The Cement Life Raft

In this excerpt from Warren and Tyagi's 2003 book The Two Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke, the authors lay out their arguments against the "predatory" lending practices of the mortgage and credit card industries and their effect on American families. The authors maintain that re-regulation of consumer lending is needed to level the playing field between creditors and families and reverse a disturbing trend: the transfer of wealth away from lower- and middle-income families, "directly into the pockets of giant lenders and their shareholders.

In May 1998, First Lady Hillary Clinton was the star attraction at a Boston fund-raiser for candidates who supported women's issues. The lineup was impressive: she stood shoulder to shoulder with a half dozen congresswomen, including Nancy Pelosi and Sheila Jackson Lee, arguably among the most powerful female politicians in America at the time. Mrs. Clinton was in her element, vibrant and hard-hitting in front of an almost all-woman audience that applauded her every sentence. Her speech was part policy (federal subsidies for day care and access to health insurance) and part pep rally (help send more Democrats to Congress). She swept out of the ballroom as the crowd jumped to its feet to cheer her on.

I [Elizabeth] stood waiting in the darkened hallway in a service entrance. I had been invited to meet with Mrs. Clinton, and there I stood, not knowing a single person either in the ballroom or among the entourage that trailed along with her. I listened as young women-presumably Mrs. Clinton's aides-chatted quietly about who were the "major players" in the room and whether that neon-red jacket made one of the congresswomen look too pasty. Behind me, two beefy men in overcoats stood silently, continuously scanning in all directions.

Mrs. Clinton thrust her hand forward. "You must be Professor Warren. I read your op-ed in the New York Times about women and bankruptcy, and I want to talk with you." A few weeks earlier I had written a column that sharply criticized a bill making its way through Congress that proposed to undercut bankruptcy protections for middle-class families in financial trouble. Before I could respond, Mrs. Clinton snapped her head sharply to the side and called to no one in particular, "Where's lunch? I'm hungry."
We were ushered to a small office with cracked leatherette chairs, carefully set out with lunch for the First Lady -- half a hamburger, French fries, Diet Coke -- and an iced tea for me. The small army of aides and security agents were left behind in the hallway; there were just the two of us in the tiny room.

Before she had taken a single bite of her hamburger, Mrs. Clinton tore into the business at hand: "I have two questions for you: How are women affected by the bankruptcy laws, and how did a woman get to be a chaired professor at Harvard Law School?"

For the next twenty-five minutes, I pounded Mrs. Clinton with graphs, charts, and projections. She ate fast and asked questions even faster. I have taught bankruptcy law to thousands of students -- some of them among the brightest in the country -- but I never saw one like Mrs. Clinton. Impatient, lightning-quick, and interested in all the nuances. In just half an hour, she went from knowing almost nothing about the bankruptcy system to grasping the counterintuitive twist that single mothers were helped when their ex-husbands filed bankruptcy because these men could discharge credit card debts and use the money to catch up on their child support. I explained to Mrs. Clinton how the pending bankruptcy bill would effectively dismantle bankruptcy protections for families, forcing single mothers to compete with legions of credit card bill collectors for an ex-husband's income and making it more difficult for families to hold on to their homes.

At the end of our discussion, Mrs. Clinton stood up and said, "Well, I'm convinced. It is our job to stop that awful bill. You help me, and I'll help you." We talked university politics for a bit, then walked outside. As we stepped through the door, she grabbed me by the shoulder, turned me around for the obligatory photograph, shook my hand again, and headed off with her people.

Mrs. Clinton's newfound opposition to the bankruptcy bill surprised me. Given her legal training and her devotion to women's causes, I had certainly expected her to grasp the importance of the issue. But President Clinton's staff had been quietly supporting the bankruptcy bill for several months. Bill Clinton wanted to show that he and other "New Democrats" could play ball with business interests, and the major banks were lobbying hard for changes in the bankruptcy laws. I had expected that it would take a lot more than thirty minutes to convince Hillary Clinton to depart from the position widely rumored to be supported by her husband.

But Mrs. Clinton stayed firm in her fight against "that awful bill." She was convinced that the bill was "unfair to women and children," and she intended to stand by her principles, even if it cost some Democratic party candidates campaign contributions. Over the ensuing months, she was true to her word. With her strong support, the Democrats slowed the bill's passage through Congress. When Congress finally passed the bill in October 2000, President Clinton vetoed it. The following summer, an aide explained to me the abrupt about-face: "A couple of days after Mrs. Clinton met with you, we changed sides [on the bankruptcy bill] so fast that you could see skid marks in the hallways of the White House." Thanks to Mrs. Clinton, families still had one financial refuge left -- at least for the moment.
But the story doesn't end there. The banking lobbyists were persistent. President Clinton was on his way out, and credit card giant MBNA emerged as the single biggest contributors to President Bush's campaign. In the spring of 2001, the bankruptcy bill was reintroduced in the Senate, essentially unchanged from the version President Clinton had vetoed the previous year.

This time freshman Senator Hillary Clinton voted in favor of the bill.
Had the bill been transformed to get rid of all those awful provisions that had so concerned First Lady Hillary Clinton? No. The bill was essentially the same, but Hillary Rodham Clinton was not. As First Lady, Mrs. Clinton had been persuaded that the bill was bad for families, and she was willing to fight for her beliefs. Her husband was a lame duck at the time he vetoed the bill; he could afford to forgo future campaign contributions. As New York's newest senator, however, it seems that Hillary Clinton could not afford such a principled position. Campaigns cost money, and that money wasn't coming from families in financial trouble. Senator Clinton received $140,000 in campaign contributions from banking industry executives in a single year, making her one of the top two recipients in the Senate. Big banks were now part of Senator Clinton's constituency. She wanted their support, and they wanted hers -- including a vote in favor of "that awful bill."

Update - Nov. 2005: On October 17, 2005 the new federal bankruptcy law went into effect making it much more difficult to erase credit card debt by filing for bankruptcy.  Regulators are also requiring credit card companies to raise minimum payments for bank-issued cards by January 2006.