So while Enron, Tyco, and Worldcom are splashed across the airwaves and the front pages, as the stock market plummets and people’s retirement funds are wiped away in a matter of weeks, what’s Congress doing? Why, making it harder for poor people to declare bankruptcy, of course.
A “bankruptcy reform” bill has been moving through Congress for the last year, and the NYTimes reports that it’s finally cleared a conference committee. The most salient point in the bill is that credit card debt would not be discharged in a bankrupcty; it would still have to be paid off.
It should surprise no one that the moving force behind the legislation is MBNA, one of the more aggressive mass-marketers of credit cards — particularly to the “sub-prime” borrowers who have worse credit and fewer financial resources. These people, of course, pay higher rates, tend to carry balances, and default more often. The plan was that the fees these borrowers paid would offset the higher default rate. It didn’t work out that way, and MBNA has successfully gotten Congress to bail out its damaged business plan.
Some interesting points from the Times that should be skipped by those who still respect the legislative process:
- “Ranked by employee donations, MBNA was the largest corporate contributor to President Bush’s 2000 campaign.”
- “The company acknowledged that it gave a $447,000 debt-consolidation loan on what critics viewed as highly favorable terms to a crucial House supporter of the bill only four days before he signed on as a lead sponsor of the legislation in 1998. Both MBNA and the lawmaker, Representative James P. Moran Jr., Democrat of Virginia, have denied that there was anything improper about the loan.”
- The compromise that moved the bill forward was the elimination of a provision that would have allowed anti-abortion demonstrators to get out from under paying court fines and judgements. Just what that provision was doing in the bill in the first place would make an interesting discussion on its own.
I don’t know if the bankruptcy system does or doesn’t need reforming. But this bill looks like Congress and the financial industry are perfectly willing to step on the necks of the very people whom they helped trip up in the first place.