Copyright 2002 The Washington Post
The Washington
Post
May 19, 2002, Sunday, Final Edition
SECTION: EDITORIAL; Pg. B07
LENGTH: 760 words
HEADLINE: A
Bipartisan Outrage
BYLINE: David S. Broder
BODY:
That hardy perennial, the bankruptcy
reform bill, is back again. Five years after banks, credit card companies and
auto finance agencies began to press Congress to let them tighten their grip on
borrowers, and 14 months after both the House and Senate passed the kind of
bills the creditors want, another showdown looms.
This week negotiators
for the two chambers are scheduled to meet again to see if they can iron out the
last remaining difference between the versions. If they can, the measure will
likely rocket through the House and Senate and be ready for President Bush to
sign. If they can't, the crowded congressional calendar may force the sponsors
to try again next year. In this case, there is every reason to hope for
gridlock.
Gridlock would doom me to write yet again next year on a topic
that has been widely ignored except on the business pages in the press. It would
require me to rail again about the way in which business lobbying -- lavish
campaign contributions to President Bush and pressure from big home-state bank
and credit card employers on such Democratic senators as Tom Daschle and Joe
Biden -- has made this a bipartisan outrage.
But writing repetitious
columns is a small price to pay if a bill as filled with inequities as this one
is delayed or ultimately defeated.
The issue the conferees will wrestle
with this week is marginal to the main thrust of the legislation. Sen. Charles
Schumer of New York, an abortion-rights advocate, wants to preserve a
Senate-passed provision that would prevent people convicted of blockading
abortion clinics from avoiding their fines by filing for
bankruptcy.
Rep. Henry Hyde of Illinois, an
abortion foe, says the Schumer amendment would penalize even
peaceful protesters and is far too broadly written. Months of negotiation
between their staffs have failed to yield a compromise. The pressure on both men
to back off enough to give the banks and credit card companies what they want is
intense. So far, neither has been willing to yield.
Credit card
companies and the banks that own them claim they are being ripped off by people
who run up unsecured debt and then file for bankruptcy to avoid paying. This
bill would basically say that any family or individual whose income at least
equals the state median and who has $ 100 a month left over after paying for
food, clothing, housing and transportation would have to work out a five-year
payment plan with the bank rather than starting over with a clean slate.
Ostensibly, it is designed to catch wealthy scofflaws. But it is likely
to be felt most harshly by middle-class individuals who file for bankruptcy --
1.4 million of them last year. Their average income was less than $ 25,000, and
the chief factors that forced them into bankruptcy were layoffs, health problems
and divorce -- not profligate spending.
Do some people cheat? Of course.
But a look at how the credit-card companies market their products will tell you
they are making so much on the high interest they charge on unpaid balances that
they are eager to sign up anybody. When I first wrote about this issue three
years ago, I marveled that 3.45 billion -- that's billion, not million -- card
offerings had been mailed the previous year. Last year, the number jumped to 5
billion. Between 1997 and 2001, the number of active subprime or risky accounts
tripled.
Does that sound like an industry that is trying to avoid
trouble or one that loves to lure people into debt and then put the clamps on
them?
The inequities in this bill are rampant. A favorite millionaires'
dodge is to buy a mansion in Florida, Texas or one of the handful of other
states with unlimited homestead exemptions before filing for bankruptcy. Then
they can stiff the creditors while living in luxury. The Senate voted for a
uniform $ 125,000 cap on homestead exemptions, but the House negotiators would
not hear of it, even when the cap was raised to $ 1 million.
In
conference, Sen. Herb Kohl of Wisconsin dropped his effort to set a uniform cap
and accepted a compromise that limits the homestead exemption only on property
owned for less than 40 months or, in a bow to Enron, by someone convicted of
financial fraud. Otherwise, the feds would set no ceiling on homestead
exemptions.
This is a bill that will squeeze money from laid-off
workers, divorcees and families plagued by health problems, while offering a
great escape mechanism for foresighted millionaires.
That's why it
deserves to be hung up on a really irrelevant issue.
LOAD-DATE: May 19, 2002
