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November 8, 1999

S. 625 - Bankruptcy Reform Act of 1999
(Grassley (R) Iowa and eight cosponsors)

The President supports bankruptcy reform that is balanced, would reduce abuses of the bankruptcy system, and would require debtors and creditors alike to act responsibly. Last year, the Senate produced such a balanced bill with overwhelming bipartisan support. The President is disappointed that, this year, the House failed to produce legislation that he could support. S. 625 reflects some improvements over H.R. 833 as passed by the House. The Administration, however, continues to have serious reservations about S. 625 and strongly opposes some of its provisions. For example, we are deeply concerned about a provision of the manager's amendment that adds an important "safe harbor" that protects low-income debtors from motions to deny them access to Chapter 7 under the means test, but also eliminates an essential "safe harbor" that would protect low-income debtors from coercive creditor motions that might be brought under a under a vague "totality of the circumstances" test more appropriately enforced by bankruptcy trustees and courts. The latter protection eliminated by the managers' amendment was included in the reported version of the Senate bill, the House-passed bill, and last year's conference report. The Administration's other objections to this bill are explained in detail in the Attachment.

Most of the Administration's concerns would be addressed by relevant amendments that the Administration understands will be offered on the Senate floor. The Administration's views on the anticipated amendments are also contained in the Attachment. The Administration remains hopeful that bipartisan cooperation will result in responsible bankruptcy legislation that the President can enthusiastically sign.

Finally, the Administration understands that certain non-relevant amendments will be offered as well. On November 4, 1999, in a letter to the Majority Leader, the President made clear that he strongly supports an increase in the minimum wage of $1 over the next two years; however, if Congress sends him a bill delaying the increase, repealing overtime protections for certain workers, adding costly and unnecessary tax cuts that threaten fiscal discipline and direct benefits away from working families, and thwarting ongoing efforts to enforce pension law, he will veto it.

In addition, the Administration strongly opposes the inclusion of an unrelated education amendment, a version of the Teacher Empowerment Act. When similar legislation passed the House this summer, the President indicated that he would veto it. The Administration's position on this legislation has not changed. The amendment would eviscerate the class size reduction program passed on a bipartisan basis last year and replace it with a block grant that fails to guarantee that any funds will be used to support the crucial work of reducing class sizes in the early grades. In addition, the block grant does not target funds toward the neediest students and does not include important provisions to improve teacher quality. If this amendment is attached to S. 625, the President will veto the bill.

The Administration opposes the drug-related amendment because it would reduce the current disparity between crack and powder cocaine sentences solely by increasing powder cocaine penalties dramatically instead of addressing both crack and powder cocaine penalties. Decreasing the threshold amount of powder cocaine necessary to obtain 5- and 10-year mandatory minimum sentences may be counterproductive because it could significantly redirect Federal law enforcement resources from the highest level offenders. In addition, this amendment would actually exacerbate the disproportionate impact of cocaine sentencing on minorities because, according to U.S. Sentencing Commission statistics, approximately 31% of defendants sentenced at the Federal level for powder cocaine offenses in 1998 were African American, 48% were Hispanic, and only 19% were white.

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