In 2005, bankruptcy was on the rise and had been for years.
Lawmakers were pondering why, exactly, that was happening — and what, if anything, they should do about it — when two future presidential rivals squared off over a bankruptcy overhaul bill that would restrict who could write off their personal debts.
In one corner, Joe Biden — one of the staunchest Democratic advocates for the bill and a senator from Delaware, home to several large credit card companies. He was also a member of the Judiciary Committee, which was debating the bill.
In the other corner, Elizabeth Warren, a Harvard Law professor who had fought against this type of bankruptcy overhaul for years and who was on a panel convened for a hearing over the bill.
Their conversation started off with a testy (but weedy) exchange about bankruptcy courts. And it escalated from there, with plenty of interruptions and the occasional barb — Biden at one point cast Warren's arguments as "mildly demagogic." It ended with a tense dispute over what, exactly, the dispute ought to be.
WARREN: [Credit card companies] have squeezed enough out of these families in interest and fees and payments that never pay down principle.
BIDEN: Maybe should talk about usury rates. That maybe, that's what we should be talking about, not bankruptcy.
WARREN: Senator, I'll be the first. Invite me.
BIDEN: Now, I know you will, but let's call a spade a spade. Your problem with the credit-card companies is usury rates, from your position. It's not about the bankruptcy bill.
WARREN: But Senator, if you're not going to fix that problem, you can't take away the last shred of protection for these families.
BIDEN: OK, I get it. [pause] You're very good, Professor.
It was heated debate with a polite, even charming end — complete with laughter throughout the hearing room, but the stakes are higher now, with both Warren and Biden potentially poised to share a debate stage.
And while debate over a 14-year-old bankruptcy bill might otherwise be largely forgotten by now, the 2020 presidential election has made the disagreements between Biden and Warren relevant again — and shows how their exchange over that 2005 bill show up in their current presidential campaign strategies.
With Democrats in the minority in the Senate in 2005, Biden argues he was trying to make a Republican bill better. Warren thought, even then, that it was fundamentally flawed and bad for consumers.
What the bill did
A major question at the heart of the 2005 bankruptcy bill was why bankruptcies were on the rise.
One side — including Warren and many Democrats — said it was because people were financially strapped because of major obligations like medical debt, and that credit card companies were exacerbating the problem.
Others — largely Republicans, but also some Democrats, like Biden — said that it was a combination of irresponsible spending and a system that made it too easy to apply for bankruptcy, leading to abuse. That abuse, these lawmakers argued, leads to higher costs for other people seeking credit.
The 2005 bill restricted who could discharge their debts via Chapter 7 bankruptcy and also made the process more difficult. It included a means test, in the form of comparing a person's income with their state's median income. The goal, proponents argued, was to make sure that people who could still pay their debts weren't able to unfairly escape their debts, while also ensuring that people who couldn't pay were able to get relief.
The bill also said that a person had to go through credit counseling before obtaining bankruptcy.
Opponents, however, cast bankruptcy as an important financial protection that the legal system provides to people in difficult circumstances. They thought that the bill would make it unduly hard to file, enriching credit card companies in the process. And indeed, as they argued, credit card companies themselves had lobbied for it.
Warren and her fellow opponents also argued that bankruptcy was a women's issue, as single and divorced women were disproportionately represented among bankruptcy filers. Passing this type of reform would therefore disproportionately hurt women and children, they said (an argument that Warren pointedly made in a 2002 Harvard Women's Law Review essay that focuses heavily on Biden).
A long runup
This was not new legislation. Similar bills had been proposed in Congress several times — it even reached the Oval Office in the final days of Bill Clinton's presidency, but he declined to sign it.
Biden and Warren had been on opposite sides during that period, as well — Biden voted for that 2000 bill, and Warren had counseled Hillary Clinton that it would be bad for consumers.
And that was the lay of the land when they met on Capitol Hill.
"This is one of those situations where the current story is not misleading. They were both very key players in this," said David Skeel, professor at the University of Pennsylvania law school and the author of a history of bankruptcy.
"Elizabeth Warren was the most important critic of the legislation, and she spent years fighting it. That's what really first got her into the into the public eye," he said. "And Joe Biden was critically important to passing the legislation because credit card companies are very important to Delaware. And that's where he was coming from."
In the end, the bill passed. And as for the effects, they're complicated.
