Queen Elizabeth The left's new lioness tells her story

A Fighting Chance

Elizabeth Warren (Metropolitan Books, 2014) 365 pages with photos, notes and index

Elizabeth Warren achieved academic recognition as a highly influential legal scholar and revered teacher, arguably America’s foremost authority on personal bankruptcy. She gained public visibility through a series of government appointments, leading up to her election as the first woman senator from the state of Massachusetts in 2012. She has aggressively staked out a prominent role as the people’s advocate for a number of economic issues, and as an outspoken opponent of the Wizards of Wall Street, their philosophy and their methods. Many are now committed to making her the long absent leader of progressive politics in the United States.

It is therefore with great anticipation that we turn to Warren’s autobiographical narrative, A Fighting Chance, for clues as to how someone growing up in crimson red Oklahoma, who considered herself a Republican into the 1990s, came to be a boldly progressive Democrat. It is her striving to develop informed, ethical policies, and an eagerness to fight for them with all she has, that gives this book zest and invites our admiration.

Warren’s views on the economic struggles and financial pitfalls confronting the middle class, a topic that she has long researched and addressed in four previous books, were surely influenced by events during her grade school years. The Herring family, including Elizabeth’s three older brothers, had just about managed on father’s semi-skilled jobs that kept them moving from town to town. When Elizabeth was 12 her father suffered a heart attack and after a long, costly recuperation, was barely able to hold down minimum wage jobs, ending up as a janitor. With debts mounting, the station wagon repossessed, and their very modest abode in danger of repossession, Elizabeth’s mother, who had not previously been in the labor force, landed a minimum wage job. Elizabeth found after school work (the older brothers were no longer living at home). The Herring family survived, allowing Elizabeth to continue attending her very good high school. She was insecure with her richer classmates, and a washout at extracurricular activities, except for one: she won the Oklahoma State High School debating championship in her senior year, allowing her to attend George Washington University on a full debate scholarship.

Warren does not tell us exactly how close to bankruptcy the Herring family was. But as a young law professor at the University of Texas, bankruptcy law, and more crucially bankruptcy filers, became the focus of research that established her academic reputation and years later led her to Washington. Working with two university colleagues, the team conducted a series of data intensive surveys of bankruptcy case filings from court records in representative states, and later, a companion questionnaire and telephone interview of families filing for bankruptcy. Publication of results from their extensive statistical analyses revolutionized bankruptcy scholarship and led to the publication of two books aimed at a broader public [1].

Warren’s analysis of more than 1,500 survey respondents who had filed for bankruptcy, together with many extensive personal interviews with families who were confronting or undergoing bankruptcy, enabled her to challenge the common perception, abetted by financial industry propaganda and fake studies, that bankruptcy petitioners were either deadbeats who ran up bills they couldn’t pay, or con artists gaming the system. Warren persuasively shows that bankruptcy filers, far from being deadbeats or cynical opportunists, are typically middle-class households who in 90 percent of the cases file for one of three reasons: (1) medical illness (50 percent of the cases); (2) job loss; (3) family breakup (death or divorce). Moreover, in a comparison across generations Warren demonstrates that overspending on non-necessities did not account for the rapid increase in bankruptcies in the 1995-2005 period. Almost always, people file for bankruptcy only after they have exhausted all their financial resources including debt, and they do so with an extreme sense of shame.

Based on her demonstrated expertise, and her increasing public and congressional visibility in defense of equitable bankruptcy laws, Warren is invited to head up the newly formed National Bankruptcy Review Commission that is charged with coming up with policy recommendations. This is 1995 and Warren is now a chaired law professor at Harvard and the banking industry (who also finance credit cards and payday loans) is gearing up to pass much tougher bankruptcy laws. Bankruptcy filings are rapidly increasing throughout this period, but Warren is able to demonstrate in a well received book co-authored with her daughter, Amelia Tyagi, published in 2003, that two income families are actually worse off financially than one income families a generation earlier because of higher costs of necessities such as housing, child care, college and medical care [2]. The battle between Warren and the big banks goes back and forth for a decade; they have virtually unlimited lobbying funds, but Warren proves resourceful and hones her political skills. In 2005 the bank-sponsored bankruptcy bill is finally signed into law by President Bush, and bankruptcy filings decline by almost three-quarters in 2006. Warren takes three pages of A Fighting Chance to express her bitter disappointment.

Warren’s battle with Wall Street resumes in 2008 when bundled risky subprime mortgages are marketed as AAA investments but undergo a pandemic of failure. The bundling algorithm was flawed: almost all airline passengers fly safely, but if the passenger next to you dies when the plane crashes your chances for a safe flight are greatly reduced. Under intense pressure from U.S. Treasury Secretary Henry Paulson to rescue Wall Street from the worst financial crisis since 1929, a crisis of Wall Street’s own making, Congress passed the Troubled Asset Relief Program (TARP) on October 3, 2008. The title of the bill was meant to be a prophylactic against charges of malfeasance or criminality by bankers who knowingly pushed these extremely risky packages (called CDOs) while simultaneously betting on their failure through what are called credit swaps.

