WCA March 2008

Wire & Cable ASIA – March/April 2008

year ahead in the US, with sales there rising to 370,000

vehicles from 305,473 in 2007. The Hyundai Kia Automotive

Group, based in Seoul, constitutes the world’s sixth-largest

auto maker.

The mortgage crisis

Personal bankruptcies in the US, curbed

for a year, are again on the rise

Personal bankruptcy filings jumped 40% to more than

801,000 in the US in 2007, indicating the toll imposed by

rising mortgage payments, job losses, and other financial

pressures. The total number of such filings was around

573,000 in 2006, the first full year in which a new law

made it more difficult for consumers to seek bankruptcy-

court protection from creditors. That level was the lowest

since 1998, according to data collected by the National

Bankruptcy Research Center. Congress in 2005 enacted the

biggest changes in US bankruptcy laws in a quarter-century,

mandating an income test to determine a prospective

borrower’s ability to meet obligations. In that year, personal

bankruptcy filings rose to more than 2 million, after having

been in the vicinity of 1.5 million annually for most of the

past decade. To beat the eligibility provisions of the new

law, which went into effect in October 2005, some 600,000

filings were made in that month alone.

Now, after a moderate 2006, personal bankruptcies are on

the way up again. According to the American Bankruptcy

Institute, a research group in Alexandria, Virginia, the

trend is likely to worsen this year. ABI Executive Director

Samuel Gerdano said, “The roughly 40% spike in consumer

bankruptcies during 2007 presages even higher filings this

year, as the heavy consumer debt load is made worse by the

home mortgage crisis.” Senator Richard Durbin, Democrat

of Illinois, said that an estimated 2.2 million homes might be

lost to foreclosure in the coming months, and that up to a

third of all homeowners are likely to see a decline in their

home values.

The Senate is considering a bill that would expand the

authority of bankruptcy judges to reduce the size of home

loans. Under a bill introduced by Mr Durbin, judges could

modify mortgages by treating them as secured debt only

up to the market value of the property. Rob Hotakainen,

reporting from Washington for the McClatchy Newspapers,

noted that the issue ‘is gaining plenty of attention on

Capitol Hill’, where leading Democrats are proposing to roll

back the landmark bankruptcy law. But Mr Hotakainen also

observed that some members of Congress “are leery of”

any more government intervention in matters of personal

money management. (‘Bankruptcies Surge,’ 7

January)

President Bush piped up in December, with the suggestion

of a five-year freeze on loan rates as a way to slow the pace

of home foreclosures. However, it seems likely that, unless

and until someone hits upon some way to save people

from themselves, commentators will content themselves

with hurling insults at the banks and mortgage companies

that wrote sub-prime loans (‘snake-oil salesmen’,

‘predators’, ‘swine’) while the default crisis does its slow,

termite-like work.

Dorothy Fabian

–

Features Editor