One outcome: The bill included a provision that made obligations like child support and alimony a top priority for debtors to pay off — which addressed one concern of the bill's opponents.
And another, overarching result: Bankruptcies fell sharply afterward. And that's linked to one other effect of the bill, according to Skeel.
"The biggest effect is that it is now more expensive to file for bankruptcy than it used to be," Skeel said, "because of the the so-called means test that was put into the 2005 amendments that requires that debtors fill out forms to determine whether they would be capable of repaying some of what they owe."
But, crucially, it's not totally clear that that shows a reduction in bankruptcy abuse, he added.
Research on the bill also doesn't hand either side a total win. On the one hand, the reform was associated with lower interest rates on credit cards, as Vox's Matthew Yglesias pointed out in an article on the Warren-Biden debate.
But, Yglesias argued, studies also suggested that the law meant less access to credit and lower credit scores for some borrowers, not to mention a potentially slower bounce back from the Great Recession.
The political fallout
Potential 2020 voters have already had a preview of Warren's attacks on Biden. In 2016, Sen. Bernie Sanders, I-Vt., attacked Hillary Clinton's vote for a similar 2001 bankruptcy bill — a vote she took after Warren convinced her it was a bad bill. Sanders used Warren's criticisms as part of his attacks.
Warren talked about her disappointment in a 2004 interview with journalist Bill Moyers:
WARREN: She voted in favor of it.
WARREN: As Sen. Clinton, the pressures are very different. It's a well-financed industry. You know, a lot of people don't realize that the industry that gave the most money to Washington over the past few years was not the oil industry. It was not pharmaceuticals. It was consumer credit products. Credit card companies have been giving money, and they have influence.
MOYERS: And Mrs. Clinton was one of them as senator.
WARREN: She has taken money from the groups, and more to the point, she worries about them as a constituency.
For her part, Clinton argued that she was able to support the bill because it, at that point, included better protections for women seeking child support and alimony.
That whole dynamic surrounding the law is repeating itself in this election.
"If you talk to many independent voters, they worry that both parties are funded by the same corporate interests," said Adam Green, co-founder of the Progressive Change Campaign Committee, which has endorsed Warren ahead of 2020. "Elizabeth Warren has been part of the solution trying to re-brand the Democratic Party as being of the people. The credit card fight was just one chapter of that ongoing struggle."
While Warren uses the fight as evidence of her willingness to fight corporations on behalf of everyday Americans, Biden and his supporters frame the bankruptcy bill as evidence of his practicality — and they also emphasize protections in the bill like those prioritizing child support.
"Sen. Biden, knowing essentially that the bill was likely to make it through a Republican-led Congress to a Republican-controlled White House, really worked hard to make sure that bill protected middle-class families," said Terrell McSweeny, who worked as a Biden staffer just after the bill's passage.
And that plays into a larger narrative from the Biden campaign.
"Folks, I'm going to say something outrageous," he has said. "I know how to make government work. Not because I've talked or tweeted about it, but because I've done it. I've worked across the aisle to reach consensus, to help make government work in the past."
Democratic voters are concerned with far different topics than the bankruptcy bill, like climate change and a health care overhaul.
But then, if both candidates remain key contenders for the nomination — and if they share a debate stage — there's a good chance the topic will come up again, as a symbol of the differences between the two candidates.
And while bankruptcy expert Skeel acknowledges that he's not a political strategist, he does have one political prediction based on the Biden-Warren bankruptcy fight.
"It strikes me that one potential implication," he said, "is it's highly unlikely you will see a Democratic ticket with both of them on it."
In a previous version of this story, we incorrectly say Joe Biden was the ranking member of the Judiciary Committee in 2005. Although he had held that position previously, he did not in 2005. In addition, we misspelled Terrell McSweeny's last name as McSweeney.
AUDIE CORNISH, HOST:
The Democratic Party plans this week to announce the lineups for the first batch of 2020 presidential primary debates. For a preview of what these debates might be like, NPR's Danielle Kurtzleben says just watch a 2005 Senate hearing.
DANIELLE KURTZLEBEN, BYLINE: Fourteen years ago, Congress was considering an overhaul to the nation's bankruptcy system - one that would restrict who could write off their debts. It might sound boring, except for the people involved - on one side, Delaware Senator Joe Biden, who backed that overhaul; on the other, Elizabeth Warren, then a Harvard law professor. Biden questioned her at a congressional hearing, where they argued over what exactly they were arguing over.
