It was October 1987, and the House of Representatives was debating a bill written by then-Rep. Chuck Schumer that would disclose more information to prospective credit card customers. The legislation would ultimately create the “Schumer box” — the part of a credit card agreement that lists interest rates, terms, and fees in large type. Liberal Democrats wanted more than just disclosure. Illinois Rep. Frank Annunzio submitted an amendment to limit the allowable interest rate on all U.S. credit cards to 15 percent. A 1978 Supreme Court ruling had rendered state-level interest rate caps useless, allowing lenders to charge 40 percent or more. Some states kept tight rules in place nonetheless, but a few became a Wild West for financial institutions, attracting major companies with an anything-goes regulatory environment. “This credit card business is the biggest money item these banks have,” thundered Mario Biaggi, a New York Democrat who supported the amendment. “You don’t have real competition among the big banks. They take advantage of the inertia of the consumer.” With a healthy 257-177 advantage, House Democrats had the numbers to force the federal cap through. But Schumer and his colleagues on the House Banking Committee wanted no part of significantly depressing credit card profits, having struck down this amendment almost unanimously in committee. One of those colleagues, a young Democrat from Delaware, stepped forward to urge a no vote. His name was Tom Carper. “The bill before us without this amendment is a good bill,” Carper said. “Mr. Annunzio is trying to make a point here, and it’s a point that shouldn’t be lost on us or the banks. But I think it’s premature to try to make that point. We can do a lot of good things with this legislation and a free enterprise competitive system. Let’s let that competition work.” Carper added that young college graduates and the working poor would not be able to access credit if interest rates were capped. It rehashed a perennial claim from banking industry supporters: You have to let banks gouge their customers, because how else will customers obtain vital services? Against an alliance of Banking Committee Democrats and pro-business Republicans, the amendment failed. It took two decades for a federal interest rate cap to be debated again, as part of credit card reform legislation called the CARD Act. This time, Sen. Bernie Sanders, I-Vt., would fail to overcome the power of the banking lobby. Among the 60 senators voting no was the senior member from Delaware: Tom Carper. It was still, 22 years later, premature. For nearly 40 years, banks have found a reliable ally in Carper. Staked with millions in campaign donations, Carper has taken the side of the industry in virtually every policy debate over that period, with the unfortunate side effect of helping to create the conditions for the 2008 financial crisis — and the next one.

Photo: Michelle Gustafson for The Intercept

This has sadly been expected of politicians representing Delaware, where banks reflect a significant chunk of the economy and dominate campaign contributions. Carper has faced no serious opposition from within his party over the years. It’s just been the way business is done in Delaware. But Kerri Evelyn Harris, Carper’s opponent in the September 6 Democratic primary, is trying something different, highlighting victims of predatory banking practices, which even in Delaware outnumber those who benefit. A Harris victory would signal an end to the home-cooking bank lobbyists have received from Delaware politicians since the 1980s.

But even among that group of yes men and bank sycophants, Carper stands out. When Carper first got elected statewide as treasurer in 1976, Delaware was not yet a haven for financial institutions. It was struggling with high unemployment and high inflation, much like the national economy in the Carter years. Then the Supreme Court offered a lifeline. In Marquette National Bank v. First of Omaha Corp., the court ruled unanimously that Omaha Bank, while chartered in Nebraska, could mail Minnesotans credit card offers with interest rates above those permitted by Minnesota law. This established the doctrine of “exportation” in credit card regulations: banks could export their home-state rules to customers elsewhere. It also created a nationwide banking system overnight; before this point, banks could not operate across state lines without permission. (The same regulatory change is repeatedly clamored for by insurance companies that want to operate across state lines so they can all set up in Nebraska or Delaware and evade state consumer protection laws.)

Graphic: Soohee Cho/The Intercept

Shortly after the ruling, Delaware Gov. Pete du Pont, scion to another major state industry, heard from Chase Manhattan executives that if he combined Delaware’s existing business-friendly incorporation rules with loosened financial regulations, banks would swarm into the state. Desperate to diversify Delaware’s economy and create jobs, in 1981, du Pont pushed through the Financial Center Development Act with overwhelming bipartisan support. Carper was still state treasurer at the time, and making a bid for his first term in the House. The law granted out-of-state banks the right to enter Delaware as long as they employed at least 100 residents. Usury caps were mostly eliminated, so banks could use the state as a lucrative home base for its credit card divisions. Numerous fees were also made legal, as long as they were disclosed. Banks could change terms of their credit card agreements at any time (later in his career, Carper would criticize this perk, but it was his own state that gave it to the industry). Tax breaks tucked into the bill further encouraged the largest banks to come to Delaware. Eleven major banks opened subsidiaries in Delaware within three years of the law’s passage, as out-of-state laws on credit card rates or terms were made irrelevant. South Dakota also created a welcoming environment, but it couldn’t match Delaware’s proximity to New York City and corporate-friendly legal structure. Today, half of the nation’s credit cards originate in Delaware, and about 48,000 state residents are employed in the financial services industry, roughly one-tenth of the entire workforce. At the time, state officials only expected 1,000 new jobs. Carper wasn’t very involved in this transformation; treasurers just managed cash. But when he entered the House in 1983, he sought to protect Delaware’s — and the banking industry’s — advantages.

