Sen. Elizabeth Warren’s newest plan takes a direct shot at former Vice President Joe Biden’s record, going after a key piece of legislation benefiting credit card companies that he once championed.
Warren wants to repeal portions of the 2005 bankruptcy law in order to make it easier for families to find relief from crushing debt and start over.
Warren’s latest plan will make it easier for people to file for bankruptcy, pare back some of the rules that make it harder for people to recover afterward, allow student loans to be discharged in the bankruptcy process, and address racist and gender disparities in the bankruptcy system, among other things.
Bankruptcy is a bread-and-butter issue for the Massachusetts senator. She is one of the nation’s leading bankruptcy experts and focused on that area in her legal career. In the 1990s, she served on a blue-ribbon commission to review the nation’s bankruptcy laws.
She was also the leading critic of the 2005 legislation, testifying before Congress and working with allied lawmakers to try to stop it.
But she was up against a deep-pocketed credit card industry, corporate-friendly Republicans, and some Democrats ― most notably, then-Sen. Biden.
Warren never mentions Biden in her new plan. But releasing proposals that go after one of his key Senate accomplishments is a direct swipe at the former vice president, who is leading her in the Democratic presidential primary polls.
Biden worked on the bankruptcy law for nearly 10 years, and its passage in 2005 marked one of the signature legislative events of his Senate career. The law made it much more difficult for overburdened consumers to eliminate credit card debt and all but impossible to discharge student debts through the bankruptcy process.
The bill was a top lobbying priority for credit card companies including MBNA, a Delaware-based corporation whose employees were among Biden’s most important campaign donors over the course of his Senate career. MBNA paid consulting fees to Biden’s son Hunter between 2001 and 2005, while his father was at work on the legislation. The company was acquired by Bank of America in 2006 and sold to Lloyds Bank in 2017.
"I'm not the senator from MBNA," Biden insisted in 1999.
Prior to her Senate career, Warren was an academic who specialized in bankruptcy law. Her research concluded that the leading cause of individual bankruptcy was generally not raw overspending but personal tragedies ― the loss of a job, an unexpected medical bill, or divorce ― which disrupted family finances. She believed Biden’s bill would squeeze families who had already been hit by hardship in order to generate revenue for banks and credit card companies.
Biden, by contrast, billed his legislation as an effort to stop spendthrifts from abusing the bankruptcy system. Bankruptcy filings declined sharply after the bill was passed, and subsequent research from scholars including Katie Porter determined that the legislation was making it harder for families to weather the Great Recession. Porter, a onetime student of Warren’s, is now a Democratic congresswoman from California and has endorsed Warren for the Democratic presidential nomination. They’re set to campaign together in Iowa this weekend.
Biden has defended his support for the legislation, including as Barack Obama's running mate in 2008. Obama opposed the legislation, calling it "the credit card industry’s bankruptcy bill that made it harder for working families to climb out of debt." Biden argued that many low-income individuals were still protected under the new bill.
"It gets complicated but the point is this, Barack Obama saw the glass as half empty. I saw it as half full," he said.
"In 2016, Trump tapped into a very real anti-establishment sentiment by railing against Wall Street speeches, corporate trade deals, and the corrupt swamp. When thinking about electability, it would be complete malpractice to nominate someone who conspired in backrooms for years with credit card lobbyists and voted for every corporate bankruptcy bill, Wall Street deregulation, and trade deal that voters hate. Biden would ironically cede the outsider mantle to a corrupt incumbent president," said Adam Green, co-founder of the Progressive Change Campaign Committee, who is backing Warren.
In her new plan, Warren praises people like Ted Kennedy, Paul Wellstone, Russ Feingold and Dick Durbin, senators who fought the credit card industry for years over the legislation. Without naming names, she also talks about how the industry “rallied its allies in Congress again and managed to push through another version of its bill in 2005 with overwhelming Republican support and some Democratic support” ― a reference no doubt to Biden, among others.
Warren and Biden even went head-to-head on the bankruptcy bill in February 2005, when the then-Harvard Law professor testified before the Senate Judiciary Committee.
“One million men and women each year are turning to bankruptcy in the aftermath of a serious medical problem, and three-quarters of them have health insurance,” Warren said in her testimony. “A family with children is nearly three times more likely to file for bankruptcy than an individual or couple with no children.”
Biden accused Warren of making a “mildly demagogic argument,” but acknowledged that he didn’t disagree with her facts. Instead, he seized on those medical bills, asking why other creditors like gas stations and car dealerships should have to foot the bill for people’s health care costs. (He didn’t mention the credit card issuers, which have long been a major employer in his home state of Delaware.)
Warren said that until the United States fixed its health care system, families needed somewhere to turn. She conceded that Biden was right that the health care industry was saddling the broader economy with high costs, but she said that the credit card industry was essentially pre-compensating itself for bankruptcies with high-interest rates and fees.
“You’re very good, professor,” Biden said after more back-and-forth, drawing laughter from the room.