So The New York Times deems, and so it shall be: It is time to meet Elizabeth Warren:
Among all the dramatis personae of post-financial crisis Washington, there is no one remotely like Ms. Warren, 60, who has divided the town between those who admire her and those who roll their eyes at her ….
…. Ms. Warren has two roles here: officially, as head of Congressional oversight for the Troubled Asset Relief Program, and unofficially, as chief conceiver of and booster for a new consumer financial protection agency. Fusing those projects and her academic work, she has become the most prominent consumer advocate in years.
In a blitz of television appearances, she offers a story of how 30 years of deregulation has rewarded the financial industry but led to abusive practices and collapses that have hurt ordinary Americans — the same taxpayers who are paying for bank bailouts.
Ms. Warren’s climactic hour begins now: three years after she hatched the idea for the agency, the White House has backed it, the House of Representatives has approved it and it is a top Democratic priority in the Senate.
Many fans, including Representative Barney Frank, Democrat of Massachusetts, hope Ms. Warren will run it. But even if the agency is approved, it might be far weaker than what she envisioned, thanks to fierce opposition from the financial industry.
Her admirers are many, including President Obama and House Financial Services Chairman Rep. Barney Frank. As Jodi Kantor’s story for the NYT hits the newsstands, Professor Warren is already well-known to fans of Bill Maher’s Real Time, on HBO. Her two appearances to date have shown her endearing, such that my first response was like that of a child to a puppy: “Can we keep her?”
As such, it is amusing to read such fearsome hints about this seemingly quiet powerhouse:
She is an Oklahoma native, a janitor’s daughter, a bankruptcy expert at Harvard Law School and a former Sunday School teacher who cites John Wesley — the co-founder of Methodism and a public health crusader — as an inspiration. She brims with cheer, yet she is she is such a fearsome interrogator that Bruce Mann, her husband, describes her as a grandmother who can make grown men cry. Back at Harvard, Ms. Warren’s teaching style is “Socratic with a machine gun,” as one former student put it. In Washington, she grills bankers and Treasury officials just as relentlessly ….
…. Many fans, including Representative Barney Frank, Democrat of Massachusetts, hope Ms. Warren will run it. But even if the agency is approved, it might be far weaker than what she envisioned, thanks to fierce opposition from the financial industry.
Critics argue that such an agency, which would regulate mortgages, credit cards and nearly all other loans to consumers, would tighten credit in an already tight market, stifle innovation and hurt small businesses.
They have another objection as well: to Ms. Warren herself. As one administration official acknowledged, the prospect of her running the new agency may be an impediment to its creation because of her crusading style, her seemingly visceral loathing of financial services companies and her expansive way of interpreting assignments.
“‘Loose cannon’ would be an appropriate term to apply in her case,” said Dean Baker, co-director of the Center for Economic and Policy Research and a Warren supporter.
None of this—praise or criticism—is what comes through at first glance:
Loose cannon? Socratic with a machine gun? Oh, come now. Really?
Well, yes, apparently. Sort of. In 2005, Warren penned an article for The Washington Post under the title, “Sick and Broke“:
As part of a research study at Harvard University, our researchers interviewed 1,771 Americans in bankruptcy courts across the country. To our surprise, half said that illness or medical bills drove them to bankruptcy. So each year, 2 million Americans — those who file and their dependents — face the double disaster of illness and bankruptcy.
But the bigger surprise was that three-quarters of the medically bankrupt had health insurance.
How did illness bankrupt middle-class Americans with health insurance? For some, high co-payments, deductibles, exclusions from coverage and other loopholes left them holding the bag for thousands of dollars in out-of-pocket costs when serious illness struck. But even families with Cadillac coverage were often bankrupted by medical problems ….
…. The problem is not in the bankruptcy laws. The problem is in the health care finance system and in chronic debates about reforming it. The Harvard study shows:
• Health insurance isn’t an on-off switch, giving full protection to everyone who has it. There is real coverage and there is faux coverage. Policies that can be canceled when you need them most are often useless. So is bare-bones coverage like the Utah Medicaid program pioneered by new Health and Human Services Secretary Mike Leavitt; it pays for primary care visits but not specialists or hospital care. We need to talk about quality, durable coverage, not just about how to get more names listed on nearly-useless insurance policies.
• The link between jobs and health insurance is strained beyond the breaking point. A harsh fact of life in America is that illness leads to job loss, and that can mean a double kick when people lose their insurance. Promising them high-priced coverage through COBRA is meaningless if they can’t afford to pay. Comprehensive health insurance is the only real solution, not just for the poor but for middle-class Americans as well ….
…. Every 30 seconds in the United States, someone files for bankruptcy in the aftermath of a serious health problem. Time is running out. A broken health care system is bankrupting families across this country.
The article is written largely with the tone of what we might hope Professor Warren can expect of her students. That is, it reads more than a little like the papers I was taught to write, seventeen years ago, before I dropped out of the University of Oregon. Of course, she has better resources, but that’s beside the point.
What makes Elizabeth Warren so frightful to the financial industry seems to be that she understands the power of an older form of capitalism. Even into my lifetime, capitalists preached that business served certain needs in society. Indeed, the prescription for success was to find a niche, an unmet demand, and fill it. The dotcom era replaced that paradigm, as people sold ideas for billions. The heady atmosphere inside that speculative bubble was so intoxicating that the rest of American capitalism seems to have joined the party. And in the case of the financial sector, tolls came due earlier than anyone expected, or, at least, wanted to admit. A philosophical transition is at stake: Are economics theoretical tools to help humans manage the burdens of life, or is Economy a cause that we, as individuals, serve? Once upon a time, the answer was the former. Presently, it seems an open question.
Yet how one decides the answer makes all the difference in the world about how we address the challenges our private financial institutions face.
And for the industry, someone who answers according to the older, more noble capitalist aspiration is a scourge. Our financial schemes now play well outside the limits of what responsible capitalism could sustain. Why settle for slow but steady growth when there are suckers born every minute and money to be harvested with outrageous and exciting—insofar as they are viscerally stimulating at all—schemes that result in us all getting performance bonuses after we run the company into the ground? It may be greed, but it is not simple greed. There is something of a sickness, an addiction about it. When logic becomes extremist to the point of anathema, yes, there is a problem.
And this is why Elizabeth Warren is an important figure on the American political chessboard. Her introduction is, of course, worrisome to the financial sector for its non-traditional route. We have met her before in Michael Moore’s Capitalism: A Love Story, and The Washington Post presented her last year in their “Voices of Power” series.
But far from being a wild-eyed prophetess of American doom, Elizabeth Warren is very nearly prim in her forecast of the challenges facing America, and prescriptions of cures. And with a financial services bill including a consumer protection agency facing consideration by the full Senate, we are likely to hear much more of her name in the months to come.