Avoidance and Perverse Results

Have you ever noticed that nobody takes responsibility for anything anymore? Barry Bonds says that he took steroids but that he just didn't know it at the time. Gary Sheffield says he used a salve known as "clear" and took some supplements but didn't know what they were. Ken Lay and Bernie Ebbers both deny they knew the extent of the chicanery going on at Enron and MCI Worldcom. This defense didn't work real well for Ebbers as the jury found him guilty. Which has got to make Lay and his lawyers reeeeeeeal nervous about their chances when their day in court rolls around.

A variation on this theme are those folks who utilize avoidance when they don't have the discipline to moderate their behavior. We all know folks who are in 12-step programs because the cannot drink responsibly. We know people on diets who have altered their daily route to work so they don't drive by the doughnut shop. These are perfectly useful and benign approaches to making lifestyle changes. However, there are also some corporate entities who cannot trust themselves to regulate or moderate their behavior. So they they fixed the system so that they don't have to deal with the underlying problems. Which created what the law refers to as "perverse results." A couple of recent examples of this more sinister version of avoidance therapy may be found in two diverse industries: The National Basketball Association and the credit card industry.

If there is anything the NBA hates it is players declaring their eligibility for pro hoops right out of high school. So, it has proposed a league rule making 20 the minimum age for eligibility for the NBA draft. The stated reason for this is that players need time in college or junior college to mature both mentally and physically before they subject themselves to the physical and emotional rigors of an 82 game season in addition to learning to live on their own.

A lawyer friend of ours is fond of saying, " There are reasons. And then there are the real reasons." The real reasons the NBA doesn't want teenagers in the league is because the general managers of the teams in the league live in complete mortal terror of giving a wad of money and a guaranteed contract to a player that is a bust. Another reason is that the colleges act like so many unpaid farm clubs for the NBA. It would vastly prefer that players develop and mature on good old State U's dime so it doesn't have to deal with them.

So why don't they just leave it up to the individual clubs? Impractical. No club is going to refuse to draft guys out of high school as a matter of policy and let a conference rival sign the next Kevin Garnett. Why not outlaw guaranteed contracts? No other professional sports league is insane enough to offer them to their players. Yeah, right. The NBA Players Union would go full-blown batshit crazy if that one ever got floated. So why not start a minor league system like the NFL has done in Europe? Too expensive. Why not increase the scouting staffs for each club? See the preceding sentence. What's the difference between paying money to an 18 year old bust and paying money to a bust with a bachelor's degree? They don't know. Maybe it just pisses them off worse.

So rather than deal with the problem the NBA is just trying to avoid it. The perverse result is that a young man who is eligible to vote and to die for his country is not eligible to make a living at a perfectly legal occupation. There are teenagers in abundance in professional baseball and tennis. Hell, Boris Becker was a yearling boy of 17 when he won Wimbledon the first time. What so different about hoops?

For years, the credit card industry has had the red ass about people using the bankruptcy laws to discharge credit card debt. And the disdain the NBA harbors for kids who declare early is nothing like the hatred the banking lobby has for Chapter 7 of Title 11 of the United States Code. Which is the liquidation section of the Bankruptcy Code wherein a Debtor can receive a Discharge of his debts in exchange for the surrender of his non-exempt assets for liquidation to pay the secured creditors. We are sorry. Bankruptcy lawyers talk like this. Bear with us. We are translating as best as we can.

The banking lobby has long clamored for a change to the Code in order to tighten the eligibility requirements for Debtors in Chapter 7. After years of their incessant bitching the interestingly named Bankruptcy Abuse Prevention and Consumer Protection Act got through Congress and was signed into law last week by President Bush. This new law will impose a "means test" based on a formula which takes into account the Debtor's debts and his income (based on his state's median income) to determine whether he will be eligible for a 7 or whether he will be forced to file a Chapter 13 Repayment Plan.

We are all for folks paying their just debts. But the majority of Chapter 7 filers do so on the heels of personal calamity such as divorce, illness or unemployment. Why come down hard on them?

Why not make sure that an applicant is creditworthy on the front end before giving them an unsecured line of credit? Too slow. A competitor might get someone signed up. (Does this sound familiar? We wonder how many NBA executives got their start in banking.) If this is such a big crisis that is costing the industry millions why don't they contest more discharges? You kidding? You know how much money that would cost? After all, we are talking unsecured debt here.

No, it is easier to lay all of it of on the consumer, all the while making a big deal about personal responsibility in order to make it more palatable to avoid corporate responsibility.

And if that is not a sufficiently perverse result to come out of the new legislation, here's another one: The new means test for eligibility might actually encourage the unbridled use of credit cards. Here's how.

Let's say your debt-to-asset ratio is a little too robust to qualify for Chapter 7. Which is nothing to particularly be bragging about by the way. And let's say you have the usual 4 or 5 credit cards that the average American household has. Hell, run those suckers up until your financial picture is sufficiently precarious to where they can't put you in a 13! As long as you don't go on this bonanza less than 90 days before you file your Petition the debts are not considered fraudulent.

Talk about the Mother of all perverse results. Only in America. Where the real reasons that things get done don't take account of the potential for the perverse result.