An Embarrassed Republican

March 11, 2005

From RedState:  I'm not going to bore you with a million links to analyses of the bill and its politics -- they are found easily enough. The point here is fairly simple: The bill is basically a gift to corporate lenders that tightens requirements on consumers while paradoxically loosening restrictions on credit card companies. The argument for the bill goes something like this: The record number of bankruptcies in America is indicative of a lack of personal responsibility made possible through too-lax bankruptcy laws; these bankruptcies in turn force up costs and interest rates for responsible consumers; ergo, if we tighten bankruptcy requirements, American consumers and the credit industry will be better off.

This argument is almost wholly false for several reasons:

It's already plenty difficult to declare bankruptcy for the average consumer. I know because I've seen it, and I also know that it is a profoundly humiliating process that forever follows and tarnishes a person's good name and good credit. The notion that bankruptcy is somehow easy and easily abused to be deeply offensive. Make no mistake: there are those who abuse it nonetheless; but the solution to this is existing enforcement, not en masse punishment.

The record number of bankruptcies in America is not the fault of consumers so much as it's the fault of credit companies willing to extend credit to pretty much anyone, independent of their means or station. When I lived in Brooklyn, one of my roommates was unemployed for almost a full year. After six months of unemployment, he did an experiment and saved all the pre-approved credit offers he received. The result: in one month, this unemployed 26-year old was offered almost a hundred thousand dollars in preapproved credit. That the bankruptcy bill does zero to address this corporate malfeasance -- a major and easily-addressed cause of the bankruptcy rate -- is absurd.

To my knowledge, there is no empirical evidence establishing a relationship between bankruptcies and credit interest rates. The latter remain wildly variable, indicating that the credit companies have plenty of leeway. Furthermore, there is no empirical evidence that credit companies -- or any businesses involved in forms of lending -- are suffering more than ordinary cost-of-business risk from bankruptcies. This is a red herring.

The people affected by this bill are almost exclusively the desperate and the stupid. While we ought to have little problem allowing the latter their fate, having been amongst the former, I believe compassion demands something more for them than a simple tightening of the screws. But then, compassion appears to have no place amongst the Republicans pushing this wretched law.