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More from the Kanye West Fan ClubSubmitted by Prometheus 6 on September 4, 2005 - 3:37am.
on Culture wars | Economics | Hurricane Katrina | Justice | News | Politics | Race and Identity Jason Toney on Kanye West:
LATER: Since this discussion has drifted into economics, I invite anyone who stumbles on it (via web search at this point) to see the actual Kanye West discussion. I receive at least a half-dozen credit card offers every week. These credit card traps are designed to lure in the unsophisticated and unwary. The banks are predators who are preying on desperately poor people who are simply trying to survive or buy a tiny piece of the American dream for themselves. Lenders are not losing money, DW. They are posting record profits. The usurious interest rates charged to poor people makes lending to them a viable economic model. The problem of debt should be examined from a broader perspective: the deregulation of the banking industry, the patchwork quilt of state laws that allow usurious interest rates (S. Dakota, etc.), and the ease with which banks are able to avoid any constraints on their trade via Interstate Commerce laws and regulations. Why should credit card companies be allowed to charge over 20% interest to the least who can afford it when the prime rate is 5%? Why are late fees so excessive?
Also, there is no such thing as an "easy bankruptcy" unless you are a former savings and loan executive or corporate ceo whose felonious business practices bilked investors, pensioners, and savers out of biliions. Many of those types (like Marvin Warner for example) declare bankruptcy and continue to retain ownership of their multi-million dollar homes in states like Florida or Texas due to "liberal" bankruptcy laws for the rich and infamous.
These credit card traps are designed to lure in the unsophisticated and unwary. The banks are predators who are preying on desperately poor people who are simply trying to survive or buy a tiny piece of the American dream for themselves. No disagreement here. The problem is, we can't eliminate all temptation from the lives of the poor, no matter how much better they'd be off if we did. Just think if we could get poor people to stop ingesting intoxicants? Hey, maybe we should make them illegal?! The usurious interest rates charged to poor people makes lending to them a viable economic model. So does the price they're charged for intoxicants. And you propose that the answer is to make such transactions illegal? Many of those types (like Marvin Warner for example) declare bankruptcy and continue to retain ownership of their multi-million dollar homes in states like Florida or Texas due to "liberal" bankruptcy laws for the rich and infamous. Like you, I find that outrageous, and not to my personal benefit.
Credit cards are the #1 battle fought by the "at risk" portion of my extended family. I'm no friend of those who make their living pushing money. But making credit cards for the poor (and the near-poor) illegal is not the answer. The only answer, and it's far from perfect because it doesn't work as often as it needs to, is to convince the at-risk person that they will be far better off without debt. Unfortunately, the brutal institutionalized inequality of this society fosters conditions that lead many people to opt out of the struggle through self-medication. They feel they can't cure the ills of the society, so they resort to anesthesizing themselves. In the hands of some people, credit cards are also an intoxicant. But I'm not advocating removing "temptation from the lives of the poor." I'm talking about preventing their exploitation by regulating the financial industry.
But I'm not advocating removing "temptation from the lives of the poor." I'm talking about preventing their exploitation by regulating the financial industry. How would that work, if not by making profitable credit transactions with the poor illegal?
By reforming the financial sector...By making predatory lending practices and usurious rates illegal... By prohibiting excessive late fees. A lot can be done to remedy the current credit card debt crisis, but the corporations and the Congress are not interested in solving this problem. Both are complicit in the exploitation of the poor. By making predatory lending practices and usurious rates illegal... By prohibiting excessive late fees. How would that be different than making profitable credit transactions with the poor illegal? You wouldn't claim, for example, that the poor represent the same risk as the middle class? It's not that there is a single lender who sets the rates. There are a lot of lenders competing for the business. If they could make money with 10% credit cards with low late fees, we would see such offers. being made to the poor. Easy bankruptcy has made this worse. There's some hope that it will get a bit better given the change in the law.
By making those secured credit cards carry an interest rate appropriate for the fully-secured loan that it is. "You wouldn't claim, for example, that the poor represent the same risk as the middle class?" There's no greater fiction in the American body politic than the middle class.
The middle is soft my friend, and full of pretenders, posers and wannabees. The average "middleclass" American probably teeters on the brink of insolvency, living paycheck to paycheck, and knowing that energy price hikes, a recession, a health problem, or changes in employment, could drastically lower their standard of living.
