On this episode of Policy in Brief, Oren Cass and Chris Griswold take a look at the damage done to workers and local communities when businesses go bankrupt. Jobs are destroyed, wages are reduced, and local tax bases are devastated. When financial markets push firms to assume excessive risk in pursuit of higher rewards, workers and communities are left holding the bag.

Oren and Chris propose a series of reforms  to the bankruptcy code that would prioritize workers and small businesses in the event of a corporate collapse. The goal: better align risk and reward by increasing the potential costs of bankruptcy and risky financial strategies, promoting more responsible investor behavior.

Further Reading: 

• American Compass policy brief: Pro-Worker Bankruptcy Reform
• Employee Costs of Corporate Bankruptcy (John Graham, Hyunseob Kim, Si Li, & Jiaping Qiu; Federal Reserve Bank of Chicago)
• Confronting Coin-Flip Capitalism (Oren Cass, American Compass)
• A Guide to Private Equity (American Compass)
• Foreign Investors Have Been Big U.S. Stock Buyers (Deborah D’Souza, Investopedia)
• Private Equity: Overvalued and Overrated? (Daniel Rasmussen, American Affairs)