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Millennials Are the Most Indebted Generation. They Can Thank Joe Biden.

As senator, Biden facilitated the lending industry’s campaign to eviscerate consumer debt protections.

Joe Biden speaks during a hearing on June 26, 2002. As senator, Biden facilitated the lending industry's campaign to eviscerate consumer debt protections.

Joe Biden is trying to appeal to younger voters as he is expected to launch his bid for the presidency. However, for years, Biden made it his mission to block student debt forgiveness, leaving many young people facing a lifetime of debt.

Biden’s potential candidacy comes at a time when the U.S. debt crisis is reaching unprecedented levels across all consumer sectors.

Student debt broke $1.5 trillion in the first quarter of 2018 according to the Federal Reserve, outstripping auto loan ($1.1 trillion) and credit card debt ($977 billion) significantly, with 1.1 million people owing over $100,000 for their educational expenses. Twenty percent of student borrowers default on their loan payments.

Similarly, almost one in five Americans’ credit reports feature delinquent medical debt. Bankruptcy from growing insurance and prescription costs is also affecting Americans at a precipitous rate. Studies vary widely, but generally between 26 to even 62 percent of bankruptcies cited medical debt as a contributing or even primary factor. A harrowing figure from the October 2018 American Journal of Medicine showed that 42 percent of new cancer patients exhaust their life savings within two years of treatment, with an average loss of $92,098.

Perhaps tellingly, the highest median projected loss in home equity from bankruptcy was in the state of Delaware, with a projected loss of $125,745 according to 2015 data from the American Economic Association. Delaware’s own senator and former vice president of the United States, Joe Biden, is at the center of the decades-long campaign by lenders to eviscerate consumer debt protections, so it seems fitting that his home state would rank at the bottom of the nation in raw numbers.

During the 1970s, isolated anecdotes began appearing in the media about students graduating college and then immediately declaring bankruptcy to avoid their debt obligations. Although a 1977 Government Accountability Office study showed that less than 1 percent of educational loans were being erased through bankruptcy, a bill was proposed in 1978 to block students from seeking bankruptcy protections for a set time period after graduation, a landmark change to the 80-year-old bankruptcy laws then on the books.

Biden was chosen as one of three Democratic representatives on a committee tasked with writing the bill. Although the National Consumer Law Center advised the committee against an “unwise and unjust” crackdown on students, the committee imposed a five-year exemption on government-sponsored loans from bankruptcy protections. This small hole was chipped away at over years, as bankruptcy exemptions were extended to government loans for vocational schools in addition to higher education in 1984, again with Biden spearheading the effort among the Democratic constituency. Even the unrelated 1990 Crime Control Act included language that further extended the bankruptcy exemptions’ waiting periods.

In 1997, the National Bankruptcy and Review Commission, formed under the direction of President Clinton, advised that student loans be made dischargeable again like any other private, consumer debt. Once again, however, Biden favored the industry professionals’ view and limited bankruptcy protection to those who could prove their failure to pay sprang from “undue hardship.” Common wisdom among law experts is that undue hardship can only be proved if the debtor’s economic prospects are impossible to improve, colloquially known by the grim “certainty of hopelessness.”

Biden pushed legislation in 2001 that would have stripped bankruptcy protections not just from government-backed or nonprofit loans, but also from loans from private industry. This bill was eventually defeated, but a changing Congress allowed the bill to be revived and passed by George W. Bush in April 2005. A Delaware lending firm known as MBNA had recently become the top financial contributor to President Bush over his career.

Progressive firebrand and presidential candidate Elizabeth Warren has a long history of fighting against these erosions in bankruptcy protection laws, and she has repeatedly called out Biden specifically. In response to a 1998 industry push, she told The Washington Post that, “Those who want to say [that] the way to solve rising consumer bankruptcy is by changing the law are the same people who would have said during a malaria epidemic that the way to cut down on hospital admissions is to lock the door.” Perhaps her most devastating attack on Biden was actually a compilation of praise from lending industry publications who hailed the Delaware senator as “the linchpin’ to passage of the bill,’ ‘a staunch supporter,’ ‘pivotal,’ ‘a strong proponent,’ ‘the only Democratic true believer,’ ‘possibly the bankruptcy bill’s staunchest defender,’ and ‘the most ardent Democratic supporter of bankruptcy legislation.’”

Of the 18 Democratic senators who ultimately contributed to the major 2005 bankruptcy bill’s passage, none were as consistent or deep in their support of the lending industry as Joe Biden.

Under the modern progressive winds, Biden (or his press team) often defends his debt industry lobbying record with a handful of well-worn lines. He says he was representing the interests of his constituency and the business interests of his state of Delaware. Or he was working behind the scenes to include protections for mothers receiving child support from spouses using bankruptcy to escape their responsibilities. Or he made tough decisions to maintain a majority of votes with Republicans who could jump at any moment.

Biden used more strident language at the time, even occasionally attacking borrowers as irresponsible, or even criminal. Politico notes that in 2001, he said, “An awful lot of people are discharging debt who shouldn’t. This voluminous increasing in filing — it is exponential what has happened. Something is up, and that happened when the economy was booming, absolutely booming.” Delinquent borrowers drove the price up for everyone, so his argument went. “So, I am so sick of this self-righteous sheen put on anybody who wants to tighten up bankruptcy is really anti-debtor,” Biden declared. “People are getting hurt.”

