Biden, Warren and the Debate Fight a Decade in the Making

When he swore in Elizabeth Warren as a senator six years ago, then-Vice President Joe Biden recalled, with a mix of chagrin and admiration, a 2005 encounter when the two had butted heads (Biden as a senator; Warren as an expert witness) over bankruptcy law: “You gave me hell,” Biden said.

Today, Biden and Warren are both vying for the 2020 the Democratic nomination. And many are anticipating a return of fire and brimstone as the pair face off for the first time on the presidential debate stage Thursday night in Houston.

The friction between the frontrunners isn’t personal. It’s rooted in long standing policy differences, particularly over the rights of Americans to discharge their debts in bankruptcy. The last major overhaul of the nation’s bankruptcy laws took place during the W. Bush administration in 2005. And the GOP administration found an eager bi-partisan partner in its reform efforts in Joe Biden — then a senator from Delaware, a state whose lax financial regulations make it one of corporate America’s favorite places be headquartered, at least on paper. 

Warren, who has largely avoided confrontation with Bernie Sanders and other leading Democrats, has been unvarnished in her critique of Biden. When he joined the race in April, Warren painted the former Delaware senator as a tool of the financial industry, a politician who favored the corporate powerhouses of his home state over the interests of the American people. “At a time when the biggest financial institutions in this country were trying to put the squeeze on millions of hardworking families,” Warren said, “Joe Biden was on the side of the credit card companies.” 

The details of the 2005 bankruptcy bill are mind-numbing. But in its broadest strokes, the law made it more difficult for individuals to escape the yoke of their debts. The bill made debt from student loans nearly impossible to dismiss. It raised the bar on discharging medical debt. The law was particularly harsh on what’s known as unsecured debt. Examples of secured debt include mortgages and auto loans. These lenders can always seize the underlying asset if you fail to pay, foreclosing on your house or repossessing your car. The most common form of an unsecured loan? Credit card debt.

For Biden, the ostensible aim of the law was to crack down on fraud, what he termed “unnecessary and abusive bankruptcy” that allowed people with ability to repay their debts to use bankruptcy to slough off their obligations on their creditors, raising costs across the economy to the detriment of “every single American consumer.’’

Warren, whose academic legal research focused on bankruptcy, had seen first hand how and why families ended up in bankruptcy. She came to see bankruptcy as a tool for families in crisis, whether that was divorce, or job loss, or a serious health problem. Warren understood bankruptcy as a critical part of the safety net — a protection for Americans who would otherwise fall through the cracks. 

These differences in worldview exploded onto the national stage in Senate Judiciary Committee hearings on the bankruptcy bill back in February 2005, when Biden and Warren — invited by then Massachusetts Sen. Ted Kennedy as “one of our Nation’s leading experts on bankruptcy law” — sparred over details like fair access to bankruptcy court and who should be responsible for medical debts.

In one exchange Biden took issue with Warren’s characterization of Delaware’s bankruptcy process, which required out-out-of state parties to present themselves in the state’s courts with a local lawyer.

BIDEN: Bankruptcy courts in Delaware are not open?

WARREN: They are not open to employees of companies like Enron who cannot afford — 

BIDEN: In what sense do you mean open? … The record is not open or they can’t conveniently get there?

WARREN: Employees of companies like Enron literally cannot go to Delaware and hire local counsel, which the Delaware bankruptcy court requires of them before they can make an appearance. And that effectively cuts thousands of small employees, pensioners and local trade creditors out of the bankruptcy process. If they can’t afford it, they are not there.

In a longer exchange, the two tussled over the problem of medical debts, and who should pay when a health problem creates a financial crisis:

BIDEN: That is what confuses me about your arguments, Professor Warren. They are very compelling [but] it seems to me that the Federal Government should be seeing to it that every American is put in a position where their health care costs are such that if, in fact, they have these extraordinary expenses, it is the social responsibility of the community to help them, as opposed to the social responsibility of the particular doctor or the particular bank that lent the money or the particular creditor who has put forward money… Do we say that people who, in good faith, provide a service for an individual that the individual is later unable to meet… should be responsible for taking them out from under that crushing burden?

WARREN: Senator, I think you are exactly right, and that is that we need fewer families to need to turn to the bankruptcy system. We have a broken health care finance system in the United States, and all I can do is point out that it is bankrupting families.

BIDEN: Absolutely right.

WARREN: Until we fix the broken health care finance system, those families have to turn somewhere and that means now they turn as a last-ditch effort to the bankruptcy courts.

 The inquiry then turned to the abuses of the credit card industry that keeps struggling debtors on the hook not only for the principle, but for what Warren describes as excessive interest and fees.

WARREN: With fees and interest, I submit, Senator, that there are many in the credit industry right now who are getting their bankruptcies prepaid; that is, they have squeezed enough out of 

these families in interest and fees and payments that never paid down principle.

BIDEN: Maybe we should talk about usury rates, then. Maybe that is what we should be talking about, not bankruptcy.

WARREN: Senator, I will be the first. Invite me.

BIDEN: I know you will, but let’s call a spade a spade. Your problem with credit card companies is usury rates from your position. It is not about the bankruptcy bill.

WARREN: But, Senator, if you are not going to fix that problem, you can’t take away the last shred or protection from these families.

BIDEN: I got it, okay. You are very good, Professor.

The official Senate transcript records the laughter after this exchange. The debate in Houston Thursday night, however, is likely to be less jovial.

Everyone knows Joe Biden has baggage. Thus far in the campaign, opponents have hit Biden for his space-invader style of politics, his past chumminess with segregationists, and his troubling record on criminal justice, as an architect of America’s system of mass incarceration. 

But Biden has been able to dodge the full force of these blows in part by appealing to people’s faith in the goodness of his character. Sure he’s made mistakes, and would do a lot of things differently in retrospect, but he’s fundamentally a good guy — Joey from Scranton — who is on your side, just as he was at Barack Obama’s side for eight years.

Warren’s critique of Biden poses a direct challenge to that mythos. She challenges Biden’s portrayal of himself as a champion of the everyday American, and paints him instead as a defender of corporate profits — above the needs of families facing life’s toughest challenges. It’s an attack on Biden as a member of the corporate Democratic elite that could do real damage to the former vice president, and not only in the primary campaign. It’s a line of attack that Trump is likely to parrot should Biden make it to the general election.

We can tell that the Biden campaign is taking this threat seriously by how hard they’ve come at Warren in advance of the Houston debate, trying to attack the messenger. Warren has been making a progressive purity play in her bid for the nomination — eschewing high-dollar fundraisers in favor of a grassroots-funded primary campaign. But Warren has come under attack this week for steering millions from her Senate coffers (much of it raised in big-dollar galas) to her presidential bid. Former Pennsylvania Governor Ed Rendell, a Biden surrogate, penned an op-ed in the Washington Post this week titled: “I like Elizabeth Warren. Too bad she’s a hypocrite.”

Will Warren’s expected attacks on Biden hit their mark. Can Biden pin the same “neoliberal” tag on Warren, highlighting her legal work on behalf of corporate clients? Will Sanders tag team with Warren to bash Biden. Or can he rise above the Biden-Warren fray to make the case that he (and not Warren) is the purest progressive in the running?

Thursday night should be a hell of a show.