A major overhaul of the nation’s bankruptcy laws won final congressional approval Thursday, in a move that will make it harder for Americans to rid themselves of debt by filing for bankruptcy. We speak with Rep. Jim McDermott (D-WA) and David Swanson of DebtSlavery.org. [includes rush transcript]
The House overwhelmingly approved a major overhaul of the nation’s bankruptcy laws Thursday, in a move that will make it harder for Americans to rid themselves of debt by filing for bankruptcy.
The measure cleared the House on a vote of 302 to 126. It passed the Senate last month by 74 to 25. The bill now goes to the White House, where it is expected to sign it into law.
President Bush commended the vote in a statement. He said, "These common-sense reforms will make the system stronger and better so that more Americans–especially lower-income Americans–have greater access to credit."
The bankruptcy legislation has been a priority of the credit card and banking industries for a decade, and it is the first rewrite of the bankruptcy code in a quarter of a century.
A central feature of the bill imposes a new means test on Americans who file for bankruptcy protection to determine if people should enter compulsory repayment plans, rather than have their assets liquidated to repay creditors.
The bill would also impose significant new costs on those seeking bankruptcy protection and give lenders and businesses new legal tools for recovering debts.
The core of the bill was written in 1997. The House passed versions of it eight times but it usually stalled in the Senate. When the bill did pass the Senate, then President Bill Clinton refused to sign it.
This time around, House Republican leaders refused to consider amendments on the floor and voted down a Democratic attempt to return the bill to committee. The amendments would have forced lenders to keep fees in check, expand disclosure, and would have given extra protection to victims of identity theft.
In an editorial, the Washington Post writes that the bill’s "staunchest proponents should be embarrassed that it was muscled through the House in this kind of Potemkin-democracy way. This process-or, more precisely, lack of process-is becoming routine."
- Rep. Jim McDermott (D-WA), Democratic Congressman representing the Seattle area. He joins us on the line from Washington DC.
- David Swanson, coordinator of DebtSlavery.org, a coalition of organizations opposing the current bankruptcy bill and a board member of the Progressive Democrats of America.
AMY GOODMAN: We’re joined right now by Democratic Congress member Jim McDermott of Washington. He voted against the bankruptcy bill. He joins us on the line from Washington, D.C., heading for a flight to Seattle. Welcome to Democracy Now!
REP. JIM McDERMOTT: Good morning, Amy. How are you?
AMY GOODMAN: It’s good to have you with us. Can you talk about exactly what this bill does?
REP. JIM McDERMOTT: Well, you and Juan made a wonderful synopsis of it. The real issue here is it’s a payoff to the credit card companies. They had been pushing this bill since 1997, and the power of the financial industries is such that they finally managed to get this thing through. It really clobbers poor people because, first of all, you’re not going to —- many people are not going to be -—
AMY GOODMAN: Are you there, Congressman McDermott? I think we have just lost Congress member McDermott. Well, we’re going to ask David Swanson, who is joining us from our Washington studio, David Swanson, a board member of the Progressive Democrats of America and coordinator of DebtSlavery.org, an organization that, well, it’s really a coalition of organizations opposing the current bankruptcy bill. Can you pick up where Congress member McDermott left off.
DAVID SWANSON: I can certainly try, and thanks for having me. The Congressman spoke eloquently on this bill the day before its passage and those remarks are on our website, DebtSlavery.org. You know, the corporate media has sort of presented two views on this: One is that the bill is addressing massive fraud, a claim disproven by evidence from the Congressional Budget Office, the Government Accounting Office, the FDIC, the non-partisan American Bankruptcy Institute, numerous academic studies. The truth of the matter is that bankruptcies are up, because debt is up, dramatically. And in fact, in relation to debt, bankruptcy filings are down. And debt is up in large part because of the neglected health care crisis. A well-done academic study found that about half of bankruptcy filings are the result of medical costs. Another 40% are due to job loss, divorce, or a death in the family. Most of the others are due to natural disaster or call up to fight in Iraq or identity theft or victim of a crime. At most, 3.6%, according to the American Bankruptcy Institute, involve anyone getting out of any payments that they could have made. So, — and the claims from the other side at most are 10%. So, they have redone an entire legal system, making it drastically harder on everybody, except millionaires and corporations, to address alleged fraud by 10%. So, it’s a bill that is a dream bill for the lending industry, for the auto lenders, for retailers who lend, for corporations who might go bankrupt. But there’s not a redeeming feature in it for citizens.
JUAN GONZALEZ: Well, I think we have Congressman Jim McDermott back on the line with us. We lost him there for a minute. Welcome back, Congressman.
REP. JIM McDERMOTT: Yeah, I’m sorry, whatever happened.
