Sunday, January 27, 2008

Role of 2005 Bankruptcy Bill in Sub Prime Mortgage Meltdown?



To no avail, I've searched for an answer regarding the relationship between loosened credit practices and the Republican passed 2005 Bankruptcy bill. Consider these two bits of information:

1) President Commends Congress for Passing Bankruptcy Reform Bill, 4-14-05. I commend the House for acting in bipartisan fashion to curb abuses of the bankruptcy system. These commonsense reforms will make the system stronger and better so that more Americans - especially lower-income Americans - have greater access to credit. I look forward to signing the bill into law.

2) Clayton, a publicly held company that is a major provider of mortgage due diligence services to investment banks, told state prosecutors that starting in 2005 it saw a significant deterioration of lending standards and a parallel jump in lending exceptions. At issue is what information about the quality and risk of the loans was given to the investment banks and what was given to the rating agencies.

Is there a causal or coincidental relationship?