Tsunami On Its Way – Moon of Alabama

December 17, 2005

Tsunami On Its Way

On 20th April, 2005 Senate bill 256 (sponsored by Senator Charles Grassley [R-IA]) became Public Law 109-8. This law is better known by its more Orwellian title of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Far from protecting consumers as its name implies, the purpose of the bill, according to most non-partisan consumer advocacy groups appears to be "…padding the pockets of the wealth-heavy credit industry".

Of course, it comes as no surprise then to discover that bankruptcy legislation has been fueled in the first place by soft money from these same industries.

This is not an unusual development; certain Political Action Committees (PACs) have always promoted their interests by courting (and bribing) lawmakers. Nothing untoward should be interpreted by the fact that this has worked out so very well for the top donor of the Republican Party’s 2000 election campaign.

The problem is, the credit industry did more to get this law passed than to simply buy it outright. They also internally produced the data used to cite the pressing need for consumer bankruptcy reform. Neither the American Bankruptcy Institute (ABI) nor the US Department of Justice (who actually administer the courts) maintain any aggregate or dollar-per-year statistics for personal bankruptcy filings. The U.S. government’s position on the issue is that:

A lack of data hinders any attempt to analyze the effect of bankruptcy law on borrowers and lenders. The official statistics collected by the Administrative Office of the U.S. Courts are insufficient to determine how well the bankruptcy system is working. For example, such basic information as the total amount of debt discharged in personal bankruptcy is lacking, and the data on personal bankruptcy filings have several problems that limit their usefulness.
A 2000 Review from the Congressional Budget Office (CBO)

In a commendable display of "can-do" (or "screw you") spirit, the credit industry hasn’t let a lack of unbiased data hold them down. They simply used the data given to them by the neutral-sounding, Washington-based National Bankruptcy Review Commission (NBRC).

Unfortunately, we discover that the credit industry is more than represented on the NBRC, and their figures have been criticised by the National Association of Consumer Bankruptcy Attorneys, the Congressional Budget Office and the US General Accounting Office.
There has also been an independent study from Harvard and the University of Nevada which suggests that the

…recently passed Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 may have been based on misleading information regarding small businesses.

Essentially, by failing to analyse the decisions of entrepeneur’s to file for personal (rather than business) bankruptcy, the NBRC may have skewed the data as much as 15.4% in favor of their case.
By using their own internally-generated (and non-verifiable) statistics, the NBRC have categorically claimed that the yearly cost of Chapter 7 bankruptcies is $44 billion and that 10-20% of filers are deliberately abusing the system for personal gain.

Others, not associated with the credit industry, have placed the rate of fraud closer to 3%… but since nobody has made public their magical means of identifying intent, the actual figure will have to remain something of a mystery.

What is clear in either case, though, is that the individuals who pursue bankruptcy with intent to defraud are a minority of filers. Even the (probably) inflated figures from the credit industry demonstrate that most people who are filing for Chapter 7 bankruptcy (they do not address the issue of Chapter 13, or partial repayment) do so from a genuine need.

Okay, so what? The credit industry pushed a law through that harms the consumer. Nothing new there, right? Apart from how badly this hurts the consumer, there actually is something new about this.

Any business that holds unsecured debt (and that is the basis of credit), factors in what is known as their "risk premium". This is, essentially, both a reward and an insurance policy that creditors give themselves to make up for the fact that they will, in all probability, lose some fraction of their investments.

Ever wonder why the interest rates on credit cards don’t qualify as usurous? There’s your answer; they are spreading out their risk premium over all the debtholders to insure that they continue to make a profit.

The passage of Public Law 109-8 has in many ways secured what was previously unsecured debt, but do not hold your breath waiting for this to be reflected by the risk premium you are being charged by your local bank or credit card company.

