Banks and other lending institutions spend $40 million a year buying Congress. A bankruptcy bill that has passed the House and is expected to sail through the Senate proves the money-changers get what they pay for.
Once again, they've defiled the temple. The new law for the first time would give the usurious lenders of credit cards an equal claim to the remaining funds of those declaring personal bankruptcy, jostling with women seeking alimony and child care. The creditors want it both ways. They justify loan-shark type interest rates that now quickly rise to more than 20% by claiming that unsecured credit card debt is so risky. But rather than bear the consequence of that risk, they want the government to act as the enforcer of last resort exacting payment.
The booming and highly profitable credit card industry sends out 3.5 billion solicitations a year, selling consumers on the ease of obtaining unsecured debt. A blizzard of such proposals offering low teaser rates on pre-approved credit lines arrives at the addresses of the under-aged, underfinanced and sometimes the deceased. No wonder so many unqualified borrowers go broke, accounting for most of the astounding 1.4 million personal bankruptcies last year, representing $40 billion of debt. On average, those in bankruptcy earn less than $18,000 a year after taxes; they are simply working people who got in over their heads.
Some losses to poor credit risks should be the expected cost of doing business this way. The banks knew the statistics on those risks when they made loans to people without the means to repay. And it's a highly profitable business, even with deadbeats, which is why so many solicitations continue to arrive in the mail. Yet now, in an excess of greed, they want the government to fatten their already-huge profit margins by allowing them to cut into the line in bankruptcy court.
The new legislation would allow bankers to drag families deeper into debt, then compete with widows, divorcees and children for the remaining assets or wages of a bankrupt spouse. This is a family values issue--mounting debt can tear a family apart--and, admirably, Hillary Rodham Clinton has been leading the fight against this shameful display of corporate avarice. It was her outspoken opposition to this bill last year--and the threat of her husband's veto--that doomed what she called "legislation that could fail to protect the poor, elderly and unwary from unscrupulous credit practices." But this year, the banks are back, and their 313-108 bipartisan House victory is large enough to overcome a presidential veto.
