Credit Card Congress

Jonathan Alter on the bankruptcy "reform" bill, which Bush signed yesterday:

[T]his bill, like so many others moving through Congress, comforts the comfortable and afflicts the afflicted. Worse, it provides for no distinction between those who get unlucky in Las Vegas and those who get cancer. The law was literally written by the credit-card industry, the same folks whose siren-song targeting of high-risk borrowers caused much of the bankruptcy problem in the first place. First Congress puts a half trillion in budget deficits a year on the plastic for our grandchildren to pay off. Then it sells out the average American to predatory lenders, who have the run of the place. History should remember the 109th as the Credit Card Congress.

I've heard all sorts of frightening rumors and speculation about this bill (for example, an alleged provision that debtors will be required to pay off credit card companies before they can pay new child care bills), but I really haven't had time to scour all 501 pages to confirm them. On the whole, it seem like a mistake, a new legal way to screw the poor in the name of "growth". But as the Christian Science Monitor points out, poor people ain't stupid:

"The thing that makes people file for bankruptcy is not the statute. It's lack of money, and that happens whether the bankruptcy code says X or Y," he says. "If you can't buy food, you don't worry about the niceties of the statute."

But some experts believe this new bill is going to create an even larger number of "informal bankruptcies" - people who simply move and leave no forwarding address, change their telephone numbers or hang up on creditors, and restructure their financial affairs to hide their assets.

"This new bill is erecting obstacles to formal bankruptcies so the likely response is that there will be more informal bankruptcies," says Lawrence Ausubel, an economics professor at the University of Maryland in College Park who has studied the practice of informal bankruptcies.

Even so, I see this bill as encouraging predatory lending and irresponsible credit extensions, since now it seems creditors have more ways to squeeze blood out of a stone.

I should note that this bill was sponsored by Sen. Chuck Grassley, an active member of the Family. I'd like to see him explain to Jesus why he's fallen in love with the money changers.