Already comprised of a lot of "working" poor, the plight of the middleclass will only worsen as the jobs they used to depend on continue to move offshore.
This analysis is wrong and stupid. 1) Poor people were already occasionally able to take on debt before the supposed bankruptcy reform. 2) The debt they did take had the pre-reform bankruptcy laws priced in. Which means that the terms at which companies were willing to extend credit took into account the pre-reform rate of bankruptcy. Borrowers paid for the right to go bankrupt under those laws in the form of higher interest and costs of borrowing. 3) Then the law was reformed at the request and lobbying expense of the lenders - meaning the amount the poor paid to compensate credit card companies for their ability to go bankrupt was given to credit card companies in exchange for nothing. A direct one-time transfer from the poor to the credit card companies. 4) Most credit holders, especially poor ones are not able to immediately change the price of their borrowing to reflect the new immediate change of the terms of their loans. That is why the value that is being paid to compensate for the old bankruptcy laws was simply transferred. A fair word to use in this situation is stealing. 5) If the cost of interest and price of borrowing goes down, it will go down just enough so that lenders are compensated for the new bankruptcy laws - meaning the deal will not be better or worse for the poor in the long run. But the change in the bankruptcy laws was immediate. The change in the market terms of lending will be more gradual, and until it reaches its new balance, lenders will take more uncompensated costs from the borrowers. The net impact of the "reform" was a one time transfer of wealth from higher bankruptcy-risk borrowers to credit card companies and a decreasing continuous transfer from borrowers to credit card companies until the prices fully respond. So you're wrong about this "reform" helping poor people. But the worst part is that you have the audacity to accuse someone else of not thinking clearly. That's really unbelievable. That makes you an idiot. I've been out of town for four days so I don't quite know where to post this message. Last week I listened on the radio to a Dutch engineer who has a major role in the construction and maintenance of the dike and levee system in the Netherlands. He said that the system in Holland was built to withstand a storm that was predicted to occur once every ten thousand years while the system of levees surrounding New Orleans was built to handle a storm that would occur once every one hundred years. In response to the usual idiotic question from the American news anchor who wondered about the expense of the levee and dike system in Holland, the Dutch engineer said that it was far less expensive than what will have to be spent to rebuild New Orleans and surrounding environs. Why is it more important to have a B-1 bomber air base in North Dakota than it is to protect the busiest shipping port in North America? 2) The debt they did take had the pre-reform bankruptcy laws priced in. Which means that the terms at which companies were willing to extend credit took into account the pre-reform rate of bankruptcy. Borrowers paid for the right to go bankrupt under those laws in the form of higher interest and costs of borrowing. It seems ot me OBM that your disagreement is somewhat secondary. You seem to agree with the primary claim, namely that easy bankruptcy for poor people is not generally a good thing for poor people. I'll agree with you, the law was passed at the request of lenders, and likely improves the overall quality of their loan portfolios.
No. Not secondary.
Borrowers will in the long run will get lower priced loans, but just lower enough to offset the reduced risk of bankruptcy. In other words borrowers will get loans that are inferior from their point of view for a lower price ... eventually. In the mean time, the law improves the quality of credit card company loan portfolios directly at the expense of the quality of poor people's borrowing portfolios. Not secondary - direct stealing from every borrower, and hitting poor borrowers the hardest. The absolute primary impact of the "reform" law was to transfer (steal) money from poor borrowers to increase the wealth/"quality of loan portfolios" of credit card company owners. It is absolutely impossible to claim that the reform was good for poor people. The person who said the law is proof Bush does not care about poor people was absolutely right. Your claim that more difficult bankruptcy is good for poor people is 1) beside the main point of the law Bush passed 2) irrelevant to the point being made by the person you were responding to, though you had the gall to claim the person you were responding to wasn't thinking clearly 3) Not true, especially in an environment where the US poor already has substantial access to credit. Being able to discharge debt under reasonable circumstances does have value. Bankruptcy was more reasonable before the "reform" than after. In recent years we have seen the corrupt core of corporate America exposed time and again, from Enron to Wall Street brokerage firms. But many folks, and DW I have to include you here, continue to buy into the myth that somehow these mega-companies are operating legally AND ethically. On the contrary, most corporations violate the law when they deem it to be profitable, pay a few miniscule fines when caught, and go back to business as usual. If a particular law proves to be too formidable an obstacle to their predatory practices, THEY WRITE NEW LEGISLATION and payoff members of Congress to sponsor and vote it into law. The "citizens" of America--those who benefit most from the nation's resources, and who enjoy the rights and privileges that citizenship confers--are corporations, the wealthy elite, and their political underlings. The "people" of this country have absolutely no rights or power respected by the government and its corporate owners. They provide the lubricant to keep the wheels turning in the form of labor and consumption of goods and services. But like the poor victims of "The Maxtrix," most are so brainwashed or brain dead they cannot distinguish reality from the virtual reality projected by corporate power through corporate media.
