Imagine being a Member of Congress and having to sell the following bill of goods to your constituents while you’re home on August recess. “Well, gee, I know you’re out of work because of the collapse of Enron/WorldCom/[fill in company name], and that you’re having trouble keeping up with your mortgage and paying for the prescription drugs you need for your heart condition. I know that you have to delay your plans to retire because you lost so much money on the stock market. Nevertheless, my first priority when I get back to Washington is to pass a law that will make it easier for credit card companies to collect money from you when you are forced to file for personal bankruptcy next month. You know those companies, right, the same ones that sent you all those “pre-approved” mailings about how you could borrow money from them, no problem, at exorbitant interest rates? The truth is I owe them big time. After all, they are funding my campaign for Congress.”
At the very same moment that major corporations that inflated profits with fancy accounting tricks seem to be declaring bankruptcy on a weekly basis, Congress is on the verge of approving legislation pushed by credit card and banking companies that have bankrolled political campaigns to the tune of $134 million since 1989. “Reforming the bankruptcy system will usher in a new era of greater personal responsibility,” Sen. Charles Grassley (R-IA) declared when he introduced the bankruptcy bill back in 2001. Of course he neglected to mention that he counts MBNA, Bank of America, and Citigroup Inc., among the nation’s top credit card issuers, among his most generous political donors, and has taken $218,000 from the credit card and banking industries throughout his career in Congress, according to the Center for Responsive Politics. Meanwhile, Rep. George Gekas (R-PA), the lead sponsor of the bankruptcy legislation on the House side, has taken $81,500, and MBNA is on his list of top donors.
The fact is, the bankruptcy bill version of “personal responsibility” is to get tough on ordinary people, while leaving plenty of loopholes for the wealthy. It would make it easier for credit card companies to collect money from people forced to file for bankruptcy, often because they are facing a medical crisis, a divorce, or some other personal calamity—such as a layoff—when the credit card industry has aggressively sought them out and urged them to spend. Indeed, nine in ten bankruptcies are triggered by the loss of a job, high medical bills, or divorce, according to the Consumer Federation of America (CFA). Women are the hardest hit, forming the single biggest group in bankruptcy. The bankruptcy bill would make life for them much tougher, for example, by changing the rules so that women would be pitted against banks when trying to collect child support from a former husband who has filed for bankruptcy.
Meanwhile, the corporate executives who made millions while their companies collapsed would get the soft treatment if they declare bankruptcy. For one thing, say consumer groups, many would be able to keep their expensive homes, which would be protected from creditors thanks to a “luxury home loophole.” For another, executives with business debt wouldn’t have to meet a means test for what they can afford to pay, while people with consumer debt would.
The sad fact is that the current Congress and administration are in huge debt to the credit card and banking industries, which might help explain why the House voted 306 to 108, and the Senate, 82 to 16, to approve the bankruptcy bill in 2001. The top ten credit card issuers in the country, including Citigroup Inc., MBNA Corp., Bank One Corp., Bank of America, among others, are also among their most generous campaign contributors, and are together the source of more than $6 million for federal candidates and parties in the current elections alone; overall, the banking and credit card industries have already spent $13.8 million, two-thirds of that figure going to the GOP, on the 2002 elections. MBNA was the top contributor to President George W. Bush’s presidential campaign, and Citigroup Inc. was among his top
ten donors.
The only thing holding up the bankruptcy legislation for so long has been disagreement over a controversial abortion provision inserted into the bill, which lawmakers before recess made progress on resolving. Now the bill is on the move again. But how will politicians explain to their constituents the different value system Washington has for ordinary people filing for bankruptcy versus large corporations? It’s a tough sell to make, particularly when people have already over-extended their credit – and their trust.
