Sunday, October 05, 2008

Bankruptcy judges should be able to adjust loans to head off foreclosures, senior judge says

A federal bankruptcy judge who is an acknowledged expert on the subject says the government should allow judges to adjust mortgages to avoid foreclosures, a step that was not authorized by the financial rescue bill that Congress passed last week, Al Smith writes in an op-ed piece in The Courier-Journal of Louisville and the Lexington Herald-Leader.

Judge Joe Lee of Lexington, right, would also "abolish a punitive 'means test' and cut filing costs to seek bankruptcy, ban predatory lending, and, for the credit card business, perhaps most infuriating of all, 'enact a national usury law.' As Judge Lee sees it, our credit cards are but tickets to a casino operated by a few invisible mega banks," Smith writes. "Like any casino, the fewer the rules, the higher the odds favor the house."

Lee says part of the blame for the financial crisis lies with credit-card companies and other lenders who pushed for a tougher bankruptcy law for years and finally got it in 2005 by touting a crisis that did not exist. "The darker purpose was to lower the risk of extending credit to shaky borrowers at high interest rates to enhance profits," Lee told Smith, a longtime friend.

"Bankruptcy court lacks the theatrics of an O.J. Simpson trial, but it can be heartbreaking, and Judge Lee probably knows more about it than almost any living American," Smith writes. "Author of a standard textbook and 40 articles on bankruptcy, at 83, he is among the five most senior of the country's 363 bankruptcy judges, and perhaps the most respected." (Read more)

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