Unless or until the corporate takeover of America is confronted and challenged by the "people," second-class citizenship for the vast majority of "Americans" will continue to be our lot and destiny.
Borrowers will in the long run will get lower priced loans, but just lower enough to offset the reduced risk of bankruptcy. Isn't that good?
Not good enough. Credit card companies can profitably market a 10% no late fees card. The secured cards have no risk, and balances below the savings account balance increase the bank's reserves. They'd eat the market alive.
No. It's not good. If dell lobbies to have computer warranties banned, the price of computers will go down because computers don't have warranties. That is not free money for consumers. The consumers are getting a worse product and the money they save just makes up for the worse product. In the meantime, dell pockets the money for the warranties they've sold when warranties were legal. And while the ban on warranties is immediate, prices will take time to adjust to the new environment - more free money for dell until the prices adjust. Consumers will pay less for loans, but they are not paying less for the same loans, they are paying less for loans with more restrictive terms. You are supposed to pay less for loans with more restrictive terms. That is not good. Just like you are supposed to pay less for computers without warranties. In neither case is that helping consumers. If dell lobbies to have computer warranties banned, the price of computers will go down because computers don't have warranties. At least keep the polarity aligned here OBM. I've been opposing banning transactions desired by both buyers and sellers. The real point: with stiffer bankrupcy laws, there will be more loans available. It's not the case that all poor people are equal, it's that the lender needs to expect to be paid back. Easy bankruptcy means that people in the margin are denied credit at any price.
Credit card companies can profitably market a 10% no late fees card. The secured cards have no risk, and balances below the savings account balance increase the bank's reserves. They'd eat the market alive. I think you're not factoring in the value of those late fees to the bank. For what it's worth, a phone call will usually get them to drop it.
Totally missing the point of what was a very clear example. Maybe, just maybe if you read the last posts over again slowly you'll figure out what I've already written repeatedly. I'm not going to keep repeating it.
No. Idiot. The real point is that credit was already broadly available to the poor. This "reform" did not increase credit availablity to the poor as much as it transferred value from every borrower, especially poor borrowers to lenders. Bankruptcy has an important role not only morally but in societal productivity. The ability to start over without leaving the country or living under circumstances where no matter how much you earn there is no change in your standard of living is good for the poor and for the rest of the country. What credit card companies labelled "easy bankruptcy" in order to justify a direct transfer in wealth from the poor to themselves was never "easy". There have always been fairly severe consequences for bankruptcy and it had never been easy or worthwhile for most people rich or poor, even those behind on their debts. But it was an option if your wife got cancer or the factory closed - and America was better for it. Because you are a moron, you've really bought into this "easy bankruptcy" labelling. The sole purpose of that labelling was to assist in stealing value/wealth from borrowers, especially poor borrowers. Unless you own credit card company stock, this reform has not helped you. But in order to steal wealth from America's borrowers, the credit card companies had to come up with something. And believe it or not, there are some dunces going around who really bought it. Bankruptcy before was "easy" but now its "stiffer" so that will help the poor. If it wasn't for the internet, I wouldn't think people that stupid even really existed.
