Bankruptcy Reform

Yesterday the Senate passed bankruptcy reform legislation. This legislation has long been on the wish list of the credit card companies, which is tied in with the rest of the financial sector. The Republican majority turned back several amendments which would have made the legislation somewhat more reasonable. We have found out that Trent Lott has nothing on Bill Frist when it comes to being a real you-know-what when given enough votes in the majority.

One of the strengths of the two party system is the ability of one side to moderate the other. This check seems to have failed in this case. Aside from debtors, there are two major losers here: the Republican Party and bankers, who are driving like lemings into the sea.

This new legislation is one of those things that people are going to notice, particularly those social issue Republicans who are a paycheck or two away from disaster. Even if they themselves don't file for bankruptcy, they will have a friend or relative who will and there will be no doubt as to who is to blame for the harsher treatment of debtors. It may turn out that the Republicans have done to themselves what Terry McAuliffe was trying so desperately to do to them, associate them with the economic elite. These folks don't care if someone wealthy gets to keep more of their money, but when you start messing with the down and out, folks are going to notice.

The credit card companies and banks are also losers here. They are likely correct that people do game the bankruptcy system when overusing credit cards. They aren't going to be doing that anymore. When the impact of this legislation is felt people are going to stop using their cards in a big way. Other forms of consumer debt will also go down, including those nasty mortgage lines of credit. You can only take someone's house once before they get wise to you.

The passage of this legislation is one of those seminal events which will prove the addage that necessity is the mother of invention. Debtors will seek different instruments, such as those I have proposed in the Musings from the Christian Left. In Europe, unions provide credit services to their members. I predict that employee owned firms will begin to provide some of the same services, blurring the line between the credit union and the firm. Services that could be provided include educational loans, mortgages and payroll lines of credit.

For more information on how this can occur, go to my site at:
http://www.christianleft.net/21stCentury/PayEquity.html
http://www.christianleft.net/21stCentury/InterIndependence.html