In a deal brokered by the feds, Citigroup has agreed to acquire the majority of Wachovia, the latest bank to fail. From CNN:

Citigroup will acquire the banking operations of Wachovia for $2.2 billion in an all-stock deal, following much speculation over the weekend about the fate of the nation’s fourth-largest bank.

Citigroup buys Wachovia bank assets for $2.2B | CNN

Brad Perri is a Minnesota bankruptcy lawyer who will be guest blogging at Caveat Emptor from September 29th through October 10th.

Really? No, not really.

But I think it is time for us to change how we think about bankruptcy.

After all, what is the normal story you tell yourself when you think about bankruptcy? I imagine if you are like most people, the story you tell yourself about bankruptcy goes something like this: People should pay their bills; it is immoral if they don’t; if I don’t pay my bills, I am an immoral deadbeat.

What is the problem with that story?

Well, for starters, that is not the story any businesspeople tell themselves or each other when they think about bankruptcy. Bankruptcy is strictly a business matter; it has nothing to do with morality.

700 billion is a lot of money. How do you as consumers get your head around that figure? Well a good start might be with a basic definition of money itself. Here is a good start:

A companion pice to Nick’s post of earlier today.  Earlier this summer the Boston Globe printed a response to an editorial which laid the blame of the current mortgage crisis at the feet of the CRA.  Perhaps the best part of the response is the comment that no statistics were provided.

I think that’s what we need (in addition to congressional hearings) to find out what exactly went down. I’m not willing to buy into any explanation without empirical evidence and testimony by those who knew or were suppose to know the facts of the situation.

One of the great shibboleths of the Republicans is that the Community Reinvestment Act, which requires banks that receive FDIC guarantees must actually address the credit needs of the communities they are chartered to serve, is the cause of our great foreclosure mess. The line goes that in order to comply with the CRA, those banks, against their better judgment, had to make all sorts of bad high risk subprime loans to people who really weren’t qualified, and ultimately defaulted.

Obviously there are a number of flaws in this whole line of reasoning, including an ignorance of the history of the act and how it works; the continuing problem of steering and the high percentage of people who actually qualified for a conventional loan but were placed into a subprime loan by the broker who stood to make more through the yield-spread premium kickbacks.

The following is a great discussion which took place on Thursday 9/25.  For a great instruction on credit reporting and consumers listen here.  The interview begins at 59:43 of the 1:19 broadcast segment.  

If you are concerned about your credit rating and/or report this is a must listen.

Brad Perri, a bankruptcy attorney in Minnesota, will be joining us as a guest editor for the next two weeks

Bankruptcy is kind of the granddaddy of all consumer protection laws, but we don’t talk about it enough here, since none of the regular editors are bankruptcy lawyers.

Before bankruptcy, debtors had to work off their debt as slaves or by dangling begging cups out of the window of the debtors’ prison. The Founding Fathers included bankruptcy in the U.S. Constitution. Which makes sense, really. Debt slavery seems contrary to the whole Democracy thing.

So for the next two weeks, Brad will explain what bankruptcy is, why consumers should not be afraid of it, and more. Stay tuned!

If you were a Washington Mutual customer yesterday, you are a Chase customer today. JP Morgan Chase bought up most of WaMu’s accounts in the biggest bank failure in history. Expect the stock market to limbo to new, lower heights today.

What will happen if you are a WaMu customer? Here is what Chase has to say:

Washington Mutual is selling many assets to JP Morgan and opening its doors to the Feds, who will take over what is left of the formerly-huge bank.

WaMu’s collapse is the biggest bank failure in history.

Judge Michael Davis overturned the obscene $222,000 jury verdict in the Capitol v. Thomas trial with what may become a landmark decision. He ruled the RIAA’s “making available” theory was bogus, and called on Congress to fix the law that made the Thomas verdict possible:

The Court would be remiss if it did not take this opportunity to implore Congress to amend the Copyright Act to address liability and damages in peer-to-peer network cases such as the one currently before this Court. . . . While the Court does not discount Plaintiffs’ claim that, cumulatively, illegal downloading has far-reaching effects on their businesses, the damages awarded in this case are wholly disproportionate to the damages suffered by Plaintiffs. Thomas allegedly infringed on the copyrights of 24 songs—the equivalent of approximately three CDs, costing less than $54, and yet the total damages awarded is $222,000—more than five hundred times the cost of buying 24 separate CDs and more than four thousand times the cost of three CDs. While the Copyright Act was intended to permit statutory damages that are larger than the simple cost of the infringed works in order to make infringing a far less attractive alternative than legitimately purchasing the songs, surely damages that are more than one hundred times the cost of the works would serve as a sufficient deterrent.

. . .

Unfortunately, by using Kazaa, Thomas acted like countless other Internet users. Her alleged acts were illegal, but common. Her status as a consumer who was not seeking to harm her competitors or make a profit does not excuse her behavior. But it does make the award of hundreds of thousands of dollars in damages unprecedented and oppressive.

Capitol v. Thomas: Judge Orders New Trial, Implores Congress to Lower Statutory Penalties for P2P | EFF (via BoingBoing)

Every Senator and Representative should talk this tough.  Sen. Dodd and Rep. Frank - you listening?