Joe Biden, Elizabeth Warren The fight for bankruptcy could return in the debate: NPR

In 2005, bankruptcy was on the rise for years.

Legislators wondered why, exactly, what was happening – and what should they do, if they did – when two future presidential rivals opposed a bankruptcy restructuring bill that would limit people who could cancel their personal debts.

In one corner, Joe Biden – one of the most ardent Democrat advocates of the bill and a Delaware senator, which is home to several major credit card issuers. He was also the senior member of the Judiciary Committee, who was debating the bill.

In the other corner, Elizabeth Warren, a Harvard law professor who had fought for years against this type of bankruptcy restructuring and sat on a panel convened for a hearing on the bill.

Their conversation began with a tedious (but senseless) exchange on bankruptcy courts. And that escalated from there, with many interruptions and occasional shouts – Biden at one point called Warren's arguments "slightly demagogic". This ended in a tense conflict over exactly what the conflict should be.

WARREN: [Credit card companies] have sufficiently escaped from these families in interest and in fees and payments that never repay the principle.

BIDEN: Maybe should talk about wear rates. That's maybe what we should talk about; no bankruptcy.

WARREN: Senator, I'll be the first. Invite me.

BIDEN: Now, I know you'll do it, but let's call a cat a cat. Your problem with credit card companies is the rate of wear, according to your position. It is not the bankruptcy bill.

WARREN: But senator, if you do not solve this problem, you can not remove the last flap of protection from these families.

BIDEN: OK, I understand. [pause] You are very good, professor.

It was a heated debate with a polite end, even charming, full of laughter in the courtroom, but the stakes are higher now, with Warren and Biden potentially poised to share a stage of debate.

And if the debate on a 14-year-old bankruptcy bill could otherwise be largely forgotten now, the 2020 presidential election has given full relevance to the disagreements between Biden and Warren – and shows how their exchange on this 2005 bill is reflected in their current presidential campaign strategies.

With the Senate Democrats in 2005, Biden said he was seeking to improve a Republican bill. Warren thought, even then, that it was fundamentally flawed and bad for consumers.

What did the bill do

A major issue at the heart of the 2005 Bankruptcy Bill was Why bankruptcies were on the rise.

A party – including Warren and many Democrats – said it was because people were short of money because of important obligations like medical debt and the credit card companies were aggravating the problem.

Others – largely Republicans, but also some Democrats, like Biden, said it was a combination of irresponsible spending and a system that made the bankruptcy application too easy, which led to abuses. These abuses, according to these legislators, entail higher costs for other people seeking credit.

The 2005 bill limited the number of people who could pay their debts through bankruptcy under Chapter 7 and made the process more difficult. It included a means test, comparing a person's income to the median income of his or her state. According to the advocates, the goal was to make sure that the people who could to pay their debts have not been able to escape their debts unjustly, while also ensuring that people who could not pay can get relief.

The bill also stated that a person had to consult a credit counselor before declaring bankruptcy.

Opponents, however, make bankruptcy a significant financial protection offered by the legal system to people in difficult circumstances. They thought that the bill would unduly harden the ranking, which would enrich the credit card companies. And indeed, as they supported it, the credit card companies had themselves lobbied.

Warren and his colleagues also argued that bankruptcy was a women's affair, with single and divorced women being disproportionately represented among failed filers. Passing this type of reform would therefore disproportionately affect women and children, he said (an argument that Warren explicitly made in an essay by Harvard Women's Law Review published in 2002 that strongly Focus on Biden).

A long race

This was not new legislation. Similar bills had been proposed several times in Congress – he even got to the Oval Office in the final days of Bill Clinton's presidency, but he refused to sign it.

Biden and Warren had also been opposed during this period. Biden voted for the 2000 bill and Warren advised Hillary Clinton to say it would be bad for consumers.

And that was the configuration of the land when they met on Capitol Hill.

