TPM Cafe: Opinion

Professor Todd Zywicki, apologist-in-chief for the bankruptcy amendments, famously testified before Congress last February that not a single word needed to be changed in the bankruptcy bill — not so much as a misplaced comma, an incorrect cross-reference, an ambiguous phrase or simply a bad idea. It was, he told Senator Feingold, all perfect. Representative Sheila Jackson-Lee had introduced an amendment to provide some protection for victims of natural disasters. She was concerned about whether people caught in, say, a hurricane could waive paperwork requirements if their documents were buried in ten feet of mud or modify income calculations so that disaster relief payments wouldn’t be counted, but her proposal was voted down on party lines. According to Professor Zywicki, the bill — without the amendment — was perfect.

Now the Big Hurricane has hit, and a number of people are taking another look at whether bankruptcy relief for families and small businesses will be adequate. The New York Times suggested Monday morning that Katrina victims be given a reprieve on meeting the requirements of the law — and Professor Zywicki went on the attack. His complaint? The NYT editorial, according to Professor Zywicki, has the temerity to speak of the bankruptcy bill as “special interest politics.” Gee, the NYT is writing about a bill written by credit industry lobbyist Jeff Tassey and George Wallace, and, as the lobbyists cheerfully put it, “shopped” to a friendly congressman, and then backed up with tens of millions of dollars in campaign contributions. Special interest politics, indeed!

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When the credit card companies are calling the shots, who is a victim of a natural disaster? Only those who can prove up just the right mix of circumstances.

Senator Vitter, R-LA, finally put in a bill on Friday to amend the bankruptcy laws. Victims of Katrina will face months without income, unexpected expenses while they take refuge, and damage when they return. Data show that following a hurricane, there’s about a 50% increase in the growth in bankruptcy filings — and more in places where flooding has been a problem. So Senator Vitter wants to help out — but who exactly will he help? Is it the victims or the creditors?

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Finally, last night the Republican senator from Louisiana submitted his relief bill for the victims of Katrina — and his relief bill for the credit card companies. Yes, Senator Vitter says that there is a problem with applying the new bankruptcy law to the victims of a hurricane. (Loud cheering — he gets it!) But then he says that a teaspoon of help is enough to bail out these families. (Loud booing — he doesn’t get it after all!)

Poor Senator Vitter. He’s caught in the terrible dilemma of offering help either to the families washed out by Katrina and or to the credit card companies that want to wring every last dollar out of these people. Yesterday Senator Vitter threw his support to the credit card companies.

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Last week I asked how anyone could be opposed to giving a small break to the victims of Hurricane Katrina in the form of relief from the new provisions in the bankruptcy amendments. After all, these aren’t the people who the credit industry claimed to be targeting. These are people who have lost homes, cars, and jobs. They don’t need the credit counseling required by the new law, they may not be able to find the six months of pay stubs required by the law, and they shouldn’t be saddled with the extra litigation and uncertainty that this complex new statute imposes. So why not delay the new law for these people?

David Donnelly gives one reason: James Sensenbrenner, the chief supporter of the bankruptcy bill in the House, owns nearly a quarter of a million dollars in bank and credit card stocks. The bankruptcy bill was written by the credit industry lobbyists to help the credit industry; delay, even for a few thousand Katrina victims, costs the industry money.

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As more people begin to look at the squeeze on middle class families, the impending changes in the bankruptcy laws look worse and worse. Both Republican Senator Vetter and Democratic Senator Feingold have proposed exemptions and modifications for Katrina victims. The details differ, but the central message is the same: bankruptcy is an essential middle class safety net, and the new amendments tear holes in that net.

Now a second movement is emerging: As Washington reflects on the impact of bankruptcy amendments that were written by credit industry lobbyists, states are recognizing that they have some power to help their citizens. Jason just noted that in a very quiet move, New York has just increased its homestead exemption from a laughable $10,000 to a more plausible $50,000 (and perhaps $100,000 for couples).  The consequence is that a family can declare bankruptcy in New York and have a better chance of saving their home — even after the federal laws do their best to make bankruptcy harder.

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Senator Feingold and 15 cosponsors have introduced legislation similar to that introduced yesterday in the House. The proposal is straightforward: delay the bankruptcy for hurricane victims, and make permanent amendments to the bankruptcy laws to give more leeway for courts to deal with the victims of natural disasters. A little help for people who will be struggling hard to get back on their feet.

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On October 17, about the time the lights are scheduled to go back on in New Orleans, the new bankruptcy law is supposed to go into effect. Whatever else anyone can say about this bill, everyone agrees on one fact: the law makes it harder for anyone to go bankrupt. Sure, the credit industry says the means test will snag only people with above-median incomes, but literally hundreds of provisions in the bill apply to every family, not just those with higher incomes. Filing fees will increase, paperwork will increase, credit counseling will become mandatory, consumer education will be required, the amounts to be paid to confirm a plan in Chapter 13 will go up — and on and on.

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Common sense says that bankruptcy filings rise when families are wiped out after a hurricane. And the data back it up. Peter Gosselin at the L.A. Times gives the first report of a data analysis put together by Professor Robert Lawless at University of Nevada Las Vegas. I’ll write more on this after my class this morning, but take a preliminary look for now.

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Congress is calling an emergency session for next Tuesday to do something about the aftermath of Katrina. Representatives Conyers, Jackson Lee and Nadler have an idea: let’s take another look at the bankruptcy legislation. It seems that in the haste to adopt the credit industry version of the bill, some amendments to cut a little break for the victims of natural disasters were defeated. Now everyone is scurrying to re-read the those amendments to see just how hard this new bankruptcy law will fall on families and small businesses thrown into financial chaos in the wake of Katrina.

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Newsweek counts eight ambassadorships handed out to $100,000-plus donors since January. Add in Bush’s appointee from Friday, billionaire Roland Arnall, and that brings us to a Big Donor Appointment Rate of one every 24 days. Billionaires, get your bids in now.

Roland Arnall paid in at least $600,000 to President Bush’s causes to earn him an ambassadorship to the Netherlands, but where did he get all that money? Should he have the Ambassadorship — or should it go to the people his company is accused of cheating?

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