I would have thought that this conflicted with the Contracts Clause

The Contracts Clause only apples to states, but there is another point that Prof. Posner is missing. When a company is insolvent, i.e. it does not have enough assets to pay its creditors, it's speculative as to whether there are any property or contract rights to speak of.

Shorter version: I owe you $1 million, but I have no assets and minial income expectations. What property or contract rights do you have against me? I believe a court would say that you have none worth mentioning.

He appears to be saying that they do since that was the effect of the policy put in place by Roosevelt and upheld by the Supreme Court.

He's looking at it from an economist point of view. A lot of things have the effect of reducing a debt, including tax policy.

From a legal p.o.v., I don't have a problem with the government printing money, or buying companies or their assets. It's when the government starts retroactively changing the rules by picking debts to reduce, voiding employment agreements it no longer likes, butting in front of prior secured interests, etc.

We fix our mistakes, learn from our mistakes and go forward. We don't go back and change the rules.

In the 30s, the government devalued the currency and voided contract clauses that sought to bypass currency devaluation. Five members of the SCOTUS ruled that voiding such contract clauses was within the government's power to regulate the value of money.

Zingales isn't talking about revaluing the dollar or printing more dollars, he is talking about selective debt foregiveness in the financial sector. I don't see the comparison at all. The government doesn't have the power to go around and write off other people's debts for the greater good, does it?

He appears to be saying that they do since that was the effect of the policy put in place by Roosevelt and upheld by the Supreme Court.

As for the discussion at the Volokh Conspiracy it might be relevant, but it is looking at home mortgages as debt for homeowners. For a financial institution such mortgages would be considered assets, unless I am mistaken.

No Bithead, in this case we have days possibly weeks to decide on something. Chapter 11 can take years. Time is a luxury we do not have.

You're arguing practical application and logistics, and in that framework, we don't disagree. You're quite right, it would take far too long to be effective.

I'm arguing OTOH, from more of a ethical principle stanpoint.

In the 30s, the government devalued the currency and voided contract clauses that sought to bypass currency devaluation. Five members of the SCOTUS ruled that voiding such contract clauses was within the government's power to regulate the value of money.

Hmm. I would have thought that this conflicted with the Contracts Clause, but evidently SCOTUS thought otherwise. There's a discussion, initiated by Eric Posner, of the Contracts Clause and the Dodd plan over at the Volokh Conspiracy: The Dodd Plan: A Contract Clause Problem? that might be worth reading on this issue (especially the comments).

And there is a precedent for such a bold move.

Having now read the SCOTUS decision referenced, Perry v. U.S. (1935), I don't think it has anything to do with what is being proposed.

In the 30s, the government devalued the currency and voided contract clauses that sought to bypass currency devaluation. Five members of the SCOTUS ruled that voiding such contract clauses was within the government's power to regulate the value of money.

Zingales isn't talking about revaluing the dollar or printing more dollars, he is talking about selective debt foregiveness in the financial sector. I don't see the comparison at all. The government doesn't have the power to go around and write off other people's debts for the greater good, does it?

There are reasons to believe large financial institutions might be more problematic. The assets and liabilities are in complex arrangements. Many of these assets and liabilities are held by other financial institutions that might be forced into bankruptcy as well.

And while providers of concrete goods and services have been able to continue operations during reorganization, its questionable whether financial institutions, whose stock and trade is "trust," can do the same.

The short answer is we don’t have time for Chapter 11.

No.
The short answer is that government wasn't invlved in creation of those liabilities.