US Government Debt Different - Finance Department - University of ...

Donald S. Bernstein 23714A Comment on ProfessorMooney’s Thought Experiment:Can U.S. Debt Be Restructured?Donald S. Bernstein 1I have been asked to comment on Professor Mooney’s audacious“thought experiment” about how the public debt of the UnitedStates might be restructured, despite Section 4 of Amendment XIVto the United States Constitution, which states that the “validity ofthe public debt of the United States, authorized by law…shall notbe questioned.” Although we all hope the day never comes whenthe United States has to consider such a possibility, staring into theabyss, at least for a few moments, may help us see how best to avoidit. My perspective is that of a practicing corporate bankruptcy attorney,and, as you will see, I will draw upon analogies to the largecorporate debtors I know so well. The analogies will, of course, beimperfect, because the United States is different not only from othersovereigns, but even more so from any debtor company, no matter itssize. Still the comparisons are worth considering.Any method of restructuring the debt of the United States must bespeedy because of the chaos that would ensue if the restructuringprocess were to become drawn out, as most corporate restructurings1 The author is a partner and head of the insolvency practice at the law firm DavisPolk & Wardwell LLP and chair of the National Bankruptcy Conference.