NBC Response to “Workout, No Bailouts”
NBC Chair Donald S. Bernstein's letter to The New York Times responding to a "Workouts, Not Bailouts" op-ed, advocating for bankruptcy-based debt renegotiation as a proven solution to the economic crisis, citing Chapter 13 and the successful Chapter 12 farm-crisis precedent from the 1980s.
- Chapter 13 bankruptcy permits renegotiation of nearly all debts except home mortgages; NBC recommended corrective legislation to include mortgages
- Chapter 12 successfully resolved the 1980s farm crisis by allowing farmers to write down mortgages to market value while keeping farms and lenders receiving full collateral value
- Bankruptcy-based renegotiation requires no new federal agencies, programs, or personnel and provides prompt, targeted relief compared to bailout proposals
Letters to the Editor
The New York Times
620 Eighth Avenue
New York, NY 10018
Dear Editor:
Paul Krugman sounds a timely alarm, advocating help for borrowers holding unaffordable mortgages on overvalued homes. ("Workouts, Not Bailouts," August 17) His suggestion that a federal agency buy mortgages and renegotiate with borrowers, admittedly, "would need . . . work."
Here's a simpler, proven solution: renegotiation in bankruptcy.
Chapter 13 of the Bankruptcy Code permits renegotiation of nearly all debts but home mortgages. The National Bankruptcy Conference recently recommended corrective legislation.
This solution resolved the 1980's farm crisis, when foreclosures drove family farmers off farms, crushing values. Then, Congress enacted chapter 12, under which farmers wrote down mortgages to market value, and paid them off (more slowly) with market rate interest. Families kept their farms, lenders received full collateral value with interest, and farm values survived.
This approach requires no new agencies, programs or personnel, and promises prompt, targeted relief.
Sincerely,
Donald S. Bernstein, Chair,
National Bankruptcy Conference, a voluntary organization of leading lawyers, law professors and judges that advises Congress on bankruptcy legislation Donald S. Bernstein National Bankruptcy Conference PMB 124, 10332 Main Street