The scheme I've mentioned is merely profitable, not usurous. But even if you leave the late fees intact, or give them a credit limit of $400 on a $500 security deposit in exchange for eliminating late fees, leaving that foot over the line of usury would still be a lot more supportable with the interest rates that are proper to a secured loan. With the fed funds rate at 3%, credit cards shouldn't be charging more thsn a 6% rate on secured cards. This actually puts the lie to your assertion that banks would market credit cards at reasonable rates if it were possible. The fact is, they will market credit cards at the most unreasonable rates allowed by law. And then they lobby and bribe and buy new politicians to pass laws raising the rate ceilings. There was a time the interest rates being assessed now would get a lender tossed in jail for loan sharking. You know this. Of course, the point of the post I linked to is that everyone on the Gulf Coast is now at the mercy of their creditors because the new bankruptcy laws give them no simple out even in these conditions, while corporate interests get all the help they can imagine. I'm not going to keep repeating it. The actual error was indefending an assertion that was never made by ANYONE:
The correct response was "Where did I say that?" unless your purpose is to demonstrate reasoning. The scheme I've mentioned is merely profitable, not usurous. But even if you leave the late fees intact, or give them a credit limit of $400 on a $500 security deposit in exchange for eliminating late fees, leaving that foot over the line of usury would still be a lot more supportable with the interest rates that are proper to a secured loan. To start with, credit card limits are difficult to enforce (unlike debit cards). Many transactions involve a "pre-auth", which grants the merchant the right to charge so much to the card. Merchants commonly over-authorize, a gas station these days tends to authorize $100, and it's difficult to "give back" the excess authorization, it expires in three days last I checked. Credit card companies manage this problem by not enforcing limits strictly. But the real problem is that credit card accounts generating less than maybe $20/month profit aren't good business. That profit comes from two sources, interest in excess of bank costs, and fees. It is diminished by deadbeats Securing the account protects against deadbeats, but it doesn't generate any profit.
Because you are a moron, You know OBM, it doesn't bother me personally. I've been doing this a long time. But think about it. You've got my attention, we're sincerely discussing the issue. What other goal did you have in mind which might be being advanced here? Do you want me to go away? To accept your analysis based on that kind of argument? Or what?
Tell that to the guy whose card got declined at a restaurant.
That is irrelevant to the discussion.
Only because that's what the business plan says. I got over 1,000,000 accounts that generate $15/mo profit... Understand... FIFTEEN MILLION DOLLARS PROFIT PER MONTH... I see no grounds for complaint beyond pure greed. And each of these issuers have considerably more than a million accounts, many if not most cranking far beyond $20 per month profit by charging +20% interest on funds they're paying 2, maybe 3 percent on.
I don't know if you've noticed, but folks around here are pretty unforgiving of denials of what's happening in front of everyone's face...in this case, an unneeded enhancement to corporate profitability. Entropy requires that profit come from somewhere...and rich folks get special low-interest deals, so guess where it comes from? The point is, a lender would not create a class of account which maxed out at $5/month profit. and rich folks get special low-interest deals, so guess where it comes from? If you're going to do business with someone, it is with the expectation of making a profit. Personally, I'm not much motivated to make a profit from doing business with the poor, particularly by selling them something which with a high degree of likelihood is destructive in their lives. At the same time, declining to do business with the poor has the effect of reducing options for the poor, and by reducing competition for those willing to do so, it increases the prices the poor must pay for whatever business I'm declining to be in.
The sell them something helpful...like credit at a reasonable price.
Really? I thought the point was that accounts that generate $20/month profit aren't good for business. Now that you've ducked that one, let me ask you--WHY is $5/per month on a couple million accounts unacceptable? Because they want MORE of their money. Right? You think $60/year from a million folks... Understand: 60 million dollars...all-in, total profit... ...isn't enough? Especially when card balances less than the savings account that totally secued the credit card increase the bank's revenues at far-below-market rates? Please. Kayne, I must say... I'll give credit where credit is due, that sir goes out to you. Keepin' it real but "ignored the TelePromTer." Remember this... in America you are FREE... to do what we tell you. You didn't care about that and I applaud you for it. These are only words, but your words caused a big ruckus and all you did was excercise your 1st Amendment right, right? Doesn't is suck knowing that so-called "A-listers" are just puppets with their agendas on a scale just using disasters to catapult their own fame and glamor. You Kanye West, did something for the people. I ain't rich or famous, but I felt you were talking directly to people like me; real people with real problems. YOU ARE A MODERN DAY PROPHET. Much Respect... M. D'Ville It's always important to place these corporate entities in historical context. The link below sheds some light on the fine banking tradition in the USA: http://www.emergingminds.org/magazine/content/index.php?itemid=2370 Now that you've ducked that one, let me ask you--WHY is $5/per month on a couple million accounts unacceptable? Because they want MORE of their money. Right? You think $60/year from a million folks... Understand: 60 million dollars...all-in, total profit... You neglected that "maxed out" term, p6. Consider a lender who has loaned $400 at 10% interest. That's $40/year. Say this lender can borrow that money at $10/year. Gross profit, $30/year. And that's as good as it gets. Most accounts generate even less profit. That's just not a viable business, and you can't make up for it in volume. Credit card companies also have to cover fraud, which can occur even in secured card situations (the "security" ends up stolen and has to be returned).
