[PEN-L:30282] RE: bankruptcy bill and the real estate bubble

["Devine, James" <jdevine@xxxxxxx>]

Title: RE: [PEN-L:30281] bankruptcy bill and the real estate bubble

 some news analysts writing on this bill say that it won't pass (again) because the Congresscritters want to get campaign contributions from the Credit Card companies next year, too. As long as it's being considered, the bucks roll in.

Jim

-----Original Message-----
From: Michael Perelman
To: pen-l@xxxxxxxxxxxxxxxxxxx
Sent: 9/16/2002 10:38 AM
Subject: [PEN-L:30281] bankruptcy bill and the real estate bubble

The interesting kicker comes at the end.

Published on Friday, September 13, 2002 in the Boulder Daily Camera
Credit-Card Companies Manipulate Congress by Molly Ivins

AUSTIN, Texas - Sometimes you have to connect the dots, and sometimes
the connections just hit you over the head.

Congress is on the verge of taking a final vote on the bankruptcy bill,
the product of a five-year effort by credit-card companies to stack the
law in their favor and against average citizens. But you will be
relieved to learn that our lawmakers have thoughtfully included a
loophole that leaves six states, including Florida and Texas, free to
continue providing extraordinary advantages to rich citizens from all
over the country who need to shelter their gelt from bankruptcy
proceedings. The millionaire protection amendment.

And this is about to happen despite the fact that one of the bill's most
important sponsors, a congressman with financial problems, got a
$447,500 loan - as The New York Times genteelly put it, "on what
appeared to be highly favorable terms," from (guess who? Right again) -
a major credit card company.

Rep. James P. Moran, Democrat of Virginia, got the loan from the MBNA
Corp. of Delaware in 1998, the world's largest independent credit card
agency, just one month before he signed on as the lead Democratic
sponsor of the bill, giving it the appearance of a bipartisan effort.
Quite a coincidence, eh?

And that's just what Rep. Moran said. "The timing of my loan was wholly
coincidental with the co-sponsorship of bankruptcy reform."

I find that entirely believable, since I live in Texas where such
coincidences lie thick on the ground. Just last summer, our governor
Rick Perry appointed a former Enron executive to the state Public
Utilities Commission, to better to regulate our energy market. The very
next day, Perry got a $25,000 check from Kenny Boy Lay, but Perry
explained, it was "totally coincidental."

You would think Moran would have a little more sympathy for Americans
caught in the toils of the bankruptcy laws - his own financial problems
stem from running up debts on his credit cards, stock market losses and
paying for cancer treatment for his daughter. Ninety-percent of all
bankruptcies are caused by getting sick, getting laid off or divorce.
But then, most Americans don't get half-million-dollar loans that
qualify as the largest mortgage package given by MBNA to any single
debtor that year.

Naturally, most congresspeople get their money from credit card
companies in the form of campaign contributions, rather than loans. And
that makes it so much better, you see. MBNA was President Bush's largest
corporate contributor in 2000 and, since 1990, banks alone have made
contributions of over $106 million to Congress, the parties and
presidential candidates. The Center for Responsive Politics website
(opensecrets.org) has the gory details on who got how much with links to
current contributions.

Bankruptcies have been rising in recent years, but there is no evidence
of abuse of the system by average Americans or that it is hurting the
card companies. Credit-card debt and credit-card companies profits are
rising, too.

This card-company bill institutes a harsh "means test" and makes it much
harder to get the "fresh start" status from bankruptcy. Average citizens
will be pushed into five-year repayment plans, leaving less for child
support. The bill will particularly affect women.

But whose fault is it that bankruptcies are rising? The Public Interest
Research Group points out that the four leading banking regulatory
agencies - the Federal Reserve Board, the Office of the Comptroller of
the Currency, the Office of Thrift Supervision and the FDIC - just
issued a report in June documenting predatory lending practices. The
credit card companies are making loans to consumers already in debt
trouble, not to mention offering cards to teenagers. Some credit-card
companies charge monthly minimum payments so low consumers wind up owing
more than they did before, instead of ever paying off their credit-card
debts.

Citibank has just agreed to pay the Federal Trade Commission $200
million to settle predatory lending charges. So why reward the very
companies that are causing the problem? Is this what Congress intended
with its "Corporate Responsibility Act"?

The bill does contain a provision to keep Kenny Boy and Company from
taking advantage of the millionaire's loophole: You can't use it if
you've been convicted of securities fraud. Great, but as you may have
read, it is extremely difficult to get convictions for securities fraud.

In Texas, at the end of the tech bubble, the S&L frauds and after the
stock market dive, people here are suddenly scrambling for high-end
houses. They trade up from the $1 million house to the $5 million or $10
million. The state's "homestead" exemption protects the family home from
the claims of debtors. It's a good thing for most people, but has become
another form of fraud by the big rich.

This bill stinks. Write, phone, fax or e-mail your representatives, and
remind them that they work for you, not the credit-card industry.

--

Michael Perelman
Economics Department
California State University
michael@xxxxxxxxxxxxxxxxx
Chico, CA 95929
530-898-5321
fax 530-898-5901