Something's bankrupt, all right

I operate off the optimistic assumption that most people are doing the best they can, that they aren’t generally trying to harm other people as much as they’re trying to protect themselves. I’m having a hard time maintaining that optimism in the current political climate.

The bankruptcy bill passed today, and is certain to be signed by President Bush. Why did this bill pass? What great problem is being addressed by this legislation? Were credit card companies going out of business left and right because of bankruptcy declarations on the part of their customers?

It would be easy for me to sit here with my one credit card that I pay off in full each month and say, “just don’t run up credit card debt.” It is good advice, live within your means and all that, but I also have health insurance. Very good health insurance, that also covers my prescription drugs. Many families who go bankrupt these days do so because of medical costs. Sure, live within your means, but what do you do when your kid gets sick?

The Republicans are supposed to like free markets, but what they’ve given the credit card companies with this bill is a protection from the free market. They’ve insulated the credit card companies from the risks of their own actions. Nobody’s making the credit card companies give out credit cards so widely and freely, with little regard to credit worthiness. They’re choosing to do so, because as long as those non-credit worthy consumers don’t go bankrupt, but keeping paying the minimum each month, they’re making money off of them. The risk is those consumers eventually going bankrupt, and the credit card companies just had that risk mitigated for them.

So, evidently, the Republicans are for free markets when we’re talking regulation to curb excesses of capitalism, or even outright fraud (see Enron and the California “energy crisis”), but not so much for free markets when it comes to risk.

It’s hard to not be cynical when bills like this one pass.