"This is one of the situations in which current history is not misleading, and they have been key players in this case," said David Skeel, a professor at the University of Pennsylvania's Faculty of Law. author of a history of bankruptcy.

"Elizabeth Warren was the most important critic of the bill, and she spent years fighting it, which is what really brought her into the public eye," she said. -he declares. "And Joe Biden was of paramount importance in passing the legislation because credit card companies are very important to Delaware, that's where he came from."

Finally, the bill was passed. And as for the effects, they are complicated.

One result: the bill included a provision making obligations such as child support and child support a top priority, which responded to a concern of opponents of the bill.

And another overall result: Bankruptcies have declined sharply thereafter. And this is related to another effect of the bill, according to Skeel.

"The biggest effect is that it is now more expensive to declare bankruptcy than before," Skeel said, "because of the so-called resource test that was put in place in the 2005 amendments and which requires debtors to complete forms in order to: determine if they would be able to repay a portion of what they owe. "

But most importantly, it is not entirely clear that this shows a reduction in bankruptcy abuses, he added.

The research on the bill does not give either a total victory to one or the other party. On the one hand, the reform was associated with lower interest rates on credit cards, as pointed out Matthew Yglesias of Vox in an article on the Warren-Biden debate.

According to Yglesias, studies have also suggested that the law limits access to credit and reduces the credit ratings of some borrowers, not to mention the potentially slower rebound of the Great Recession.

The political fallout

Potential voters in 2020 have already seen Warren's attacks on Biden. In 2016, Senator Bernie Sanders, Vt., Attacked Hillary Clinton's vote in favor of a similar bill on bankruptcy in 2001 – a vote that she took after Warren convinced him that it was a bad bill. Sanders used Warren's critics as part of his attacks.

Warren spoke of his disappointment in a 2004 interview with reporter Bill Moyers:

WARREN: She voted for.

HOMES: Why?

WARREN: As Senator Clinton, the pressures are very different. It's a well-funded industry. You know, many people do not realize that the industry that has given the most money in Washington in recent years was not the oil industry. This was not pharmaceuticals. It was consumer credit products. Credit card companies give money and influence.

MOYERS: And Mrs. Clinton was one of them as a senator.

WARREN: She took money from the groups and more specifically, she worries about them as a group.

For her part, Clinton argued that she was in a position to support the bill because, at that time, it provided better protections for women seeking child support.

All this dynamic around the law is repeated in this election.

"If you talk to many independent voters, they worry that both parties will be funded by the same corporate interests," said Adam Green, co-founder of the Progressive Change campaign committee, which approved Warren before 2020. "Elizabeth Warren has Part of the solution is trying to change the Democratic Party into a popular party, and the fight against credit cards was just one chapter of this ongoing struggle. "

While Warren uses the fight as proof of his willingness to fight businesses on behalf of ordinary Americans, Biden and his supporters view the bankruptcy bill as evidence of its practical side. They also emphasize protections such as those that favor child support.

"Senator Biden, essentially knowing that the bill was likely to pass from a Republican-led Congress to a Republican-controlled White House, has really worked hard to ensure that this bill protects the families of the United States. middle class, "said Terrell McSweeney. as a Biden staff member right after the passage of the bill.

And that plays into a larger narrative of the Biden campaign.

"People, I will say something outrageous," he said. "I know how to make the government work, not because I talked about it or tweeted it, but because I did it.I worked behind the scenes to reach a consensus, to help the government to operate in the past. "

Democratic voters are interested in topics very different from those in the bankruptcy bill, such as climate change and the overhaul of the health system.

But then, if the two candidates remain key candidates for the nomination – and if they share a stage of debate – there is a good chance that the subject will come back as a symbol of the differences between the two candidates.

And although bankrupt expert Skeel acknowledges that he's not a political strategist, he has a political prediction based on the Biden-Warren bankruptcy battle.

"It seems to me that a potential implication," he said, "is that it is highly unlikely that you will see a Democratic ticket with both."