The funny thing about this is that by calculating and applying their risk premium, the harm caused by an individual declaring bankruptcy (fraudulently or otherwise) does not touch the credit agency; it has always been absorbed by the consumers who do not default on their unsecured loans. In other words, unless something catastrophic were to take place in which an overwhelming majority defaulted on their debts suddenly, the creditors have statistically guaranteed that they will continue to make a profit and remain in business.

This begs the question then; is the credit industry simply being more avaricious than ever, or do they have reason to suspect that an economic tsunami is on its way?

Posted by b on December 17, 2005 at 00:14 UTC | Permalink

Comments

Monolycus, thanks for this post. I have always enjoyed the economic discussions here and at the old place.
I’m looking forward to digesting and following this story.

Posted by: jonku | Dec 17 2005 0:51 utc | 1

Thanks for the outline Monolycus. i think this works as an example, in duplication even, of the pictorial nature (sincerity thread) used by the administration — whereby the central image is amorphus and defuse (how the bill is defined or framed as in the peoples interest)– contrasted to the hard edge negative space that surrounds the central image and defines it concretely in no uncertain terms ( the actual teeth of the bill). Metaphorically, like the hard shell voids left from the victims of Pompeii.

Posted by: anna missed | Dec 17 2005 2:06 utc | 2

they are spreading out their risk premium over all the debtholders to insure that they continue to make a profit.
they always . ot is completely stacked against the people w/less because the charge more % the worst credit you have. and then w/the penalties it starts to snpwball. the difference now is you can never get off the cycle once you start going down, well almost never. i hate credit cards. the only time i use them if i get some offer that says 2.9 forever until you pay the transfered poryion off. and i don’t get those poffers very often. also, once you are late the rate gets jacked to 18% or something . recently i found out, just by chance they discontinued the auto withdrawl w/out telling me. i think one has to have some access or line of credit to fall back on, and they know it too. they all have access to eachothers records. and so do the health/car ins/. but you guys probably already know this. it makes me vomit. cash is not exactly usually discouraged but they concept of using a card is so widespread. even a debit card is more common. which of course gives them access to all your financial records. i try to deal in cash as much as a can for reasons of privacy. it PTF out of me when i go to a store and have to pay twice as much if i don’t identify myself. and they call it a sale? get real. the people most in need, sick, out of a job, on the ledge, its a way for to enslave you forever. they want to divide the shaft from the wheat as early as they can. thats why they offer all these credit cards to kids in high school. only now, there is very little way out.
thanks for the post monolycus

Posted by: annie | Dec 17 2005 2:06 utc | 3

well, cats out of the bag i type w/2 fingers. should have checked for spellin! anyway, bankruptcy!
question, if we get a new congress in 06 can they reverse this?

Posted by: annie | Dec 17 2005 2:10 utc | 4

The linked analysis contains a lot of technical info regarding the current state of the economy, but essentially concludes that our “robust” economy is smoke and mirrors:

While it may seem nonsensical to average Americans that the dollar remains so strong in spite of the apparent weakness of the US economy (GM and Ford each laying off 30,000 highly paid workers, and a housing market bust on the horizon that may cost up to 800,000 jobs), I have an explanation. We are living in fictitious times, and perhaps the twilight of this illusion is near. But as of yet, the financial economy that is the domain of governments and big international banks still trumps the real economy of production, workers and labor. At present, it is widely accepted that the dollar is holding its strength based on its interest rate advantage over other major currencies such as the yen and euro. In spite of the government’s precarious financial situation, US government debt is still considered to be a “risk free” investment. (After all, it is backed by the full taxing authority of the US government. That means your back, fellow citizen). International investors can thus feel safe when they borrow in foreign currencies at a low rate, and invest in US government debt a higher rate for “guaranteed” returns. It is the next best thing to having what Bernanke calls the government’s printing press – free money. In essence, this is what makes the US dollar attractive to investors (especially foreign ones, and especially rich ones) and keeps it strong, in spite of the nation’s abysmal balance sheet. This investment relationship pushes up the value of the dollar, making it more difficult for US manufacturers sell their products overseas, and makes it more difficult for Americans to find work. Yes, it is bad for the real economy, but it is good for the bankers.

