Bloomberg News: Bankruptcy Law Backfires as Foreclosures Offset Gains (Update1)

[Infomaniac]

Nov. 8 (Bloomberg) -- Washington Mutual Inc. got what it wanted in 2005: A revised bankruptcy code that no longer lets people walk away from credit card bills.

The largest U.S. savings and loan didn't count on a housing recession. The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank.

``Be careful what you wish for,'' Westbrook said. ``They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures.''

http://www.bloomberg.com/apps/news?pid=20601109&sid=ar909uO1CqHw&refer=home


I bet the banks are losing more money on the foreclosures than they ever would have lost under the old bankruptcy law.

[AzDar]

1. Karma.

Assholes.

[Infomaniac]

5. Karma is right

Greedy assholes who can't think their way out of a paper bag. Mama always said you couldn't get blood from a turnip. What did these people who wanted the "reform" think people were going to do when their backs were up against the wall? Not eat or feed their kids?

[Captain Angry]

2. You had a typo...

I fixed it for you.

I bet the banks are losing more money on the foreclosures AT THE MOMENT than they ever would have lost under the old bankruptcy law.


Obviously, you had it right, I'm just saying that I don't believe for a second that they're not going to profit in the long run. I don't know if it will be a bailout, or something else, but they're not going to eat it.

[Infomaniac]

3. I agree. It will be some sort of bailout.

The losses from the foreclosures are staggering. I looked at some of the SEC filings for the public banks and read through the financial statements. The banks are writing off many, many, many more times in non-performing loans than what was reported before the passage of the bankruptcy "reform." It's not sustainable and I suspect there will be some sort of bailout.

[Captain Angry]

4. The properties that underly these investments aren't going away.

My conspiracy nut feeling is that we're on the verge of seeing the new class of realtors. The banks themselves.

Or a surrogate that obscures who is truly buying up good property at pennies on the dollar.

Somebody will emerge in great shape.

[Kat45]

8. The people who took out the loans should be helped, not the

predators who sold them. But we all know who will be the beneficiaries of any govt help.

[madrchsod]

6. the old bankruptcy laws

the judge could set the terms on a mortgage loan and credit cards if it was under chapter 13. they also could wipe the slate clean under 7. i don`t feel sorry for the bankers

[ursi]

7. thanks for posting this

it's good to know when greed turns into karma.