The White House is rushing to have its debts erased, just weeks before the Bankruptcy Abuse Prevention and Consumer Protection Act is scheduled to go into effect. By filing now, the Bush Administration avoids the law's tough new penalties, including mandatory repayment and court-ordered financial counseling. Sources close to the White House say that the Administration began having trouble paying its bills after the President burned through most of his political capital.
Political capital borrowed at interest rates of 18%
By Deanna Swift
WASHINGTON, DC—The White House is officially bankrupt. That’s what advisors to the President are saying after the Bush Administration moved to have its debts erased, just weeks before a tough new bankruptcy law goes into effect. By filing now, the White House can climb out from under its unpaid debts and declare a fresh start under chapter 7 of the bankruptcy code.
Avoiding a strict new law
That’s good news for the Bush Administration, say financial advisors. If the White House had waited until October 1st to declare bankruptcy, much tougher standards would have applied, thanks to the Bankruptcy Abuse Prevention and Consumer Protection Act signed into law by President Bush last April.
White House above the median income
Under the new law, debtors who earn more than the median income in their state and can repay at least $6000 of their debt over five years will no longer be able to have their debts wiped out. With the median income in Washington, DC slightly more than $46,000, the White House obviously falls into that category, say experts. Under the new provisions, the Bush Administration would also be forced to enroll in a court-supervised financial-counseling program, something advisors say that the President wants to avoid. "He obviously doesn't want somebody telling him how much he can spend or telling him that he's got to live within his means," says one source close to the White House.
White House 'living near the edge'
Sources close to the White House say that the Administration began having trouble paying its bills after Mr. Bush started spending the political capital he believed he had earned in his contest with Democratic contender John Kerry. Feeling flush with cash, say experts, Mr. Bush began to display a behavior typical of many bankrupt Americans: he lived beyond his means. He even began risking his retirement savings on risky get-rich-quick schemes. Describes one onlooker: "The phone was ringing at the White House all day and all night as collection agents called wanting to know when they were going to get their money. It was a very tense situation."
Second thoughts about a bill
Mr. Bush was reportedly very excited about the changes in the bankruptcy bill until he realized that some of the tough new penalties would likely to apply to him. Now, say sources close to the White House, he is particularly concerned about the law's language concerning serial filers--people who have filed for bankruptcy on more than one occasion. "Frankly, he's had some financial problems in the past and he's always had other people who were willing and able to bail him out. Now the new law says that it's not up to society to pay his debts."
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Losing the White House
If he declares bankruptcy within the next few weeks, say experts, Mr. Bush's assets will be liquidated and given to creditors, while many of his remaining debts will be cancelled, giving him a fresh start. If he waits until the new law goes into effect, Mr. Bush will likely lose whatever equity he has in the White House. The new law says that in order to qualify for a homestead exemption, a bankruptcy filer must live in the home for a majority of the time. Since Mr. Bush has spent much of his Presidency at his second home in Crawford, TX, say observers, he would likely fail to meet that standard.
Do you think that President Bush should consider attending a money management class? Talk back to Deanna Swift.