Posted by: lonesomeG | Dec 17 2005 3:16 utc | 5

2 links i’m gonna copy and paste a good portion of one because it is behind rego.

In order to rent a modest two-bedroom apartment in Sacramento – and still eat and keep the lights on – the average worker would need to earn $19.38 an hour, according to a report released Tuesday by the National Low Income Housing Coalition. Less than half of Sacramento’s renters earn enough to do that, the report said.
Using data from the Department of Housing and Urban Development, the U.S. Census Bureau, the Bureau of Labor Statistics, the Department of Labor and the Social Security Administration, the report’s authors determined the fair market rent – the cost of rent and utilities on a modest rental unit – in every county and metropolitan region nationwide.
“There is a huge pent-up demand” for affordable housing, said Sheila Crowley, president and CEO of the National Low Income Housing Coalition.
This year, for the first time in the 16 years the coalition has published “Out of Reach,” it determined that there is no place in the country where a full-time worker earning minimum wage can afford to rent even a one-bedroom apartment at fair market rent.
A minimum wage worker in Sacramento would have to work 115 hours a week to cover rent for a two-bedroom apartment and other bills, the report said.
The report shows that this year’s national housing wage – the hourly wage a full-time worker needs to earn in order to cover the rent with no more than 30 percent of his or her income – is $15.78 an hour.
That’s up from $15.37 an hour in 2004 and is more than three times the federal minimum wage of $5.15 an hour.
In California, the state housing wage is $22.09 an hour, more than three times the state minimum wage of $6.75 an hour. Skyrocketing utility rates and wage stagnation for the nation’s low-income workers have exacerbated high housing costs, said Danilo Pelletiere, research director for the coalition.
“It’s a lot of things working together to make sure low-income people have a hard time,” he said.

Posted by: annie | Dec 17 2005 4:28 utc | 6

Credit-card companies sell their uncollected debt at a reduced rate on the dollar. These sales are listed as assets on their balance books.
So there it is: by running up credit card debt, you hare helping to CREATE WEALTH! Where else is this possible except in Post-Reagan America? People who run up consumer debt should be given tax breaks to encourage a growth industry!
So even if the credit card companies are only recovering 60 cents on the dollar for their bad debt, it doesn’t mean that they are losing money.
In most cases, the bulk of the debts is compound interest, and all it means is that they are making a slightly less exorbitant profit off their usury.

Posted by: ralphieboy | Dec 17 2005 8:03 utc | 7

Slightly OT, the myth of free trade has beem debunked by “trarah” the World Bank (Is Wolfi asleep at the wheel?)
World Bank Reconsiders Trade’s Benefits to Poor

In a recently released book, the World Bank says that the potential benefits for the world’s poor of a far-reaching trade deal “are significantly lower” than it had previously thought.
…
The bank estimated three years ago that freeing international trade of all barriers and subsidies would lift 320 million people above the $2 a day poverty line by 2015. Now, however, bank economists project the figure at between 66 million and 95 million people. And even that assumes the WTO negotiators would completely abolish tariffs, quotas and other obstacles to commerce — a fanciful scenario, calculated only to show what a maximum deal would produce.
Assuming a more plausible outcome in which the WTO members agree to some deep cuts in tariffs and subsidies while stopping short of pure free trade, the reduction in the number of people below the $2-a-day line by 2015 would be only about 6.2 million to 12.1 million people, the bank now reckons. That is less than 1 percent of the people living below the line.
…
The bank now projects that eliminating government interference in trade flows would add about $287 billion to the global economy by 2015 (or $461 billion, using more generous growth assumptions), with a bit less than one-third of that going to developing countries. That translates into a 0.7 percent gain in economic output for rich countries, and a 1.5 percent boost for poor countries. Some countries — Mexico, Bangladesh, Cameroon and Mozambique among them — would come out losers, at least in early years, a problem the bank contends could be addressed through aid aimed at helping them improve their export capacity.
The $287 billion figure pales beside the $832 billion global gain that the bank was projecting as recently as 2003. “What a difference two years makes,” wrote Frank Ackerman, a Tufts colleague of Wise, in a recently published paper.

