Debt's Dominion.

• Author: Johnston, David Cay
• Position: Protection racket: how bankruptcy went from saving the average Joe to shielding the CEO

DEBT'S DOMINION by David A Skeel, Jr. Princeton University Press, $35.00.

IMAGINE THE GOOD FORTUNE TO BE AN author whose history of bankruptcy in America is published just as Enron collapses, the credit card industry clamors to get tough on the customers it addicted to plastic money at 26 percent interest, and while the garbage that passed for accounting at Waste Management still fouls the air.

America could use a competent history of bankruptcy law right now because the excesses of the past two decades are about to bring us a new round of debtors seeking refuge from their creditors, some desperate and some manipulative. One bill favored by credit card banks would let them hound some debtors for life, adding late tees every month and denying the fresh start that bankruptcy has traditionally brought. This bill would make it much harder for the average uninsured Joe to get out from under crushing medical bills, while still leaving open the gaping loopholes in the law that helped facilitate some of the current disasters and serving as an easy out for large corporations whose filings, the result of gross mismanagement, protect fat executive salaries.

If ever there was a moment ripe for a serious examination of bankruptcy in America, this is it. The last history was published in 1935, making a solid history of how we got here most welcome just now. Author David A. Skeel Jr., a University of Pennsylvania law professor, promises readers the untold story of now bankruptcy evolved as a uniquely American way of dealing with debtors who cannot pay their bills, a story that he writes was shaped by political forces and an elite section of the bar.

At the founding of the Republic, Alexander Hamilton and the Federalists pressed for a new idea of bankruptcy as renewal, not a time for debtor's prison. Hamiltonians wanted to encourage credit to spur economic expansion, while the Jeffersonian Republicans wanted to protect farmers from foreclosure by bankers. This debate over how to deal with the insolvent and balance the interests of creditor and debtor, Skeel writes, has been waged for more than two centuries. A host of schemes have been tried, modified, and abandoned by Congress. Now, as we learn to live in a global economy, the American idea of bankruptcy as renewal rather than ruin is gaining currency in other developed countries, but the down side of that system is becoming all too apparent in the United States. A critical examination of the confluence of forces--asset inflation, accounting rules, and changing partnership laws--is desperately needed. Unfortunately, Skeel's book isn't it.

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