Reform Bankruptcy Law or Bail Out the Big Boys?

This blog has consistently railed against bailing out the banks and mortgage companies that caused the sub-prime crisis, now spreading throughout the world economy.

As panic slowly spreads, the calls from the banks and mortgage companies for Federal money become deafening.

“Too big to fail” is one of the arguments for helping out poor companies, like Bear-Stearns.

A far better remedy is to let the Big Boys lie in the bed they made, and take their lumps, and reform Chapter 13 bankruptcy law.

This year, I made it to my Washington DC for my second NACBA lobby day.

My Michigan friends and I visited the staff of seven Congresspersons, urging the passage of Chapter 13 bankruptcy law changes that would allow bankruptcy judges to re-write certain mortgages on residences, to lower the balance to the value of the home, and to change the interest rate.

This would actually save the mortgage companies the money it would cost them to foreclose.

They would receive the value of the home through the Chapter 13 plan payments, without having to pay attorneys, realtors, people to fix up the home, risking pipes freezing, and so on.

It seems that the mortgage industry vehemently opposes this because they are afraid that passage would rule out the bailout they want from the government.

How about letting your Senators and Representative how you feel, reform the bankruptcy law, at no cost to the taxpayer, or have Uncle Sam step in with our money to bail out the Big Boys?