Did the 2005 Bankruptcy “Reform” cause the world financial collapse?

Did the 2005 Bankruptcy “Reform” cause the world financial collapse?

Federal Reserve Bank of New York Staff Report No. 358 - Seismic Effects of the Bankruptcy Reform.

Remember the Bankruptcy Abuse [sic] Reform act of 2005? Yeah, the one that the credit card companies and banks got passed by buying the very best Congress money can buy. Turns out, according to the New York Fed's research, that since people going bankrupt after the BAR found it more difficult to stop paying their unsecured debts - i.e. credit cards - they were forced to stop paying their mortgages instead. Over 120,000 of them a year, according to the NY Fed researchers.

Hmm, Citibank: that is one of the biggest credit card issuers around, right? So, lezzee here. Citi went and bought itself a new bankruptcy bill in 2005. One result was that, (let’s give ‘em a break and multiply two years instead of three) a quarter of a million people had to default on their mortgages. That in turn caused a crisis in U.S. sub-prime mortgages. That in turn blew up the whole damn world financial system. And now, Citi is getting $308 billion in our money to save its sorry ass?!?

This would be effing hilarious if it weren't destroying so many peoples' lives at this point.

Seriously, I'm pretty sick and tired of people whining and screaming when I argue that we need to Euthanize Wall Street to save the economy, and that we need to keep the friends of Citi director Robert Rubin, like Larry Summers and Timothy Geithner, as far away from President Obama as we can.

OK, so that's my rant. Here's some excepts from the last month's Federal Reserve Bank of New York Staff Report No. 358, , Seismic Effects of the Bankruptcy Reform.

We argue that the 2005 bankruptcy abuse reform (BAR) contributed to the surge in subprime foreclosures that followed its passage. Before BAR, distressed mortgagors could free up income by filing bankruptcy and having their unsecured debts discharged. BAR blocks that maneuver for better-off filers by way of a means test.

Our specific argument is that the bankruptcy abuse reform (BAR) contributed to the surge in subprime foreclosures by shifting risk from credit card lenders to mortgage lenders. Before BAR, any household could file Ch. 7 bankruptcy and have credit cards and other unsecured debts discharged. Sidestepping unsecured debts left more income to pay the mortgage. BAR blocked that maneuver by way of a means test that forces better-off households who demand bankruptcy to file Ch. 13, where they must continue paying unsecured lenders. When the means test binds, cash constrained mortgagors who might have saved their home by filing Ch. 7 are more likely to face foreclosure.

The estimated impact of BAR on subprime foreclosures is substantial. For a state with average home equity exemption, the average subprime foreclosure rate over the seven quarters after BAR was 12.6 percent higher than the average subprime foreclosure rate over all states over the period before BAR. This translates to just over 32,000 more subprime foreclosures nationwide per quarter due to BAR.

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edited

You had a lot of XHTML mistakes in your post, which I took the liberty to correct. Check out the user guide on the right column link. Lots of info on how to format as well as other user guide info for EP.

To all folks, please check your post after hitting submit (publish) to make sure it's formatted as you want.

On the bankruptcy bill, well, I don't think it caused this, that is attributable to derivatives, i.e. the shadow banking system, but it sure didn't help!

At this point one would think people would be protesting in the streets for all of the money has gone to these banks, many with absolutely predatory practices and nothing to the homeowner, the consumer.

It's just criminal.

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Thanks for the scrub

and sorry for the inconvenience. Does that mean the preview is not actually WYSIWYG? But I shall certainly look at the posted end product in the future before assuming I'm done.

On the causes of the crash, of course I agree. The point I wanted to make was that Citi and the Street promote and thrive on usury and speculation, but it has all come full circle.

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preview, causes

The preview should be exactly what you will see posted. At least that's the underlying code and how it's worked for me. You probably didn't notice the <B> you're putting in there without the closing tag, which is </b>.  The XHTHML tag for bold is  <strong> and needs the closing tag, </strong>.  Also, you don't need to put paragraph tags <P> in your post but if you do, you need closing tag, </p>.  

 

Then you're leaving SNIP in your blockquote.

 

So, what happened was you had an open <B> tag which made bold the entire post, which I don't think you meant.

 

As your friendly anal admin, you can email me with questions. 

I usually put answers in the user guide as well as the admin forum (and I'll respond via email). 

But, one thing is because I have a lot of things enabled on the site (unlike most other blogs) a malformed blog post can potentially mess up the entire site.  I have a lot of code running to automatically correct mistakes but it's possible something gets past the script if human eyeballs do not catch their errors.

 

 

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