Broke In The Age Of Bushco

We will soon be observing the three-year anniversary of the Congress- ional passing and signage by George W. Milhous Bush of the so-called Bankruptcy Abuse Prevention and Consumer Protection Act, more commonly referred to as the Bankruptcy Bill. It passed on April 14, 2005 and became law on April 20th.

Aside from the so-called “K” Street project, the energy industry giveaways, cuts in the estate tax and cover-up of Mark Foley (as well as failing to craft 9 of 11 appropriations bills after they lost Capitol Hill in November 2006), this to me represents the single most scandalous act of the 109th Congress (lots of company in that category, I realize).

James Surowiecki of The New Yorker provides more background and tells us what has happened since (from here)…

In recent months, a lot of people have been handed financial get-out-of-jail-free cards. C.E.O.s who presided over billions in losses have walked away with tens of millions in compensation. The Federal Reserve has showered cheap money on banks and brokerages. Even Bear Stearns caught a break when, last week, J.P. Morgan agreed to quintuple the price it will pay to take over the firm. But there’s one group for whom forgiveness has not been forthcoming: ordinary consumers struggling with piles of credit-card debt. For them, escaping the burden of their bad decisions and their bad luck has become much harder.

That’s because of a law that Congress passed (the Bankruptcy Bill), which has made it more difficult for people to write off their debts. Filing for bankruptcy has become much more expensive. More important, while lower income people can still declare Chapter 7, which takes away your assets but then discharges your debts, most middle- and higher-income people now have to declare Chapter 13. That means they have to pay their creditors monthly for five years before they’re free.

And as we know, Dubya promised, not unlike the carney hustler at the circus, that this scheme would “make credit more affordable” …

So are we (better off)? That depends on your perspective. The law did slash the number of bankruptcies – they fell by sixty-two percent between 2004 and 2006. And the credit-card companies should be happy – their profits rose thirty percent between 2005 and 2007. But the law hasn’t done much for anyone else. Interest rates and credit-card fees have not fallen as promised. And for debtors life has become significantly harder: many can’t afford bankruptcy – strangely enough, it’s possible to be too poor to pay the filing fees – and many others can’t qualify. These people will either spend the next five years having their paychecks garnished or simply muddle along, avoiding debt collectors and accumulating huge interest and late fees on their credit cards.

And this Democracy Now! post, including an interview with Dem U.S. House Rep Jim McDermott, tells us…

The core of the bill was written in 1997. The House passed versions of it eight times but it usually stalled in the Senate. When the bill did pass the Senate, then-President Bill Clinton refused to sign it.

This time around (in ’05), House Republican leaders refused to consider amendments on the floor and voted down a Democratic attempt to return the bill to committee. The amendments would have forced lenders to keep fees in check, expand disclosure, and would have given extra protection to victims of identity theft.

And speaking of amendments to the Bankruptcy Bill, this incredibly detailed Daily Kos post from March 2005 by Maryscott O’Connor give us a breakdown on how they were defeated in the Senate so the bill in its entirety could be “ramroded” through Congress (as the Washington Post noted at that time – apparently, a moribund journalistic impulse from its editorial board sprung to life - the bill’s “staunchest proponents should be embarrassed that it was muscled through the House in this kind of Potemkin-democracy way. This process-or, more precisely, lack of process-is becoming routine”).

In the O’Connor post, three names appear over and over again as the amendments are defeated, and those are Tom Carper, Ben Nelson, and Orrin Hatch (and as much as I praised Sen. Charles Grassley on SCHIP over the last few months, he deserves equal parts scorn for bringing this vile garbage of a bill to hideous fruition). Hatch opposed a so-called “homestead” exemption to protect senior citizens from being forced into bankruptcy due to health-care costs because it could have also allowed our government to go after the estates of wealthy robber-baron CEOs should we try to hold them liable for their mismanagement and fraud.

Also, for anyone who wonders why Joe “Boogaloo” Biden can never seem to get it going with that presidential candidacy of his every four years, consider that, despite his numerous accomplishments in public life, he has cast some genuinely stinky votes every so often, and he did so here, opposing an amendment “…To protect service members and veterans from means testing in bankruptcy, to disallow certain claims by lenders charging usurious interest rates to servicemembers, and to allow servicemembers to exempt property based on the law of the State of their premilitary residence.”

Another note…though he is still not a well man I’m sure, Sen. Tim Johnson of South Dakota nonetheless needs to be held to account for his cowardice here also.

And going back to the Surowiecki column, he makes the following point also…

Making it harder for people to discharge their credit-card debts has other drawbacks as well. Homeowners would once do almost anything to keep up their payments on their homes, even if it meant falling behind on other debts. In the past year, though, economists have reported an increase in the number of people who are just walking away from their homes, because it’s now often easier to abandon a mortgage than a credit-card bill. (The practice has even been given a name – “jingle mail,” because people simply send their keys back in an envelope.) So the new law may very well have exacerbated the housing crisis.

I know Atrios among others has made that point before now, but it bears repeating - back to Surowiecki...

(During the ‘90s)…a tougher law would have made sense if the U.S. really had been dealing with a crisis. But it wasn’t. While the number of bankruptcies soared, the economy as a whole showed no great signs of strain; it grew briskly, creating millions of new businesses and new jobs. The credit-card companies themselves were doing fine too: between 1995 and 2004, as bankruptcies nearly doubled, their profits nearly tripled. In responding to an imaginary threat, we ended up making the economy less dynamic and less flexible. Now that hard times are here, we may find ourselves with a genuine bankruptcy crisis. But it will be one that Congress created.

And how exactly did the three individuals running for president vote on the Bankruptcy Bill? Glad you asked…

To say that this was an inopportune vote for the New York senator to miss is an understatement.

Finally, New York Times columnist David Leonhardt brings us a summary today on the economic effects of the non-prosperity brought to us by our ruling cabal, including the destruction caused by the Bankruptcy Bill (a well-written but depressing read). Lest I leave you with nothing but gloom and doom (living up to my “handle,” I know), please allow me to note that Leonhardt – with the type of reporting typically forsaken for so long by our corporate media during the reign of Bushco – tells us that the eventual way out of our mess will come with the investment in the people and infrastructure of this country that has been neglected for very nearly 30 years, primarily under Republican governance.

If that isn’t a message written in great big 20-foot-high neon letters to keep in mind this November 4th when we all do our civic duty, I don’t know what is.

Update 4/22/08: More horror stories...