Reality check 1: The maxed-out customer costs then bank nothing. Even processing costs approximately zero with massive automation. Reality check 2: Somehow, they managed to cover fraud back when rates were like 10% lower than they are now. And it's the vendor's responsibility anyway. You say sometimes the "security" is stolen...well, when it's cash in a bank account, I got no sympathy for the company, which needs to tighten up its shrinkage controls. I got less sympathy than I have for Big Pharma...and I got NONE for them. When you say it's not a viable business, yet a fraction of the customers can generate millions in pure profit per year (remember, you said profit per account, which calculation takes into account all the things you're warning of), you are so wrong it's painful to watch.
Then get out of it. Someone else will pick it up. But don't legalize theft. And YOU shouldn't come in talking about how they will charge less if there's a market for lower costs. Not after all the manipulations the industry has done to drive those credit card rates up. The maxed-out customer costs then bank nothing. maxed-out profit. As in, in your model, even with no fraud, no bankruptcy, everyone pays eventually, the maximum gross profit is $30/year. Not a business. You say sometimes the "security" is stolen...well, when it's cash in a bank account, I got no sympathy for the company, which needs to tighten up its shrinkage controls. More what I had in mind was a forged check provided as security, or an identity theft crook. But don't legalize theft. It's simply not theft for a willing buyer and a willing seller to enter a transaction which both understand. Even when that transaction looks one-sided to an outsider. To make such transactions illegal is an example of the very facism which is regularly complained about around here, and while it might be in their best interest, it limits the freedom of the poor to manage their own business affairs.
It is when you get it one or two million times. So what's the issue in the end...$20/month, $5/month, $2.25/month? What's next, a dollar?
They WERE illegal, and they were made legal. THAT is what should never have been done, Go back to that link I just gave you. Get the history. There's a lot of stuff there P6, I didn't see anything controversial. A more direct link? You'll not find me claiming they're not sharks. When that shark bites, with his teeth, babe, scarlet billows start to spread.
You'll like this one a lot. In fact, I wouldn't really be surprised if you know the guy.
You'll like this one a lot. Excellent. (but I don't know him or anyone else important in the financial industry). This interview is long, but full of insight regarding credit cards; Kahr explains things well (understandable) and also explains the flow of money in a way which participants should understand. Good cite, P6.
I don't control you. Seriously I can't force you to accept that two plus two is four. Not to say that I can't be wrong, but that even if I'm right you don't have to accept my analysis. I joined this thread annoyed at your much earlier "not thinking clearly" quip. But when I say you are a moron because you have accepted the line "easy bankruptcy" when bankruptcy had not been by any reasonable standard "easy" - you have a choice of either showing that "easy bankruptcy" really is easy and calling me a moron back, or showing that "easy bankruptcy" is really easy and not calling me a moron back or ignoring the substance and explaining why you don't care that I call you a moron. You had a good reason for making the choice you made. I'm not here to convert you. Sometimes putting thoughts to words is fun and good exercise. Calling you a moron was what I felt like writing at the time. Sometimes putting thoughts to words is fun and good exercise. I'm with you on that one OBM, and I hope you continue. I do think we've likely explored this one well. Leaving bankruptcy aside for a moment, I offer a reaffirmation of the intoxicant analog, because I think it is very real. Consider a poor guy who's looking to buy a couple of 40s. Consider three scenarios:
Now if we took a poll of Americans, asking "of these scenarios, which is better for the poor guy?", we're going to get people distributed across all three. I'm a 1. Not because I want to make the local storeowners rich, but because if the guy's going to buy beer, I'd just as soon he spent a smaller amount of money on it, and I sure don't want him funding criminal enterprise. Now I would hope the guy is temperate in his use of alcohol, while agreeing that many will not, and such behavior will keep them poor forever. That's how it is with credit. We can treat the poor like the rich, namely let them find the best buy they can among multiple willing sellers. We can do our best to educate them as to what it is they're buying, and at what cost to their future. Of we can become dogooders and make it tougher, by outlawing the kind of transactions most likely to be offered to the poor, because we know they're not good for poor people. Or we can go all the way and revitalize the criminal loan shark industry, who have got to be suffering against current competition.
