Yra Harris on How BAPCPA Has "Flown Back in the Banks' Faces Good and Hard"

With little fanfare, Yra Harris, a veteran trader of Chicago's pits, started blogging his Notes From the Underground last December.  I learned about it last month from a good friend of his, and strongly recommend it to you.  Yra is a frequent guest commentator on CNBC, and one of the smarter guys in the room.

Yesterday on CNBC's Squawk Box, Yra commented on how BAPCPA's changes ended up screwing the banks "good and hard."  He explains that BAPCPA's anti-consumer protection features have had the unintended consequence (see others here, here, and here) of flipping around distressed middle class America's incentives in a way that has multiplied the banks' net consumer losses manyfold.  Pre-BAPCPA, people would file bankruptcy to keep their house and escape their credit card debt.   Now, however, people are instead paying down their credit cards at the expense of their mortgage in order to keep their credit lines available for the inevitable rainy day(s).  Meanwhile, they live mortgage-free for 12-18 months and build up their cash reserves until they're finally forced from their home in foreclosure. 

And so, Yra concludes, the law that has "done more harm to middle class America" than any other single piece of consumer legislation (others concurring here) has "flown back in the faces of the banks and slapped 'em hard," again proving true the old saying, "be careful what you wish for" because, as Yra puts it, "it'll come back at you good and hard!"

To read more bankruptcy law articles by Steve Jakubowski, visit the Bankruptcy Litigation Blog