The following bankruptcy history-related papers, arranged by abstract ID number, can be downloaded from the Social Science Research Network:

University of Wisconsin’s Bernard Trujillo: "The Wisconsin Exemption Clause Debate of 1846: An Historical Perspective on the Regulation of Debt."  (Abstract ID: 925014)


Federal Reserve Bank’s Kenneth Garbade: "The Evolution of Repo Contracting Conventions in the 1980s."  (Abstract ID: 918498)


FDIC’s Michael Krimminger: "The Evolution of U.S. Insolvency Law for Financial Market Contracts."  (Abstract ID:  916345)


Abstracts for each of these papers follows:

Bernard Trujillo, "The Wisconsin Exemption Clause Debate of 1846: An Historical Perspective on the Regulation of Debt."  (Abstract ID: 925014):

This article begins by examining the economic and political causes of the current push towards consumer bankruptcy reform. The article then re-visits a foundational moment of contemporary bankruptcy and debt collection policy: Wisconsin’s choice in 1846 to contain exemption language in its constitution. Wisconsin’s exemption clause protects some base-line amount of debtor’s property from the collection efforts of creditors in order to give the debtor a fresh start. The article examines the 1846 debate for lessons that may be relevant for the 1998 debate and concludes that strong economic and social reasons argue in favor of retaining commitment to the policy of the fresh start.


Kenneth Garbade, "The Evolution of Repo Contracting Conventions in the 1980s."  (Abstract ID: 918498):

Contracting conventions for repurchase agreements, or repos, changed significantly in the 1980s. The growth of the repo market, new uses for repos, and the emergence of new and previously unappreciated risks prompted market participants to revise their contracting conventions. This article describes the evolution of the conventions during that period, focusing on three key developments: the recognition of accrued interest on repo securities, a change in the application of federal bankruptcy law to repos, and the accelerated growth of a new form of repo – tri-party repo. The author argues that the emergence of tri-party repo owed to the efforts of individual market participants acting in their own economic self-interest. By comparison, recognition of accrued interest and the change in bankruptcy law were effected, respectively, by participants taking collective action and seeking legislative relief because uncoordinated, individual solutions would have been more costly. These developments offer important insights into how markets operate: contracting conventions that are efficient in one market environment may have to be revised when the environment changes, and institutional arrangements can change in any number of ways.


 Michael Krimminger, "The Evolution of U.S. Insolvency Law for Financial Market Contracts."  (Abstract ID:  916345):

The enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was the most significant change to the United States’ insolvency laws for the financial markets in more than fifteen years. Unlike all prior laws defining how financial market contracts would be treated in bankruptcy or a bank insolvency, the new comprehensively updated and harmonized all of the principal laws that could come into play in insolvencies of market participants, including banks, thrifts, credit unions, broker-dealers, investment banks, and other companies.

The 2005 Bankruptcy Reform Act, however, was not a new direction in American law. The special protections provided to termination and close-out netting for capital markets contracts in the new amendments simply continued an evolutionary process in American insolvency law that started with the enactment of the new Bankruptcy Code in 1978. Once the foundation for protection of the liquidity of financial market contracts had been established by 1991, American law provided the basis for effective risk management by market participants. The task of the past fifteen years has been to secure those benefits, clarify the interrelationships between different insolvency laws, and define the scope of flexibility to accommodate market developments.

It must be recognized, however, that these protections are a departure from the pari passu principle inherent in equitable insolvency laws. Nonetheless, this principle has never meant that all creditors should receive the same proportional share. Insolvency law has always recognized that creditors should be able to benefit from some characteristics of the bargain they made with the debtor before its failure. As illustrated in the article, the fundamental goal of those special protections is the prevention of the risks to the stability of the financial system that could result from a cascade of interrelated defaults if normal insolvency processes prevented termination and settlement of pending trades. As a result, there are limits to the further expansion of those protections if they are to remain consistent with the underlying public policy that supports them.

This article examines the evolution of the special protections for financial market contracts under U.S. insolvency law (including the Bankruptcy Code and the Federal Deposit Insurance Act’s protection for "qualified financial contracts") and the public policy goals underlying those protections, looks at the continuing course of that evolution in the Bankruptcy Reform Act, and provides an overview of what this evolution means for bank and non-bank insolvencies of financial market participants.


Special thanks to the folks at, who suggested we let people know of the following policies and procedures in respect of downloading papers from SSRN:

Anyone new to our system who clicks on the link to purchase the paper will be first asked to register their e-mail address on our system. This is something that is required before one can download. The registration is just a security feature and doesn’t cost anything, nor will the e-mail address be used for any other purpose but for our system to be able to recognize the user in his use of our services.

Thanks also to our firm’s part-time law clerk and full-time Northwestern U. student DeJohn Allen for helping assemble this post.

© Steve Jakubowski 2006