The Two-Income Trap - Elizabeth Warren [64]
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.4 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.5 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.6 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.”
The Brave New (Unregulated) World
There is one final chapter in the story of how millions of seemingly ordinary, middle-class families found themselves falling off a financial cliff. Just at the time when parents got caught in a vicious bidding war for middle-class housing, just as the cost of college tuition and health insurance shot into the stratosphere, just as layoffs increased and the divorce rate jumped, a new player appeared on the scene. A newly deregulated lending industry emerged, eager to lend a few bucks whenever the family came up short.
Pick up almost any newspaper, and there will be a story about America’s most widespread addiction: the insatiable hunger for debt. Every year for the past decade, mortgage debt has set a new record.7 Home equity loans grew even faster, increasing by over 150 percent in just four years.8 And no one would dare leave home without a fistful of those little plastic cards.
The news media rarely give any explanation for why all that debt piled up, leaving the reader to infer that the debt explosion is some sort of inevitable by-product of today’s moral and economic climate. But Americans didn’t wake up one morning and decide en masse that they needed stuff so much that they’d be delighted to take on a big fat second mortgage and that they’d be thrilled to skip a credit card payment or two, as the headlines might imply. Nor was there a sudden “national conspiracy of people who buy credit cards and then max them out,” as one professor of finance claimed.9 Those mountains of debt were made possible by one very important change that largely went unnoticed in all the discussions about Americans and debt—a seemingly small modification in the laws of consumer finance, a tiny change that transformed centuries of family economics in an instant.
Just a generation ago, the average family simply couldn’t get into the kind of financial hole that has become so familiar today. The reason was straightforward: A middle-class family couldn’t borrow very much money. High-limit, all-purpose credit cards did not exist for those with average means. There were no mortgages available for 125 percent of the home’s value and no offers in the daily