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CounterPunch
August
20, 2002
The Politics of Bankruptcy
Punishing
the Poor to Bail Out the Credit Pushers
by Ralph Nader
When the current Congress convened last year there
were lots of promises to curb predatory lenders that peddle credit
on outrageous terms to poor, elderly and unsophisticated borrowers.
Not only is Congress reneging on its
promises, but it is rushing to reward the lenders whose scams
have devastated low, moderate and middle income families and
forced many into foreclosures and bankruptcies.
Congress' gift to the predatory lenders
is a scam artists' dream under the guise of "bankruptcy
reform." The sponsors hope that this "lenders' relief"
bill can be shoved through Congress in the last days of the session--before
the American public realizes its elected representatives are
rewarding the banks, credit card companies, finance companies
and other financial corporations which have provided the Congress
nearly $30 million in campaign contributions to promote "bankruptcy
reform" in recent years.
 The financial industry--along with its allies
like gambling casinos and car dealers--are attempting to convert
the nation's consumer bankruptcy law--which has served consumers
and business well for decades--into a punitive debt collection
enterprise which will keep hard-pressed consumers in what amounts
to "debtors' prisons" for years.
The lobbyists for the credit merchants
have consistently resorted to the tactics of the "big lie"
with claims that the long-standing consumer bankruptcy protections
are being abused by "dead beats" attempting to escape
their debts. The hard facts gathered from surveys of bankruptcy
filings show that 90 percent of all bankruptcies are triggered
by the loss of a job, high medical bills and divorce.
Bankruptcy law always has been based
on the principle that debtors facing impossible financial situations
be given an opportunity for a new start--a second chance--to
regain their role as productive citizens rather than being thrown
on a human trash heap to satisfy the demands of the creditors.
Not only is this sensible and humane
for the family trapped in unforeseen financial troubles, but
it makes the utmost economic sense for local communities and
the nation as a whole. Crushing families through a harsh bankruptcy
law means more people on welfare rolls, off tax rolls and dependent
on already hard pressed local charities.
Congressional supporters of the repeal
of bankruptcy protections know quite well that many of the money
problems faced by families today are the result of runaway credit
card schemes of the past decade which have duped so many unsuspecting
consumers. Credit card offers have filled mailboxes with come-ons
of easy credit. Introductory offers of a low interest rate are
quickly converted into double digit charges plus a mounting list
of fees. As the card holder falls deeper into debt, the card
companies continue to up the ante by offering bigger and bigger
credit limits. Ultimately, the consumer is sucked into cascading
debt multiplied by high interest rates and hidden and deceptive
charges and fees.
And Congress--now so anxious to enact
a punitive consumer bankruptcy law--has consistently rejected
efforts to reign in credit card abuses. Instead, they want to
punish the poor to bail out the credit pushers.
Congress' timing adds an extra note of
cruelty to the conversion of bankruptcy into a punitive anti-consumer
device. Thousands of workers are losing their jobs, savings and
pensions as a result of fraudulent management at Enron, WorldCom
and other large corporations. Many of these workers are left
with only a few hundred dollars in the bank, no jobs and facing
outlays for mortgages, education, transportation and other necessities
in an economy where unemployment is at six percent and rising.
Members of Congress have turned out reams
of news releases and uttered thousands of words of lament about
the workers caught in the whirlwind of massive corporate fraud.
But, now many of these same Congressmen are ready and willing-and
anxious-to enact a bankruptcy law which will truly clobber these
same workers. Next time you hear your Senators and Representatives
express sympathy for the victims of corporate fraud, ask how
they voted on the repeal of consumer bankruptcy protections.
And you might ask them how they justify
shredding consumer bankruptcy protections while leaving corporations
free to continue to avail themselves of an easy route through
bankruptcy, shedding investor equity and reorganizing as viable
companies. An soft easy landing for corporate bankruptcy versus
a harsh punitive rocky route for consumer bankruptcy-an atrocious
double standard.
How serious is Congress about protecting
citizens against corporate excesses and unfair, unscrupulous
and deceptive lending practices? The vote on wiping out consumer
bankruptcy protections will come up in both the Senate and the
House of Representatives in September. It will be a major test
of Congress' ability to summon the courage to stand up to the
massed lobbying forces of corporations. Forget the well-honed
news releases and speeches-watch for the actual vote of your
Senators and Representatives--for or against repealing protections
for consumers on bankruptcy. This will be the hard telling evidence
of who your elected representatives really represent in Washington.
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