Debt Creeps Into Democratic Campaign
The bankruptcy experts over at creditslips.org, while careful to shy away from actually going down that road, nonetheless picked apart the comments on bankruptcy that came up during the recent Democratic presidential debate. Bankruptcy reform, passed in 2005, made it harder for consumers to wipe away certain debts. Robert Lawless, a law professor and bankruptcy expert at the University of Illinois College of Law, summed things up this way: “It is only Sen. Obama who can claim he did the right thing.”
More from Lawless:
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.
Whether that will give Obama any sort of edge is questionable. The 2005 bankruptcy law in hindsight is seen increasingly as lender-written legislation. All the rhetoric back then about irresponsible consumers and their credit card debts seems dated and irrelevant, with banks and mortgage companies taking big losses over investments in subprime mortgages. Consumer advocates now are trying to change the law to allow modifying mortgage loans for borrowers in bankruptcy.
The candidates didn’t address that effort during the debate, and it’s not a given it will come up again sometime soon. Bankruptcy still remains, in the minds of many, a technical issue that doesn’t lend itself easily to campaign slogans. Nonetheless, as Lawless notes, Obama deserves the credit – if you don’t mind the use of that term here – for standing up to the financial services industry when many colleagues didn’t.