Washington Outlook
EDITED BY PAULA DWYER
Tougher Bankruptcy Laws--Compliments of MBNA?
Last December, as Congress struggled to wrap up a lame-duck session, it sent President Clinton an overhaul of bankruptcy laws. The bill, the most sweeping change in bankruptcy policy in two decades, had handily passed both houses. But Clinton, complaining that it was unfair to those who fall on hard times, let it die. That was a big disappointment to credit-card issuer MBNA Corp., which has spent several years lobbying for a bankruptcy rewrite and stands to be the biggest beneficiary of an overhaul.
Now, MBNA is about to hit pay dirt. New bankruptcy legislation is on a fast track. Judiciary panels in the House and Senate have held perfunctory hearings, and a bill could be on the House and Senate floors as early as late February. A White House spokesman has indicated that George W. Bush will sign it.
The bill--a carbon copy of last year's version--is aimed at stopping consumers from dissolving debts they can afford to repay. It would establish a "needs-based" formula that would determine whether debtors can pay off part of their debt under court supervision. Those earning at or above the median for their state would have to make good on at least part of their obligations.
LARGESSE. While this would help all lenders, it especially benefits MBNA, the world's largest credit-card issuer. The credit that MBNA and its fellow plastic-issuers extend is typically unsecured, so they have less recourse than other creditors when a customer can't pay. Morgan Stanley Dean Witter analyst Kenneth A. Posner estimates that the overhaul could boost credit-card issuers' earnings by 5% this year. For MBNA, that could mean some $75 million more in profit, based on third-quarter earnings.
With that kind of payoff, the company has been pushing hard for the bill--and the election of a President who will sign it. In Campaign 2000, MBNA employees contributed $237,675 to Bush, making them the candidate's single biggest source of cash, according to the Center for Responsive Politics, a campaign-finance think tank in Washington. On the soft-money side, MBNA chipped in nearly $600,000, with about two-thirds going to the GOP. (Most of the rest went to a Democratic Party committee.) On top of that, MBNA Chairman and CEO Alfred Lerner and his wife, Norma, each kicked in $250,000 to the Republicans. Charles M. Cawley, CEO of MBNA's bank unit and a friend of Bush Sr., organized fund-raisers and gave $18,660 to Bush and the GOP.
Much of the money flowed in the second half of last year, when the bankruptcy bill was moving on Capitol Hill. One example: On the same day the House gave final approval, MBNA ponied up $100,000 for the Republican Party. "This is just a real good illustration of the way things work in Washington: Money is given, money is given strategically, [and] money is given by industries for a particular purpose," says Celia Viggo Wexler, author of a Common Cause report on consumer-credit companies' political giving. Adds Edmund Mierzwinski, consumer director for the U.S. Public Interest Research Group: MBNA's largesse is "clearly money well spent." Lerner, Cawley, and an MBNA spokesman did not return calls seeking comment.
Consumer groups say they'll continue to fight the bill, which they contend is especially ill-advised in the slowing economy. After falling 12% from a high of 1.44 million in 1998, bankruptcy filings are ticking up again. One early report shows cases in January rose 15% over a year ago. A handful of Democrats will seek to soften the bill's impact on indebted consumers, but quick approval seems guaranteed. "This legislation is on a downward ski slope, never to be stopped," said Representative Sheila Jackson Lee (D-Tex.) at a recent hearing. And smoothing the way is MBNA.
By Christopher H. Schmitt
Bush vs. Labor?
Union officials are steaming over what they see as President Bush's pro-business tilt in labor-management relations. Bush on Feb. 9 signaled that he might intervene in the long labor dispute between Northwest Airlines and its mechanics union if the two sides can't reach a settlement by Mar. 12. Bush's move is unusual: It came at the start of a 30-day "cooling off" period, and thus could further delay the threat of a strike--labor's trump card. Labor leaders say Bush's ties to current and former Northwest officials explain his action: Frederic Malek, a board member and former president, was one of W.'s partners in the Texas Rangers baseball team. Malek says he has not spoken to the President or anyone else in government about the Northwest situation, "nor would I think of doing so." And Elaine Chao, Bush's new Labor Secretary, resigned as a Northwest director after her Cabinet nomination. She has recused herself for one year from any Northwest matters, says a spokesman.
By Aixa M. Pascual in Atlanta and Nicole St. Pierre
ANWR Oil: Support Sinks
Alaska Senator Frank Murkowski soon will offer a consensus GOP bill to allow oil and natural gas drilling in the Arctic National Wildlife Refuge. The plan, backed by Bush, is designed to reduce reliance on overseas oil. But political support may be dwindling. On Feb. 14, Murkowski conceded that some of his GOP colleagues have said they can't back the bill for fear that environmental groups will run ads against them. And Senator John Kerry (D-Mass.) has threatened a filibuster.
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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