Creditors' Imagined Communities and the Unfettered Expansion of Secured Lending

Abstract:     
While scholars debate the fairness and efficiency of full priority secured lending and asset securitization, lawmakers pass statutes that only expand these types of financing. Lawmakers seem compelled to err in favor of sophisticated secured creditors and against creditors in weak bargaining positions.

This article addresses why non-adjusting creditors remain on the sidelines as lawmakers embrace legislation encouraging asset securitization and expanding UCC Article 9. It argues that non-adjusting creditors' positions must be understood in relation to a socio-political climate steeped in deference to the needs of institutional creditors. Legal scholars have failed to take issues of broad socio-political climate into account in analyses of how and why the law continues to expand secured creditors' domain.

Contemporary media on finance and business evidence this socio-political climate. There is an acute lack of critical distance from financing activities that pervades journalism in the United States. This lack of critical distance in public discourse on finance is a form of disregard of economic inequality among Americans. This article hypothesizes that disregard of inequality in business reporting indicates an imagined community of investors with which even disadvantaged creditors identify. Widespread identification with an imagined community of investors enables secured creditors to present unfettered expansion of business credit as consonant with public interest both within the UCC drafting process and before the state legislatures.

Number of Pages in PDF File: 46

Keywords: uniform commercial code, commercial law, secured transactions, securitization

JEL Classification: K10, K19, K31, G10

Accepted Paper Series