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Can Anything Save Us from Unintended Consequences?

Stuart Vyse is a psychologist and author of Believing in Magic: The Psychology of Superstition which won the William James Book Award of the American Psychological Association. He is a fellow of the Committee for Skeptical Inquiry.

Quick quiz: What caused the Great Recession of 2008?

OK, I admit it. That’s an unfair question. It was complicated. If you’ve done some homework, you might be able to mumble something about a housing bubble, subprime lending, mortgage-backed securities, credit-default swaps, big banks, irresponsible borrowers, George W. Bush, Barack Obama….

But there is one thing I can be fairly certain you will not mention: the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). You may not have heard of BAPCPA or, if you have, it may only be a foggy memory. So, here is a little history:

In the 1990s, personal bankruptcies were rising sharply, and the banking industry began a lobbying campaign to stiffen the bankruptcy requirements—a move that was expected to increase the profits of credit card companies. Attempts to pass a bill failed until President George W. Bush was reelected in 2004. Finally, after big banks spent $40 million in campaign contributions and millions more in lobbying efforts, the bill went into effect in late 2005 (Labaton 2005). It had a number of provisions, but most importantly it increased the up-front costs of filing for bankruptcy and made the process more onerous.

Figure 1. Nonbusiness (personal) bankruptcies and percentage of homes in foreclosure (right-hand axis) for the years 1990–2016. The vertical line marks the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Sources: U.S. Courts and Mortgage Bankers Association.
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