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Bill Nelson shows contempt for consumers

Florida’s Bill Nelson voted for cloture on the bankruptcy bill today, helping to ensure that it will move to the house where it should pass in a few weeks.

The bill would disqualify many families from taking advantage of the more generous provisions of the current bankruptcy code that permit them to extinguish their debts for a "fresh start." It would also impose significant new costs on those seeking bankruptcy protection and give lenders and businesses new legal tools for recovering debts.

The bill still allows wealthy individuals to shelter virtually limitless wealth through various tricks, and it encourages violent anti-abortion protesters to declare bankruptcy in order to avoid paying hefty and well deserved court imposed fines and settlements.

The Senate on Tuesday first defeated an amendment that would have prevented violent protesters at abortion clinics from using the bankruptcy laws to shield themselves from judgments awarded in civil lawsuits. That amendment, which lost by a vote of 53 to 46, had threatened to derail the legislation. The senators then voted 69 to 31 to limit debate and cut off any effort to kill the legislation by filibuster. ......

"This bankruptcy bill is mean-spirited and unfair," said Senator Edward M. Kennedy, Democrat of Massachusetts. "In anything like its present form, it should and will be an embarrassment to anyone who votes for it. It's a bonanza for the credit card companies, which made $30 billion in profits last year, and a nightmare for the poorest of the poor and the weakest of the weak."

In a letter to Congress two weeks ago, 104 bankruptcy law professors predicted that "the deepest hardship" would "be felt in the heartland," where the filing rates are highest - Utah, Tennessee, Georgia, Nevada, Indiana, Alabama, Arkansas, Ohio, Mississippi and Idaho.

Critics also said the measure fails to do anything to curb abusive bankruptcy practices by wealthy families, who can create special trusts to shelter their assets, and by corrupt companies like Enron and WorldCom, which were able to find favorable bankruptcy courts and deprive many of their employees and retired employees of benefits. The Senate defeated a series of amendments proposed by Democrats that sought to address those issues.

"The bill has a real bias," said Senator Charles E. Schumer, Democrat of New York, whose proposal to close a loophole that permits wealthy people to shelter assets through a special trust was defeated last week. "It deals with abuses in bankruptcy by one group but not with another group."

Krugman had some thoughts this morning, before the cloture vote.

The bankruptcy bill was written by and for credit card companies, and the industry's political muscle is the reason it seems unstoppable. But the bill also fits into the broader context of what Jacob Hacker, a political scientist at Yale, calls "risk privatization": a steady erosion of the protection the government provides against personal misfortune, even as ordinary families face ever-growing economic insecurity.

The bill would make it much harder for families in distress to write off their debts and make a fresh start. Instead, many debtors would find themselves on an endless treadmill of payments.

The credit card companies say this is needed because people have been abusing the bankruptcy law, borrowing irresponsibly and walking away from debts. The facts say otherwise.

A vast majority of personal bankruptcies in the United States are the result of severe misfortune. One recent study found that more than half of bankruptcies are the result of medical emergencies. The rest are overwhelmingly the result either of job loss or of divorce.

To the extent that there is significant abuse of the system, it's concentrated among the wealthy - including corporate executives found guilty of misleading investors - who can exploit loopholes in the law to protect their wealth, no matter how ill-gotten.

One increasingly popular loophole is the creation of an "asset protection trust," which is worth doing only for the wealthy. Senator Charles Schumer introduced an amendment that would have limited the exemption on such trusts, but apparently it's O.K. to game the system if you're rich: 54 Republicans and 2 Democrats voted against the Schumer amendment.

Other amendments were aimed at protecting families and individuals who have clearly been forced into bankruptcy by events, or who would face extreme hardship in repaying debts. Ted Kennedy introduced an exemption for cases of medical bankruptcy. Russ Feingold introduced an amendment protecting the homes of the elderly. Dick Durbin asked for protection for armed services members and veterans. All were rejected.
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Warren Buffett recently made headlines by saying America is more likely to turn into a "sharecroppers' society" than an "ownership society." But I think the right term is a "debt peonage" society - after the system, prevalent in the post-Civil War South, in which debtors were forced to work for their creditors. The bankruptcy bill won't get us back to those bad old days all by itself, but it's a significant step in that direction.

And any senator who votes for the bill should be ashamed.

Bill Nelson should be ashamed.

Make no mistake about it, today's vote was a cynical surrender to monied interests, and those who voted “Yea” hope nobody will remember come election time. If this bill ultimately passes--and it probably will--sick people will be squeezed, elderly people will lose their homes and military members will go from fighting in Iraq to fighting creditors at home. Oh, and violent anti-abortion protesters will be able to declare bankruptcy to avoid paying fines.

But campaign coffers will swell.

Speaking of which, the Credit Card Corps certainly earned their money today: Senators Tom Carper (D-Delaware), Joe Biden (D-Delaware), Ben Nelson (D-Nebraska) and Tim Johnson (D-South Dakota) all voted for cloture. Long-time fence-sitters Senators Mary Landrieu (D-Louisiana) and Blanche Lincoln (D-Arkansas) also got in the act, as did someone we thought was a Consumer Champion: Sen. Bill Nelson (D-FL).

Why does Bill Nelson hate American consumers?

Remember: despite unprecedented numbers of personal bankruptcy filings, the credit card industry is enjoying record profits, and most of the cards involved in bankruptcies have already made a profit for the issuing bank.