That will be quite a relief for poor contries who were pressured into the “Free Trade” scheme by the WorldBank, IMF and others.

Posted by: b | Dec 17 2005 11:25 utc | 8

That bankruptsy bill is nothing more than an indentured servitude act set to turn the peasants (sheeple) into servants to the nobles. This is nothing more than unadulterated power garbing using money and forcing usery on the American people. But the shame of the whole thing is Joe Biden was one of the main pushers of this bill. He should be tied to the yard iron, whiped and then be forced to walk the plank. He was shameless in his backing of this bill.
The WTO talks are getting little coverage, but are quite flamable at this moment. South Korean farmers are pissed and their not going to take it anymore.
Some interesting thing that I’m sure have been talked about here, Wally Mart wants to take local zoning and building code laws to the WTO and have them declared unfair trade barriers. Further, there is a push to have worldwide immigration controled by WTO. These pushes are outragious and having distant bureaucrats overturning law passed by the democratic process. This is what free trade is about. Taking the rule making process from elcted governments and putting control of laws into the hands of unelected bureaucrats.

Posted by: jdp | Dec 17 2005 14:21 utc | 9

@anna missed
“…the central image is amorphus and defuse (how the bill is defined or framed as in the peoples interest)– contrasted to the hard edge negative space that surrounds the central image and defines it concretely in no uncertain terms ( the actual teeth of the bill).”
That has been the modus operandi of totalitarian states for a long, long time. While chiefly a response to the rise of Nazism, psychologist Erich Fromm wrote a famous critique of the problem democracy versus totalitarianism and astutely observed that “…when a certain class is threatened with new economic tendencies it reacts to this threat psychologically and ideologially; and… the psychological changes brought about by this reaction further the development of economic forces even if those forces contradict the economic interests of that class” (Fromm, Escape From Freedom, p.295. Henry Holt & Co., 1941).
They facilitated this reaction in this instance by the way the data are presented. Even if their figure of a 10-20% fraud rate is accurate (and we have no reason to believe that it is), that same data tell us that 80-90% are not cheating anyone and have availed themselves of this recourse from genuine need. In presenting their case in this way, those in the same class as the “cheats” become incensed at the idea that someone is putting one over on them and the question of how the industry itself is harming them is thereby not addressed. Instead, what this bill amounts to (if we need a pictorial analogy) is the gunning down of a crowd of poor people because we suspect that a small per centage in that crowd are dishonest. In contrast, a crowd of rich people, a crowd who are demonstrably systemically dishonest, have handed us the guns.
This is true with the “War on Terror”, hot-button issues like gay marriage, the USAPATRIOT Act and just about any other issue with which we are constantly being bombarded. It works because we, the people, are willing to sacrifice our own (because we can not abide the thought that they are “getting away with something”) more than we despise corporations and governments (whom we might not trust implicitly, but whom we invariably give the benefit of any doubt).
The tipping point here would be when the majority finally internalise the message that wealthy legislators and corporations are not your friends no matter what pretty language is used to rationalise their crimes. Many single corporations have cost more than the combined total of private bankruptcies per year claimed by the NBRC. Why are the class of plebs not clamouring to reform corporate bankruptcy law?
@annie
“cash is not exactly usually discouraged but they concept of using a card is so widespread.”
Actually, I have appeared in person with cash in hand to make a purchase (printer cartridges from a mall kiosk… Dell printers only work with their own cartridges and those are only available through their own dealers, mostly online) and had my cash refused since they did not even keep a register on the premises. I was forced to purchase a mall gift card (run by Visa and only available in round figures, so I had to spend a few dollars more than the cost of my purchase to acquire it)in order to have them ordered.
It’s an isolated incident (at this time), but when automobiles were originally introduced, they were “luxury items”. At one time, you could choose not to have a telephone and still get things done, but I defy you to get any paperwork accepted without filling in the mandatory field for a phone number now. Isolated incidents become norms pretty quickly.
Incidentally, I also type with two fingers.
@ralphieboy
“So even if the credit card companies are only recovering 60 cents on the dollar for their bad debt, it doesn’t mean that they are losing money.”
That is also another means they use to generate revenue in their “risky” business. I tried to demonstrate briefly above how they were never losing any money and I thank you for furthering my case. They are moaning here about the “risks” involved in their business, but risk is exactly what they are in business for in the first place. It is their bread and butter. They are in the business of unsecured debt.
That is why this move is so puzzling to me. I see only three posibble motivations for it (I outlined two of them above… they are simply being avaricious, or they are covering their asses for a major impending financial crisis). There is a third, and it is not so much the product of wearing a tinfoil hat as it sounds at first blush given their hand in political affairs and the science of perception management. Simply, masses who are crushed by debt are easier to control. Considerations like getting an education or moving into a higher tax bracket or protesting injustice are academic when you are engaged full-time in the process of putting food in the bellies of your children. I’ve observed before that as long as we have a “volunteer military”, we will never have a national health care system. Simply, the only reason for many people to enlist is that it is the only steady job they can get with anything approaching health benefits for themselves and their dependents. If the military is stretched too far and if recruiting numbers are down, it is in the interests of the national leadership to make more poor people suffer so they will be forced to sign up.

