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November 14, 2007
Bankruptcy Brainlessness
From Bloomberg:
Bankruptcy Law Backfires as Foreclosures Offset Gains
By Kathleen M. Howley
Nov. 8 (Bloomberg) -- Washington Mutual Inc. got what it wanted in 2005: A revised bankruptcy code that no longer lets people walk away from credit card bills.
The largest U.S. savings and loan didn't count on a housing recession. The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank.
``Be careful what you wish for,'' Westbrook said. ``They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures.''
As someone who opposed the more egregious terms of that law, right here on my blog, I laugh with disdain at the plight of the banks. Hah!
Congress may soon take action to ``reform the bankruptcy reform,'' Zandi said. The House Judiciary Committee is working on legislation to let bankruptcy judges restructure home loans by lowering interest rates and reducing mortgage balances to reflect current market value.
Banks including Washington Mutual, Citigroup and Wells Fargo & Co. sent a letter to the committee opposing the change, saying such restructurings should be done privately.
Posted by crandal at November 14, 2007 07:36 AM
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