The Quitter Economy:
"The reason we're seeing liquation rather than bankruptcy from so many retailers is because people are hopeless," says Dean Baker, co-director of the Center for Economic and Policy Research at the Economic Policy Institute. "We're still looking at a very bad year in 2009 and probably most of 2010, so it's very difficult to be optimistic about reorganizing and coming out of it stronger."
Liquidation has become the corporate analog to residential foreclosures—with banks slow to restructure mortgages to help out shaky borrowers, and borrowers quick to "mail in the keys" to the bank when the value of their house plummets. Foreclosures rose 79 percent in 2007 and spiked another 81 percent in 2008, to a record 2.3 million households. "It wouldn't surprise me if we approach 3 million households in 2009," said Rick Sharga, senior vice president of RealtyTrac, which compiles foreclosure data. At the same time, hedge funds, which helped foment the boom, have started mailing in their own keys. If a fund suffers losses in a year, the managers can't start earning lucrative performance fees unless the fund returns above its high-water mark. Rather than soldier on, many operators have opted to simply fold, returning money to investors.
Companies, homeowners, and money managers willing to quit rather than fight is both a symptom of the nation's deep economic woes and emblematic of the challenge the Obama administration faces. More than a mere "economic crisis" is facing Barack Obama. Our Yes, We Can president is going to have to fix a No, We Can't economy.
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