Bill Delahunt: “I want to pose the question of why did we see the spike in bankruptcy filings up until 1998 and then saw a dramatic…”

“I want to pose the question of why did we see the spike in bankruptcy filings up until 1998 and then saw a dramatic decline of some 15 percent in the last 2 years? Well, in 1998, the FDIC, the government agency, found that as a result of interest rate deregulation, credit card companies had become more profitable and were able to extend more unsecured credit to less creditworthy borrowers. In other words, credit card issuers were handing money out to just about everyone. Anyone with teenagers knows that because they receive bundles of credit card solicitations. In other words, people who should not have been extended credit were getting it. This conclusion, I suggest, is supported by an astonishing fact. The median family income of filers has dropped from $23,250 in 1981 to $17,650 in 1997. And we wonder why we have a crisis. But, as the filings peaked in 1998, the credit card companies saw their profits stall and began to tighten their underwriting requirements. In the last 2 years, we have seen this decline. In other words, the invisible hands of the marketplace are working. As a University of Maryland study has concluded, the bankruptcy crisis is self-correcting.”