The politics of bankruptcy

The credit card industry has pumped millions into Congress. Here's the payback.

By Tim Grieve
Published March 9, 2005 1:43PM (EST)

Remember those post-election polls, the ones that may or may not have said that voters gave George W. Bush four more years because they cared about "moral values"? We just went back to take a look at some of those polls, and we found something truly remarkable. So far as we can tell, the pollsters who conducted them didn't find a single voter whose choice in the 2004 election was driven by a desire for "bankruptcy reform."

And yet, here we are, just two months into the new Congress, and the Senate is about to pass the most significant reforms to federal bankruptcy law in 25 years. Why? It's not because the people are clamoring for it. It's not because George Bush or John Kerry made it a major campaign issue. It's because people with money -- people with money who give money to politicians -- want to make more of it.

Try as we might, we can't come up with any other explanation for making bankruptcy reform such an early-term priority -- or for the way that some Democrats are rolling over on procedural votes to make the passage of the bankruptcy bill a certainty now. The bill makes it harder for individuals to wipe out their debts in bankruptcy. Banks and credit card companies say the reform is necessary to prevent rampant abuse by Americans who want to live high and then stiff someone else with the bill; consumer groups say the bill takes away the protection bankruptcy provides for families who find themselves deep in debt because of a job loss, illness or some other personal calamity. (In another example of red state voters' paying the price for voting against their own economic interests, the bill may hurt most in the 10 states with the highest rates of bankruptcy filings: Utah, Tennessee, Georgia, Nevada, Indiana, Alabama, Arkansas, Ohio, Mississippi and Idaho.)

White House spokesman Trent Duffy has the usual world-turned-upside-down talking points on the bill: "The administration supports the passage of bankruptcy reform because ultimately this will lead to more accessibility to credit for more Americans, particularly lower-income workers," Duffy tells the New York Times.

It will also lead to greater profits by the credit card companies, but Duffy didn't say so much about that. It hadn't occured to us that the credit card companies were in such financial trouble; they seem to be able to afford all the postage it takes to fill our mailbox with come-ons for easy credit every day. But that's not all they've been filling. Over the last six years, credit card companies have pumped more than $24 million into the pockets of federal candidates and the political parties, according to the Center for Responsive Politics. When the Senate votes on the bankruptcy bill this week, they will finally get what they paid for.

Tim Grieve

Tim Grieve is a senior writer and the author of Salon's War Room blog.

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