Megan McArdle on bankruptcy reform:
I’m against the bankruptcy reform not because I think that one side or the other is getting shafted, but because I think that easy bankruptcy is one of the great unrecognized strengths of the American economic system. Easy bankruptcy is what frees people to be entrepreneurs, to take risks without fearing that one wrong move will destroy them forever.
I understand that bankruptcy reformers think that they can target the deadbeats without touching the merely excessively daring, but I’m not so sure. And while the abuses of the system may be morally outrageous, I don’t see that they’re particularly damaging. Capital One and its ilk seem to be getting along pretty well without our help. I’d be happy to leave it that way.Kevin Drum gets to the crux of the dichotomy:
Credit card companies want the ability to make risky loans, but they also want federal protection that protects them from bearing the risk that goes along with making those loans. That’s a pretty cushy setup, as long as you can buy yourself enough politicians to make it happen. Apparently they can.
Considering the profit banks and credit card companies make from exorbitant late fees and interest rates I’d wager that they’d think twice about supporting bankruptcy reform if it included strict usury limits. If you were to cap rates for non-secured credit at prime + 5% and late fees at 1%, or $25 as a part of the bankruptcy reform bill low income consumers would probably be the big winners. Of course that isn’t happening…
Update: Glenn Reynolds has a bunch of links to various takes on the legislation. The only real groundswell for reform seems to be coming from the moneyed interests that lobby Congress.