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A Growing Wave of Bankruptcies Threatens U.S. Recovery

Courtesy of Pam Martens

Big Name Corporate Bankruptcies in 2020 with Hundreds of Smaller Ones Unreported

A Small Sampling of Big Name Corporate Bankruptcies in 2020 with Hundreds of Smaller Ones Unnoticed

By Pam Martens and Russ Martens

The bankruptcy epidemic in the U.S. started last year, long before any COVID-19 pandemic had touched down. U.S. retailers ranked among the greatest casualties of 2019 with a total of 17 bankruptcies. Big names among the retail bankruptcies in 2019 included Gymboree on January 16; Charlotte Russe on February 3; Things Remembered on February 6; Payless ShoeSource on February 18; Charming Charlie on July 11; Barneys New York on August 6; and Forever 21 on September 29.

Now, the retail shutdowns resulting from COVID-19 have simply accelerated what was already a growing trend of companies seeking relief from debts they cannot pay back. Some of the major bankruptcies this year mean permanent, not temporary, job losses.

The 118-year old J.C. Penney Co. had 846 stores when it filed for bankruptcy on May 15 of this year. It said it plans to permanently close 242 of those stores. On May 19, Pier 1 Imports, which filed for bankruptcy in February, said it plans to liquidate all of its remaining 540 stores.

Hundreds of store closings in malls spell escalating job losses and more pain in the commercial real estate market. According to Moody’s, shopping mall vacancies had already reached an historic high of 9.7 percent at the end of March. Distressed mall owners will, in turn, put stress on big Wall Street banks which will have to take more loan loss reserves on their exposure to commercial real estate. That, in turn, will mean that the big banks, which have an outsized presence in consumer and business lending, will start trimming credit card lines to consumers and credit lines to businesses. In fact, that process has already begun. That, in turn, will stunt consumer spending, which, unfortunately, represents two-thirds of U.S. GDP.

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