The recent news conference staged by congressional opponents of the credit union-backed bankruptcy reform bill raised several questions for those of us cynical types in the press.
This was true even for someone like me who has questioned the credit union lobby for throwing their fortunes in with the bankers for what the evidence indicates is of little gain for credit unions. Credit unions have been making a major push for this bill at a time when losses due to loan charge-offs are at all time lows.
The best estimates are that CUs may be able to increase their collections on bankruptcy related loans by as much as 5% to 10%, maybe $5 million to $10 million. Those are the most optimistic projections. Therefore, it's hard to argue that relief from bankrupts is critical for CUs.
Yet the other side doesn't seem to get it either. There is unquestionably widespread abuse within the bankruptcy system. Ironically, the opponents of this point of view went a long way to proving this while trying to disprove it.
There they were the most liberal members of Congress; Democratic Sen. Paul Wellstone of Minnesota, flanked by Ted Kennedy of Massachusetts and Russell Feingold of Wisconsin, along with Rep. Jerry Nadler of New York. They brought along a couple of so-called victims of the impending bankruptcy measure to emotionally appeal to the press.
Call me cold, but my sympathy seemed to wane when one of the 'victims,' whose husband had left her and refused to pay alimony or child support, told us of her difficulty of paying the bills, like private school tuition for her kids. Correct me if I'm wrong, but it seems to me if you are having a hard time paying your bills and need to ask the courts for permission to stiff your creditors, then you probably shouldn't be sending your kids to private school. Your creditors shouln't subsidize your childrens' education. It seems to me the bill's opponents could have come up with a better face for their victims list.
Another witness told of how she and her husband were hoodwinked into taking out a subprime loan at something like 18% interest to purchase their home. That, plus thousands of dollars they racked up on their credit cards forced them into the bankruptcy courts.
This particular victim said she and her husband were ignorant of the hidden costs of the mortgage and were pushed over the edge by their credit card loans. They lamented that they might have to sell their dream home and rent instead. This cold-hearted reporter was left to wonder if it was their creditor's fault that they could no longer afford to own their own home and whether bankruptcy opponents were suggesting that the creditors be required to subsidize these peoples' bad judgment.
I mention these two stories because they provide good examples of the complexities of the bankruptcy issue. It seems to me if they were going to make a good argument that the proposed bill is going to hurt certain people, the opponents could have come up with better examples.
These kinds of cases are the logical extension of the democratization of credit. While credit has become readily available in the past few decades to millions of Americans who did not previously have access, there is nothing that says everyone, regardless of their financial situation or past credit history should have access to new loans. Or is there?
Meantime, it looks as if Senate Majority Leader Trent Lott won't be calling President Clinton's bluff on the threat to veto the bankruptcy bill. Lott is expected to delay action on the bill until the waning days of Congress, probably in September, when Congress likes to hastily throw everything together in desperation to prove to voters they are doing something. The bill continues to have broad bipartisan support in both the Senate and House, enough to pass, but there is some doubt whether there is enough support to override a presidential veto.
Sen. Gramm Eyes CU
Hearings In September
WASHINGTON, D.C.-Senate Banking Committee Chairman Phil Gramm, R-Texas, is expected to hold hearings on NCUA's Community Reinvestment Act-like proposal for credit unions as early as September, but is also expected to expand the scope of the hearings to include the implementation of the provisions of HR 1151, the CU Membership Access Act, two years after enactment. Gramm, the leading congressional opponent of CRA, has denounced NCUA's proposal as beyond the agency's legal authority because Congress struck down a similar effort to apply CRA to credit unions during deliberations of HR 1151. Gramm is also said to be interested in the other provisions of the new credit union law, including the FOM provisions, the cap on member business loans, the minimum capital standards.
NCUA Won't Give More Time To Fight CAP Reg
ALEXANDRIA, Va.-The NCUA Board will not agree to CUNA's request for more time to round up opposition to the board's community action plan for community credit unions and is expected to cut off comments at Aug. 18.
CUNA had requested the comment period be extended two months to allow it to build opposition to the proposal, which will require all federally chartered community credit unions to create and adhere to a comprehensive plan to serve all segments of their FOMs. CUNA and NAFCU have been working to enlist support from credit unions and members of Congress in its effort to defeat the proposal.