Lending industry proponents used similar tactics, conjuring the image of the high-income bad borrower, indulging in shopping sprees and leaving the bill for the taxpayer, not unlike the caricature of the “welfare queen” used during the Reagan and Clinton eras as a boogeyman to push welfare reform. However, a National Bureau of Economic Research paper dispels the idea that the bill’s language successfully targeted these abuses, instead finding that “bankruptcy filings have declined mostly for low-income, possibly liquidity-constrained individuals.” The study found no corresponding decline in bankruptcy filings for high-income borrowers.

These poorer individuals may have been deterred by the very cost of declaring bankruptcy. The 2005 bill also increased the complexity, and thus the cost, of filing for bankruptcy. A Government Accountability Office study found that the average cost of making a claim increased from $712 at the time of the bill’s passage to $1,078 two years later. A study from the University of Maine in 2012 put that number around $1,300, almost double the original figure. On its face, the bill appears to have hurt exactly who opponents said it would hurt and did little to curb abuse. However, even Biden’s other defenses of his record fall apart on examination.

While it is true that Biden forwarded amendments that would benefit mothers attempting to collect child payments from fathers declaring bankruptcy, he only appears to have done so after Elizabeth Warren found an ally in then-First Lady Hillary Clinton on that very issue. Usually, Biden opposed even modest protections for borrowers. For instance, he voted against one amendment that would protect mothers who failed to receive their child support or alimony. He voted against setting a limit of 30 percent on loan interest. He also voted against special protections for bankruptcy among former military, victims of identity theft and those with unmanageable medical debt.

The consequences of the bankruptcy bill are tragic and far-reaching. And Biden’s deep and long-lasting personal ties to the Delaware-based credit giant, MBNA, are downright alarming when paired with his vociferous advancement of its interests.

To wit, MBNA’s executives and employees were key contributors to Biden’s campaigns, shelling out more than $200,000 over the years, according to the Center for Responsive Politics. For context, the lending industry as a whole has contributed an estimated $1.9 million in total to Biden’s various election efforts.

MBNA’s influence was further questioned after Biden sold his family’s Delaware home to MBNA executive John Cochran for $1.2 million in February of 1996. Republican election opponents at the time overplayed their hand, claiming the price was double the home’s worth. Although that would be a gross exaggeration, analysis suggests that the deal strongly favored Biden’s interests. These questions lingered in a 1999 interview with The Washington Post, prompting Biden to quip that he was not “the senator from MBNA.” In the very same breath, however, he stated that he was not “the senator from 1979, either,” reaffirming his full-throated support for the “business-friendly” legislative and deregulatory efforts popular throughout the Clinton decade.

During the following years, Biden’s son, Hunter, was hired by MBNA fresh out of law school with a six-figure salary. Hunter’s ties to MBNA even became an issue during the 2008 election. A day after the Obama team announced Biden’s selection for the VP slot, campaign aides were forced to acknowledge that Biden’s son, Hunter, had been paid by MBNA through a consulting arrangement after his employment. Biden personally went into damage control and downplayed the significance of the creditor’s influence in an interview with NBC’s Tom Brokaw and all, presumably, was forgotten.

Warren even accurately predicted in the Harvard Women’s Law Journal back in the Bush era that Biden could coast through after all his work on behalf of lenders untouched, stating, “bankruptcy is sufficiently arcane, sufficiently obscure that it is possible for an otherwise respected legislator to support legislation that, over the next decade, will make it more difficult for millions of women to keep their homes, feed their children, and deal with bill collectors.”

Biden has yet to officially enter the race, continuing to keep his name in the press by refusing to commit and teasing his intentions through strategic leaks and whispers. His strategy seems to be working well: Nearly every current poll of 2020 contenders includes him at or near the top of the list, apparently coasting off Obama-era nostalgia and avoiding full vetting by not officially entering the race.

The political winds have shifted considerably since the 2000s, but every other major contender for 2020 and in modern politics opposed the bankruptcy bills. Sen. Bernie Sanders and Gov. Jay Inslee, both House members in 2005, voted against the Bankruptcy Abuse Prevention and Consumer Protection Act, as did then-Sen. Barack Obama. Bill Clinton pocket-vetoed a version of the bill in 1999 after Hillary’s criticism of the bill. Warren’s opposition was most vociferous and stretched across well over a decade while she was a Harvard professor.

Along with Biden’s championing of the infamous crime bill that is regarded as the linchpin of mass incarceration, his record on the debt crisis could be disqualifying. Whether he will be held to account at all still remains to be seen.

In Warren’s landmark book co-written with her daughter, The Two-Income Trap, she criticized Biden’s role in stripping out consumer protections for families and single mothers: “Senators like Joe Biden should not be allowed to sell out women in the morning and be heralded as their friend in the evening.”

As the 2020 electoral field takes shape, it’s important to recognize the impact of less-than-glamorous legislative battles, such as the one that has raged for decades over debt and bankruptcy. They could reveal important clues about what candidates’ actual policies might look like, beneath the veneer of shiny campaign promises.

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