Rich or poor it is a good thing that if the unexpected happens and you cannot pay your bills or even if you make a mistake your income will not be, for the rest of your life, garnished to the poverty level. That's good for the people who face the circumstance and it is good for the economy. It is good for the credit market that rich or poor you can take a loan knowing that under reasonable conditions if you cannot repay the loan it can be discharged. Credit card companies have huge professional staffs whose job is to calculate the amount of people who will go bankrupt and adjust the price of lending so that it compensates the credit card companies. Credit card companies with huge amounts of customers and access to insurance and capital markets are well equipped to calculate and handle the risk that a factory closes permanently in Illinois and can carry that risk at low cost compared to the permanent life-altering cost of that risk if it is passed to individual factory workers in Illinois. Credit card companies had been assuming that risk and were paid for it as they should have been and the country was better off for it. Factory workers whose plants have not closed have been paying credit card companies a fair, competitively priced amount for taking on that risk. In the United States, essentially every person, rich or poor, who did not have a previous history of not repaying credit had access to credit. After credit card lobbying, the government decreed that credit card companies suddenly do not have to take on that risk, it should be passed onto the factory workers. The fair amount that factory workers have been paying credit card companies for carrying risks the companies are better suited to carry? The credit card companies just keep it in exchange for nothing. There is nothing new here. As I have been repeating since the beginning, the reforms of bankruptcy is unambiguously bad for the poor. Firstly it is a direct theft of money that customers have fairly paid credit card companies to carry the risk of bankruptcy. Secondly it puts the risk of events that should reasonably trigger discharge on individuals who are not well equipped to deal with those events instead of companies that are. So that's that. You were arguing that Bush's bankruptcy reform was good for the poor and it was not. Just flat out wrong. I don't know if you have in some weird way mixed up Bush's bankruptcy reform with preventing someone from banning credit. I have no idea where that is coming from. There is no transaction that Bush's reform made legal that was illegal before. That's really just a bizarre thing to be talking about on this thread. Anyway bankruptcy reform is absolutely solid evidence that Bush does not care about the poor. There never was "easy bankruptcy" that was just a lie invented by the credit card companies to steal money that was given to them in good faith under competitive conditions. I'm taking your weird attempt to change the subject as the closest you are going to come to a concession that you were wrong in what you posted earlier. Agreed OBM, we came to be discussing two diffrent topics.
Very different topics. My original argument was that the second makes more credit available to poor people. You countered by pointing out that this is a one time windfall to the credit industry, which has the effect of transferring money from poor people to financial institutions. Does that seem a fair place to leave it? We almost agree. Making bankruptcy harder to obtain does not always effectively make more credit available to the poor. The poor are less well equipped to absorb financial catastrophe and rationally will avoid credit if they are forced to absorb that risk. In that case the effective amount of credit available to the poor, taking into account the terms the poor are rationally willing to accept given their ability to absorb risk, may well be lower if that debt cannot be discharged after a financial catastrophe. Bankruptcy has a real positive economic role. One cannot just say whatever it is make is harder and the poor will be better off. Financial institutions really are better at quantifying and protecting themselves from what would financial catastrophes for individuals. And they really are able to pass those costs to their customers in a way that is a bargain for their customers if there are bankruptcy laws. Even leaving the windfall aspect aside - though that is the main aspect that caused the credit card companies to lobby for it - it is not true that making bankruptcy harder necessarily helps the poor get credit. We also cannot ignore the impact of bankruptcy on families that actually use that option. It is possible for credit to put a person or a family in a position where they are not better off if they work harder because of the debt they are servicing. In the absence of bankruptcy, that person should and will just stop working forever. That is not good for anyone in the economy. So even if more credit is available at the cost of a perverse set of incentives for some of the poor that can easily be a net negative for the well being of the poor in general. Basically, unless you can demonstrate that easy bankruptcy is too easy in a specific way, it does not follow that making bankruptcy harder helps the poor overall. It seems like a simpler argument than it actually is. In the specific case of the Bush reforms, when you add the one-time windfall - it becomes very clear that this was not good for the poor overall. Discharging and canceling debts is a time honored American tradition and it has been used since the founding of the nation by all classes of people to create new lives and new opportunities for themselves. The reason that folks like Davy Crockett, for example, kept moving west was not because they feared being crowded but because they were fleeing their accumulated debts. The changes in the bankruptcy laws that the idiots in Congress and the brain donors in the Bush Administration promoted were not founded on any reasonably objective findings.