Photo: U.S. Government Printing Office

From 1983 to 1992, Carper served on the House Banking Committee. Most observers consider developments in the 1990s — like formal repeal of the Glass-Steagall separation between commercial and investment banks, the Riegle-Neal elimination of interstate banking restrictions, and the effective ban on derivatives regulations — as critical to chipping away at the New Deal regulatory framework that ultimately brought us the financial crash. But the 1980s played its part as well. “It was a 20-year campaign,” said Arthur Wilmarth, law professor at George Washington University, who is currently writing a book on Glass-Steagall repeal. Carper’s first term in Congress saw passage of the Secondary Mortgage Market Enhancement Act. This eliminated the ban on banks selling asset-backed securities without a government guarantee, and pre-empted state restrictions on their sale. It even let institutional investors purchase the securities, as long as an accredited rating agency gave them high marks — marks, it turned out, that were not hard to come by. Combined with earlier bills allowing higher-risk lending and the 1986 Tax Reform Act, which gave a tax exemption to real estate securities, this created the securitization architecture that banks would use to build the subprime bubble two decades later. “Subprime lending could not have flourished” without these innovations during Carper’s House tenure in the 1980s, writes Vermont Law School professor Jennifer Taub in the book “Other People’s Houses.” But Wilmarth notes that the first asset-backed securities issued after SMMEA’s passage were actually bundles of credit card receivables. Mortgage securities didn’t take over as the largest securitized asset class until the late 1990s. Credit cards were something of a dry run for how to set up a securitization market. “First, you have to pre-empt the annoying state laws protecting consumers,” Wilmarth said. “That gives you a nationwide market. And securitization gives you an enormous pool of investors who think they’re getting a high yield. It migrates from credit cards to home equity lines of credit and auto loans and high-risk mortgages.” Credit cards were also incredibly profitable. A 1992 study from the Philadelphia Federal Reserve notes that throughout the 1980s, credit card operations earned two to five times the rate of return in the rest of the industry. Ed Mierzwinski of the U.S. Public Interest Research Group cited the monoline credit card companies, which specialized only in credit cards, for growing the industry. “They popularized affinity cards, at your university, your department store, your phone company,” Mierzwinski said. The biggest monoline company was MBNA, and although it was formerly known as Maryland National Bank, it was based in Delaware. When not engaged in fending off credit card interest rate caps, in 1987, Carper urged the Federal Reserve to allow banks to get into the securities business. A vintage C-SPAN clip shows Carper pressing Fed Chair Alan Greenspan on this point. The Fed eventually granted regulatory permission for banks to establish securities subsidiaries, which led to short-term funding arrangements sometimes known as “shadow banking.” These liabilities grew from $500 billion in 1980 to a whopping $12 trillion in 2007, and were critical to the credit crunch that followed the collapse of the subprime mortgage market. As the savings and loan crisis raged, Carper defied House Speaker Jim Wright in demanding a $15 billion bailout of the Federal Savings and Loan Insurance Corp., the antecedent to the FDIC. That was three times as much as Wright wanted, but Carper eventually won that fight. Carper also played a role in 1989’s Financial Institutions Recovery, Reform and Enhancement Act, introduced in reaction to the savings and loan crisis. While FIRREA created new penalties for banks, the amendment Carper added to FIRREA protected state laws that indemnified corporate directors and officers, and was intended to safeguard Delaware’s generous indemnification laws. “That’s the way Delaware rolls,” said Mierzwinski. Christine Brennan, a Carper spokesperson, asked about his legislative record around banking, said that everything Carper has done, he has done for working families in Delaware, and that he has been a key player in major reforms that banks have opposed. Senator Carper is a tireless advocate for Delaware’s working families, and it is misleading to imply his votes are for sale. Not only does Senator Carper support the strongest possible reforms to our broken campaign finance system, including a Constitutional Amendment overturning Citizens United and moving toward public financing of campaigns, but Senator Carper has also supported the most sweeping reforms to our financial system since the 1930s over the objections of the nation’s largest banks. Thanks in part to Senator Carper’s support, the CARD Act and Dodd-Frank became law, and families across the country are seeing the benefits, as well as increased consumer protections. Senator Carper strongly opposes the Trump Administration’s efforts to rollback Dodd-Frank and Mick Mulvaney’s assault on the Consumer Financial Protection Bureau. Senator Carper is also a strong proponent for protecting our nation’s veterans and military families from financial scams, especially protecting student veterans from predatory for-profit colleges that are ripping off service members and providing worthless degrees. In fact, Senator Carper’s support for the Obama’s Administration’s relentless assault on these for-profit institutions has led to many of them closing.

Photo: Paul Morse/Official White House photo

Sen. Tom Carper walks to the Senate floor on Feb. 11, 2014. Photo: Bill Clark/CQ Roll Call via Getty Images