Linda Tirelli - a bankruptcy attorney in White Plains, New York - has a case load of approximately twelve hundred clients and they're ordinary folks: first responders, retirees, teachers, construction workers. Most are in bankruptcy because they're unemployed or underemployed; collateral damage from 2008's financial meltdown. Their situation, according to Tirelli, is made far worse because they would like to stay in place while trying to put their lives together but changes to the consumer bankruptcy code in 2005 have made that all but impossible.
Hillary Clinton, as New York's Senator, should have stepped up to the plate and fought the change because the old code provided for something called judicial modification; a provision that that allowed a bankruptcy judge to force banks to modify a homeowner's mortgage.
Hillary didn't and almost three years after the bill's passage the housing market tanked and took the world's economy with it. Tens of millions of homeowners were sucked into the maws of the foreclosure machine, chewed up and spit out; in the process losing equity, credit, sleep, health, not to mention self-respect. Much of this agita could have been ameliorated, according to Tirelli:
Homes might have been saved if following Obama's election the administration supported judicial modification and it would have cost the taxpayers NOTHING, zip, zero, zilch. If the banks and servicers felt the pressure that a bankruptcy judge could modify a mortgage loan on a primary residence then they would have considered doing more modifications on their own; avoiding the cost of having lawyers argue their case in bankruptcy court.
I've written about Tirelli for American Banker and Huffington Post; she's a go-to source for news and among her noteworthy feats was the outing of foreclosure fraud by Wells Fargo in 2014. That bit of rock-kicking got her named lawyer of the year by 4,000 of her colleagues, members of the National Association of Consumer Bankruptcy Attorneys
Together with fellow lawyers - and on their own nickel -- Tirelli recalls traveling to DC, pre-2008 election, to surf the halls of Congress, peeking and poking around for a friendly face who might help restore judicial modification to the bankruptcy code.
Tirelli, a registered Republican, found those friendly faces in the guise of the two Democratic presidential contenders, Barack Obama and Hillary Clinton: The former, all gung ho for the idea; the latter, well, a staffer in Hillary's office - all smiles - promised to forward the information because, as he told Tirelli, the Senator "knows how important the issue is to consumers."
So, in 2008 Tirelli went all democratic, voting for Obama but as the financial tsunami drowned Main Street the new President's support for judicial modification turned out to be just another promise with fingers crossed behind back.
The first two versions of the TARP bill tried to float this life preserver but the renewed nexus of a financially empowered Wall Street and friendly faces like Timmy Geithner at Treasury conspired to send judicial modification to never/never land.
Ironically, the 2005 reform bill did allow a homeowner to save a second home or rental property.
Back Asswards, as Tirelli puts it:
It's not a coincidence that the rules changed such that I can save your vacation property before I can save your primary residence. Let's face it, the majority of homeowners don't have the luxury of owning a rental or secondary property so they made damn sure that we couldn't do judicial modifications on primary residences. It would have hurt Wall Street but it would have saved homeowners.
Hurting Wall Street was not on Senator Clinton's agenda in 2005.
She sang a different tune as First Lady.
After reading a 1998 New York Times op-ed by Harvard Law Professor Elizabeth Warren, Hillary summoned the Prof to a meeting and listened intently to a passion fueled sermon about the impact of changes to the bankruptcy code on middle-class families who fall on hard times.
Efforts to change the code were led by lobbyists for the credit card industry who feared that high carb profits would continue to take a hit when drowning-in-debt consumers sought refuge in Chapter 7 (which was, as many critics pointed out at the time, the logical end to a relentless marketing campaign to convince Americans that better lives could be led through the unbridled use of plastic).
Elizabeth Warren sensed the danger early on and explained to Hillary that changes to the code would preserve the credit card industry's bottom line but it came at a high cost. Warren made her case using the example of a divorced mother with kiddies, pointing out the level playing field sought by the credit card industry would make hubby's cash fair game for the snatching and eliminate the sacrosanct nature of child support and alimony. Not good for a divorced mom who wants to keep family in hearth and home.
According to Warren, First Lady Hillary "got it." So much so that she implored husband Bill to kill the piece of bankruptcy reform legislation that sat ready for his John Hancock. Bill acceded to Hillary's wishes. It was his last act in office; pocket vetoing the bill in 2000.
Fast forward to Senator Clinton: 2001, who now supported the proposed changes to the bankruptcy law. The bill was essentially the same but Hillary had a changed and as Elizabeth Warren told Bill Moyers in a 2004 interview the Senator's political priorities now seemed to fall in synch with her new constituency: Wall Street.
Senator Clinton, together with 36 other Democrats including Senator Joe Biden, voted "yea" for the reform bill in 2001 but the Congressional numbers didn't add up for passage. It would take a new election to turn a recalcitrant Congress into an enthusiastic one, passing the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act," in April of 2005. While placing added burdens on regular folks seeking a safe harbor to escape from debt, Mega-Industries that screwed up badly like fraud-laden Enron, Adelphi, Worldcom and Global Crossing could still flock to bankruptcy court as they figured out next moves.
The new consumer bankruptcy code raised fees for filing (a real encouragement if you're already broke) and to ramp up the shame factor (something that the debt-collection industry loves to exploit) you had to pay for taking a kindergarten-style financial literacy review which seemed to financially benefit only the companies that were offering the course
No longer would the bankruptcy court provide a reprieve for hard-pressed debtors seeking the traditional "fresh start" while trying to hold on to a primary residence.
True to form, Senator Sanders voted no whenever the bill came up for a vote.
In the August, 2007, Presidential primary debate with Barack Obama, Hillary offered mea culpas for supporting the bill in 2001 (she abstained in 2005).
Hillary has since remained silently weak-kneed on the issue of consumer bankruptcy and in the current campaign has avoided discussing any real alternatives for underwater homeowners who remain subject to the not-so-tender mercies of mortgage servicers and third-party investors (Trump has remained silent as well). Even Treasury's half-hearted modification program, HAMP, will be rolling up by year's end and there's been little in the way of suggestions regarding a replacement.
In 2014, Senator Warren, citing failed efforts to ameliorate the housing crisis took the Obama Administration to task claiming that efforts to reverse the foreclosure damage done by Wall Street was the equivalent of trying to put out a forest fire with an eye dropper.
Like a downed fighter with the best corner men money can buy, Wall Street has picked itself back up, gotten back into the ring, dusted off the derivatives and damn any regulatory torpedoes are headed full speed into new revenue streams including housing, putting aside any talk of bad old days coming back. No, they'd like you to believe it's a thing of the past - a legacy - but stats prove otherwise. It's still a problem and something that Tirelli is keen to talk about.
There are still millions of homeowners in foreclosure and Hillary sat idly by while the 2005 bankruptcy reform act stripped judges of their power to modify mortgages. As far as I'm concerned - unfortunately - my business will continue to boom.
I can only imagine the conflicts that went on in Liz Warren's head when arriving at the decision to bite the bullet and support Hillary. If Secretary Clinton becomes President Clinton - and if Warren allows her voice to be drowned out by Wall Street's chumminess with the new Prez -- then the bitten bullet may prove to be a dum-dum with splinters ricocheting off Main Street sidewalks and targeting ordinary Americans.
Joel Sucher is director/writer and co-founder of Pacific Street Films and is currently finishing a comic novel, The Insufferable Business of Documentary Filmmaking.