Thursday, March 10, 2005

Bankruptcy Reform Bill

Almost passing under the radar this week is a bankruptcy reform bill in Washington. I am not on top of the details of it, but I am pretty sure that it makes it tougher for individuals to file bankruptcy, and has been derided as a gift to the credit card issuers. In a very entertaining rant, Ted Kennedy decries that this bill will increase the credit card industry's profits from 30 billion up to 35 billion dollars per year.

As I prefaced above, I don't know anything about the bill, but I am quite knowledgeable about asinine economic theories. For the sake of argument, I will assume that Ted is absolutely right, that this bill is a windfall for the credit card industry. SO WHAT !!!!!!!!!!!!!!

Five billion more in annual profit for widely held public companies? What is wrong with that? Applying a market multiple of 15 to the increase in annual industry earnings, equates to a 75 billion dollar increase in shareholder equity. Who wins here? How about the over 50% of households that own equities and the 100% of pension funds that own them. And these credit card companies, flush with more money, maybe they will hire more people and/or raise the wages of their employees. Is this what Ted is against?

I have read that bloggers on both the left and the right concur that this is a bad bill, I just hope they have better reasons than the simpleton Ted Kennedy.

What would Ted tax if there was no profits or income?

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