The concept of a regulatory agency that would protect consumers of financial products from the opaqueness, pitfalls and traps that are an integral part of mortgages, credit cards, payday loans, and other financial agreements was truly the brainchild of Elizabeth Warren. It was based on years researching households in financial distress—and inspired by a pre-Consumer Product Safety Commission (CPSC) toaster that nearly burned down her kitchen. Why not a financial product safety agency?

The $700 billion TARP bailout legislation included funding for a Congressional Oversight Panel (COP) to check on how the bailout money was being spent and what effect it was having. Warren is called upon to head up COP. She arrives in Washington expecting to be issued a badge and handcuffs but quickly learns that COP is structured to be the dog that will not bark and has few teeth. The small agency has no subpoena powers, cannot compel anyone to provide data, nor can it block payment to a bank that COP deems excessive or unjustified. COP can ask questions but these questions do not have to be answered. COPs only duty is to write a monthly report. Warren mainly wants to know how bailout money is helping to reduce the millions of home owners who are in or near foreclosure, and what about all those failing small businesses and banks? She gets blown off by outgoing Secretary Paulson and his replacement under President Obama, Tim Geithner. But she makes waves publicizing the agency’s mission, appearing everywhere on network TV as well as The Daily Show, and taking COP on the road to talk to distressed home owners. She eventually gets some bipartisan support (always a goal of hers) when it is revealed that AIG was paying out $168 million in bonuses to the employees responsible for the company’s financial disaster. Warren is told by White House economic adviser Larry Summers that insiders do not criticize insiders, but she only steps down to head up a bigger project.

The concept of a regulatory agency that would protect consumers of financial products from the opaqueness, pitfalls and traps that are an integral part of mortgages, credit cards, payday loans, and other financial agreements was truly the brainchild of Elizabeth Warren. It was based on years researching households in financial distress—and inspired by a pre-Consumer Product Safety Commission (CPSC) toaster that nearly burned down her kitchen. Why not a financial product safety agency? Warren started her campaign in 2007 with a proposal for such an agency, and after the 2008 election, with the Democrats in control and bank reform legislation on the agenda, she sees an opportunity to get her proposed agency enacted into law as part of Dodd-Frank financial reform bill. Will Rep. Barney Frank agree to attach her consumer financial protection agency to his and Senator Chris Dodd’s financial reform bill?

In one of the book’s most entertaining episodes, Warren recounts getting lost journeying from her home in Cambridge to Rep. Frank’s apartment in nearby Newton (she is not good at following directions). The scene when she finally arrives is pretty crazy but Warren is focused. Frank is dubious at first: pushing both banking reform and consumer financial protection in the same bill risked losing both. Warren makes her pitch (this is a champion debater talking), and Frank not only agrees, but ultimately provides critically needed support.

Warren must also address the counter argument that a number of federal laws involving consumer credit already exist, with enforcement the responsibility of seven different federal agencies. Do we need one more? Warren convincingly argues at a crucial meeting that none of the existing agencies prioritize protecting consumers from dangerous credit products, and all of them have been co-opted by the banks they regulate. Besides, infamous payday loans and a growing class of mortgages were not in the purview of any regulatory agency. Warren is serious about the need for a single controlling consumer agency. Writing in a volume on government and markets Warren explicitly rejects the multiple regulatory approach of economics Nobel winner Joseph Stiglitz, whose expertise concerns failed markets such as the market for financial products [3]. While acknowledging that financial markets meet Stiglitz’s conditions requiring regulation, Warren argues that a single, broad based agency with rule-making and rule-enforcing powers offers the best shot at effectively regulating financial products. She had in mind the success of the Consumer Product Safety Commission.

President Obama had earlier publicly supported Warren’s proposed agency, complete with the exploding toaster analogy (not for the last time did he borrow her material), and as of June 2010 the Consumer Financial Protection Bureau (CFPB), an independent agency, would be included as part of the Dodd-Frank bill. This proves to be a bridge way too far for the financial industry. But it is a fair fight: Warren and friends vs. one million dollars a day spent by the banks on lobbying and campaign contributions to defeat or cripple the CFPB bill.

