This chapter is focused on the “Secret War” in Laos, which began after the Second Geneva Accords of 1962 were signed, reaffirming Laos’ official neutrality, and ending with the signing of the Vientiane Agreement in 1973, which was designed to lay the groundwork for national reconciliation through establishing a coalition government. However, it instead eventually led to the communist Pathet Lao takeover of the country in mid 1975, and from then little-known but persistent armed conflict between communist forces and anti-communist insurgents continued after 1975. The overall goal of this chapter is to summarize the important circumstances associated with the war in Laos, something that has apparently not been done before. The war in Laos represents a tragedy for Laos and its people, regardless of what side of the political divide one was on. Those from all sides shed blood, and large numbers were displaced due to military conflict and aerial bombardment. The Secret War in Laos stretched for eleven years, between 1962 and 1973, but, as should be clear from this chapter, conflict actually raged, on and off, and to varying degrees in different parts of the country, for over fifty years, beginning in 1945.

With the emergence of modern reorganization law in the 1930s, the absolute priority rule came into being. In contrast to what proceeded it, this priority regime cashed out the value of everyone’s stake in the firm at the time of the reorganization. The fifth chapter shows that this idea emerged in large reorganizations not because of any belief in the intrinsic merit of recognizing absolute priority but only because New Deal reformers thought that such a priority rule best protected passive and unsophisticated investors from insiders. Giving each individual creditor the right to insist on being paid in full before anyone junior received anything, however, proved to be incompatible with achieving the mutually beneficial bargains that justified reorganization law in the first instance.

The Statute of 13 Elizabeth originally appeared merely to prohibit a debtor from fraudulently conveying assets in order to defeat creditors, but it served as the fountainhead of many important principles in American commercial law. Chapter 1 shows how this law came to be applied to negotiations among creditors and their common debtor. This chapter explores how it operated in the wake of the financial failure of Robert Morris at the end of the eighteenth century. Robert Morris had been one of the richest and most prominent men in the country, but he failed spectacularly and pulled many other once successful merchants down with him. This financial catastrophe drew parties to the courthouse, where the judges began with first principles.

This chapter focuses upon retail merchants and their suppliers at the start of the twentieth century. When small retailers at the start of the twentieth century encountered trouble, it fell to the credit professionals who worked for their faraway and unpaid suppliers to sort things out. These credit men, as they called themselves, did not tolerate debtors whom they deemed unworthy, but they believed that it was appropriate to give some debtors a second chance. Their solicitude for these “worthy debtors” combined notions of honor and decency with self-interest. They pressed for legal reforms to provide a check against the forces that interfered with their efforts to reach a “friendly adjustment” of debt. In the process, they changed what behavior between debtor and creditor was acceptable and what was not.

This chapter connects fraudulent conveyance principles to the practices that judges adopted during the reorganization of the Atchison, Topeka and Santa Fe and the other great railroads that failed in the second half of the nineteenth century. The benchmarks judges put in place during this era established the ground rules for bargaining among investors for the next several decades. Judges did not try to shape the outcome of the negotiations. Instead they ensured that deals were only struck honestly and in good faith. There had to be a process that gave everyone a fair opportunity to participate.

This chapter shows how reorganization law changed dramatically during the 1970s. A group of skilled lawyers and academics returned to first principles and boldly reworked reorganization law once again. In their hands, the unwritten law that governs today took its modern form. These reformers focused squarely on creating an environment that was conducive to bargaining. Judges were to provide oversight, but they were no longer to do the heavy-handed policing upon which New Deal reformers had insisted. At the same time, however, judges had to embrace the basic norms of the credit men and do more than simply ensure that everyone had a seat at the table. Bargaining had to be forthright, and parties could not conceal conflicts of interest or advance private agendas.

During the 1980s, Thomas Jackson and I showed how reorganization law took nonbankruptcy rights as it found them. It limited itself to sorting out the collective action problem that existed when a corporate debtor lacked the assets to meet all its obligations in full. The challenge was one of sorting out nonbankruptcy entitlements, ensuring that assets were being put to their highest valued use, and at the same time requiring the debtor to play by the same rules as everyone else. Although this view of reorganization law does not seem especially controversial today, it led to much sturm and drang, most notably perhaps in the spirited, but consistently civil debates that I had with Elizabeth Warren during this period.

In the 1930s, a group of New Deal reformers joined the investment bankers and the credit men to refashion the bargaining environment once again. The consensus that emerged during this decade is the focus of the book’s fourth chapter. The New Deal reformers brought their own distinctive understanding of how judges were to oversee negotiations among creditors and their common debtor. They believed that judges had to take steps to ensure that, at every turn, the bargaining process did not slight the rights of passive investors who had neither the information nor the sophistication to bargain on equal terms with Wall Street insiders.

The sixth chapter looks at reorganization practice after the Second World War. The heavy regulatory oversight that New Deal reforms imposed on large firms was unsuccessful. Government regulators showed themselves to be insufficiently nimble. And the law depended too much on judicial valuations that proved too malleable and too uncertain. Moreover, although the norms of the credit men and the emphasis on accommodating worthy debtors worked tolerably well for small businesses, these norms offered judges no easy way to find their bearings elsewhere. Nowhere was this more evident than in real estate insolvencies.