In Corporations with Professor Marks, we followed the interesting story of a corporate lawyer who helped a stable Manhattan residential drug rehabilitation program acquire a similar but mismanaged program in the Bronx. The Manhattan program was in good hands with its pro bono merger and acquisitions specialist lawyer, who knew exactly how to resolve the problem of outstanding debt in the Bronx program. The debt was guaranteed by a local parish priest who chaired the Bronx program but didn’t know about the mismanagement that drained its loans:
[The lawyer for the bank that was out $30K] could see that to collect on the loan, the bank would have to try to enforce the guarantee by suing the priest in the Bronx Supreme Court. There would have to be a jury trial. From that it followed that in a charitable loan, where the priest never got any money, the bank couldn’t win, and the matter would probably be picked up by the newspapers. Why should the bank generate ill will trying to collect on a loan meant for community goodwill? (Lederman, Tombstones: A Lawyer’s Tales from the Takeover Decades)
The debt was canceled, along with the threat of suspending drug rehabilitation services for the forty community members housed and treated by the Bronx program. Information was king—which is to say, the priest was pressed by the bank until the pro bono lawyer had leave to talk shop with the bank’s lawyer who put the brakes on the loan officer’s collection. If the priest would have known that the loan was uncollectable, then he would have been off the hook on his own initiative just by standing up to the loan officer.
Going forward, loan officers might be more cautious about taking guarantees that are hard to enforce, which might mean fewer loans to nonprofits but better management and repayment by those who actually qualify. In this world, the Bronx debacle would be remembered as a point on a learning curve of strict risk assessment. The bank would be saying: get your act together according to how we’ve characterized worthwhile risk, and then we can do business.
But it is also possible that, with a small stretch to illustrate a point, someone rehabbed in the Bronx program might become a loan officer and then decide the risk to the program was worthwhile even though it cost the bank $30K. In this alternate world, the Bronx program’s mismanagement was unexpected and atypical. This loan officer might continue to give loans in similar situations, and might argue that if high risk is accepted for access to high profit all the time in the form of junk bonds and recapitalization, then maybe it is defensible to expand the reasons for high risk to include access to long-term rootedness in a community through a reputation of reinvestment in that community.
It may also be pointed out that the microfinance that won Grameen Bank a Nobel was a surprise in that people without adequate collateral for loans regularly paid them back anyway, perhaps out of a sense of honor and connection to the empowerment values of the microcredit enterprise. Why not issue limited macrocredit with the same values? (Community banks might be on this tip sooner than multinationals, but the pool of funds and ability to absorb risk is correspondingly smaller.) Here, the bank would be saying: come as you are and we’ll see what we can do, because as a community we sink or swim together.
Quiet interest in law for the people
If the second world is less likely than the first, it’s not because it’s unworkable. I know my social circle is skewed toward activists, but even still, I think many people want that relational, respectful and secure world. It’s not a matter of convincing people to want it if enough will choose it already once they see it in action. But fighting against inertia to establish persuasive, relational templates for a very complex society is hard work. Professional roles require lots of exhaustive preparation and vulnerability to those above us who are teaching the trade, and meanwhile we are trying to be good friends, spouses, parents, community members, etc. while working on side projects that were once main projects.
For those who choose to be counter-cultural, we can’t just be that—we have to acculturate, which is all-consuming in itself, and then we have to squeeze extra time and energy out of our lives to reflect and define new ways to do things. The counter-cultural part, if it’s done in a sustainable way beyond just making noise on the sidelines of society, is actually extra, and if we’re not careful, it’s just like a relationship that we lose time for, or a hobby that gets crowded out. It goes the way of side projects that were once main projects.
Then again, one piece of advice I’ve heard about moving from an excited newbie to an established hobbyist is to let the activity become a “quiet interest”—after the romance of finding a new purpose or identity, internalizing that new thing as part of our lifestyle, something that doesn’t need defense, or the approval of others, only a personally-sustained attention that ebbs and flows as we have the availability. Above becoming lawyers, we can become social engineers with law as our tool—it is possible to emerge from law school with law as our tool, instead of becoming law’s tool. And let’s not be dismayed by Miracle Max’s classic exchange with his wife in The Princess Bride:
Max, to the Man in Black: Have fun storming the castle!
Valerie, Max’s wife: Think it’ll work?
Max: It would take a miracle…