The Wall Street Journal-20080124-Campaign -08- Clinton Slammed for Vote On 2001 Bankruptcy Bill
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Campaign '08: Clinton Slammed for Vote On 2001 Bankruptcy Bill
WASHINGTON -- Sen. Hillary Clinton is on the defensive for another vote aligned with President Bush early in her legislative career: this one for a measure to make it more difficult to erase personal debts through bankruptcy.
As the focus of debate for presidential candidates shifts from Iraq to the economy, Sen. Barack Obama has stepped up criticism of Sen. Clinton's 2001 bankruptcy vote, just as he has hammered her for her 2002 vote authorizing the Iraq War. The Illinois Democrat is citing Mrs. Clinton's bankruptcy vote as an example of why he is better- suited to protect consumers in an increasingly uncertain economic time.
And just as Mrs. Clinton has tried to distance herself from her Iraq vote, she has said she regrets her bankruptcy vote and wishes she could have it back.
The Bankruptcy Reform Act of 2001 that Sen. Clinton voted for eventually died in Congress, but a similar measure became law in 2005. Sen. Clinton has said she would have opposed the 2005 bill, but she missed the vote because she was with her husband during surgery.
The 2001 bill "had some things I agreed with and other things I didn't agree with, and I was happy that it never became law," Sen. Clinton said at a Jan. 15 debate in Las Vegas.
The 2005 law made it more difficult for people to qualify for Chapter 7 bankruptcy, which lets individuals pay creditors a portion of the debt they owe. Instead, the new law directed more people toward Chapter 13 bankruptcy, which requires repayment plans.
"Reform is needed," Sen. Clinton said in 2001, according to a news release still on her Senate office's Web site. "The right kind of reform is necessary. We're on our way toward that goal, and I hope we can achieve final passage of a good bankruptcy reform bill this year."
The credit-card and banking industries spent millions of dollars lobbying for the law, arguing it was necessary to prevent people from abusing the bankruptcy system and unfairly escaping debt. But liberal and consumer groups countered that the law traps consumers struggling with their finances.
"[The 2005 bill] was in my view one of the worst pieces of legislation that passed in the last 25 years," said Senate Banking Committee Chairman Christopher Dodd (D., Conn.), who is working on legislation to undo much of the 2005 law.
More than 30 other Democrats voted to support the 2001 bill, including former Sen. John Edwards, but Sen. Obama has repeatedly seized on Sen. Clinton's vote on the campaign trail.
Both the 2001 and 2005 bills "were bad ideas because they were pushed by the credit-card companies, they were pushed by the mortgage companies and they put the interests of those banks and financial institutions ahead of the interests of the American people," Sen. Obama said at the Las Vegas debate. "And this is typical."
Sen. Clinton has countered that Sen. Obama's record on the matter is inconsistent. A Sen. Clinton campaign spokesman said Sen. Obama voted against an amendment to the 2005 law that would have capped credit- card interest rates. "He's a rather imperfect messenger to attack anyone on bankruptcy," said Sen. Clinton spokesman Phil Singer.
Sen. Obama spokesman Bill Burton called the Clinton campaign's assertion "a smokescreen". "He voted against the [2005] bill and she knows it," Mr. Burton said.
Banking-industry officials said the law has been a success. "We believe bankruptcy should be there for those who need it," said Floyd Stoner, chief lobbyist for the American Bankers Association, which pushed the bill. "But where are we as a society if we say -- 'You signed contracts, and if you can't afford to repay, you just don't have to?'"
Since the 2005 law was passed, the number of nonbusiness Chapter 7 bankruptcy filings declined to 349,012 in 2006 from 1,155,081 in 2004, according to the American Bankruptcy Institute.
