THE WHITE HOUSE

Office of the Press Secretary

October 12, 2000

The Honorable J. Dennis Hastert
Speaker of the House of Representatives Washington, DC 20515

Dear Mr. Speaker:

I understand that the House will take up today the conference report on H.R. 2415, which apparently incorporates the text of S. 3186, a recently filed version of bankruptcy legislation. If this bankruptcy legislation is sent to the President, he will veto it.

Over the last few months, this Administration has engaged in a good faith effort to reach agreement on a number of outstanding issues in the bankruptcy legislation. The President firmly believes that Americans would benefit from reform legislation that would stem abuse of the bankruptcy system by, and encourage responsibility of, debtors and creditors alike. With this goal in mind, we have pursued negotiations with bill proponents on a few key issues, notwithstanding the President's deep concern that the bill fails to address some creditor abuses and disadvantages all debtors to an extent unnecessary to stem abuses by a few.

An agreement was reached in those negotiations on an essential issue -- limiting homestead exemptions -- with compromises made on both sides. Unfortunately, H.R. 2415 fails to incorporate that agreement, instead reverting to a provision that the Administration has repeatedly said was fundamentally flawed. The central premise of this legislation is that we must ask debtors, who truly have the capacity to repay a portion of their debts, to do so. This would benefit not only their creditors but also all other debtors through lower credit costs. Unlimited homestead exemptions allow debtors who own lavish homes to shield their mansions from their creditors, while moderate-income debtors, especially those who rent, must live frugally under a rigid repayment plan for five to seven years. This loophole for the wealthy is fundamentally unfair and must be closed. The inclusion of a provision limiting to some degree a wealthy debtor's capacity to shift assets before bankruptcy into a home in a state with an unlimited homestead exemption does not ameliorate the glaring omission of a real homestead cap.

Moreover, the President has made clear that bankruptcy legislation must require accountability and responsibility from those who unlawfully bar access to legal health services. Yet the conference report fails to address this concern. Far too often, we have seen doctors, health professionals and their patients victimized by those who espouse and practice violence. Congress and the States have established remedies for those who suffer as a result of these tactics. However, we are increasingly seeing the use of the bankruptcy system as a strategic tool by those who seek to promote clinic violence while shielding themselves from personal liability and responsibility. It is critical that we shut down this abusive use of our bankruptcy system and prevent endless litigation that threatens the court-ordered remedies due to victims of clinic violence. The U.S. Senate was right in voting 80-17 to adopt an amendment that would effectively close down any potential for this abuse of the Bankruptcy Code. We fail to understand why the bill's proponents refuse to include this provision and shut down the use of bankruptcy to avoid responsibility for clinic violence.

I repeat President Clinton's desire to see balanced bankruptcy reform legislation enacted this year. The President wants to sign legislation that addresses these known abuses, without tilting the playing field against those debtors who turn to bankruptcy genuinely in need of a fresh start. He will veto H.R. 2415 because it gets the balance wrong.

Sincerely,

                              John Podesta
                              Chief of Staff to the President

                                 # # #