Stephen Nunez  Howard Rosenthal

1. Bankruptcy “Reform” in Congress: Creditors, Committees, Ideology, and Floor Voting in the Legislative Process Stephen Nunez  Howard Rosenthal

2. HOME PAGE (512) 330-0073 Mr. Wm. Paul Lawrence II100 Congress Avenue, Suite 2000Austin, Texas 78701Phone: (512) 330-0073Fax: (888) 333-8984Email: paul@lawrence-firm.comHours: By Appointment Bankruptcy. Nobody wants to file bankruptcy, but it's not the end of the world, either. Bad things do happen to good people. Millions of others have taken this path toward putting their lives and their businesses back into balance. Remember, this too shall pass.

3. Facts • Consumer bankruptcies > 1 million per year. • Individual households now in bankruptcy > 8 million. • Bankrupts who are they? • Not extreme poor. • But very rare if income > $75,000. • How many households bankrupt at some point in life ?

4. History • After 1898, bankruptcy low salience, interest groups matter. • No roll call voting on: • Chandler Act, 1938 • Chapter 11, 1978. • Credit card coalition NCBC pushes for reform in late 90’s • 105th Congress, no final bill • 106th Congress, pocket veto • 107th Congress, abortion killed conference report in House

5. Policy Issues • Should We Lock’em Up or Give’em a Fresh Start? • Bills push above median income types from ch. 7 to ch. 13. • Bills push paperwork and counseling. • Senate bill axes state exemptions, sets national exemption of $125,000. • Bankruptcy as Welfare Safety Net. • Bankruptcy Policy as Morality. • Small business bankruptcy.

6. Is the Problem Profligate Debtors or Profligate Creditors?

7. Theoretical Issues • “Ideology” , “Economic (pork barrel)” interests, Electoral Incentives • WNOMINATE—the bill has a liberal-conservative cutpoint • Bankruptcy filings—ambiguous effect • State exemptions • Campaign contributions--NCBC • -- • Outliers? • Extra dimensions • Pivotal politics vs. Bargaining • Strategic voting • Cross chamber kills

8. Senate Bill Moves in Liberal Direction from House Bill. How? • By negotiated compromise in the Judiciary committee • By many, divisive votes on the floor.

9. Liberal amendments added in Judiciary committee • Abortion bombers. • Voted unanimously after bargain. • Privacy. • Voted unanimously after bargain. • Tenant rights. • Specter defects. • N.B. Committees are as ideological and the floor and do not show evidence of dimension unique to jurisdiction. Senate committee Dems more liberal on the issue than are floor Dems.

10. Liberal amendments added on floor • Predatory loans. • Spousal income. • Kohl amendment on exemptions.

11. Strategy for the Creditor Coalition • Political Uncertainty—Gore or Bush • Preventing Counterbids—Snyder and Groseclose • Go for a large majority • Moderate the bill • Buy votes—moderate Democrats • Keep the bill on the agenda. • Support the Republican party.

12. House Passage Vote, 2001 • Analysis for Returning Democrats • Independent Variables • WNOMINATE score from 106th Congress • Cont-NCBC contributions • BCOM-dummy for member of banking • JCOM-dummy for member of judiciary • BCOMCONT interaction • FILE-bankruptcy filings per household in judicial district of congressional district.

14. Rep. LaFalce continues to be a leader in seeking to curb some of the worst abusesin the credit card industry. Here he meets with three college students from the 29th Congressional District to discuss credit card solicitation practices on campus.

15. Freshmen Democrats • Predicted out-of-sample using average WNOM for Democrats. • Low contributions • Freshmen voted for bill more than predicted. • Votes as spot purchases—incumbents may have been paid for votes on bill vetoed by Clinton, freshmen will be paid for current votes.

16. The Effect of Money With Out-of-Sample Predictions for Freshmen & Republicans

17. Too Much Money to Republicans? • Rs got average of $8155 vs. $5871 to Ds. • Actual vote for bill, 306 • Votes if no contributions ~290 • Votes if party totals maintained, but equal within party ~ 300 • Votes if all money to Dems, equal within party ~ 340 • Optimal allocation within party, party totals maintained ~ 320 • Optimal allocation ~ 355 (all money to Dems)

18. Optimal Allocation of NCBC Contributions

19. WHO GOT MONEY? • Moderate Dems (weakly), conservative Republicans (strongly) • Banking committee members • Dems from marginal districts • Overall fit low

21. Moderating Jackson-Lee Amendment & Recommital • Some Republicans would have supported more moderate bill. • Results are robust—two votes are more informative than one. • Pro-consumer but pro high exemptions.

23. (107) Average Predicted House Vote EXMP = 1 if KS, OK, TX, SD, FL, IO

25. Dep. Var. = Fraction of Votes On Republican Side

26. Committee Action • Basic liberal-conservative alignment on floor reproduced in committee markups. • Ideological “shift” on bankruptcy in Judiciary. • House Democrats more liberal than floor Democrats (as in logit results) • Committee vote does not predict floor vote because of shift. • Multidimensionality perhaps blocked by agenda control in House and bargaining in Senate.

27. Conclusion • Money matters—estimated effects+possible threat effects. • Effect of money buried in regression constant. • Compromise—credit card companies get less than what they want. • Ideology—poor districts should no care given compromise. • Exemptions • Abortion