Bankruptcy

Clinton, Edwards, and Obama on 2005 Bankruptcy Law

By Bob Lawless

Adam Levitin's post and Katie Porter's comment on about last night's Democratic debate and the candidates' discussion of the 2005 bankruptcy prompted me to start writing a comment about the Democratic candidates' stand on the 2005 bankruptcy law. It started getting too lengthy, and the comment turned into this post. Adam is right that we have stayed away from electoral politics. Actually, there is not really a "we" as we don't coordinate our posts or viewpoints. As I have said, we can't even agree on where to go for dinner when we're all together. So, this is just my view on the 2005 bankruptcy law and the Democratic candidates.

The only Democratic candidate who has a clean record on the 2005 bankruptcy law is Senator Obama. He opposed the bill in his public statements and voted against it when it came to a vote.

Former Senator Edwards had supported an earlier version of the 2005 law, and he was no longer in the Senate (as Katie Porter noted in her comment) when the 2005 law came to a vote. We don't know how he would have voted, but his support for the prior version suggests he would have supported the 2005 law. I will give Senator Edwards credit for admitting his support for the law in 2001 was a mistake rather than taking the cop-out that the 2005 law was substantially different than what became law in 2005 -- it wasn't.

Senator Clinton initially opposed changes to the bankruptcy law when she was first lady but later came to support the law when she was elected senator. (Details in Elizabeth Warren & Amelia Warren Tyagi, The Two-Income Trap (Basic Books 2003), at pp. 123-26.) Senator Clinton did not vote on the 2005 bill because of her understandable absence due to President Clinton's heart surgery. In last night's debate, she repeated her statement that she opposed the 2005 bankruptcy law despite her support for an earlier version. There were differences between the 2005 version that became law and the 2001 version, but the differences are not as dramatic as Senator Clinton might like casual observers to believe. It is hard not to see Senator Clinton's changing positions as largely influenced by her need for political and financial support first as a senator and then as a potential presidential candidate. Katharine Seelye of the New York Times political blog, The Caucus, has a good post from last August with a more extensive analysis of Senator Clinton's changing positions on bankruptcy reform.

In last night's debate, both Senator Clinton and former Senator Edwards expressed regret over their earlier support for the bankruptcy law (transcript here), and they should regret these positions. It always was apparent that the 2005 bankruptcy law would hurt the middle class, which Senator Clinton and former Senator Edwards profess to care about so much. Senator Clinton and former Senator Edwards hardly stood alone from their fellow Democrats. The 2005 bankruptcy law passed the Senate 74-25, with eighteen Democrats voting in favor (full roll call vote here). The story of the 2005 bankruptcy law is about industry campaign contributions overcoming the better instincts of our nation's leaders. Senator Obama deserves some recognition for standing up to the consumer credit industry.

None of this is meant to endorse Senator Obama or to suggest that one should not support Senator Clinton or former Senator Edwards. On the issue of the 2005 bankruptcy law, it is only Senator Obama who can claim he did the right thing.

Full post as published by Credit Slips on January 16, 2008 (boomark / email).