No debate on bankruptcy

All the Democratic presidential candidates now say the 2005 Bankruptcy Act was a bad idea. Americans looking at their credit card bills probably agree.

By Andrew Leonard
January 16, 2008 10:34PM (UTC)
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Although Tim Russert did his best to make it look like Hillary Clinton supported the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) in the Las Vegas Democratic debate Tuesday night, the charge won't quite stick. But as noted at the best online clearinghouse for all things credit-related, Credit Slips, just the fact that the bankruptcy law was even mentioned is notable for its timeliness.

Russert observed that both Sens. Clinton and Edwards had voted for a 2001 bankruptcy bill that didn't ultimately pass but could be considered the precursor to BAPCPA.


RUSSERT: Senator Clinton, you voted for the same 2001 bankruptcy bill that Senator Edwards just said he was wrong about. After you did that, the Consumer Federation of America said that your reversal on that bill, voting for it, was the death knell for the opponents of the bill. Do you regret that vote?

CLINTON: Sure I do, but it never became law, as you know. It got tied up. It was a bill that had some things I agreed with and other things I didn't agree with, and I was happy that it never became law. I opposed the 2005 bill as well.

Note that Clinton does not say she voted against the bill (which passed 74-25). She was actually the only senator who failed to vote at all. Her husband underwent heart surgery the day of the vote, so we'll give her a pass. She did release a statement at the time that made her position clear.

This bankruptcy bill fundamentally fails to accord with the traditional purposes of bankruptcy, which recognize that we are all better off when hard-working people who have suffered financial catastrophe get a "fresh start" and a second chance to become productive and contributing members of society. With the passage of this legislation, which makes obtaining this fresh start more expensive and more difficult, we are ensuring that many responsible Americans will continue to be buried under mountains of debt, and unable to take back control and responsibility for their lives.

As if on cue, on Wednesday, J.P. Morgan Chase, while in the middle of acknowledging its own billion-dollar subprime writedown, also announced that the "charge-off rate" for its credit card business continued to rise in December, bumping up to 3.89 percent, and could go as high as 4.5 percent in the first half of 2008.

The charge-off rate reflects credit card debts that have been delinquent for over 180 days or are otherwise uncollectable. While even a 4.5 percent charge-off rate is still well below the average rate for the four years previous to the passage of BAPCPA, the steady rise is a bad sign. As the 2008 recession deepens, Americans who fall behind will have a harder time than ever catching back up. Meanwhile, the big banks, which seem to have relatively little trouble making a fresh start by raising a few billion more dollars of fresh capital from global markets whenever they feel like it, will trundle right along.


UPDATE: Credit Slips has more.

SECOND UPDATE: Salon readers provide more clarity. Bill Clinton's original bypass surgery took place on Sept. 6, 2004. On March 20, 2005, the day the bankruptcy bill passed, he had followup surgery to remove scar tissue and fluid from his chest.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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