Bankruptcy Law Backfires on Banks as Foreclosures Offset Gains

[ProSense]

Bankruptcy Law Backfires on Banks as Foreclosures Offset Gains

By Kathleen M. Howley

Nov. 8 (Bloomberg) -- Washington Mutual Inc. got what it wanted in 2005: A revised bankruptcy code that no longer lets people walk away from credit card bills.

The largest U.S. savings and loan didn't count on a housing recession. The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank.

``Be careful what you wish for,'' Westbrook said. ``They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures.''

Washington Mutual, Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. spent $25 million in 2004 and 2005 lobbying for a legislative agenda that included changes in bankruptcy laws to protect credit card profits, according to the Center for Responsive Politics, a non-partisan Washington group that tracks political donations.

The banks are still paying for that decision. The surge in foreclosures has cut the value of securities backed by mortgages and led to more than $40 billion of writedowns for U.S. financial institutions. It also reached to the top echelons of the financial services industry.

more

U.S. national debt hits US$9 trillion for the first time (and more news on the economy)

Obituary: Conservative Economic Policy (plus "The Twelve Days of Crisis")

[graywarrior]

1. Ha ha.

We can thank Biden and Bill Nelson as one of the many who voted that bill in.

[Lone_Star_Dem]

2. What did they expect?

If a person only has X amount of income and they've extended more credit than that income can cover, something will have to give eventually.

Now they can try and get blood from a turnip.

[Hydra]

3. This really is all their fault

There is only so much wealth you can suck up from the working class before our growth-based economy begins to die.

Morons. I hope they enjoy living in a banana republic where theft and fraud are cottage industries.

[dpbrown]

4. Take that, you Republican trickle-down nutballs!

:rofl:

[Ellen Forradalom]

5. What goes around, comes around.

Suckers.

[cascadiance]

6. Ultimately an economy with a "normal" wealth gap and salaries that keep up with inflation...

... is the only way out of this mess!

As long as we continue to slip in our salaries against REAL inflation which is a lot higher than what Bushco tries to point to with the false indicators of looking at imported product values at Wal-Mart, etc. the middle class will continue to die, and they will continue to lose any way of profitting from them.

At some point, perhaps Wal-Street will discover that an empowered worker class and middle class are a GOOD thing for the economy and companies and not a bad thing!

[magellan]

7. There's just one bright side to this Republican economic debacle

A significant number of Americans are going to be burned one way or another by it, badly. That pain will sear into their memories WHO was president and WHAT party was in control of monetary policy when it happened, for a very long time to come.

[formercia]

8. Economic slavery

A dead slave can't pick cotton, no matter how hard you beat him.

[flashl]

11. However, if you have 'dead janitor' insurance

the dead slave just keep on giving.

[melody]

9. Gosh, that's almost enough to make me believe in karma

At last they learn the economy is an open system. What destabilizes the whole, messed with them, too.

[The2ndWheel]

10. The unitended consequences of running from physical reality

It's always chasing us. It's relentless. We can't escape it. We can run, we can hide for a bit, but physical reality is everywhere.

Obviously we can't allow it to actually catch us, as we've got too much invested in running from it. We'll end up doing something to keep running. There will be consequences for that too, but we can't rest.

[ladjf]

12. A great example of poetic justice.

[ProSense]

13. Kick! n/t

[eridani]

14. Wow! You mean that impoverishing your customer base is bad business in the long run?

Whodathunkit? I'm shocked! SHOCKED!! I tell yu!.