Elizabeth Warren is angry—angry for you, as she has always been.
Warren chairs the special congressional panel monitoring the $700 billion banking bailout. And her anger is for the $5 trillion lost in 401(k) and other retirement accounts, losses that scrambled the nest eggs of millions of hard-working taxpayers, consumers and homeowners. It’s directed at mortgage and credit card lenders who for decades, she says, knowingly tricked and trapped consumers with bad debt—earning themselves millions in bonus money in the process. It’s at the government for not doing more to protect its citizens before the economic fallout of last fall and, since then, for failing to require more disclosure and accountability of those companies that got your tax money for their mistakes.
A tenured Harvard law school professor, Warren has long been a champion for consumers. In 2005, for example, she found that nearly half of all U.S. bankruptcies were filed by working families in the aftermath of a major illness or injury, even though three out of four had health insurance at the onset of their physically—and financially—debilitating condition. “That should not be happening,” she says.
In a study for AARP released in June 2008, months before the Wall Street meltdown, she reported that those age 55 and older were the fastest-growing group to declare bankruptcy in 2007—nearly one of every four cases, and with bankruptcy rates increasing significantly with age (including a sixfold increase since 1991 among those 75-plus).
“Again, medical problems were a big reason,” she told the AARP Bulletin, “but so were their attempts in trying to just maintain their homes—such as having to charge emergency repairs to credit cards because their expenses outstripped their incomes for months or years.”
Warren was appointed to the panel overseeing the U.S. Treasury Department’s Troubled Asset Relief Program (TARP) in November by Senate Majority Leader Harry Reid, D-Nev. “He was very much impressed by her advocacy on behalf of middle-class families and consumers,” says Reid spokesman Jim Manley.
It’s an advocacy that stems from her own childhood in Oklahoma, as the youngest of four children. Her parents survived the Depression and Dust Bowl, but never fully recovered. Her father, who lost his job as a salesman just as she was born, wound up working as a maintenance man. Her mother worked full time (for Sears’ catalog department)—a rarity in those days. “We needed the money,” says Warren, who turns 60 this month. “As a child, my mother would put her hand on my forehead when I was sick while she calculated how big the doctor’s bill already was and whether she was able to pay another. There were a lot of times, with all four kids, when she would say, ‘Let’s give it a couple more days.’”
Hard work and self-reliance were learned early on. “My parents raised me to believe you can’t count on others to bail you out from your problems,” she says. Warren’s first job was at age 9, baby-sitting a neighbor’s child with a bad case of colic. “I earned 35 cents an hour to rock that screaming baby back and forth, so his mother could escape for a while,” she says. “But by the time I was 10, I had a sock full of money … and have never been without cash since then.”
She graduated from high school at age 16 and attended college on a full scholarship. She became a law professor at age 26, first at Rutgers, where she graduated, and later taught at Texas, Michigan, Penn and, since 1995, at Harvard, where she has specialized in commercial law, contracts, bankruptcy and consumer debt.
She’s also been a best-selling author, whose eight books includeThe Two-Income Trap and All Your Worth, cowritten with her daughter, Amelia Warren Tyagi. And she has been an attorney who went after job-discriminating employers and deadbeat dads. Early on, she taught brain-injured children.
With the congressional panel, Warren has been charged with tracking the effectiveness of the huge federal bank bailout program. The panel’s monthly reports have assessed the overall effectiveness of the Treasury Department’s handling of TARP (www.COP.senate.gov).
In April and May, Republican members opposed the panel findings. In April, former Sen. John Sununu, R-N.H., criticized the panel for diverting attention from its focus on TARP when it examined a range of other policy options instead. In May, Rep. Jeb Hensarling, R-Texas, similarly criticized the panel’s evaluation of banks’ lending to small businesses and families, saying the panel went beyond its proper scope. Financial services lobbyists have long assailed Warren and charge that she’s using her new post to further push her own anti-industry agenda. The American Bankers Association, a trade group that represents lenders, declined to comment to theBulletinon Warren’s criticisms of industry practices.
Warren has consistently advocated that institutions providing loans should face the same accountability required of consumers when they seek mortgages or other loans. “When a credit card contract is 31 pages long, unreadable to most people and loaded with tricks and traps that are fundamentally unfair [for consumers], it’s the government’s role to ensure there’s a level playing field,” she says.
It’s not level, she says, with credit issuers allowed to take advantage of cash-strapped consumers. Even without subpoena power, she has forced officials to demand, and tell, more about how your tax dollars are being used. She’s even publicly criticized the administration’s bailout plan—citing a double standard in which banks get billions with less accountability than has been required of the auto industry. “But President Obama has recently fired a warning shot to lenders, and new credit card regulations to protect cardholders [starting in July 2010] are a step in the right direction,” Warren says. “So the world may be changing.”
What we need, she says, is a “Financial Product Safety Commission”—modeled after the Food and Drug Administration or Consumer Product Safety Commission—to protect Americans against unfair credit practices. “Just as we shouldn’t have to worry about prescription drugs being loaded with arsenic or toys covered with lead paint,” she says, “we shouldn’t have to worry about hidden traps in every financial product.”
The Obama administration is reportedly exploring the idea. In March, Sen. Dick Durbin, D-Ill., introduced legislation to create such a regulatory agency. Rep. Barney Frank, D-Mass., chairman of the House Committee on Financial Services, told the Bulletin: “I am very interested in this. We will be pushing this forward.”
That might soothe Warren’s anger. “It’s no life, especially for AARP members,” Warren says, “if you have to keep track of every penny saved and spent. Life is about grandchildren … reading, painting and other things you want to do. But ultimately, we need to get our financial lives in order so the true focus can be those things. The goal is security, so you’re safe going forward and not always having to think about money.”
Sid Kirchheimer writes about consumer and health issues.