Should Biden Share Blame for Foreclosure
Experts: Many Americans
Lost Homes Due to a Bill Championed by Biden
By JUSTIN ROOD
ABC News ---August 28, 2008—
Experts say hundreds of thousands
of Americans may have lost their homes due to a bill championed
by Sen. Joseph Biden, D-Del., Barack Obama's vice-presidential
At least two studies have concluded that the United States'
foreclosure crisis was exacerbated by a 2005 law that overhauled
the nation's bankruptcy law. That conclusion is echoed by other
experts, although the banking and credit industry disputes it.
Congressional Republicans drove the effort to pass the
Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)
of 2005. But Biden who has enjoyed hundreds of thousands of
dollars in campaign donations from credit industry executives
endorsed the measure early on and worked to gather Democratic
support for it.
Biden's early and vocal support was "essential" to the bill's
passage, said Travis Plunkett of the Washington D.C.-based
advocacy group Consumer Federation, which opposed the measure.
Biden "went out of his way to undermine criticism of the
legislation," and his efforts helped convince other Democrats to
support the bill.
"Biden was a fairly strong proponent of that bankruptcy bill,"
said Philip Corwin, a consultant for the American Bankers
Association, which represents banks and lenders. However, Biden
was "not in our pocket in any way," he added.
Biden's Senate office did not provide comment for this story.
Asked if the Obama/Biden campaign was concerned Biden's record
was a liability when discussing economic security, David Wade, a
spokesman for the Obama/Biden campaign, said, "Barack Obama and
Joe Biden have real solutions for struggling families in danger
of losing their homes because of the Bush economy and abusive
BAPCPA "is directly responsible for the rising foreclosure rate
since the end of 2005," concluded a 2007 study by Credit Suisse.
The law "increased foreclosures and the number of homes for
sale," echoed a July 2008 study by U.S. Treasury researcher
David Bernstein. That study estimated the law had pushed
foreclosures or forced sales on 200,000 homeowners since it went
into effect, but noted that was a rough, "back-of-the-envelope"
"Trying to tie the forclosure crisis to the [2005 bankruptcy]
bill is a stretch," said the ABA's Corwin. Corwin called the
Credit Suisse report "junk" and said the Bernstein study wasn't
"worth the paper it was written on."
The head author of the 2007 Credit Suisse report clarified his
earlier findings in an email Wednesday. "The law likely
contributed to increased foreclosures early on," said researcher
Rod Dubitsky, but combined with other key factors, including
subprime lending practices, to create the current crisis.
Bernstein did not respond to a request for an interview.
The bill was backed by banks and credit card companies including
MBNA, which is headquartered in Delaware, Biden's home state.
They wanted the bill because it would make it harder for
Americans to use bankruptcy to avoid repaying credit card debt.
MBNA executives had been Biden's single largest source of
campaign donations, and MBNA has employed Biden's son Hunter as
a company executive, lobbyist and consultant. The Obama campaign
has said Hunter Biden did no work for MBNA on the bankruptcy
bill. MBNA has since been bought by Bank of America.
Over the past two years, sub-prime mortgage borrowing and a
weakening economy have pushed increasing numbers of Americans
into dire financial straits. Under the old rules, many could
have declared bankruptcy, shed much of their debt, restructured
their mortgages and held onto their homes, according to experts
and the two reports.
But the 2005 law Biden championed made it more expensive and
more difficult to declare bankruptcy, experts conclude. That
forced hundreds of thousands of distressed homeowners to sell
their homes, or default on their mortgages, after which the bank
would sell their former home, according to the studies. That
flood of homes going up for sale in an already-weakening market
further depressed home prices, according to the two reports,
snowballing into the current crisis.
BAPCPA "increased home foreclosures, increased the dollar value
of financial assets in default, and put additional downward
price pressure on real estate markets," concluded the Bernstein
report. Bernstein conducted the report as an individual, not as
a representative the Treasury Department.
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