“[N]ow that we’re in the role of lender, and you’re in the role of borrower, we’re sure that you’ll find these same terms fair.”

Dear Wall Street,

Hi, this is the lobbyist for a group called The Taxpayers, Debtors, and Insured People of the United States. Now that we’ve rejected the first bailout plan, I’m sure that in the spirit of tough, free market capitalism, and spirited negotiations, you’ll consider our second offer. Here are some terms that I’m SURE you will find reasonable:

1) We are willing to loan you money at a very low, introductory rate of 8.9%. If you are even one nanosecond late on your payment, your rate will go from 8.9% to 32.9% instantly. You will have no right to appeal this. The interest rate increase will be retroactive. None of this “but I mailed it out Friday” nonsense. We must get it, and the check must clear, for your payment to count. A reminder: transactions that occur after 2pm are not credited until the next business day, so be sure to make your payments before then.

2) If you are late on any of your other payments to your other creditors, your rate will also be spiked to 32.9%. I know it has nothing to do with us, but if you are late paying someone else, then OBVIOUSLY you are a bigger credit risk to us.

3) We will send you onerous terms and conditions 148,000,000 pages long in 6 point font. Of course, those terms can change on a whim, at any time, so we’ll be sending you hourly updates to the contract, which we expect you to read and keep up with. Sorry, we will be the only ones that can amend the contract; you cannot.

4) You will have a predetermined credit line, and if you go over it by even $1, your interest rate will spike to 44.9%. Sorry, it’s in the contract on page 109,209,392.

5) The bankruptcy laws have now changed. If you get into a bind, I’m afraid you won’t find much sympathy; no more silly excuses will be accepted. We are going to have the titles to all of your buildings and physical assets put in our name, so when the inevitable time comes and you trip up, we’ll simply take everything from you. There will be no court hearing.

6) We’ll be conducting a background check, driving records check, drug test, and disease risk check of all of the top executives of your firm. After all, you’re a riskier loan if you have any of those afflictions, aren’t you? Well, if we find ANYTHING wrong, your interest rate will skyrocket, instantly, and without notice.

7) If your business is located in a “bad neighborhood”, or a “poor city”, or a “hurricane zone”, or “flood plane”, or “terrorist targeted city”, as defined by us, we can raise your interest rates at any time, to any rate we choose.

For the last quarter century or so, you’ve imposed these terms, or some variation of them on us, when loaning us money or insuring us… arguing every single time that it’s “necessary” and that these sorts of changes “will result in more profitable companies that will pass the savings along to consumers”. Well, now that we’re in the role of lender, and you’re in the role of borrower, we’re sure that you’ll find these same terms fair.

Wall Street, prove the cynics wrong and accept our new plan. Prove to everyone that you’re not the hypocrites that everyone thinks you are.

Best regards,

THE TAXPAYERS, DEBTORS, AND INSURED PEOPLES OF THE USA

In the immortal words of Little Richard: Good Golly, Miss Molly.  What the bejeebers is going on with this economy?!

Well, we pick up with where we left off last week. At the week’s close, we were debating the bailout and what to include. Despite the best efforts of some of the smartest and most dedicated consumer advocates I know (and know of), the big-biz-friendly Congress “declined” to actually help out the consumers whose foreclosure cases lie at the heart of this meltdown: there is no provision for bankruptcy cramdown in Chapter 13 within the proposed bailout legislation.

Then, on Friday came news of a troubling overnight development: the collapse of consumer finance giant WaMu and its subsequent asset seizure by the feds. Friday night, of course, Republican presidential candidate John McCain changed his mind and went to the debates, and never mentioned the middle class.

And over the weekend, the rumblings we heard last week about the proposed bailout became loud roars of protest. Judging from some of the mailbag entries at this MSNBC.com page, there are a boatload of angry taxpayers out there who do not think this bailout is such a good idea at all.

I confess, I remain committed to my initial thoughts - that the bailout was a regrettable necessity. But how it’s been pursued - and most importantly, what it includes and even more telling, what it does not include - these issues leave a very sour taste in the mouth of many, and I’m no different.

And then today we get the news that consumer spending has slowed.

