[Congressional Record Volume 146, Number 149 (Wednesday, December 6, 2000)]
[Senate]
[Pages S11660-S11661]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      BANKRUPTCY REFORM ACT OF 2000--CONFERENCE REPORT--Continued

  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the 
previous debate time with respect to the bankruptcy bill begin at 1:45 
p.m. on Thursday, with a vote then to occur on passage at 3:45 p.m.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Mr. President, I rise today to speak yet again on the 
topic of bankruptcy reform. Yesterday, we invoked cloture on the 
Bankruptcy Reform Conference Report with 67 votes. That's a solid 
bipartisan level of support. We have a conference report where both the 
majority leader and the minority leader voted to cut off debate. At 
long last, Congress is on the verge of enacting fundamental bankruptcy 
reform. Earlier this year, the Senate passed bankruptcy reform by an 
overwhelming vote of 83-14. Almost all Republicans voted for the bill 
and about one-half of the Democrats voted for it as well. Despite this, 
a tiny minority of Senators used unfair tactics to prevent us from 
going to conference with the House of Representatives in the usual way. 
So, we put the bankruptcy bill into another conference report. The 
important thing about this conference committee--which I have said 
before but want to reiterate now--is that the committee was evenly 
divided between three Democrats and three Republicans. There was no 
Republican majority on the conference committee. We would not be here 
if not for support from Democrats on the conference committee. So all 
of these objections to the effect that Republicans used some procedural 
trick to avoid dealing with the minority is simply and flat out false.
  As I am speaking, the House passed the bankruptcy conference report 
by a voice vote. We are almost there. And with the level of bipartisan 
support demonstrated in yesterday's vote, I am confident we'll send the 
best bill we can to the President.
  As I have stated before on the Senate floor on numerous occasions, 
every bankruptcy filed in America creates upward pressure on interest 
rates and prices for goods and services. The more bankruptcies filed, 
the greater the upward pressure. I know that some of our more liberal 
colleagues are trying to stir up opposition to bankruptcy reform by 
denying this point and saying that tightening bankruptcy laws only 
helps lenders be more profitable. This just is not true. Even the 
liberal Clinton administration's own Treasury Secretary Larry Summers 
indicated that bankruptcies tend to drive up interest rates, 
Mr. President, if you believe Secretary Summers, bankruptcies are 
everyone's problem. Regular hardworking Americans have to pay higher 
prices for goods and services as a result of bankruptcies. That's a 
compelling reason for us to enact bankruptcy reform during this 
Congress.

  Of course, any bankruptcy reform bill must preserve a fresh start for 
people who have been overwhelmed by medical debts or sudden, unforeseen 
emergencies. That is why this conference agreement allows for the full, 
100 percent deductibility of medical expenses. This is according to the 
nonpartisan, unbiased General Accounting Office. Bankruptcy reform must 
be fair, and the bicameral agreements on bankruptcy preserves fair 
access to bankruptcy for people truly in need.
  These have been good times in our Nation. Thanks to the fiscal 
discipline initiated by Congress, and the hard work of the American 
people, we have a balanced budget and budget surplus. Unemployment is 
low and so is inflation. But in the midst of this incredible 
prosperity, about 1\1/2\ million Americans declared bankruptcy in 1998 
alone. And in 1999, there were just under 1.4 million bankruptcy 
filings. To put this in some historical context, since 1990, the rate 
of personal bankruptcy filings has increased almost 100 percent.
  Now we see signs of slowing in the economy. We see consumer 
confidence declining. We see the stock market losing value. We need to 
fix our bankruptcy system before a recession comes

[[Page S11661]]

and we're overwhelmed with huge numbers of bankruptcies. According to a 
recent article in the New York Post, we as a nation are looking down 
the barrel of a new and larger epidemic of bankruptcies. This article 
quoted a recent study from a New Jersey research firm that predicts a 
10-20 percent increase in bankruptcies next year. Another expert quoted 
in the article indicates that the increases may be much greater. We 
need to act now.
  As I indicated earlier, we have been doing pretty well lately as a 
country. With large numbers of bankruptcies occurring at a time when 
Americans are earning more than ever, the only logical conclusion is 
that some people are using bankruptcy as an easy out. The basic policy 
question we have to answer is this: Should people with means who 
declare bankruptcy be required to pay at least some of their debts or 
not? Right now, the current bankruptcy system is oblivious to the 
financial condition of someone asking to be excused from paying his 
debts. The richest captain of industry could walk into a bankruptcy 
court tomorrow and walk out with his debts erased. And, as I described 
earlier, the rest of America will pay higher prices for goods and 
services as a result.