JUAN GONZALEZ: No problem. We’d like to ask you in terms of this battle in the House, the Washington Post, as we have mentioned, had an editorial talking especially about the way that this was rammed through without amendments. Could you talk a little bit about the battle in the House, and what’s happening now in the House with some of this legislation, especially favored by the administration?
REP. JIM McDERMOTT: Well, this was a perfect example of what the problem in the House is now. It is a railroad. When they decide in the Rules Committee or in the Speaker’s office, they bring it out on the floor and ram it through. They don’t want to have the amendment process. In other years, we have had as many as a dozen amendments which we could debate and try and change the bill. This year, they said, "Well, we have debated it for the last six years. We don’t need any amendments. Let’s pass it." And, you know, you have got new members in the House. You have got a whole change in the economics of the country in the last — since 1997, and yet they don’t want to have any debate on the bill. They want to run it right through. That’s typical of their — they will do same thing next week on the energy bill. They’ll run that through the Congress, giving away $7 billion to the oil industry without very much debate. It’s really the ending of democracy, because democracy requires debate, and various opinions have to be expressed.
JUAN GONZALEZ: And in terms of the bill itself, obviously, the financial industry has been claiming that it’s been suffering from increased bankruptcies, but yet every day that I open up my mailbox, I find credit card companies trying to convince me to take out more cards, or if I have a card, to take out more debt. So, they’re constantly marketing debt to the American people, and so how badly are they doing?
REP. JIM McDERMOTT: They’re not doing nearly as badly. They just want to squeeze the last drop of blood out of a turnip. Today’s Washington Post has a story on the front page about a woman who had $65,000 in debt. She discharged it in a bankruptcy suit, and the next day, she got a credit card, because that $65,000 was taken off, so it shows nothing, and she got these things sent through the mail to her because the credit card companies look and they say, "Look, here’s a good lady, she has no problems, no debts," and they send her a credit card. There is simply no restriction whatsoever on their marketing of those cards, and unfortunately, people get into using them, and then something like an illness comes along and wipes them out, or a divorce or something. Most of these are filed because of real family disasters.
AMY GOODMAN: Looking at the amendments that were voted down, including closing off the trust loophole for millionaires, limiting the homestead exemption, creating a minimum homestead exemption to save the homes of the elderly, protecting employees and retirees from corporate practices that deprive them of their earnings and retirement savings when a business files for bankruptcy, discouraging predatory lending practices, exempting debtors from means testing if their financial problems were caused by identity theft, limiting the amount of interest that can be charged on any extension of credit to 30%, and it goes on from there, providing protection for from medical debt homeowners. Who is in charge of pushing this through? How much money are they getting from the industries that benefit? Let’s put that question to David Swanson of DebtSlavery.org.
DAVID SWANSON: Since 1989, the credit card companies have given over $43 million in campaign contributions. But that’s not the entire story in that the auto loan companies and retailers and, in many cases, credit unions and numerous other corporations, as well as the Chamber of Commerce, have lobbied intensely for this bill over a period of years, and that lobbying has had a strong effect. You know, the credit card industry is turning the government, with this law, into its collection agency at a public cost of hundreds of millions of dollars. So this law is not about individual responsibility, but it’s clearly also not about responsibility for the credit card industry, which makes massive profits, $30 billion last year, off of the high rates it charges for those who are risky borrowers, supposedly. But now it wants the government to step in and guarantee that even for those who default, every last dime is going to be squeezed out of people, at public expense.
JUAN GONZALEZ: David Swanson, in terms of those who voted for the bill, there was a significant number of Democrats who voted for the bill. Were there any — also Republicans who broke ranks and decided to oppose this bill?
DAVID SWANSON: There were not. Every single republican in both Houses voted, and every single one voted for the bill. In the Senate, 18 democrats and one independent voted for the bill. One democrat did not vote. In the House, 73 democrats, which is down from 90 last time around, voted for the bill. So, the RINO, the republican in name only, has really gone extinct here. The republicans have closed ranks, but the DINO, the democrat in name only, is growing and is gaining attention. Progressive Democrats of America is going to go after these democrats, and Moveon is going to be running ads in these democrats’ districts against them for having backed this bill.
AMY GOODMAN: Congress member McDermott, I know you have to get on that plane back to your district in Seattle, but I wanted to just ask you a quick question on another issue, but on Capitol Hill. Congressional republicans killed the democrats’ latest attempt to rewrite ethics rules in a 218-195 vote along party lines. Minority leader, Nancy Pelosi swiftly issuing a statement accusing republicans of showing allegiance to the ethics standards of Tom DeLay. Only two republicans dissented. The vote came a day after a few lawmakers expressed concern at a closed-door meeting over the party’s handling of the ethics issue. Several officials said that Congress member Dan Lundgren of California cautioned fellow republicans about using power arrogantly, invoking the example of the former House Speaker, Jim Wright, and the Democratic majority he once led. Can you talk about what’s happening with the Ethics Committee and this vote?