Posted by: Monolycus | Dec 17 2005 15:16 utc | 10

@annie
“question, if we get a new congress in 06 can they reverse this?”
Only if you believe that new Congress would be any less friendly to corporations and more responsive to the needs of the citizens. I don’t generally like to bet with odds as low as that.
@jdp
It’s feudalism in all but name. I didn’t mention Biden’s contributions to the bill, but I made sure to mention that it was sponsored in the Senate by Charles Grassley. Some of the regular readers of MoA might recall running into Grassley’s name recently (hint: ask your Uncle).

Posted by: Monolycus | Dec 17 2005 15:37 utc | 11

mono & others
this worrk of yours here is bothe useful & apalling (not that capital’s more venal aspects are unknown to us now

Posted by: remembereringgiap | Dec 17 2005 15:47 utc | 12

jdp – indentured servants served seven years and then they became freemasons. our US retrograde credit (and tax) laws are making sure freemasons become *permanent* indentured servants, which in any definition of the word, constitutes slavery. paying someone $5.50 an hour when it costs $15.87 an hour to live, and then ripping them off at 28% credit interest plus penalties doesn’t sidestep the 13th amendment and US usury laws:
‘Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.’ <-- like Iraq, or Pac. Isl's US bankrupcy laws are now the 'duly conviction', after which, it's then legal to make you a slave! corporations (and government) are about slavery, and 'free trade' is about extending the reach of US slave trade to expatriate global populations. 'free slave trade', that's where it comes from. if you haven't figured that out yet, you need to read a *whole lot more* about american history, especially re slave trade and the abolitionists, and the original usury laws staring in 1500's. http://www.eh.net/encyclopedia/article/jones.usury
The Qur’an forbids usury. US is also the only country in the world where state-gifted natural resources can be owned by private corporations, (although Iraq is about to become the 2nd). In all other countries resource royalties go towards offsetting taxes and the cost of government aid, allowing for free education and health care.
annie – ¿haven’t you figured out yet that the Dem’s are same-same as the Rep’s, that it’s all a big wealth and power game, about who can extract the most tribute during their term(s) in office? it’s a roman mentality. you think these congress people and legislators go back to being retail shopkeepers and chicken farmers?! All .gov is a *permanent* elite class of masters, whether they are Dem’s, Rep’s, Labor, Conservatives, Liberals, Greens, Oranges, all same-same. slave masters.
their idea of a ‘soft landing’ is the gradual rollover of US citizens into a corporate-banking owned indentured servitude, without civil revolt. bring in cheap h-1b labor, and export any work where you can’t bring in cheap labor, and crush the unions, eliminate benefits and pensions, and then stem the huge flood of citizen and immigrant demand for health, education and human services.
cradle-to-grave, baby-food to dog-food, slavery.
there are more available jobs now than in years. entire regions are at <25%-30% of available new hires for the programmed work. nobody can afford to move with that work, because bernanke flooded the world with M3 US$'s and greenspan eased off credit, so they could hook, line and sinker US into 'buying up', meaning you're now paying twice the buy-in, and twice the holding costs than just five years ago. compared to argentina, where the values only dropped 40% and everyone called that a 'meltdown', here, everything dropped 50%, and they're calling it a 'sustained recovery'....
¿comprende?
heard on the street. 'hey, dude, how's it going?' 'ahh, another day on the street?' 'what're you up to?' 'just hanging out' 'got any smoke?' 'naww' 'see ya!' (20 degrees f)
overheard an aid worker down by the bus station: 'we have so many families right now on the ragged edge of becoming homeless that we can't take care of the homeless or better their condition.'
overheard at the local homeless shelter: 'hey, sit down and get yourself comfortable!'
overheard at the local VA: 'fill out these forms and we'll get you into the system.'
overheard on my phone line: "testing, testing..."
once you become their target, you're just another dead man walking.
these are the times that try wo(mens)' souls....

Posted by: Loose Shanks | Dec 17 2005 16:02 utc | 13

as mistah charley says, have mercy on our souls, if any

Posted by: remembereringgiap | Dec 17 2005 16:10 utc | 14

@jdp I’m somewhat surprised at the little coverage the WTO has been getting down in the north end of the planet. I’m halfway thru a bit on it that I’ll try n post manana.
