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I know there are people who have kind of walked away from the debate because they said, well, this does not
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Now, once that unholy coalition got formed and the expediency and politics got together and the agreement was cut, then the people who wanted this bill from the beginning started to pile on additional provisions, because there really was not an effective coalition out there fighting the bill. So now we end up with all kinds of provisions in this bill that are special interest provisions that really have no rational basis.
There was no demonstration of abuse by small businesses of the bankruptcy code. It was about individual abuse. Yet we have a whole body of provisions in this bill now making it more difficult for small businesses to reorganize under the bankruptcy laws. And I tell my colleagues that the impact of that ultimately will be that person after person after person will lose their jobs because small businesses will not be able to reorganize and continue in business to continue the jobs for those people.
So I do not know. It is difficult for me to even grab ahold of one or two or three provisions. The whole concept of this bill, the whole theory that divides poor people and rich people and says we are going to set up separate systems of bankruptcy for us, one, a pauper's court, in effect, and another a richer people's court, in effect, is just alien to anything I can come to grips with and is bad public policy.
I understand why it was expedient, I understand the politics of it, but it is sorry public policy. And that will be the most devastating legacy of this bill.
Mr. SENSENBRENNER. Mr. Chairman, I yield 1 minute to the gentleman from Arizona (Mr. FLAKE).
Mr. FLAKE. Mr. Chairman, I thank the gentleman for yielding me this time.
I rise in strong support of the bankruptcy reform legislation before us today. Many of the bankruptcy filings that do occur do originate from consumers who have been struck by sudden or unexpected financial hardship. No one wants to deny bankruptcy relief to those who truly deserve it. However, there are also consumers contributing to the upward trend in bankruptcy filing who could, with thoughtful planning and dedication, recommit themselves to repaying some of the debts they have incurred. These consumers, if permitted to simply walk away from their debts, will pass along their cost to others in the form of higher credit or tighter credit availability, increased tax burdens and higher prices for goods and services.
Now, the average American household pays about $400 a year in hidden costs associated with consumer bankruptcy. The abusers of this system, it is important to note, are not simply low-income families. In fact, many of the bankruptcy filers actually earn more than $100,000 in the year they file for bankruptcy. While this legislation has been depicted as a one-size-fits-all approach, it is highly flexible.
Mr. NADLER. Mr. Chairman, how much time is remaining?
The CHAIRMAN pro tempore (Mr. LAHOOD). The gentleman from New York (Mr. NADLER) has 11 minutes remaining.
Mr. NADLER. Mr. Chairman, I yield 2 1/2 minutes to the gentleman from Massachusetts (Mr. DELAHUNT).
Mr. DELAHUNT. Mr. Chairman, I thank the gentleman for yielding me this time.
Mr. Chairman, I want to pose the question of why did we see the spike in bankruptcy filings up until 1998 and then saw a dramatic decline of some 15 percent in the last 2 years? Well, in 1998, the FDIC, the government agency, found that as a result of interest rate deregulation, credit card companies had become more profitable and were able to extend more unsecured credit to less creditworthy borrowers.
In other words, credit card issuers were handing money out to just about everyone. Anyone with teenagers knows that because they receive bundles of credit card solicitations. In other words, people who should not have been extended credit were getting it.
This conclusion, I suggest, is supported by an astonishing fact. The median family income of filers has dropped from $23,250 in 1981 to $17,650 in 1997. And we wonder why we have a crisis. But, as the filings peaked in 1998, the credit card companies saw their profits stall and began to tighten their underwriting requirements. In the last 2 years, we have seen this decline. In other words, the invisible hands of the marketplace are working.
As a University of Maryland study has concluded, the bankruptcy crisis is self-correcting. The reason is that lenders are profit-maximizing institutions that select their own credit criteria and they responded to this unexpected increase in personal bankruptcy. I find it rather ironic that proponents who usually proclaim the benefits of the free market would seek government intervention, a remedy, by the way, which will only impact the debtors and not impose any responsibility or accountability on creditors who behave irresponsibly.
Let the market work and reject this bill.
Mr. SENSENBRENNER. Mr. Chairman, I yield 3 minutes to the gentleman from Iowa (Mr. LEACH), the distinguished former chairman of the Committee on Banking and Financial Services.
Mr. LEACH. Mr. Chairman, I thank the distinguished chairman for yielding this time to me.
Bankruptcy is an extraordinarily sensitive subject. The issue here, we must bear in mind, is balance, rather than the need for a bankruptcy law itself. After all, one of the first laws of the first Congress was a bankruptcy law, which was passed because we had debtors prisons in the United States. We ended debtors prisons, which were part of our experience as well as the European experience. We never had the pound-for-the-pound experience that was in Merchant of Venice in the European experience, but we had debtors prisons.
