many, making purchasing of bad debt a lucrative business for secondary owners of the debt.
Perhaps one of Trump's inadvertent contributions to the Turkish economy and broader global economy may be his unabashed defense of bankruptcy laws and the debate it has spurred among legislators. Although it pains me to say it, Trump may have a point.
Another important take-away from the Republican debate on Saturday was the winner of the Iowa caucuses, Ted Cruz, reminding the American people that the employment rate in the U.S. is at near 40-year lows. While headlines tout the miraculous recovery of the U.S. economy, Cruz highlighted the dire straits the "working class" find themselves now forced to navigate. As the South Carolina primary draws closer, the number of candidates continues to dwindle. Last week I had predicted New Jersey Governor Chris Christie would drop out following the New Hampshire primary and he did. At this point, Dr. Ben Carson, who received only 2 percent of the vote in New Hampshire should drop out, but will not. Carson appears to be using the primaries as a spring board on the paid-speech circuit, and will only drop out once he is no longer invited to the upcoming debates.
U.S. Supreme Court Justice Antonin Scalia passed away Saturday afternoon prompting speculation as to who will fill Scalia's seat on the high court. The "champion of conservatism," Scalia will be remembered for many major opinions, most notably the "Citizens United" case. "Citizens United" effectively lifted all restrictions and limits on campaign spending by corporations. Scalia wrote a concurring opinion and joined the majority in lifting said restrictions. It will be interesting to see whether or not an objection to the case will be brought now and how it will impact the current election.
I want to leave you with a Scalia quote, which if sincere, may absolve him of many of the sins his retractors indict him with: "The judge who always likes the results he reaches is a bad judge."