Complain about a product or service

Bankruptcy Bill Aborted

November 18, 2002
A bill intended to turn the screws on bankrupt consumers has fallen victim to abortion politics. Banks, credit card companies and other big campaign contributors have been lobbying mightily for the measure and are not likely to be pleased by the bizarre turn of events.

Tighter bankruptcy laws, along with tort "reform" and tax reductions, are the plums business interests are most hopeful of reaping from the Bush presidency. All were denied them during the Clinton year.

Through years of greasing both Republican and Democratic skids, financial institutions had built what is politely termed "bipartisan support" for the measure, which would have made it much more difficult for consumers to erase their debts in a bankruptcy proceeding. Corporations would not have been affected by the bill.

But their best laid plans ran afoul of the polarizing abortion issue. Liberal democrats in the Seante inserted a clause to restrict anti-abortion demonstrators from using the bankruptcy laws to avoid paying court judgments resulting from violent protests.

When the bill reached the House, Rep. Henry J. Hyde (R-IL) and other Republicans took exception to the abortion provision. Despite numerous attempts to reach a compromise, the measure languished until last week, when its House sponsors put together a stripped-down version that lacked the abortion langugage.

House Republicans called the action a "principled" last-minute effort to give the Senate a bill it woulc pass. Democrats said it was a "cynical ploy" to put the blame for the measure's defeat on the Senate, knowing that abortion-rights supporters in the Senate would have filibustered it.

The impasse leaves Members of Congress with some explaining to do to many of their biggest campaign contributors and to the corporate lobbyists to whom the bill represented money in the bank.

There were a record 1.45 million bankruptcy filings last year, up 19 percent from the year before.

Sen. Charles Grassley (R-Iowa) argued in favor of the bill, which he said would "close loopholes exploited by big spenders and better protect consumers who have been left to pay higher prices for goods and services." But the late Sen. Paul Wellstone (D-Minnesota) called it "dastardly for consumers, especially in these economic times." Supporters should be embarrassed, he said.

The banking and credit-card industries flooded Congress with campaign donations and, in some instances, other favors. MBNA Corporation, the world's largest independent credit card company, acknowledged that it made a $447,000 debt-consolidation loan to Rep. James P. Moran Jr., a Virginia Democrat who was regarded as a crucial supporter of the measure.

MBNA and Moran contended there was nothing improper about the loan, which was made four days before Moran signed on a lead sponsor of a 1998 version of the legislation. MBNA and its employees ranked as the largest corporate contributor to President Bush's 2000 campaign.

Tightening bankruptcy provisions for middle-class consumers has been the No. 1 legislative priority of the banking and credit card industries for years. Most consumer advocacy groups vigorously oppose the measure, saying it penalizes average Americans who are hit by serious illness or prolonged unemployment, the leading causes of consumer bankruptcy, while doing nothing to tighten the screws on corporations and wealthy individuals who use bankruptcy to escape their financial obligations.

Back to the top |