Morally bankrupt

Think Progress points us to E.J. Dionne on the bankruptcy bill now being considered in the Senate.

Dionne quotes Elizabeth Warren of Harvard Law:

Testifying before the Senate Judiciary Committee in early February, Warren argued that the proposal "assumes that everyone is in bankruptcy for the same reason -- too much unnecessary spending."

What does that mean in practice? "A family driven to bankruptcy by the increased costs of caring for an elderly parent with Alzheimer's disease is treated the same as someone who maxed out his credit cards at a casino," Warren said. "A person who had a heart attack is treated the same as someone who had a spending spree at the shopping mall. A mother who works two jobs and who cannot manage the prescription drugs needed for a child with diabetes is treated the same as someone who charged a bunch of credit cards with only a vague intent to repay."

TP also notes that the bankruptcy bill, a priority for lobbyists from the legal loansharks of the credit card industry, is receiving the support of many so-called "values voters."

If that’s the case, maybe Senators should review the Bible before their floor debate. As you can see from these quotes provided by Rep. Bernie Sanders office, the Bible is very clear about God’s views on the evil of usury ...

In addition to being forbidden by Christian teaching and universally morally condemned before the 20th century, usury is also bad business.

It's unsustainable. It doesn't work. Bad loans made to people with insufficient credit don't magically become good loans by hiking the interest rate on them even higher. All that does is improve the short-term paper profits of the credit card banks while making it even less likely that these loans will ever be repaid (thus further eroding the long-term actual profits of the credit card banks).

I propose an amendment to the bankruptcy bill instituting federal caps on credit card interest rates and fees.

This would butt heads with the Supreme Court's 1978 Marquette ruling, but it's about time the court was forced to reconsider that dubious decision. (Bankrate.com has a good backgrounder on it here.)

Such an amendment would do more to improve the health of the credit card industry than this bill will with its crude Paulie Walnuts-style enforcement approach. Increasing the misery of the miserable won't actually benefit the prodigal misers backing this bill. The crisis facing the credit card industry is not only the result of irresponsibly greedy debtors, but also of irresponsibly greedy lenders. The bill ought to address both problems.

UPDATE: Peatey, in comments below, points us to this post from Angry Bear, which is too good to leave buried in comments.

Comments

[Peatey]

Fred, Kash at Angry Bear has a great economic perspective:

This bankruptcy bill works to substantially reduce the potential losses that lenders face, and thus removes a form of market discipline on lenders. In contradiction to the claims of the banking industry that this bill will result in lower interest rates for consumers, this bill may in fact do the opposite, since it will enable lenders to make more high-interest, risky loans with reduced fear of having to absorb losses due to borrowers declaring bankruptcy. Either way, it seems that the bill will certainly add nicely to the profits of lenders, without any clear social benefit. It will unambiguously harm poor individuals, especially those who are financially illiterate. And it may make the distribution of capital in our economy less efficient. This makes for quite a list of potential accomplishments for one bill.

[Sven]

Such an amendment would do more to improve the health of the credit card industry than this bill will with its crude Paulie Walnuts-style enforcement approach.

Is the credit card industry in bad health? Last year, the industry made more profits than ever - $30 billion - even though record numbers of people are falling off the cliff.

If I understand you correctly, you're saying the industry is at risk of losing it's shirt over the long term because the country's credit burden is unsustainable.

That may indeed happen, but the industry doesn't agree. It's not pushing this bill because it thinks there's a risk of large numbers of customers succumbing to debt. It thinks it can keep even larger numbers of people on the edge of penury, which has proven to be a very profitable condition.

[Matthew]

Doesn't the usury condemned in the Bible refer to lending at interest -- *any* interest, not just exorbitant interest?

[Peatey]

Matthew, if you're referring to Leviticus 25:36, I often see a note at bottom saying "or, excessive interest."

[drieux just drieux]

p0: where does the foot note come from with regards to Leviticus 25:36? The historical reason that the 'zionist banking konspirakii' came into existence rested upon the reality that the 'jewish bankers' could not lend 'at rate' to other jews, but were under no constraints when lending to non-jews. Which had been a part of the problem that the 'christians' faced when trying to build out their banking industry, and why originally the 'christian princes' turned to "jewish bankers".

Before the 'liberals' panic, yes, I am more than aware of the 'zionist bolishiviki konspirakii' and have generally lumped it all together under the category of the "zionist bolshiviki banking konspirakii undt kosher deli" since, as we all know, it's that bagel, coffee and book shop conglomrate bent on destroying 'the little shop around the corner'.

p1: What makes the current 'bankruptcy comedy' so amusing, as more are starting to note, rests on the complete silence of the formly "free marketeers" who were all opposed to 'excessive governmental regulation'. Since gosh, if creditors put themselves at risk by loaning to bad credit risks, shouldn't they be held accountable for their folly? Rather than running to the government whining about how they need big government to protect them from their risks and exposures.

p2: What I am personally waiting for is the moment when someone finally screws up their courage and ties this bankruptcy bill to 'winning the war on what ever'...

[Edward Liu]

I think the courage-screwing moment will occur when someone tries to link opposition to this bill's passage to support for gay marriage and/or anti-soldier sentiments.

Of course, it could be that the bill's supporters will try both. "Drug dealers and terrorists hide under our bankruptcy laws, and activist judges use them to justify gay marriage."

[R. Mildred]

"The Gay Mafia want to welch out of their debts, we don't think that's right. I'm George W Bush, and I approve this message."

Winging it's way to a TV near you soon...

[drieux just drieux]

thank you guys for my laugh of the morning. My current amusement has been with the folks who are trying ever so hard to establish that the US Supreme Court has already ruled that the United States of America is a "christian nation" simply because they found that phrase in an aside of a US Supreme Court ruling form the turn of the century.

Don't they teach americans how to actually read legal cases anymore?

What I have found so amusing about the current bankruptcy bill is that those EVIL LIBERALS want to include language in the bill to protect members of the armed forces from the credit card industry. How Shocking! What so many civilians have avoided in their current round of 'idol worshippping' is that the DOD is letting GI's 'carry the float' - namely that the GI puts the bill on their credit card, and then files an 'expense report' and hope that the DOD settles up before the GI starts paying interest on the debt. Some here may recall when Home Depot stopped taking credit card's from GI's because of the problems.... and that was considered so shocking.

So why not simply step up to the plate and convert the so called 'all volunteer' military into a stand alone corporation, gosh like Fannie Mae, and then we can simplify the process of 'out sourcing' the military and save the tax payers the expense, both fiscal and emotional, of trying to cope with when are we more @WAR than the next guy...