  I ask my liberal friends to think about that for a second. If we had 
no bankruptcy system at all, and we were starting from scratch, would 
we design a system that lets the rich walk away from their debts and 
shift the costs to society at large, including the poor and the middle 
class? That would not be fair, but that is exactly the system we have 
now. Fundamental bankruptcy reform is clearly in order.
  I want my colleagues to know that the conference agreement preserves 
the Torricelli-Grassley amendment to require credit card companies to 
give consumers meaningful information about minimum payments on credit 
cards. Consumers will be warned against making only minimum payments, 
and there will be an example to drive this point home. As with the 
Senate-passed bill, the bicameral agreement will give consumers a toll-
free phone number to call where they can get information about how long 
it will take to pay off their own credit card balances if they make 
only the minimum payments. This new information will truly educate 
consumers and improve the financial literacy of millions of American 
consumers.
  Yesterday's vote shows that the mainstream of opinion in the Senate 
supports bankruptcy reform. But that has not stopped the tiny handful 
of liberals who oppose bankruptcy reform have waged a campaign to 
spread disinformation about the bankruptcy bill. The article in Time 
magazine that Senator Wellstone constantly refers to is a case in 
point. This article purports to prove that bankruptcy reform will harm 
low-income people or people with huge medical bills. This article is 
simply false. I spoke about this on the floor last summer but a little 
reminder might be helpful for some of my colleagues who don't follow 
this bill as closely as I do.

  What is most interesting about this Time article is what it fails to 
report. Time, for instance, fails to mention that the means test, which 
sorts people who can repay into repayment plans, doesn't apply to 
families below the median income for the State in which they live. The 
Time article then proceeds to give several examples of families who 
would allegedly be denied the right to liquidate if bankruptcy reform 
were to pass. Each of these families, however, would not even be 
subjected to the means test since they earn less than the median 
income. While this sounds technical, it's important--not even one of 
the examples in the Time article would be affected by the means test.
  The Time article fails to mention the massive new consumer 
protections in our bankruptcy reform bill. The Time article fails to 
mention the new disclosure requirements on credit cards regarding 
interest rates and minimum payments. In short, the Time article fails 
to tell the whole truth. I think that the American peopled deserve the 
whole truth.
  The truth is that these bankruptcies represent a clear and present 
danger to America's small businesses. Growth among small businesses is 
one of the primary engines of our economic success. With the 
predictions of a new tidal wave of bankruptcies next year, we have to 
be concerned about a domino effect. As more and more consumers use 
bankruptcy to escape paying their debts, more and more small businesses 
will face unsustainable losses. And if we don't act to protect small 
businesses, then one of the main sources or our prosperity will be in 
serious jeopardy. As responsible legislators, we cannot let that 
happen.
  The truth is that bankruptcies hurt real people. Sometimes that is 
inevitable, but it is not fair to permit people who can repay to skip 
out on their debts. I think most people, including most of us in 
Congress, have a basic sense of fairness that tells us bankruptcy 
reform is needed to restore balance.
  I will share with you what some of my constituents are telling me 
about bankruptcy reform. I will not go through all of these quotes. But 
a constituent from Des Moines, IA, said:

       It is insane that such a practice has been allowed to 
     continue, only causing higher prices to consumers. . . . 
     Debtors should be required to pay their debt.

  A lady from Keokuk, IA:

       Bankruptcies are out of hand. It's time to make people 
     responsible for their actions--do we need to say this?

  I could go on and on. But I have given you two examples of many I 
have gotten from my State. Considering the fact that there were 83 
people who voted for this bill when it passed the Senate the first 
time, this message must be getting through loud and clear in almost all 
of the 50 States in America or we would not have had that overwhelming 
vote.
  We are merely saying, if you have the ability to repay your debt and 
you go into bankruptcy court, you are not going to get off scot-free.
  The time has come to get this bill on the President's desk. That is 
what I hope we do tomorrow afternoon at 3:45.
  I yield the floor.

                          ____________________