On this morning's conference call, one reporter asked if John McCain's vote in favor of the controversial 2005 bankruptcy bill had any relevance to the current debate. The question wasn't really addressed, but the debate over the bill illustrates the the difference between the way the government treats financially troubled people and financially troubled corporations.
The bankruptcy bill made it harder for people saddled with debt to declare bankruptcy so that credit card companies could continue to extract money from them by, for instance, taking their homes. If the government had taken the same approach to the bankruptcy bill as it has to the bailout, then it would be offering to refinance individuals' debt and purchase their depreciated assets for above-market prices, not making it easier for credit card companies to squeeze them dry. Barack Obama voted against the bankruptcy bill, and John McCain voted for it. (Joe Biden also voted for the bill, much to his discredit.)
Obviously, the repercussions of bankruptcy on Wall Street are much more far ranging than bankruptcy on Main Street, and require a different prescription. But it's time that legislators started evening their approach to the two groups, since we've come to the point of basing public policy affecting individuals with debt on radically different standards of responsibility than financially burdened corporations.
--Tim Fernholz
