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Martha Shoffner is the least of our problems

By: 1 July 2013 No Comment
"How's that for hijinks?"

“How’s that for hijinks?”

Former Arkansas Treasurer Martha Shoffner made the news again last week when she pleaded innocent to federal bribery and extortion charges in U.S. district court. It seems the media will write something about Shoffner whenever she happens to walk near a courthouse, and we at First Arkansas News are as guilty as anyone about that. We, too, have had our fun with the sad, strange story of Shoffner at least a couple of times.

Shoffner’s tale is, after all, a fascinating one as we’re talking about a woman who allegedly sold her soul for $36,000 so she could afford an apartment in Little Rock. For those who have been keeping score, Shoffner allegedly accepted a little bit of money in exchange for sending some of the state’s bond business to a broker who was delivering cash to the former treasurer.

Throw in the fact that a chunk of those alleged bribes were delivered to Shoffner in a pie boxes (and, yes, pies were included as a bonus, seemingly) and the story is intriguing. If you haven’t been keeping up with the fun, click here for a fuller explanation of the Pie Fan’s fall from grace.

We’ve got a right to be outraged by the story as we’re talking about a public official who allegedly looked out for the interests of one individual instead of remaining loyal to the voters who put her in office. If she is convicted, Shoffner deserves whatever sentence a federal judge wants to throw at her.

However, one thing that remains puzzling is how we can get so worked up over the blatantly criminal activities of one public official who betrays the public trust while nodding while very similar — and more socially corrosive — is defended as speech protected by the First Amendment. We’re talking, of course, about the very legal and almost respected practice of lobbying that has caused far more damage than anything Shoffner and her benefactor could do if given a few hundred years.

Let me explain what I mean by looking at the Bankruptcy Prevention and Consumer Protection Act of 2005 and how it was one of the contributing factors to the foreclosure crisis that took hold in 2008 and is still weighing on the economy. Bear in mind that lobbyists from the likes of Citibank had their filthy paws all over that bit of reform and it, ultimately, served to benefit only lenders at the expense of everyone else. If you want to see just how deep lobbyists were in pushing for, drafting and lying about that reform, have a look at this analysis published in the American Bankruptcy Law Journal in 2009 and put together by one Michael Simkovic.

Simkovic’s pointed out that the credit industry claimed consumers were abusing the heck out of the U.S. Bankruptcy Code and that was costing the industry money. The industry argued that such abuse cost the average American family $400 a year in higher interest and fees and claimed that reform would curb that abuse and, ultimately, result in savings to creditors that would be passed on to consumers in the form of lower interest rates, fees, etc.

Now, there are two types of bankruptcies that are generally available to consumers. The first type is a Chapter 7 in which consumers can, essentially, discharge their unsecured debt entirely and reaffirm the secured debts such as cars and houses that they want to keep and continue paying as they always have. The second is a Chapter 13 bankruptcy which is different in that consumers must pay back at least part of the unsecured debts under a bankruptcy plan that is approved by the court and is designed to leave filers with enough money to cover their living expenses while the rest is sent to creditors. Unsecured debts include those to which no property is attached. A mortgage, for example, is a secured debt — the debtor can either pay it as agreed or lose their home to the creditor. Credit card debt, on the other hand, is typically unsecured. Clearly, credit card companies were interested in limiting the number of Chapter 7 bankruptcies that were filed as they wanted to limit the ability of debtors to simply discharge unsecured debts completely.

And that, folks, is exactly what the 2005 bankruptcy reform did. Filing for relief under Chapter 7 of the U.S. Bankruptcy Code became more difficult, filing for bankruptcy became more expensive and lawyers who worked in the bankruptcy arena found themselves with increased liability in an attempt to get attorneys to prevent clients from preventing fraud.

The result of the reform was increased profits for credit card companies. Simkovic points out that creditors posted record profits as a direct result of the reform and that the promised benefit to consumers — lower interest rates and fees — never materialized. In other words, the credit industry helped draft some legislation that directly benefited it and spent millions of dollars getting its self-interested bill passed and signed into law. That industry, alone, benefited from bankruptcy reform.

Here’s something else that bankruptcy reform did — it helped set the stage for the 2008 foreclosure crisis that still plagues the economy. That conclusion was reached by Wenli Li — an economic advisor and economist with the Federal Reserve Bank of Philadelphia — and University of California of San Diego Economics Professor Michelle J. White in this report published in December 2009.

Li and White concluded that home owners in trouble had an escape route when times got tough prior to the 2005 reform — they were able to dump unsecured debt in a Chapter 7 case and free up the cash to handle their mortgages. The reform effectively prevented a lot of home owners from going that route, meaning fewer people going through tough times were able to get rid of unsecured debts so they could take care of their mortgages. The result? Li and White claim the reform effectively caused 800,000 additional mortgage defaults and 250,000 foreclosures in 2006-2009.

To quote Sheriff Buford T. Justice, “how’s that for hijinks?”

While examples of how self-interested parties are able to lobby our government at all applicable levels to their benefit and the rest of us are legion, looking at just one example is enough to prove the point. How on earth can we get worked up about Shoffner’s bad behavior while winking at something else that is completely legal but demonstrably more damaging to society as a whole?

Again, Shoffner allegedly betrayed the public trust and will deserve whatever sentence she gets if found guilty. However, we should be mindful that she’s small potatoes compared to those who legally buy votes, pedal influence and do their best to prevent our officials from doing the jobs for which they were elected — looking out for the interests of us voters.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.

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