In other news, water is wet. Ice, we hear, is also cold, but these reports have yet to be confirmed.

News isn’t encouraging this morning. After Senator Obama sold us out changed his mind and stated his belief that the mortgage reform angle was “probably something we shouldn’t try to do in this piece of legislation” predictably the rest of the party followed suit and declared the issue a “nonstarter.” Gee, thanks, Barack.

Why is it a nonstarter? What on earth is the justification for treating the greed-soaked monsters who created this mortgage nightmare and set us on the path to national fiscal crisis better than we treat the victims of the crisis who are most in danger of losing their homes?

Tell you what: I’ll even agree to put aside the “victim” lingo for a bit. Let’s assume (solely for the sake of argument) that the homeowners are just as much “bad actors” as the corporations getting bailed out for their bad choices. Apples and apples, then - and why are we helping one and not helping the other, especially when it’s SO easy to do?

This isn’t a case of “either/or” — it’s perfectly plausible to enable mortgage modification AND bail out the financial giants. One does not preclude the other. So what could possibly be the justification for this blatant nose-thumbing directed towards the working class homeowners who are struggling to stay in those homes?

Answer: nothing but politics, I fear. Big business = good. Middle class = bad. Very, very bad.

As a constituent and bankruptcy attorney working to help families in our community save their home from foreclosure, I urge you to include court-supervised mortgage restructuring for financially distressed American homeowners in any package you approve to bail out Wall Street.  Why do I support this approach?

• The rapid deterioration of the financial sector has been fueled by the steep rise in delinquencies and foreclosures of risky mortgages.
• These mortgages have been sliced up and sold in complex financial instruments that now sit as “toxic assets” on the balance sheets of our largest banks.
• Every financial expert, including Treasury Secretary Paulson and Federal Reserve Chairman Bernanke, agree that we will not stabilize our financial markets until we stabilize the housing markets.
• The housing market will not stabilize absent a solution to the tide of foreclosures.
• Simply giving a government entity the authority to purchase the “toxic assets? of troubled financial institutions will not result in fewer foreclosures.    This is complicated, but the basic problem is that the government will not be buying mortgages …those mortgages have been carved up and sold to investors all over the world.  The government essentially would have to put all the pieces back together to modify the loan, which just is unrealistic.
• Court-supervised mortgage modification in Chapter 13 bankruptcy is perhaps the most effective tool for ending the foreclosure crisis.
• Court -supervised mortgage modification will not cost the U.S. taxpayer one penny, but will keep families on Main Street in their homes.   It deserves your support as you consider a taxpayer funded bailout of Wall Street.

This is much more nuanced and persuasive than my admittedly off-the-cuff attempt! Feel free to pull and use at will — omitting, of course, the language about being a bankruptcy attorney, unless of course you are one! — as I’m sure NACBA* just wants the message sent, and doesn’t care who sends it!

* Earlier versions of this post mistakenly referred to the group in question as NACA or the National Association for Consumer Advocates. The SC Bankruptcy & Consumer Law Blog regrets the error.

• Increasing credit account interest rates for cardholders based on information in their credit reports from other accounts
• Double-cycle billing
• Unrestricted imposition of overlimit fees
• And more.

To read the full text of the bill, click on/right click and save this PDF file: Credit Cardholders Bill of Rights - HR 5244.

We’ll have more analysis of the important legislation later on, right here on the SC Bankruptcy & Consumer Law Blog.

Obama’s new bankruptcy proposals supplement his broader — and previously announced — bankruptcy reform agenda that includes changes intended to help people in financial distress because of medical bills and allow homeowners going through the bankruptcy process to renegotiates terms of their mortgages.

The Democrat said he also would help service members and military families struggling financially after multiple moves, lengthy deployments and, in some cases, predatory lenders, saying, “If you’re protecting America, America should be protecting you from unfair bankruptcy laws.”

I’m all for anyone who can provide meaningful relief from the unbelievably bad law that has contributed to the whole foreclosure crisis by making it harder (but not impossible) to protect homes. But seriously — just service members? The entire country should be protected from unfair bankruptcy laws. Don’t you agree, Senator?