As the United States contends with the economic crisis triggered by the COVID-19 pandemic, federal bankruptcy law is one tool that can be used to resolve the financial distress suffered by individuals and businesses. When implementing this remedy, the question arises whether the law’s application should be viewed as limited to addressing private debt matters, without regard for the public interest. This Article answers the question by looking to modern U.S. bankruptcy law’s first forebear, the 1841 Bankruptcy Act, which Congress enacted in response to the depressed economic conditions following the Panic of 1837. That legislation created a judicially administered system that nationalized bankrupts’ assets, some of which featured prominently in the business of slavery. This Article focuses on a specific episode from New Orleans, which at the time was the nation’s third-most-populous city, had the nation’s largest slave market, and had one of the nation’s largest money markets. One of the bankruptcy cases commenced in that city involved the administration and sale of Banks Arcade, which was a premier commercial exchange for auctioning enslaved Black Americans. This history about how the federal administrative state restructured one component of the U.S. slavery complex should prompt critical reflection on how present-day bankruptcy law manages the fallout from a financial crisis. This Article concludes that courts have the authority to permit the public to advocate for its interests in distressed assets redeployed through the federal bankruptcy system.
This builds and expands on previous work by Prof. Pardo, including Bankrupt Slaves, but beyond "[r]ecounting this history about the role of the federal bureaucratic state in restructuring one component of the nation’s slavery complex is not just about ensuring that we remember the sins of the past, although that would be a valid end in itself", this article looks to how that ignominious history, which included the sale of at least 523 enslaved individuals under the auspices and aegis of the federal courts, can and should inform current bankruptcy law and practice.
While its does stretch the imagination to consider that the antebellum bankruptcy elite of New Orleans, which included Judah Benjamin, who would eventually serve as the Secretary of War for the Confederate State, could have even thought to consider any policy interests, let alone those of Northern abolitionists or enslaved people themselves, in the administration of the Banks Arcade bankruptcy estate, that the seeds of the idea that broader federal policy concerns were planted in the 1841 Bankruptcy Act is compelling.
A recent example of where these seeds may have started to bear fruit, is the creation of a Consumer Creditor's Committee with a dedicated Consumer Representative in the Ditech Holding Corporation bankruptcy.