(SOUNDBITE OF ARCHIVED RECORDING)
ELIZABETH WARREN: Senator, I think you've put your finger on the heart of what the bankruptcy bill - or bankrupt in general not this bill...
JOE BIDEN: Forget bankruptcy. I'm asking a larger question. Forget about bankruptcy.
WARREN: No, no, but that's what I mean. It's the question of what role bankruptcy plays.
BIDEN: That's not my question. I'd like you to answer my question.
KURTZLEBEN: At issue is this. Bankruptcy-reform backers often argue that there was too much bankruptcy abuse. Restricting bankruptcy, they reasoned, would stop that from happening. But opponents like Warren emphasized bankruptcy as a basic consumer protection. They singled out some businesses as predatory, like the credit card companies pushing the bill. That industry has a heavy presence in Biden's home state of Delaware.
(SOUNDBITE OF ARCHIVED RECORDING)
WARREN: They have squeezed enough out of these families in interest and fees and payments that never pay down principle.
BIDEN: Maybe we should talk about usury rates. Maybe that's what we should be talking about not bankruptcy.
WARREN: Senator, I'll be the first. Invite me.
BIDEN: No, I know you will, but let's call a spade a spade. Your problem with the credit card companies is usury rates from your position. It's not about the bankruptcy bill.
WARREN: But, Senator, if you're not going to fix that problem, you can't take away the last shred of protection from these families.
BIDEN: I got it. OK. You're very good, professor.
KURTZLEBEN: According to David Skeel, a University of Pennsylvania law professor who has authored a history of bankruptcy, this wasn't just any argument.
DAVID SKEEL: Elizabeth Warren was the most important critic of the legislation, and she spent years fighting it. That's what really first got her into the public eye. And Joe Biden was critically important to passing the legislation.
KURTZLEBEN: By the time they fought in that hearing room, Biden and Warren's opposition to each other was well-established. He had supported the bill in the past, and she had repeatedly, harshly criticized him for it. And fights over this type of bill have continued to resurface. In 2016, the Bernie Sanders campaign criticized Hillary Clinton for supporting a bankruptcy overhaul, and they used Warren's words to do it. Here she is talking to Bill Moyers in 2004.
(SOUNDBITE OF ARCHIVED RECORDING)
WARREN: The credit card companies have been giving money. And they're - they have influence.
BILL MOYERS: And Mrs. Clinton was one of them as senator.
WARREN: She has taken money from the groups. And more to the point, she worries about them as a constituency.
KURTZLEBEN: Now that Warren is herself running, she and her supporters are making a similar argument, using the bankruptcy fight to tell voters that she's willing to take on big companies and that Biden was not. Here's Adam Green, co-founder of the Progressive Change Campaign Committee, which has endorsed Warren.
ADAM GREEN: The credit card fight was just one chapter of that ongoing struggle between the corporate Democrat wing and those who want the Democratic Party to be squarely on the side of the people.
KURTZLEBEN: Biden and his supporters, meanwhile, frame the bankruptcy bill as evidence of his practicality. Here's Terrell McSweeny, who worked as a Biden staffer just after the bill passed.
TERRELL MCSWEENY: Senator Biden, knowing, essentially, that the bill was likely to make it through a Republican-led Congress to a Republican-controlled White House, really worked hard to make sure the bill protected middle-class families.
KURTZLEBEN: And that plays into a larger narrative of Biden as an experienced politician who believes in compromise. It's an argument he made in his kickoff speech.
(SOUNDBITE OF ARCHIVED RECORDING)
BIDEN: I've worked across the aisle to reach consensus, to help make government work in the past. I can do that again with your help.
KURTZLEBEN: That contrasts between a populist consumer advocate and a consensus-minded establishment figure has sustained itself and has been a recurring theme in this campaign. For his part, bankruptcy expert Skeel acknowledges that he's not a political strategist, but he does have one prediction of his own.
SKEEL: It strikes me that one potential implication is it's highly unlikely you will see a Democratic ticket with both of them on it.
KURTZLEBEN: It's a long way until that can happen. Until then, there's a good chance this fight could resurface on a debate stage.
Danielle Kurtzleben, NPR News. Transcript provided by NPR, Copyright NPR.