Go back to the Old Testiment. Making bankruptcy harder to obtain does not always effectively make more credit available to the poor. The poor are less well equipped to absorb financial catastrophe and rationally will avoid credit if they are forced to absorb that risk. Indeed, having more offers does not necessarily imply more offers which are at acceptable terms. But look who is the winner and who is the loser in this equation. The loser is the guy who opens up a credit card knowing that he will eventually declare bankruptcy. That guy may well find the current terms not to his liking. The winner is the guy who is on the way up out of whatever hole he's in. This guy is unlikely to declare bankrutpcy, and thus ends up the beneficiary of the modified tradeoff in terms.
Discharging and canceling debts is a time honored American tradition and it has been used since the founding of the nation by all classes of people to create new lives and new opportunities for themselves. Sure. And no one is disputing the necessity of bankruptcy. When bankruptcy works like insurance against unforseen tragedy, it works fine. But that's not the usual path to bankruptcy. The usual path, for both the poor and the rich, involves spending more than one is making over a period of years. It's totally forseeable.
Nobody does that. Or so close to nobody as makes no nevermind. It's the sort of nonsense claim that was used to justify the provisions in the bankrupcy bill. "But that's not the usual path to bankruptcy. The usual path, for both the poor and the rich, involves spending more than one is making over a period of years. It's totally forseeable." Like United Airlines right? Like United Airlines right? Commercial bankruptcies and personal bankruptcies have substantial differences. It's generally a goal in a commercial bankruptcy to keep the business operating, so that the employees keep their jobs. Thus, great effort is made to trade off pain for shareholders and bond holders against the goal to keep the business alive. United Airlines did not transition from the regulated era well. United had pilots who retired making $350,000 per year in 1990, and lots of them making over $250,000. They had a generous pension plan which paid them a significant portion of that in retirement. They had tens of thousands of retired people collecting over $100,000 per year in retirement pay. While ticket prices were regulated, they could just show where their profits were small and get a ticket price increase. But when deregulation created $100 coast-to-coast tickets, they were in trouble. They never resolved their issues, and inevitably they were required to declare bankruptcy to be able to operate at all. This same fate awaits the other high-pension airlines.
Since corporations are legal persons they, in principle, should not. Do black lenders do any better? If not, why not? You know any Black credit card vendors? "It's generally a goal in a commercial bankruptcy to keep the business operating, so that the employees keep their jobs. Thus, great effort is made to trade off pain for shareholders and bond holders against the goal to keep the business alive." This may have been a goal in other times but I don't believe that this remains a matter of paramount concern among regulators and overseers in today's environment. The examples you cite pertain to those employees who were paid at the upper end of the scale but United's efforts to be declared legally free from its pension obligations will fall hardest on those United employees who made far less than $100,000 per year not the commercial pilots or their widows. Soooo... the gist of dw's argument is that it's bad to regulate credit card companies, but good to regulate the beer-drinking habits of poor folk. Ooookay. Since I'm married to a bankruptcy attorney, I'm biased-- but I'll say anyway that I am utterly baffled as to dw's notion of "easy" bankruptcy. What would be "hard" enough to learn those shiftless poor folk, some of whom are the above-described middle class (students with ruinous loans and minimum-wage jobs, homeowners with long illnesses and no insurance, and so on) ? The comparitive "ease" of a bankruptcy has a lot to do with the type one files, but none are "easy" in the sense that you can just stick a little coupon in the mail, skip out on all your debts, and go drink your life away in peace and comfort twenty-four hours later. Those who peddle that fiction really annoy me.
Sorry alsis, I didn't really intend to suggeset that bankruptcy was easy. I did intend to suggest that it is easier now than it will be a month from now. The examples you cite pertain to those employees who were paid at the upper end of the scale but United's efforts to be declared legally free from its pension obligations will fall hardest on those United employees who made far less than $100,000 per year not the commercial pilots or their widows. You sure PT? I had understood that the Pension Benefit Guarantee Corporation, in effect a federal anency, resists paying pensions on a sliding scale starting low, and tops out at a maximum over which they simply don't guarantee anything at all. That the big losers were those with big pensions.
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Anyone who thinks that easier bankruptcy is a good thing for poor people isn't thinking clearly.
To the extent that poor people might occasionally need to take on debt, lenders are more likely to loan money when they expect to be paid back.