McConnell Gets His Payback from the Debt Industry
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Tonight, President George W. Bush will speak at Louisville's Seelbach Hilton at a $2,000-a-plate fundraiser for Senate Minority Leader Mitch McConnell to pay him back for his support for the White House's policies.
The event comes roughly on the second anniversary of the day the U.S. Senate passed a sweeping bankruptcy law overhaul, the Bankruptcy Abuse Protection and Consumer Protection Act (BAPCA). Despite widespread criticism from both consumer organizations and conservative talk show hosts, Sen. McConnell, then Senate Majority Whip, provided the legislative muscle to push through that bill. It was one of the President's priorities.
But the bankruptcy law has made it harder for Americans to get out of debt. It imposes credit counseling requirements and a means test designed to push more people into Chapter 13 bankruptcy, denying them the right to fully discharge debts.
Moreover, the bankruptcy bill is one of the most egregious examples of pay-to-play politics in recent memory. According to the Center for Responsive Politics, the credit card and commercial banking industries have given $224 million to federal candidates and political parties since 1989, contributing 62 percent percent to Republicans and 38 percent percent to Democrats. The industry greased the skids for over a decade to be able to write preferential legislation into law.
Senator McConnell managed the floor fight to pass the bill, and he has received more than $535,000 in campaign contributions from the credit card and commercial banking industries. Just a few months before the bill's passage, McConnell raked in $60,000 from executives at two financial giants, UBS and Citigroup, at a New York City fundraiser. He was served well by his chief fundraiser, former banking lobbyist Alison Crombie Kinnahan.
Senator McConnell contends the bill was necessary to stop bankruptcy fraud. Yet bankruptcy lawyers and judges call it a "monumental failure," adding red tape without limiting fraud. Ninety percent of people who declare bankruptcy do so because of job loss, medical expenses, or divorce. Kentucky, it should be noted, ranks 9th in the country in bankruptcy rates, according to the American Bankruptcy Institute.
This story speaks volumes about how well the moneyed interests are heard in Washington, and whose voices are left out. Sometimes money helps pass a law. Other times it buys complacency in face of an emerging crisis. Let's stay with the credit card industry.
Students are particularly hard hit by an industry that aggressively markets on college campuses. Author Robert Manning estimates that credit card companies pay $1 billion to 300 universities for the right to set up tables on the quad and offer bookstore promotions. One industry insider at a major credit card company revealed that students constitute 25 percent of their new account goals. At a time when families and students are feeling more and more squeezed by tuition hikes, many turn to the offer of "easy money" through credit cards for textbooks, school supplies and other necessities. Final-year college students have an average balance of $2,864, and a quarter of them are putting their tuition on plastic.
Credit card debt is not priceless, as one ad wants us to believe. Young Americans aged 18 to 25 have seen their average credit card balances grow by 24 percent from 2001 to 2005. Bankruptcy filings among those under 25 doubled in the 1990s. Multiple surveys and books have chronicled the devastating impact of high debt on young adults' ability to choose a career, live independently, buy a house, start a family, and save for their own futures.
What does this have to do with President Bush, Senator McConnell, and fundraising?
We can all but guarantee that the stories of indebted young people won't be discussed over dinner with President Bush and Senator McConnell this evening. Nor will donors ask McConnell about oversight of credit card industry practices on college campuses. It is safe to assume that no one will ask Senator McConnell about cracking down on the most abusive practices of the industry, like tripling the interest rate for one late payment.
Even if these issues were raised tonight, Congress -- and Senator McConnell -- have shown who they really owe: campaign donors, like the credit card industry. They are the ones that foot the bill for the polls, television and radio ads, recorded calls, and direct mail that sugar-coats who politicians really represent in Washington.
As the mountain of debt young Americans carry grows larger each year, students know their obligations to repay will be sticking with them for life.
Given how Senator McConnell and Congress paid back the credit card companies and commercial banks so handsomely two years ago, the campaign finance system may not be that much different. Every election puts politicians further in debt, just not to us.