LEGISLATIVE UPDATE Sensenbrenner Promotes Latest House Offer on Legislation

<i>Bankruptcy reform legislation is still pending in a House-Senate Conference
Committee. Conferees have been trading offers on several disputed items in the
comprehensive legislation. House Judiciary Committee Chairman James Sensenbrenner chairs
the conference. He made the following remarks after the House sent their latest offer
to the Senate.</i>

</p><p>F. James Sensenbrenner, Jr.<br>
Chairman, House Judiciary Committee<br>
before the Credit Union National Association<br>
February 27, 2002

</p><p>I would like to begin by acknowledging the significant contributions that CUNA and
you, its members—particularly your grassroots outreach efforts—have made to advance
bankruptcy legislation through the Congress. You have played a key role in the
progress this legislation has made. Credit union representatives have testified before
the House and Senate and have generously given their expertise and analysis to our
members and staff, for which we are very grateful.

</p><p>In recent months, there have been a number of stories in the media claiming that
progress on the bankruptcy bill is "stalled" or that the bankruptcy bill is "dead" or,
asserting like this week's <i>Washington Post</i> headline, [the] "Bankruptcy Reform Bill
[Is] in Trouble Again."

</p><p>I feel a bit like Mark Twain who observed that reports of his death were
exaggerated. Contrary to these prognostications of gloom and doom, the bankruptcy
bill is alive and well, and its future has never been healthier.

</p><p>Here are the facts:

</p><ol>
<li>Unlike the prior administration, the Bush Administration clearly supports
bankruptcy reform.

</li><li>Bankruptcy reform is needed now more than ever. In recent months, bankruptcy
filings have skyrocketed. In 2001, the number of filings was the highest ever
in our nation's history.

</li><li>As these filings increase, so does the cost that our economy must bear. A
1997 study, for example, estimated financial losses attributable to bankruptcy
filings for that year alone would exceed $44 billion. This loss, when amortized
on a daily basis, amounts to at least $110 million every day. For credit unions
in particular, this is a loss that burdens every member.

</li><li>There are other studies showing that some bankruptcy debtors can, in fact,
repay a significant portion, if not all of their debts. As a result, some debtors,
having an unfettered ability to repay their debts, use bankruptcy to avoid their
financial obligations, much to the detriment of everyone else who pays their bills.

</li><li>In the nearly five years that this legislation has been pending, the House
and Senate bills have never been closer in terms of their similarity as they are now.
When we began the bankruptcy conference last November, there were only three dozen or
so substantive differences between the bills that required resolution. Since November,
close to two-thirds of these differences have been resolved by staff.

</li><li>Just yesterday, the House staff sent to the Senate a global compromise
package that resolves all of the remaining issues, including controversial issues
pertaining to abortion and homestead exemptions.

</li><li>Highlights of the compromise include the following:

<ul>
<li>A. With respect to the homestead issue, the House moves in the direction of
the Senate by using a longer reachback period of two-and-a-half years instead
of the two-year period in the House bill. The compromise also includes the
House seven-year reachback for fraud.

</li><li>B. With respect to the abortion issue, the House compromise would make (i)
debts for willful and malicious threats of serious bodily injury as well as
(ii) debts for willful and malicious "crimes of violence" (which is a term
defined in the criminal provisions of the United States Code) non-dischargeable.

</li><li>C. It excludes from the bill needs-based test compensation received by victims
of Sept. 11.

</li><li>D. It deletes provisions in both bills that have nothing to do with bankruptcy
reform. They include the so-called "Lloyd's of London" provision and provisions
dealing with energy issues.

</li><li>E. It also deletes a provision at the behest of the Senate dealing with
asset-backed securitizations, which some claim had some connection to the <i>Enron</i>

case.
</li></ul>
</li></ol>

<p>Although we're confident that the bankruptcy conference will be completed by next
month, we need your support and assistance now, more than ever, to ensure that
happens. While you are in Washington this week, you should try to knock on as many
doors in Congress as possible to spread the word that the time to act is now. The
message must be communicated to Congress that bankruptcy reform should not be held
hostage by irrelevant and politically motivated issues.

</p><h3>American Bar Association Weighs in Against Lawyer Liability Provision in Legislation</h3>

<p>The American Bar Association is among those groups critical of a proposal in the
bankruptcy bill that would require lawyers representing debtors in consumer cases,
including legal services and pro bono counsel, to certify the accuracy of the factual
statements in the debtors' petitions and schedules. The proposal would generally hold
the lawyer personally liable for any inaccuracies, which the ABAbelieves will chill
representation of many debtors. Some have argued the bill's language creates strict
liability on counsel, requiring sanctions against any attorney who incorrectly determines
that the client is eligible for chapter 7 relief under the means test.

</p><h3>Bond Market Group Applauds Congress for Reform Efforts</h3>

<p>The Bond Market Association recently commended House and Senate leaders attempting to
work out an agreement on bankruptcy reform. A letter from the group particularly cited
the importance of the bill's updates to the netting and payment risk reduction laws of
the Code, which are designed to reduce risk in the financial markets. The provisions
clarify the treatment of certain financial products in cases of bankruptcy or insolvency.
Key financial regulators, such as Fed Chairman Greenspan and Treasury Secretary O'Neill,
support the provisions.

</p>