Bankruptcy filings by U.S. businesses soared 38 percent in September from a year earlier in an ominous sign of a weakening economy, says Wolf Richter, editor of the Wolf Street blog.
Last month’s bankruptcies reached 3,072 to bring the year-to-date total to 28,789 and marked the eleventh straight month of increases from 2015, according to data from the American Bankruptcy Institute.
“Rising bankruptcies are an indicator that the ‘credit cycle’ has ended,” Richter says in a commentary about the limits of the Federal Reserve’s ability to help an economic recovery. “The Fed’s policy of easy credit has encouraged businesses to borrow – those that could. But by now, this six-year debt binge has created an ominous debt overhang that is suffocating these businesses as they find themselves, against all promises, mired in an economy that’s nothing like the escape-velocity hype that had emanated from Wall Street, the Fed and the government.”
The financial crisis of 2008, when Lehman Brothers Holdings Inc. filed for the biggest bankruptcy of all time, triggered the worst recession in 80 years and a major jump in bankruptcy filings. Bankruptcies peaked at 9,004 in March 2010 and proceeded to fall until November 2015, Richter says.
The restaurant industry has been hit particularly hard with bankruptcies following the filings of Garden Fresh Corp., Cosi Inc., Logan’s Roadhouse.
“Nine restaurant companies representing 14 chains have filed for bankruptcy since December: Garden Fresh Restaurant, Restaurants Acquisitions, Cosi, Logan’s Roadhouse, Fox & Hound, Champps, Bailey’s, Old Country Buffet, HomeTown Buffet, Ryan’s, Johnny Carino’s, Quaker Steak & Lube, and Zio’s Italian Kitchen,” Richter says.
© 2021 Newsmax Finance. All rights reserved.