Back on topic I spend a few hours a week helping people who have got themselves too far into hock (expect to put in more than a few hours from mid-feb onwards as the chickens come home to roost). One thing that this hammer the poor legislation studiously ignores is how bad bankruptcy is for any person that has to resort to it. That is without the draconian provisions of the new US legislation.
To say bankruptcy is an easy ‘out’ comes from the same school of logic as the ‘prison is a holiday camp’mob.
People seem to have forgotten that bankruptcy laws were introduced reluctantly by the powerful in response to the social disruption, crime and community outrage of debtor’s prison.
The public believed that locking people up for owing money was counterproductive so a form of debtor’s parole was introduced. If the usurers claim that the parole isn’t being enforced enough, well apart from it being the first I’ve heard of it perhaps they should look towards decisions that were made to pass the cost of it’s administration on to the state, rather than have it funded out of recovered debt as was always intended. This was followed by tax cuts which in some areas may have left the administration under-funded but I would argue the usurers and their mates are more to blame for that than Joe Consumer.
Bankrupts I try and assist go through a period of shock and grief not unlike the loss of a significant other and/or a limb.
A huge amount of the power of their own existence has been taken off them and given to the official assignee who determines exactly what happens with any money that they earn during the years until discharge. Discharge is the time when the person is deemed to have discharged his/her obligations towards their creditors and the period varies according to the size of the debt and the bankrupt’s circumstance, it is never less than 3-5 years. The only good behaviour reduction can be for repaying the debt in full within that time. This is an extremely unlikely circumstance since if it had been considered possible that is the remedy the courts would have chosen in the first place.
Discharge gets the monkey off the debtors back. He/she no longer has to worry about doing anything considered luxurious or fun and some creditor observing it and reporting him/her. No longer has to go to the courts for permission to buy a car and explain exactly why they need a vehicle and how they can afford such luxury.
The one thing that doesn’t happen is their name get taken ‘off the books’ though. That means no more ‘cheap’ 20% interest loans for them which would be a good thing except it doesn’t stop them from getting expensive 40% loans.
In addition in NZ now that the power and telecoms companies have been privatized it also means that bankrupts; people who have little enough as it is, can no longer get electricity or telephones at the same rate as anyone else, they have to payloan shark style telecoms or utility companies in advance to get either.
I could go on but the really big issue about the changes to bankruptcy law is how is it going to be enforced? It can only be enforced with criminal sanction which means the re-introduction of debtor’s prison only this time the cost won’t be covered by the debtors and their creditors it will be met by Joe Taxpayer who had nothing to do with the civil debt in the first place.
It’s true that IT has made people’s incomes and expediture much more transperant than before but hell there’s something like 3 million illegals working ‘black’ in the US now that don’t appear to be traceable. This change will drive US citizens into the cash economy where the minimum wage will be 2 euros an hour or somesuch.
With the recent changes to the migration rules ie the children of migrants are ‘stateless’ they have lost their us citizen rights, compounded by the formation of governments in South and Central America who appear to care for their people, the illegals rate in the US will decline. So this is a way of finding citizen wage slaves. How long before their non-taxpaying causes their children to lose their birthright as US citizens? Not long.
There are so many ramifications of this under reported and little known legislation that
when I rolled into the bar last year I was shocked to see that amerikans didn’t regard it as much of an issue.
Well done Monolycus for shining a light on it because this nasty piece of greed will get us all. The banks have tried to argue for the same kind of legislation in NZ and failed but change is only an election away and lets face it this sort of topic doesn’t get much ‘traction’ at an election.