This bill is about balance, that is, who bears the cost, not about the principle of bankruptcy itself. I do not know if the balance is exactly right, but I am convinced its thrust is and that it is a better circumstance than current law.
I rise to stress one provision in this bill which I do not believe is controversial and was strongly supported by the Clinton administration Treasury as well as this Treasury and by the Federal Reserve, and that is the provision that relates to netting. We have a circumstance in international trade where the new phenomenon in international finance is a multi-trillion dollar trade in derivatives contracts, now over $30 trillion. These are the notional values of derivatives contracts. If they are allowed to net out, they come to less than a trillion dollars and can be managed.
So what this bill does is call for the automatic netting of derivatives contracts in the event of a bankruptcy circumstance. What this does is protect the international financial system and the domestic economy from true calamity in the event of a major derivatives party declaring bankruptcy.
[Time: 12:15]
In essence, in awkward economic times, this is the overwhelmingly most important provision of the bill. On its basis alone, this bill should be adopted.
I thank the distinguished chairman of the Committee on the Judiciary for putting this provision in his bill. I am very appreciative that this step will become one of stabilizing rather than destabilizing the international economy. I urge my colleagues to support the bill.
Mr. NADLER. Mr. Chairman, I yield myself 4 minutes.
Mr. Chairman, I rise in opposition to this bill which will harm American families, American businesses, especially small businesses, harm children of divorce and open the door to even greater predatory practices by lenders. It is a wish list of every big money special interest group. It does not protect debtors, and that should be no surprise, because families in bankruptcy cannot make large campaign contributions, cannot buy ads in the paper, cannot hire fancy K Street lobbyists. This bill is the poster child for the need for campaign finance reform, the ugly result of much too much special interest money in politics.
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Why is this bill being rushed through? Is it because there is a crisis in bankruptcy? No, there is not. Chapter 7 filings have declined by almost 20 percent in the last 2 years. Declined. Although studies bought and paid for by the credit card industry a few years ago told us that up to 25 percent of chapter 7 debtors could repay a substantial portion of their debts, the only independent study, sponsored by the American Bankruptcy Institute, found that only 3 percent could do so. There is no crisis warranting the most radical rewrite of the Bankruptcy Code in a quarter century.
The bill does not protect debtors and families. If it does, ask yourself why every consumer organization, every organization representing debtors, women's groups, children's advocacy groups, civil rights groups, seniors groups, bankruptcy judges, trustees and bankruptcy professionals have consistently criticized this bill for the last 4 years? How dare the sponsors of this bill tell us that it will improve the custodial mother's ability to collect child support because they make child support a priority when they know perfectly well that the priority expires with the bankruptcy discharge and Mom will then have to compete with the bank's collection department in State court with no priority. Why do the agencies that collect child support for State tax departments support this bill while those agencies who try to help mothers collect child support all uniformly oppose this bill? If this bill is good for business, why have some of the top judges and big business reorganization specialists all told us that this bill will make it harder to reorganize a business under chapter 11 and force more viable businesses into chapter 7 liquidation? As the economy slows down, is this any time to make business survival more difficult?
If this bill is about personal responsibility, why have so many consumer protection amendments been rejected, watered down and ruled out of order so we cannot even debate these issues? Why does the bill contain a special interest provision to allow a small group of wealthy investors to avoid having a legal judgment against them enforced in our courts as required by international law? Why does the bill let anti-abortion terrorists abuse the Bankruptcy Code to evade lawful court judgments through costly and lengthy litigation? Why does the bill fail to place a real cap on the millionaire's loophole, the unlimited homestead exemption? Why were we not even allowed to offer amendments and debate these issues on the floor?
If this bill is so pro-family, why was an amendment by the gentleman from California (Mr. SCHIFF) which would have corrected the bill so that a battered, legally separated spouse would not have to count the income of her husband as her own even if she never saw a nickel of it taken out of the bill? Why would the bill require that she use this phantom income to repay her creditors and deny her relief when she cannot? Why should a landlord be allowed to evict tenants despite the normal bankruptcy stay? Will homelessness make people better able to repay their debts?
Does any Member think that credit card companies will really return the extra profits this bill will give them over to consumers in the form of lower interest rates? How much of the profits that the credit card companies realized from interest rate deregulation have been passed on to consumers in lower interest rates? Have credit card interest rates gone down with mortgage rates and car rates?
Why have the conferences been held in secret? Why have industry lobbyists had more access to the deliberations than most members of the Committee on the Judiciary, even those appointed as conferees?
This bill is rotten and, like the bipartisan Garn-St Germain bill of a decade and a half ago that caused the savings and loan crisis and cost the taxpayers half a trillion dollars, this bill will come back to haunt every Member who votes for it when people lose their jobs, lose their families and are crushed under mountains of debt.
I urge rejection of this bill.
Mr. Chairman, I yield 1 minute to the distinguished gentleman from Virginia (Mr. SCOTT).
