Billions in bailouts for them — bankruptcy bills for us
Posted by Thomas Nephew on September 24th, 2008
As the $700,000,000,000 — or is it a trillion? — “look Ma, no strings” bailout proposal wends its way through debate in Congress, I can’t help remembering a mirror-image legislative fiasco of three years ago. From Elizabeth Warren’s summary of the Bankruptcy Bill of 2005:
Despite the very public bankruptcies of Enron, Worldcom, Adelphia, Polaroid, United Airlines, US Airways and TWA, there are no new provisions to rein in corporations that are paying millions to insiders while they cancel employee health benefits and wipe out retirement plans. Instead, this bill focuses on families, clamping down on people who have been driven to bankruptcy by job losses, by medical problems and by family break ups.
Why?
Because those are the people who owe credit card bills, and the credit card companies are the driving force behind this legislation. Some in the Senate recognize this.
The bill is more than 500 pages long, all in highly technical language. But the overall thrust is pretty clear:
- Make debtors pay more to creditors, both in bankruptcy and after bankruptcy, so that a bankruptcy filing will leave a family with more credit card debt, higher car loans, more owed to their banks and to payday lenders.
- Make it more expensive to file for bankruptcy by driving up lawyers’ fees with new paperwork, new affidavits, and new liability for lawyers, so that the people in the most trouble can’t afford to file.
- Make more hurdles and traps, with deadlines that a judge cannot waive even if someone has a heart attack or an ex-husband who won’t give up a copy of the tax returns, so that more people will get pushed out of bankruptcy with no discharge.
- Make it harder to repay debts in Chapter 13 by increasing the payments necessary to confirm in a repayment plan, so that more people will be pushed out of bankruptcy without ever getting a discharge of debt.
The Bankruptcy Bill of 2005 was among the developments leading Warren Buffett and Paul Krugman to describe the direction of the U.S. economy as one towards a “sharecropper society” or “debt peonage”, respectively.
The Democratic Party will tell you it’s clear who was to blame:
2005: McCain Voted Against Exempting Medical Debt from Bankruptcy Means Test And Against Protecting Debtors’ Homes From Being Seized As A Result Of Medical Debt. During the debate on the 2005 bankruptcy reform bill, McCain opposed a number of amendments to protect individuals forced into debt because of high medical expenses. McCain voted against an amendment that would exempt debtors from the means test if their financial troubles were caused by medical expenses, and he opposed another amendment that would have exempted from the means test individuals who have incurred substantial medical debt on behalf of dependent or non-dependent family members, such as a parent or grandparent, or who have experienced a reduction in employment status while caring for such a family member. In addition, he voted against an amendment to provide a homestead exemption of at least $150,000 of the equity in the property the debtor uses as a primary residence if the bankruptcy stems from medical expenses. [S 256, Vote 16, 3/02/05, Failed 39-58: R 0-54 D 38-4 I 1-0; S 256, Vote 18, 3/02/05, Failed 37-60: R 0-54 D 37-5 I 0-1; S 256, Vote 17, 3/02/05, Failed 39-58: R 0-54 D 38-4 I 1-0]
Links added –revealing a heaping side helping of chutzpah, because one Senator Joseph Biden voted the same way on the medical expenses exemption amendment (vote 16), and abstained on the other two. While he wasn’t an official co-sponsor of the 109th Congress’s S. 256 bill, Biden explained in a letter to the editor of the L.A. Times that the bill was one big wonderful package –“Is this bill perfect? No. But over several congresses it has earned the kind of bipartisan consensus only balanced legislation can achieve” – and had to be passed as such.
Bearing this out, Senator Cornyn (R-TX) actually withdrew an amendment limiting corporate judge-shopping, “out of respect to the managers of this bill who say that amendments to this bill would endanger its ultimate passage,” an uncharacteristically indignant David Broder reported. Broder continued,”A Cornyn spokesman told me the bill sponsors said his amendment would cost them the support of the two Democratic senators from Delaware.” They wanted, you might say, a “clean bill.”
So what? Old news.
Maybe so. But paraphrasing John Cole’s warning here, Chris Dodd, one of the flavors of the week in fighting back against the “Troubled Asset Relief Program,” might be to the financial meltdown what Joe Biden was to the “Fugitive Debtor Act of 2005.” That is, not necessarily the guy with the connections you’d want in a situation like this. As a ranking member of the Senate Finance Committee, one might fairly ask how this snuck up on him, too.
I’ll stipulate Dodd and Biden are often very good guys — on FISA, on torture, on executive power — who generally have the national interest at heart. But on issues like these they may conflate that interest with those of their big contributors and their state’s major businesses, going too far one time, not far enough the next. For my part, I still favor Senator Bernie Sanders’s checklist for dealing with this bailout power grab:
a) Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue;
b) Ensure that assets purchased from banks are realistically discounted so companies are not rewarded for their risky behavior and taxpayers can recover the amount they paid for them; and
c) Require that taxpayers receive equity stakes in the bailed-out companies so that the assumption of risk is rewarded when companies’ stock goes up.
2) There must be a major economic recovery package which puts Americans to work at decent wages. [...]
3) Legislation must be passed which undoes the damage caused by excessive deregulation. That means reinstalling the regulatory firewalls that were ripped down in 1999. [...]
4) … If a company is too big to fail, it is too big to exist. We need to determine which companies fall in this category and then break them up.
That may still be too radical for, say, the new facebook group “No Blank Checks for Wall Street“, but (a) it sounds just about exactly right to me, and (b) join up, speak up, and wait a couple of days — it may sound about right to a lot more people by then.
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NOTES: several links via old “slacktivist,” “Pacific Views” and newsrack (”In peonage to Nosferatu“) posts. Also, by way of having it handy from now on, here’s a helpful graphic comparing government bailouts since 1970. Those really big circles at the right? That’s us right now.
Category: Post. Tags: bailout, bankruptcy, democratic party, mortgage crisis.
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