Call for stricter bankruptcy laws in U.S.
U.S. Bankruptcy Court
TEXT OF STORY
Renita Jablonski: A leading economics institute in Britain has found a new culprit to blame for the severity of the credit crunch -- American bankruptcy laws. From London Stephen Beard report.
Stephen Beard: The Institute for Economic and Social Research says America's bankruptcy laws are way too lax. The penalties for going bust are too lenient. The Institute says that in a bid to promote enterprise by removing the stigma of failure, the U.S. made it too easy for borrowers to walk away from their debts. That's led both to reckless borrowing and high rates of default. The Institute is critical of the non-recourse mortgage available in some states. This is where the borrower can wipe out their mortgage debt just by handing the property back to the bank. Institute Director Martin Weale says the global economy is suffering as a result.
Martin Weale: If the United States had bankruptcy laws more like other advanced countries, then the credit crunch probably would have been less acute and had fewer international implications.
He's calling for an international agreement to make bankruptcy more painful, especially in the U.S.
In London, this is Stephen Beard for Marketplace.