WCA March 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 th 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

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Wire & Cable ASIA – March/April 2008