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Debt’s Dominion: A History of Bankruptcy Law in America, an excerpt from a new book by Prof. David A. Skeel, Jr.

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Debt's Dominion by Prof. David A. Skeel, Jr. 1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9

The Donovan and Thacher reports bore the unmistakable influence of Progressive thinking. Centered in the urban northeast, the Progressive movement of the early twentieth century sought to achieve wide-ranging social reform and often used empirical investigations to motivate the reform.15 In contrast to their sometime allies, southern and western populists, the Progressives often came from the urban elite classes, and their reforms had somewhat paternalistic flavor. Best known for the wage and working condition reforms they promoted early in the twentieth century, the Progressives included Presidents Theodore Roosevelt and Woodrow Wilson in their number. The Donovan and Thacher reform program was Progressive both in personnel and in its optimism about regulation. (Thacher’s principal lieutenant, Lloyd Garrison, is a striking illustration. Garrison later became dean of the University of Wisconsin Law School, where he helped founded the Progressive-influenced law-and-society movement.)

One of the principal contributors to the Donovan and Thacher reports was a man who would go on to become the single most important New Deal reformer on bankruptcy issues, and who will occupy much of our attention in chapter 4: William Douglas. Shortly before the Donovan and Thacher investigations began, Douglas had embarked on an extensive empirical study of New Jersey and Boston bankruptcy cases. Although Douglas has long been remembered as an advocate for the “little guy,” he strongly believed, like the other members of the Donovan and Thacher investigations, that lawmakers and courts should distinguish between deserving and undeserving debtors. Debtors who had misbehaved or were capable of repaying their creditors should not, in Douglas’s view, simply receive an immediate discharge.16

Propelled by the Donovan and Thacher findings, Senator Hastings and Representative Michener introduced the Thacher proposals as the Hastings-Michener bill in 1932. Given the shocking findings of the Donovan study and the support of the Progressive reformers, the time seemed ripe for major reform of general bankruptcy practice. But the administrative reforms were not to be. Bankruptcy professionals derailed the administrative proposals for good in 1932. The Chandler Act reforms of 1938 would bring numerous amendments, but the bankruptcy bar – or at the least, its most prominent members – would be the source rather than the target of the changes. Despite the scandals and the enormous disruption brought by the Great Depression, the general bankruptcy bar survived.

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