HE WAS KNOWN AS THE SENATOR FROM MBNA
Late in Biden’s 1996 reelection campaign, a consultant working for his Republican opponent pushed a troubling story: The senator had sold his home to an executive from the credit card company MBNA for double its appraised value.
MBNA called the story “viciously false”.
Not long after that, the company hired Biden’s youngest son, Hunter, and the criticism stuck: Biden became “the senator from MBNA.” (Hunter’s corporate affiliations have once again become an issue for Biden).
MBNA, the largest independent credit card company headquartered in Delaware, hardly drew notice at first.
In 1982, five employees from a company called Maryland Bank set up shop in an old supermarket a few miles from the state line.
They hit upon the idea of pitching credit cards to targeted groups—like sports fans or college students—and did a quarter of a billion dollars of business in just over a year.
By 1997, MBNA was mailing 30 million credit card solicitations a month and making 6 million over the phone.
Getting people into debt was how the company profited, and it was self-perpetuating.
If a debtor missed a car payment to pay a credit card on time, MBNA would raise the person’s interest rate anyway, a practice known as universal default—thereby increasing the likelihood the person would miss future payments.
MBNA employed about a third of the state’s finance workers.
The company stockpiled vintage cars (a Duesenberg was parked in its lobby) and began buying up old DuPont properties—office buildings and golf courses.
MBNA brought the same largesse to politics. It shelled out nearly $1 million in donations to federal candidates in 1994.
Biden was an exception.
He brought in more than $200,000 from MBNA employees over the course of his career.
And he developed a relationship with the company’s CEO, Charles Cawley.
When Biden held a Wilmington fundraiser for his 1996 campaign, Cawley was there.
When Cawley received an award for his charitable giving, Biden appeared onstage with him.
A couple years later, Cawley co-chaired an award ceremony for Biden.
On the company’s dime, Biden and his second wife, Jill, flew to Maine, where the senator spoke at MBNA’S 1997 corporate retreat.
MBNA lobbied Joe for the repeal of Glass-*Steagall, and because MBNA’S business model was based on delinquent customers, it lobbied to block reforms meant to help cash-strapped consumers, such as crediting bill payments to the day they are mailed rather than the day they are received.
But what it was really after was bankruptcy reform.
Between 1980 and 1997, the number of Americans filing for personal bankruptcy jumped more than 300 percent, affecting 1.3 million households annually.
A growing number of researchers, led by a Harvard Law School professor named Elizabeth Warren, believed the fault lay with the accumulating credit card fees, hospital bills, student loans, and mortgages that were placing the squeeze on middle-class families.
Their research found that, for debtors, personal bankruptcy was not an escape hatch; it was a lifeline.
A congressional effort to curb bankruptcies might have started with looking at how people were getting into debt.
Instead, Congress tackled the problem from the perspective of the creditors, who argued that stricter rules were necessary to forestall abuses of the system and prevent billions of dollars in losses from trickling down to consumers.
In 1997, a group of House lawmakers began crafting a bill that would make it harder for individuals to file for bankruptcy by subjecting filers to a means test and giving creditors more opportunities to collect.
The credit card companies loved it.
After all, they wrote large chunks of the legislation.
Biden supported the legislation introduced in the next Congress.
Bankruptcy reform went through the judiciary committee that Biden sat on, and he was the “linchpin” of the effort to pass it.
Credit card companies wanted to limit the options of people filing for personal bankruptcy, but that was only one part of the equation.
Delaware also had a lot riding on helping corporations file for bankruptcy.
For a variety of reasons, including its high concentration of white-collar lawyers and the pro-business reputation of its courts, the state was the venue for a large percentage of the nation’s Chapter 11 cases. It had even come up with a special fast-tracked bankruptcy process.
Filing in Delaware allowed companies that were functionally based elsewhere to “escape the obligation to make the process open,” as Elizabeth Warren put it.
Bankruptcy cases made huge gobs of money for Delaware’s legal industry.
When reformers introduced language that would force companies to file for bankruptcy in the states where they were actually based—a clause dubbed “the Delaware killer”—Biden used his leverage to defeat it.
Ultimately, Joe Biden ended up securing funding for four more bankruptcy judges in Delaware.
https://www.motherjones.com/politics/2019/11/biden-bankruptcy-president/