Posted by: Debs is dead | Dec 17 2005 16:21 utc | 15

Is foreclosure really a thing of the past? Or, is it just hiding around the corner somewhere waiting..waiting..waiting?
This law ain’t going to stop bankruptcy, it’s just going to stop redress..

Posted by: pb | Dec 17 2005 21:35 utc | 16

Debs, even over at kos there aren’t many discussions on free trade. Even libruls have bought the idea that free trade makes things better. But, the WTO, Gatt, nafta is not free trade. They are investment portection acts and usurpation of democratically passed laws acts. Ralph Nadar and Ros perot are saying, heh, I told you so. The neo economic model is not working and unless the cabal that promotes this shit must be backed into a corner. Read http://www.augustreview.com and you will find the source. Anyone who don’t believe the neo economic model came from the tri-lats, is plan f—ing delusional.
shanks, go easy, in the first paragraph you wack me about indentured servitude and then in paragraph seven you talk about coporate “indentured servitude.” Bankruptsy is like indentured servitude in that you don’t have good credit or can’t get credit for seven years. I understand history completely.

Posted by: jdp | Dec 17 2005 21:55 utc | 17

Hello.
I have a professional degree, funded in part by student loans. I worked a good job for over ten years and had made significant progress in paying everything off. Then I lost that job, and in the last six years of un and under-employment I burned through all of my assets–retirement, equity, stocks, and all but a one-room apartment’s worth of belongings. I have nothing they can take, no real property, no stocks, an old car, a dog–
And over a year ago, assets exhausted, I simply stopped paying.
No one has sued me, and I don’t fear them if they do. What will they do to me? Liens are enforceable only against assets. I have none. Why should I file for bankruptcy? They can’t garnish cash wages, and if they garnish social security someday, well, I can live with that to have money for the next three decades, assuming they don’t push back retirement age.
Student loans are not dischargeable in bankruptcy, absent extraordinary circumstances that the courts have rarely found. The credit card debt I have was incurred in the belief I could pay it off as well, and the banks apparently agreed. I was a good fucking risk, on paper.
My student loans never go away. If I had continued to pay them as scheduled, they would have been gone by 2018, about the day I’d turn 59.
I am tired and rambling and embarrassed to be discussing this at all but dammit things have been really tough for a lot of us and now that I’ve stopped paying those crushing debts I can still rent (landlords can be understanding when you pay promptly and are honest about your situ) and I eat healthy organic (more expensive) food rather than cheap processed crap and this winter I’ll volunteer in a warm place–
They forced me out. I This is not the exit for everyone, but I saw that simply refusing to pay and work more than is necssary to live was the only way for me to stay sane.
I don’t know if this is ultimately a wise move, but I did consider it carefully, and I know that those of you with families or other similar responsibilities might be horrified and even offended but this notion.
But I feel, deep in my gut, that I’m doing the right thing.
Am I nuts?
Peace, all.

