< meta name="DC.Date.Valid.End" content="20050825"> Amendment Nine: More on Bankruptcy

Wednesday, March 09, 2005

More on Bankruptcy

Earlier I said, after passage of the bankruptcy bill I'd rather lend to trailer trash than to distressed corporate America. Of course, this was somewhat hyperbole, somewhat true. A colleague of mine emailed me today and told me I've missed the whole point. His view is quite simple: the removal of risk in the higher yielding consumer credit business will result in a massive, but slow, restructuring of the nation's most risky (in default terms) debt. I must admit, this is a good analysis. And I suppose the credit card companies have put together some good studies showing the same. For my part, the studies I've seen make it clear this so-called reform is not dispositive of the great consumer bankruptcy risk. However, it is fairly easy to see how this could work, and it isn't out of the realm of possibility. As such, I concur that this could be a good economic reason to support this bill. However, for now, I remain skeptical of this argument and continue to view the bill as a last ditch effort to squeeze out more credit markets where credits markets are just not due. The other view though, is now clear (for once), consumer credit yields should decrease as a result of the bill.

Let me also mention here, I really enjoyed the quotes Federalist X asked to be posted. They are below and they are quite good. It is simply ashame that both political parties today are reduced to the likes of the Rush Limbaugh Show and the Daily Kos website to find their inspiration. As Federalist and his ilk remind us, inspiration is rarely found in the future.