REP. JIM McDERMOTT: Basically, the Ethics Committee is dead in the House. They put in amendments to the rules which would make it absolutely impossible to carry on an investigation against anybody because you need not only — the Committee is balanced 5-5. You need six votes. That means one person from the other side has to come across and affirmatively say, we should investigate Tom DeLay, or we should investigate anybody. And if you cannot get somebody from the other party to do that, it dies after 45 days. So it’s essentially a graveyard. They have made the Ethics Committee a graveyard for any complaints against people that have power in the House. And they have also given the ability to have lawyers coordinate testimony. They have done all kinds of things to make it very difficult to look at the problems. If this was what was going on in 1989 against Jim Wright, the scream from the republican side would be unbelievable about the arrogance, and this guy has carried it to such a degree that he actually got them to vote last year that you can serve even if you had been indicted. I mean, there is absolutely nothing that they won’t do to protect Tom DeLay, but I think he’s a dead man walking. I think that this is going to rebound against him. I have been here a long time. I have seen a lot. I served on the Ethics Committee for six years. I know what happens, and I think in spite of their efforts, they ought to be listening to Dan Lundgren or some of the more rational voices in their caucus, and make a decision that they’re going to do what the republicans did to Gingrich. They had to let Gingrich go out there and be put through the process.
AMY GOODMAN: There was an attempted coup against Gingrich before he ultimately left?
REP. JIM McDERMOTT: Exactly. And he — you know, he created the problem for himself, and nobody forced him to do any of that stuff. And it became evident — I mean, Porter Goss was the chairman of the investigating subcommittee, and it wasn’t that Porter didn’t want to protect Gingrich, but there was a point at which it was simply not possible, and Porter’s commitment to the House and to the institution was such that he had to do the job of bringing out a $300,000 fine and a reprimand and so forth. That has got to go on here. The process has to go on. Maybe Mr. Delay hasn’t done anything. I don’t know. But the process has to work. Because if the process doesn’t work, the American people say, "They’re so corrupt, we can’t trust them for anything."
AMY GOODMAN: Well, Congressman McDermott, we’ll let you go. I’m sure that your fellow passengers will happy about that, as they’re just about to close the doors there. Congress member McDermott heading back to Seattle, speaking to us from Washington, D.C. We’re going to ask David Swanson to stay on the line so we can go to break and ask you just another question about the issue of bankruptcy and the legislation that was just passed.
AMY GOODMAN: We’re still on the line about David Swanson. David Swanson of DebtSlavery.org in Washington, D.C. Juan?
JUAN GONZALEZ: David, I’d like to ask you in terms of the bill that now has passed and is expected to be signed by the President, for the average American, what will change in terms of what they can expect if they have happened to fall behind on the money that they owe to a credit card company?
DAVID SWANSON: Well, many, many Americans will be unable to file under Chapter 7 bankruptcy, which is the form of bankruptcy that allows you to get out of some of the debts you’re unable to repay. And under the current system, a judge makes that decision and decides it based on your actual income and expenses. Under this new regime, if you are under the median income in your state, and it will be your responsibility and legal costs to prove that you are, you will be required to go to a loan counseling agency, many of which are quite predatory, in themselves, and they will be the gatekeepers. And whether you file under Chapter 7 or Chapter 13, which many more people will be forced into, which requires a long-term payment plan, it will be much, much harder for you. You will have — there will be more assets that you cannot keep. There will be more payments that you have to make. Child support payments will go first to credit card companies in many cases, rather than to children. I mean, it’s absolutely extreme. And there’s a long laundry list of changes, and they are all to the disadvantage of consumers. So, I would encourage people to go to DebtSlavery.org, see which way your Congress member voted, and call them. It’s as important now to thank them or blame them as it was beforehand.
AMY GOODMAN: Isn’t this a done deal?
DAVID SWANSON: It is a done deal, but there’s an election next year, and we want to remember who voted which way, and we want to keep up the pressure and the media attention as this goes into effect six months from now. We also want to fight the energy bill and the predatory lending bill and the Central American Free Trade Agreement. This is part of an agenda that’s an attack of class warfare on working Americans. And we want to make some noise about that and hold accountable those who voted with the credit card companies on a bill without a single redeeming feature for ordinary Americans.
AMY GOODMAN: David Swanson, we want to thank you for joining us. Again, that website DebtSlavery.org. And you can go to our website where we link to guests’ websites.