Posted by: Beatrice | Dec 18 2005 23:46 utc | 18

@Beatrice
I’m not a lawyer or a priest so I’m afraid I can’t give you any absolution here. I do understand your position (I’m also under a crushing amount of student loan debt, unemployed, without assets and feel I have nothing left to lose except my life), so I don’t think you need to feel embarrassed to discuss this. As Debs pointed out, there is a profound emotional and psychological stigma attached to being financially destroyed in our culture, but I fail to see how using one’s finances as a yardstick for a successful life helps anyone. I’ll just leave that by saying that even if things had worked out differently, you are neither your job nor your bank account.
We do what we must do to survive, or we die. I was also subject to cultural conditioning about “right and wrong” and began my working life with as strong a work ethic as could be claimed by anyone. I discovered, as I suspect you are discovering, that “right and wrong” stand pretty abstractly to what is and aren’t always realistic considerations when the “right thing” to do is only beneficial to forces that hurt us. A major problem with our paradigms about pride, honor, and “right and wrong” is that the stronger we cling to them, the less flexible we become when we are forced to deal with the reality we find on the ground. It is nobody’s place to criticise your decisions; you have to do the best you are able. I’m not an advocate of ethical relativism, but I have had reason to suspect that this culture we live in might do better to place compassion and forgiveness higher on our list of priorities than we presently do.
To answer the question about how “nuts” you are, well… there’s a quote that has been tossed around here a few times about sanity in an insane system. None of us can say. I wish you the best.

Posted by: Monolycus | Dec 19 2005 14:44 utc | 19

If anyone is keeping track of consequences, some numbers have finally come in, and it turns out that hurricanes weren’t the only records set in 2005.
There are a few ways to interpret this data. If one is convinced that everything is fine and/or dandy, then this represents a huge group of consumers who will now have the means to get back on their feet and start pumping money back into the general economy.
If one is me, however, one might see this record number of people suddenly being pressed to default during a time of economic weakness and inflation as a bad thing. The lost revenue from this group will cause a decrease in projected profit for the insurance and credit industries, so they will inflate their risk premiums to make up for it (which, they are, in fact, doing… remember, there are multiple ways to skin a cat.)
Most people are aware that paying only the minimum will increase their indebtedness; the majority who only make minimum payments do this because they have no spare cash to do otherwise. The joy of raising minimum payments (tantamount to sudden foreclosure for many Americans) for the bookkeepers of rich people is that they can smile broadly and insist they are doing thier clients a favour by helping them to end their debt more quickly.
All of this will make it look, on paper, like everything is going just swimmingly. MBNA, credit counselling services and, I suspect, companies that sell cheap cat food will be showing no negative impact to their profits in the near future. I’m sure that the overall rise in the inflationary rate that will come as masses will now be forced to miss payments is entirely unrelated to this whole mess…
Guh. This is why I don’t have a job as a corporate spokescreep. I couldn’t get that last paragraph out with a straight face.

Posted by: Monolycus | Jan 11 2006 21:12 utc | 20

Posted by: Monolycus | Jan 11 2006 21:14 utc | 21

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