New York Times: Obama Aides Defend Bank's Pay to Biden Son

August 25, 2008
Obama Aides Defend Bank’s Pay to Biden Son
By CHRISTOPHER DREW and MIKE McINTIRE

During the years that Senator Joseph R. Biden Jr. was helping the credit card industry win passage of a law making it harder for consumers to file for bankruptcy protection, his son had a consulting agreement that lasted five years with one of the largest companies pushing for the changes, aides to Senator Barack Obama’s presidential campaign acknowledged Sunday.

Mr. Biden’s son, Hunter, received consulting fees from the MBNA Corporation from 2001 to 2005 for work on online banking issues. Aides to Mr. Obama, who chose Mr. Biden as his vice-presidential running mate on Saturday, would not say how much the younger Mr. Biden, who works as both a lawyer and lobbyist in Washington, had received, though a company official had once described him as having a $100,000 a year retainer. But Obama aides said he had never lobbied for MBNA and that there was nothing improper about the payments.

Campaign officials acknowledged that the connection between the Bidens and MBNA, the enormous financial services company then based in their home state of Delaware, was one of the most sensitive issues they examined while vetting the senator for a spot on the ticket.

Mr. Biden’s support for the bankruptcy changes, which were signed into law in 2005, puts him at odds with Mr. Obama of Illinois, who opposed the bill and has criticized the presumptive Republican nominee, Senator John McCain of Arizona, for supporting it. Consumer advocates and other Democratic allies remain sharply critical of Mr. Biden’s actions, saying in recent days that they could hamper the campaign’s efforts to attack the Republicans over their handling of the nation’s credit crisis.

The financial services industry began seeking relief from Congress in the mid-1990s from an increase in bankruptcies that was cutting into its profits. Its initial support came from Republican lawmakers, who repeatedly introduced bills to make it more difficult for consumers to erase their debts. During that time, executives at MBNA, which was bought in 2006 by Bank of America, began donating heavily to both major political parties and many national politicians, including Mr. Biden.

In late 1996, the company hired the younger of Mr. Biden’s two sons, Robert Hunter Biden, known as Hunter, who had just graduated from Yale Law School, as a lawyer. The company promoted Mr. Biden to senior vice president by early 1998. And after the younger Mr. Biden worked at the Commerce Department on electronic commerce issues from 1998 to 2001, MBNA hired him back on a monthly consulting contract to advise it on such issues, aides said.

Consumer advocates say that Senator Biden was one of the first Democratic leaders to support the bankruptcy bill, and he voted for it four times — in 1998, 2000, 2001 and in March 2005, when its final version passed the Senate by a vote of 74 to 25.

Travis Plunkett, legislative director of the Consumer Federation of America, a consumer group that opposed the bill, said that Senator Biden had provided a “veneer of bipartisanship” that eventually helped the credit card companies win over other Democrats. “He provided cover to other Democrats to do what the credit industry was urging them to do,” Mr. Plunkett said.

Aides to the Obama campaign said Sunday that Senator Biden’s goal was always to strike a workable compromise between the competing interests on the bankruptcy bill, and that he was not influenced by his son’s work for MBNA or the campaign donations. They said he had sought several changes in the bill to protect consumers that upset MBNA executives, then the largest employer in Delaware, while acknowledging that he also voted against other amendments proposed by other Democrats.

Hunter Biden, through his assistant at his law firm, Oldaker Biden & Belair, referred a request for comment to the Obama campaign. James Mahoney, the head of corporate communications for Bank of America, said the consulting arrangement had ended by the time Bank of America took over MBNA in January 2006.

“Senator Biden has a 35-year record fighting for people against powerful interests, whether it’s drug companies, oil companies or insurance companies,” David Wade, a spokesman for the Obama campaign, said in a statement. “He took plenty of knocks from the largest employer in his state because he demanded changes in the bankruptcy bill. But legislating requires compromise. Senators cast tough votes. Congress worked on the bankruptcy bill for nearly a decade, over five Congresses, to forge a bipartisan compromise.”

Mr. Wade added: “Senator Biden took on entrenched interests and succeeded in improving the bill for low-income workers, women and children. There were times when amendments on both sides would have blown up a bipartisan compromise backed by three-quarters of the Senate. At those moments, Senator Biden had to make the tough calls and voted to pass a bill.”

Mr. Wade said Senator Biden took extra steps to protect consumers in votes to require people in bankruptcy to continue paying child support or alimony. He also took steps to affirm that the bill exempted debtors who have serious medical problems, are veterans or are in the armed service, the aide said.

But a review of the legislative record finds as many instances when Mr. Biden joined Republicans to defeat attempts by his Democratic colleagues, including Mr. Obama, to soften the bill’s impact on those same constituencies. He was one of five Democrats in March 2005 who voted against a proposal to require credit card companies to provide more effective warnings to consumers about the consequences of paying only the minimum amount due each month. Mr. Obama voted for it.

Mr. Biden also went against Mr. Obama to help defeat amendments aimed at strengthening protections for people forced into bankruptcy who have large medical debts or are in the military; Mr. Biden argued that the amendments were unnecessary because the legislation already carved out exemptions for those debtors. And he was one of four Democrats who sided with Republicans to defeat an effort, supported by Mr. Obama, to shift responsibility in certain cases from debtors to the predatory lenders who helped push them into bankruptcy.

In many of these battles, Mr. Biden’s Democratic colleagues often voiced their frustration with the big financial interests arrayed against them. Senator Paul Wellstone specifically cited MBNA during a floor debate in March 2001 over his call for stronger protections for debtors forced into bankruptcy because of medical bills — an amendment that Mr. Biden would later vote against.

“It just so happens that the people who find themselves in terrible economic circumstances through no fault of their own — major medical bills, they have lost their jobs, or there has been a divorce — it is my view as a former political scientist and now a senator for the State of Minnesota that those people do not have the same kind of clout that MBNA Corporation has,” Mr. Wellstone said.

Mr. Biden’s supporters also point out that the Republicans controlled the Senate for much of the time when the bankruptcy bills were under consideration. MBNA employees have given Mr. Biden more than $214,000 in campaign donations over the years, the largest amount in his coffers tied to any single company. But the company’s employees have given even more lavishly to President George W. Bush and top Republican lawmakers.

Michael Luo contributed reporting.

Copyright 2008 The New York Times Company.