The Impact of the Economic, International and Social Environment on Administration - Essay Example

1 Impact of the Economic, Legal, Political,Technical,International and Social Environment on Administration In May 2005, President Bush signed into law, the new Bankruptcy legislation. On the surface the law was created to prevent filings from those who had flagrantly abused their credit privileges and also capture those who would file claims on whim and caprice. The legislation was widely criticized; bankruptcy lawyers, consumer groups and even some financial experts decried the legislation as a punitive measure. Of course the noted criticism emanated from sectors commonly viewed as having a vested interest in a liberal policy, so their protests went unheeded. The law is slated to take effect on October 17, 2005. When Rep. F. James Sensenbrenner (R. Wis.), chairman of the Congressional Judiciary Committee sponsored the legislation, he and his committee members and Congress in general acknowledged that banks and credit card companies were suspect to large losses, from the high incidence of Chapter 7 filings. However, there would soon be another downside which both the Judiciary Committee and Congress in general, nor President Bush could have ever anticipated. On August 29, 2005 hurricane Katrina slammed into the Gulf Coast and devastated the City of New Orleans. Three weeks later, hurricane Rita wreaked havoc on Texas, Mississippi, Alabama and left enough of its devastation in New Orleans to place them back at square one. In a survey by ISO, an insurance and risk data firm based in Jersey City, New 2 Jersey, they found that personal and commercial loss claims for hurricane Katrina would likely be in the neighborhood of $34.4 billion, which qualifies it as the most costly natural disaster in United States history.(New York Times,2005) Albeit this figure is unprecedented and huge, it is by no means the final devastation figure. At least 99% of the persons who were housed at the Louisiana Superdome and the Civic Center, along with countless others who co-exist from pay check to paycheck who are uninsured, are yet to be tallied. Robert Lawless, a law professor at the University of Nevada Law School found in a recent Nevada Law Journal study that bankruptcy filings rose about 50 percent faster in states affected by hurricanes than in those unaffected. Mr. Lawless's study found that the peak in bankruptcy filings was not right after a storm but two to three years later. (New York Times/Editorial 05). Obviously the victims of Katrina will no doubt skew these findings as they unquestionable fit the profile of those who typically file for chapter 7 relief.Lawless points out, "The commonality of most bankruptcy filers is a huge setback beyond their control, like illness, the death of a loved one, divorce or layoff".(New York Times). The banks and credit card companies who paid and lobbied for the passage of this new bankruptcy law, will no doubt benefit immensely because it will now become more difficult for Chapter 7 filers to erase their negative history. Obviously, this writer believes that under normal circumstances, when one establishes credit and incurs a debt, then you are obligated to pay. Of course the operative word here is "normal". If one has delusions of how abnormal things are in New Orleans after Katrina, one can listen to the plight of the Mayor of New Orleans, Ray Nagin in an October 11, 2005 interview where he said. " 3 "I will lay-off 3,000 city employees because I have not been able to find the money to keep (non-essential) workers on the payroll".(Nagin qtd.Fox News) These individuals are at the bottom of the food chain and maybe they did not lose as much as many others, but now, all that they did have prior to the arrival of Katrina is gone. How will they recover from this financial ruin, without the protection of bankruptcy The lobbying efforts of the banks and credit card companies exhibit excellent political maneuvering with the signing of the new law by President Bush. The preliminary projection is the law will enable the corporations to forestall the bankruptcy filing efforts of 50,000 to 300,000 persons per year. This undertaking was spearheaded by Rep. F. James Sensenbrenner (R. Wis.), Chairman of the Congressional Judiciary Committee. According to Public Citizen, Chairman Sensenbrenner has received over $90,000 from commercial banks towards his political campaigns since 1989. In return he was tapped to promote the "public good". At Consumer affairs. com, an article by Martin H.Bosworth reports that bi-partisan politics is still alive and thriving on Capital Hill, as Louisiana senators, Mary Landrieu (D) and David Vitter (R) introduced a reconstruction bill, designed to exclude victims of the disaster from many of the bankruptcy's bill harshest provisions.(Bosworth) The exemptions include being able to include expenses from Katrina damage as necessary monthly expenditures, for purposes of including them in the "means test" for bankruptcy filers. The bill also allows Katrina victims to qualify for the "special circumstances provision", which would allow them to file under chapter 7 more easily. In the House, Rep, Louise Slaughter (D. NY) also introduced House Resolution 4 (H.R.) 3662, "The Financial Safeguards for Hurricane Survivors Act", which would delay the implementation of the new bankruptcy law for two years, enabling Katrina victims to file for bankruptcy under the current rules. (Bosworth) Albeit there has been a groundswell of activity from both sides of the house floor to save Katrina victims from the new law, Chairman Sensenbrenner has announced that he will not conduct hearings on relief from bankruptcy for Katrina victims. In an October 5, 2005 article in Fox Fan central, the United States Justice Department stepped up to the plate to allay controversy and inject compassion for the disaster victims. The Justice Department United States Trustee was granted special permission and issued this statement. "The new guidelines take into account the hardships experienced by victims" (qtd in Bosworth) A Justice Department official told Rep. F. James Sensenbrenner (R. Wis.), in a letter dated Wednesday October 5, 2005, "The trustee program has directed its bankruptcy administrators in the field to exercise "appropriate restraint and discretion favorable to hurricane victims" in some of the law requirements. The requirements at issue in the Justice Department action include the core change made by the new law, an income test for determining whether people can have their debts cancelled in exchange for forfeiting certain assets or if they must repay them under a court-ordered plan. The trustees are being told to consider lost Income, increased expenses and other items resulting from the hurricane to be "special circumstances" to be taken into account in the means test.(Fox Fam ) Although The bankruptcy law as it was signed by the President in May 2005, has been temporarily rescinded, it is still a win, win situation for all parties concerned. Works Cited Bosworth, Martin H. , Congress Ponders Katrina Bankruptcy Relief, Consumer Affairs.com, September 28, 2005. Available on-line : www.consumeraffairs.com/news04/2005/Katrina_bankruptcy04html-21k-6oct2005 Congress and Katrina, New York Times, October 3, 2005,Editorial. Available on- line:www.nytimes.com/2005/10/03/opinion/03mon1.html Nagin Lay-offs Cause "great sadness", Fox news_com_u_s_& world, October 5, 2005. Available on-line: www.foxnews.com/story410,2933,169968,00.html-31k Read More