Remora

Out of the American mangle

The poor you don't need to have with you always. But if you do, and you give them credit (only 19.9% compounded monthly!), why, make their life a living hell for a generation. That was, and is, the message and substance of the bankruptcy "reform" act that died, again, in the Congress this week. Here's the Friday NYT:

"With a long-stalled bill to toughen bankruptcy laws declared dead today in Congress because of abortion politics, Senate Democrats and House Republicans were left to blame each other for the collapse of a measure that otherwise had broad bipartisan support and was championed by powerful corporate lobbyists."

The New York Times is long on the Homeric epithet -- you know, those things like "wine dark sea", or "swift footed Achilles", that fill in rhythmic spaces in the epic. The 'broad bipartisan support" and "championed by powerful corporate lobbyists" is the Times standard description of the bankruptcy act. LI would suggest, perhaps, corrupt enforcement of usurious practices similar in kind to that practiced by your average loan shark," but maybe the rhythm is off. What do you think?

LI has written about that undead bill before -- don't worry, it will be back. It was killed this time due to the ineffable mysteries of legislation: it got caught in a pr abortion rights -- right to life crossfire. LI has gone into the penetralia of the bill once too often before -- the way it penalizes the working class in extraordinary ways, the way it privileges paying back credit card debt over, say, paying child support, the way it sets up one more obstacle to blue collar redemption in an age in which every clintonoid politician tells us that we have to promote "flexible" job markets.

Open Secrets has a nice little summary of the issue and the parties in play. Here's their abridged version of what the legislation is about:

HOW THE INTEREST GROUPS SEE IT
Banks, credit card companies and credit unions have been leading the drive to rewrite of the nation�s bankruptcy laws. The American Financial Services Association, the trade group that represents the major credit card companies, joined other financial industry trade associations, Visa and Mastercard in 1998 to form the National Consumer Bankruptcy Coalition. The coalition has been the leading voice in favor of bankruptcy reform, contending that more than 30 percent of those filing bankruptcy have the ability to repay significant portions of their debts. But the financial sector isn�t the only group lobbying on this issue. Gambling interests, including some of Las Vegas� biggest casinos, also are pushing for a new bankruptcy law, according to their lobbying filings. Car dealers, retail stores and even entertainment companies also have weighed in on the issue, mostly in support of reform.

Consumer groups, including the Consumer Federation of America and Public Citizen, are lobbying against the bill. They contend Congress should crack down on the financial companies, which they criticize for handing out credit cards and credit lines indiscriminately. Additionally, they contend the legislation is too far-reaching and could ultimately do more harm to indebted Americans than limit fraud and abuse.

As things go in America, there is, of course, another story about credit -- its extension and forgiveness -- that clues us in to the central moral of our skewed times. For the slackers and the lags that gamble and renege, that buy their fancy cars and thumb their noses at GM, well, their hatefulness -- and we know how bad bad bad they are -- could be washed as white as snow if only they were , well, a little higher in the food chain. There, the terms of the loan are reversed. There's a nice story about the unpaid and forgiven loans of CEOs and their immediate underlings, and the board members that "govern" them, in Business 2.0 -- happily coinciding with the vote on the the credit card company wish list act. Here's the core graf:

"Roughly three-quarters of the nation's top 1,500 companies -- 1,133, to be precise -- have disclosed loans to insiders in recent regulatory filings, according to a study due to be published in November by the Corporate Library, a firm based in Portland, Maine, that analyzes corporate data and advocates greater accountability to shareholders. Of the companies that disclosed loans, 510 made them for the purchase of stock, for a handful of other uses such as housing and tax payments, or for purposes that weren't specified at all. The average loan was about $5.5 million."

My my, 5.5 million dollars. For that money, even a slag might start biting his knuckles and wondering how, oh how he was going to repay it. But the GMs and MBNA America Banks that are weaping oceans of tears over the stray sheep lying through their sheep teeth in bankruptcy courts thoughout the land have, at least, a good heart. These are essentially Christian corporations when it comes to their highest employees. Character, you know, attracts its own redemption. That is why owing such terrific amounts of the ready has not distracted our governors from the tiller. No, they bravely shoulder those five million dollar, or fifteen million dollar, or even four hundred million dollar debts. Yes, and now we can admire them more, because it is so hard, what with yachts and depreciating stocks and such, to come up with 5.5 mil to pay back their companies! oh, could this mean the loss of invaluable personnel? These giants of industry, sucked into the industrial waste with the rest of us! Gasp!
But gentle reader, don't weap for them. This is a big country. Here's another delicious graf:

"All told, loans to insiders in recent years may have reached more than $5 billion. Hundreds of millions of dollars in loans, perhaps as much as $1 billion, have been or will be forgiven, based on Securities and Exchange Commission records and estimates by corporate compensation experts. This suggests that companies will be eating losses from insider loans for years to come. But the more damaging legacy may be that the practice -- by helping fuel the explosion in CEO pay that is at the heart of much of today's outcry over corporate behavior -- will contribute to the perception that management has all too often lined its pockets at investors' expense, and to the public's distrust of how American companies are run."

Luckily, most of these loans aren't made with interest -- that would be oh so gross. I mean, we are talking about some of america's best and brightest -- interest is something they collect, darling, not something they should be forced to pay out. But that the rate of non-payment is 20 percent -- now, that is something, ain't it?

The poster boy for corporate loans in the King article is from Microsoft. Meet Rick Belluzzo:

"Early in September, Microsoft (MSFT) had a small confession to make. Back in December 2000, the company had lent its president, Rick Belluzzo, $15 million, taking some of his stock options as collateral. Though the options were underwater and had no value at the time, Microsoft figured its stock would eventually go up. But by last August, when Belluzzo resigned, the options were even further submerged. So the software giant forgave the loan -- it had no choice under the deal Belluzzo had struck -- charged off the $15 million, and said its belated disclosure was "appropriate" because the loan was really just an "advance." "

Now, to be fair, our legislature has officially outlawed insider loans of the Belluzzo type. The Sarbanes-Oxley act definitely puts them under bar. This will call for a lot of semantic ingenuity on the part of corporate lawyers. In the meantime, the bankruptcy bill will rise again. You can MBNA bank on it!