Obama on Credit Cards and Bankruptcy

This is quick post about Obama's speech on the economy in Raleigh, N.C. He spent two and a half "paragraphs" of it discussing credit cards and bankruptcy. (The link is to the whole speech. I've also excerpted the relevant passage in the "continue reading" part of this post.)  I'm intrigued by his five-star risk rating idea for credit cards because I have a particular interest in meaningful disclosures, ones that can actually help real people make decisions about financial products. But I am a little disappointed by the limited way he discussed bankruptcy reform. Yes, letting people prove medical bankruptcy would be a good start.  But as many of us look more closely at the post-BAPCPA data, I'm becoming more convinced that it's the procedural barriers and the expenses they entail keeping people out of bankruptcy, not the means test itself. If that's correct, a small improvement to the substance of the law might not make much of a difference, especially if it were accompanied by additional procedure (i.e., the process by which people would "demonstrate" that they filed because of medical bills).

Here is the relevant text from the speech:

"Finally, we need to help those Americans who find themselves in a debt spiral climb out. Since so many who are struggling to keep up with their mortgages are now shifting their debt to credit cards, we have to make sure that credit cards don’t become the next stage in the housing crisis. To make sure that Americans know what they’re signing up for, I’ll institute a five-star rating system to inform consumers about the level of risk involved in every credit card. And we’ll establish a Credit Card Bill of Rights that will ban unilateral changes to credit card agreements; ban rate hikes on debt you already had; and ban interest charges on late fees. Americans need to pay what they owe, but you should pay what’s fair, not just what fattens profits for some credit card company and they can get away with.

The same principle should apply to our bankruptcy laws. When I first arrived in the Senate, I opposed the credit card industry’s bankruptcy bill that made it harder for working families to climb out of debt. John McCain supported that bill – and he even opposed exempting families who were only in bankruptcy because of medical expenses they couldn’t pay.

When I’m President, we’ll reform our bankruptcy laws so that we give Americans who find themselves in debt a second chance. We’ll make sure that if you can demonstrate that you went bankrupt because of medical expenses, you can relieve that debt and get back on your feet."

Comments

[Mike Dillon]

I wonder if this is a policy that he came up with on his own or if he had help on it from his National Finance Chair, Penny Pritzker. Reason I'm curious is because Ms. Pritzker and her long defunct bank, Superior Bank, still owe 1400 of it's depositors more than $50 million - money which none of them will ever see despite the fact that the Pritzker *family* (as opposed to Superior Bank) recovered $125 million, if I remember correctly, from a settlement deal between the FDIC and Ernst & Young. I believe the exact terms were that the Pritzker family was to be awarded 25% of whatever the FDIC recovered from E&Y.

And there have been rumblings that, should Sen. Obama win the coveted 1600 Pennsylvania Ave address, Ms. Pritzker could end up in the Treasury Dept.

Of course, on the other side of the ticket, Sen. McCain has Phill Gramm as his financial chair. Mr. Gramm was well known for both his, and his wife's, involvement with matters such as Enron among other things....

I'm really getting tired of my vote being based upon who I think will screw me the least as opposed to who I think the best person is for the job.

[AMC]

I would hope both presidential candidates come to realize that BAPCPA is just a disaster.

They need move back to old Bankruptcy Code because the folks who came up with BAPCPA were as competent at drafting legislation as the Chicago Bears have been at drafting running backs.

[Patches]

Amen AMC!

You think the least they could have done was to fix the grammar mistakes. Maybe number the “910” statute. The “910” statute is cited 11 U.S.C. 1325(a)* now ???? How about 11 U.S.C. 1112(b)(4)(O) where they used “and” instead of using “or”. The use of “and” made it seem that all of the requisite conditions needed to be met in order to dismiss a chapter 11 case. The Bankruptcy Judge in the case of TCR of Denver LLC 05-45287, ordered the parties to write briefs addressing the new language of the code mentioned above. Funny thing was that he ordered them to brief in rhyme. If you have not read the briefs you should, they are funny. Unfortunately the Judge did write his opinion in rhyme which would have been cool. Here is a “brief” excerpt from US Capitals Brief on the Dismissal of the Chapter 11 Case submitted by Kennedy and Kennedy P.C. :

“Ah, then to the question of or or and
Or should I say of or and and?
And just how far absurdity may take us
In interpreting the law of the land.

A first question must be answered:
Must an interpreter presume
That Congress has at its command
A knowledge of the English language—
And the difference between or and and?

Not any Congress, let us recall,
This is the Congress that brought us all
The Iraq war based on weapons no one can see;
So reality must be a question of degree.

One can’t be too careful in assessing the terrain,
For we hear one congressman recently declaim
The “radical militant librarians” are in fact
Out to derail the Patriot Act!

And now that domestic spying’s okay
What chance has the BAPCPA?
When the radical militant librarians
Team up with the militant grammarians?”

[AMC]

But Patches - the testimony was that not even one word of the BAPCPA needed to be changed. No ifs, ands, or buts.

[Patches]

That’s funny! Your right as always AMC, the Judiciary Committee on February 10, 2005 (S.256) testimony suggested that BAPCPA was “perfect”. I don't think most Bankruptcy Judges think so. But when Bush signed the law he said “The bipartisan bill I’m about to sign makes common-sense reforms to our bankruptcy laws”. (per Whitehouse news release in 2005)

Republicans say they don't like federal judges to impart their own "liberal" interpretation of the law and actually took a lot of discretion away from Bankruptcy Judges. When they mess up so bad and the words make no sense, they force Judges to do that very thing they hate. In applying "strict" construction, the words themselves would lead to an absurd result. Then you have Judges having to look at committee notes etc... You have some Judges saying “now I have to guess as to what they were intending” other Judges say “they should have known, so because they did not use a certain word or phrase they must have intended it to be that way”…. messed up, so live with it, in other words.

[Patches]

This guy has a great BK blog also. "Z" you might know this guy.

http://stevesathersbankruptcynews.blogspot.com/

He has a recent blog on getting Ops free of charge.

Alright Stephen here is your plug...