Massive U.S. Home Foreclosures Tied to 2005 Bankruptcy Law Changes, Scathing Government Report Says:

Massive U.S. Home Foreclosures Tied to 2005 Bankruptcy Law Changes, Scathing Government Report Says:
By Marc Chamot

What really caused this oncoming real estate derailment, and train wreck that brought about our economic meltdown?

Our politicians in both parties, thinking that they knew everything about our very needs, but really never did, have made a big economic mess, over their idiotic decisions of the past, and it has just come back to haunt us, big time.

With these inept Washington politicians, time after time, and once again they’ve been proven wrong.

And now with a new scathing government report just out, the main culprit that’s causing these mass foreclosures nationwide, is that very damaging 2005 bankruptcy law changes that benefited credit card lenders, and royally screwed the homeowners/borrowers, and real estate lenders.

The false hood in promoting that 2005 bankruptcy law that was supposed to be beneficial for both, the creditors and the consumers was a total political disaster and a LIE.

The critics, and opponents of that ill devised bill are now being proven right, while the ideologues/idiots of Washington that supported it were totally, and emphatically wrong!

When the 2005 congress overwhelmingly passed a credit card industry protection act, the gutting of bankruptcies laws to protect mainly credit card lenders, some people argued against the idea, because it would be too destructive for the American consumer.

With the New York Federal Reserve Bank Reports now out, the 2005 bankruptcy bill is the key culprit in the massive nationwide home foreclosures surge, which is destroying our economy.

Past bankruptcies regulations protected both, debtors and their homes, but the 2005 bankruptcy laws, reversed its priorities, and it made people take care of their outstanding credit card bills first, then lastly, their homes, and with no money left to pay their mortgages.

The Fed report estimates that over 32,000 homes are being foreclosed in America per quarter. Here is part of the report:

Federal Reserve Bank of New York
Staff Reports
Seismic Effects of the Bankruptcy Reform
Donald P. Morgan
Benjamin Iverson
Matthew Botsch
Staff Report no. 358

November 2008
This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments.

The views expressed in the paper are those of the authors and are not necessarily reflective of views at the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Seismic Effects of the Bankruptcy Reform
Donald P. Morgan, Benjamin Iverson, and Matthew Botsch
Federal Reserve Bank of New York Staff Reports, no. 358
November 2008
JEL classification: G21, G33, K35

Abstract
We argue that the 2005 bankruptcy abuse reform (BAR) contributed to the surge in subprime foreclosures that followed its passage. Before BAR, distressed mortgagors could free up income by filing bankruptcy and having their unsecured debts discharged.

BAR blocks that maneuver for better-off filers by way of a means test. We identify the effects of BAR using state home equity bankruptcy exemptions; filers in low-exemption states were not very protected before BAR, so they would be less affected by the reform. Difference-in-difference regressions confirm four predictions implied by that identification strategy. Our findings add to research trying to explain the surge in subprime foreclosures and to a broader literature on household bankruptcy demand and credit supply. Full Report: http://www.newyorkfed.org/research/staff_reports/sr358.pdf

[W]eeks before Congress is likely to approve the long-sought overhaul [of bankruptcy laws], bankruptcy judges across the country warn that the measure would undermine the very section of the law under which debtors are now repaying more than $3 billion annually to their creditors.

The result, the judges said, would be the collapse of more repayment plans, forcing debtors out of bankruptcy court protection. Creditors then could try to force debtors to pay the full amount owed — not the reduced amount a judge had ordered — by moving to repossess their belongings or bringing legal actions.

Many people would have to pay creditors far into the future, the critics said, and thus be unable to restart their economic lives, a long-held aim of bankruptcy.

Here's how bankruptcy judge Keith Lundin of Tennessee sums it up:
"The advocates [of the bankruptcy bill] aren't trying to fix the bankruptcy law; they're trying to mess it up so much that nobody can use it."

The credit card industry responded to the story with its usual tact and aplomb:
"[Bankruptcy judges] are part of the … problem," declared Jeff Tassey, a Washington lobbyist who heads the coalition of credit card companies, banks and others that has spearheaded the overhaul drive.

"They're not real judges, not Article 3 judges," Tassey said. He was referring to Article 3 of the U.S. Constitution, under which judges in the regular federal court system are appointed for life. Bankruptcy judges are appointed under Article 1 to 14-year renewable terms.
-- Spencer Ackerman

America’s To Trash List:
If you are one of those many Americans that have lost a home, or just plainly are feeling the effects of our tarnished economic situation, because of these foolish politician’s inactions. VOTE these SOBs out of office next time.

Archive Main March 2005 next »
(March 30, 2005 -- 5:30 PM EDT // link // print)

Several days ago, we linked to a post on the Center for American Progress blog that raised an important question for the 18 senators that voted for a 1991 amendment offered by former Senator Alfonse D'Amato (R-NY) to limit the interest rate credit companies can charge to 14 percent only to vote against an amendment offered by Senator Mark Dayton (D-MN) to the current bankruptcy bill that would have limited that rate to 30 percent.

Thinkprogress asked:
Why would 18 Senators, including co-sponsors of the original measure, vote for a tougher pro-consumer measure in 1991, and then vote against a weaker measure in 2005? Could it be that the more than $2 million these Senators took from the credit card/banking industry in the interim made them change their mind?
We offer the following list of those senators in case our readers wish to get an answer for themselves:
Sen. Max Baucus (D-MT)1991-1996 contributions from commercial banks: $88,9001997-2002 contributions from commercial banks: $170,777
Sen. Joe Biden (D-DE)1991-1996 contributions from commercial banks: $73,5751997-2002 contributions from commercial banks: $33,675
Sen. Thad Cochran (R-MO)1991-1996 Commercial Banks: $24,7501997-2002 Commercial Banks: $40,100
Sen. Pete Domenici (R-NM)Spoke in favor of D'Amato Amendment during floor debate1991-1996 Commercial Banks: $89,1201997-2002 Commercial Banks: $66,290
Sen. Chuck Grassley (R-IA)1997-2002 Commercial Banks: $123,300
Sen. John Kerry (D-MA)1997-2002 Commercial Banks: $183,102
Sen. Trent Lott (R-MS)1991-1996 Commercial Banks: $70,5751997-2002 Commercial Banks: $80,800
Sen. John McCain (R-AZ)1997-2002 Commercial Banks: $235,228
Sen. Paul Sarbanes (D-MD)1991-1996 Commercial Banks: $84,8001997-2002 Commercial Banks: $55,800
Sen. Richard Shelby (R-AL)1991-1996 Commercial Banks: $246,5331997-2002 Commercial Banks: $215,600
Sen. Arlen Specter(R-PA)Co-sponsored the 1991 D'Amato amendment1997-2002 Commercial Banks: $105,225
Sen. John Warner (R-VA)1997-2002 Commercial Banks: $43,800
Other Senators who voted for the D'Amato amendment, but against the Dayton bill (data on contributions from commercial banks unavailable):
Sen. Ted Stevens (R-AK)Co-sponsored the 1991 D'Amato amendment
Sen. Conrad Burns (R-MT)
Sen. Herb Kohl(D-WI)
Sen. Pat Leahy(D-VT)
Sen. Harry Reid (D-NV)
Sen. Larry Craig (R-ID)
http://www.talkingpointsmemo.com/bankruptcy/archives/2005/03/