Mr. SCOTT. Mr. Chairman, there are a number of reasons that have not been pointed out why this bill is a bad bill, the reasons of why we have a fresh start, a tradition that if someone is inundated by debts so that they can cash in all they have and get a fresh start. Some people incur debts through no fault of their own, a business reversal, illness, loss of a job. There is no balance in this bill.
We have heard if you can pay a substantial portion of your bills, you ought to pay those. There is nothing in this bill that limits it to a substantial portion. If you can pay $167 a month out of whatever your bills are, millions of dollars, you have got to pay that $167 for the next 5 years. This will lead to frustration and desperation suffered by many Americans. If our goal were to increase the number of people that go berserk and shoot their colleagues, this is the kind of frustration and desperation that would lead to that kind of result.
I would hope that we would keep our traditional bankruptcy laws so that those who are totally inundated with debts and can never get out can get a fresh start.
Mr. CONYERS. Mr. Chairman, I am delighted to yield 2 minutes to the gentlewoman from California (Ms. LEE).
Ms. LEE. Mr. Chairman, I thank the gentleman from Michigan for yielding me this time and also for his lifetime work on behalf of people in our country.
I rise today in strong opposition to this anticonsumer, antiworking family, antiwoman, anti-low income, antichild bankruptcy legislation and to support the Democratic alternative which provides for true bankruptcy reform. Many Americans, as we know, were left out of the economic boom of the past decade. They are saving less and accumulating more debt. To add insult to injury, the credit card companies are using aggressive, unsolicited marketing techniques to offer huge lines of credit to consumers who cannot afford it, including college students who have no income. All of these factors contribute to a system where more and more Americans are struggling just to get by, and some need to rely on bankruptcy as a safety net. This has nothing to do with being irresponsible or not wanting to pay one's bills.
Many working families are forced into bankruptcy when emergencies arise, including loss of a job, the loss of a spouse or long-term illness. Instead of helping families get back on their feet in these cases, the Republican reform bill would make declaring bankruptcy under chapter 7 or 13 much more difficult. This is just plain wrong.
The domestic support provisions in H.R. 333 are inadequate. Hundreds of thousands of women who are owed child support or alimony would be harmed financially under the Republican bill. The bill does nothing to protect women owed child support by men who declare bankruptcy or those who need to declare bankruptcy themselves due to financial hardship when their former spouse or noncustodial parent fails to pay child support. Additionally, this bill fails to ensure that parents and children will have first claim on the bankruptcy filer's funds rather than big business collection departments. This bill says to the majority of ordinary Americans that we are abandoning them on behalf of big-time corporations. It is wrong.
The Democratic alternative is sensible and is fair. The Republican bankruptcy reform bill is punitive.
Mr. CONYERS. Mr. Chairman, I proudly yield the balance of my time to the gentleman from Ohio (Mr. KUCINICH).
The CHAIRMAN pro tempore (Mr. LAHOOD). The gentleman from Ohio is recognized for 1 minute.
Mr. KUCINICH. Mr. Chairman, this bill is bad for consumers and bad for business. Recently in Cleveland, the district I represent, a major American company sought to reorganize under chapter 11 of the bankruptcy laws. LTV, one of the most important employers in Ohio, one of the most strategically important companies in the country, was compelled to seek bankruptcy protection because of factors beyond their control, unfair and illegal dumping of cheap foreign steel and inadequate Federal enforcement of antidumping laws.
But if H.R. 333 had been law, LTV would not have been able to reorganize under chapter 11. Instead, the company would have been dissolved and the assets liquidated. Thousands of jobs
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This is only one of the many extreme changes in the law that H.R. 333 would make. It is a bad bill, but especially as we may be on the verge of a recession at a time when more businesses will need to reorganize or else face layoffs and liquidation, this bill closes the door to reorganization. It virtually guarantees more layoffs, more liquidation, and more ruin for entrepreneurs, both large and small. Defeat H.R. 333.
Mrs. MALONEY of New York. Mr. Chairman, it is with great regret that I come to the floor in opposition to this bankruptcy bill.
Mr. Chairman, I supported this legislation when the House last took a recorded vote on bill.
Unfortunately, the bill that we are voting today lacks a critically important amendment that has been added in the Senate.
In the Senate, Judiciary Chairman HATCH and Senator SCHUMER of New York have agreed to a compromise amendment that resolves the issue of the treatment of perpetrators of abortion clinic violence who declare bankruptcy.
Bankruptcy reform is important but clinic bombers should not be allowed to excuse penalties assessed on them by the courts through bankruptcy.
This is growing problem that the majority is ignoring.
More than 2,400 acts of violence have been reported at family planning clinics since 1997. These include bombings, arsons, death threats, kidnapings, asaults, and other acts of harassment.
I will carefully follow the progress of this issue in conference and I strongly urge my colleagues to add the Hatch-Schumer compromise.
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