Just about everyone, with the exception it seems of Chief Justice John Roberts, is aware that powerful, well financed interest groups do not actually buy votes, they “earn” them by more subtle means. Warren takes us through the legislative process for the CFPB as if it were a law school case study. Lobbyists are not in your office, congressperson, to pick a fight with you or threaten you. They are friendly, attractive, and extremely well informed about the legislation you are considering, and about what it will do, or not do, for your district. And there is a back office that can arrange to bring in important people from your district to help you make up your mind. And of course they would like to support your campaign to the extent they can. But Warren has her own campaign machine: herself everywhere, hundreds of support groups, and the cast of Saturday Night Live. There are some give backs, one engineered by the newly elected senator from Massachusetts, Scott Brown that saves the banking industry $19 billion. But in late July 2010 President Obama signs Dodd-Frank, and CFPB is born intact.

There is recent empirical research in political science that indicates that public opinion polls, the views of the people, do not have a statistically significant influence on congressional votes unless supported by private interest groups, predominately corporate interests [4]. It is therefore a rather remarkable achievement that Elizabeth Warren, not yet holding elective office, was able to take an issue hardly on the public horizon and transform it into public law in three years. There are countless public interest groups that have struggled long and hard on dozens of worthy causes, but to little avail. Perhaps Warren might offer them some guidance as to how to proceed.

Warren makes clear to the reader that she both wanted and expected to be appointed as director of the CFPB. The problem is getting the “enemy of Wall Street” confirmed by the Senate; the President thinks this is not going to happen and so contrives an arrangement in which she is acting director, a position not requiring confirmation. Warren enthusiastically goes to work launching the agency: she enlists excellent people to set up an outreach program that lets consumers report their interaction with financial entities. The information gathered can be used both to inform the public and to focus attention on bad lending practices. She initiates the design and testing of a one-page mortgage contract. She brings in an outstanding candidate to be permanent director of the CFPB, Rich Cordray, former attorney general of Ohio, and President Obama is eventually able to get him confirmed.Writing about her experience putting together an agency that potentially has broad powers to protect consumers against frequently predatory suppliers, Warren, for many years a Republican because “those were the people who best supported markets,” [5] reveals a new constituency she wants to protect and promote: the public sector. Starting with President Reagan’s characterization of government as the “problem,” there has been in Warren’s view an unrelenting assault not only on the concept of “big government,” but also on all government workers, and on government programs long accepted as vital to the welfare and progress of the country. This theme turns out to play a key role in her campaign for the Senate.

At one point in their discussions, President Obama suggests to Warren that she run for the Senate against Republican incumbent Brown who had won the seat to the surprise of many pundits in a special election in January 2010 necessitated by the death of the long revered liberal Democrat, Ted Kennedy. At the time Brown’s victory was significant because the Republicans would have 41 members and thus able to invoke cloture to block consideration of presidential nominations and pending senate bills, a power that they freely abused. For Elizabeth Warren, winning the Massachusetts Senate seat would be the formal demarcation between being an academic and a politician. Warren does not discuss the reasoning behind this career transformation (but she does resign her chair at Harvard following her election); however, the reader will have become aware that this transition has been an ongoing process for some time.

Although this is her first election campaign, Warren once again demonstrates that she is a quick learner. She broadens her message so that it relates to a larger constituency. In an article written in 2007 she talked about “the vanishing middle class,” and how, without a vibrant middle class, there was no path out of poverty for the poor [6]. A theme throughout Warren’s writings for the general public has been economic problems confronting the middle class. That has been her research and policy focus. Policies that address problems of the poor and the lower end of the middle class, many of them economic such as a living wage and worker control in their jobs, need to be addressed if Warren wants to fashion a broader welfare policy. The genius of the video that went viral, summarized by “nobody got rich on his own,” is that it cleverly reintroduced a concept missing for decades in American politics; that of the “social contract’ as the foundation of societal relations.

In the end Warren enlisted the services of countless volunteers in the largest get-out-the-vote drive in the state’s history, outraised the Brown campaign by $7 million, and won the election by a margin of 54-46 percent.

In A Fighting Chance, Elizabeth Warren wants to introduce herself to a larger audience. It is written in a folksy, unassuming style, modest indeed for someone of her many talents and achievements. After traumatic years following her father’s heart attack, the birth of her daughter, Amelia, and son, Alex, and divorce from her first husband during which time Elizabeth had barely begun a career, discussion of family life recedes into the background. But for sure Elizabeth was lucky in love the second time around with Bruce Mann. Elizabeth makes clear that without Mann’s support and encouragement over the past 35 years much of what she has achieved would not have been possible. And it does seem like Elizabeth’s projects are family affairs. Her son Alex has been her tech person throughout, and both Alex and her daughter Amelia, with whom she had co-authored the book that first brought Elizabeth to public prominence [2], played key roles in her senate campaign.

Warren’s prominence as a spokesperson for progressive economic reform and social justice will only continue to grow. A number of left-oriented public interest groups, including influential MoveOn.org, have actively campaigned for Warren to enter the Democratic presidential primary race. So far she has been very consistent in saying no to running for president. Warren’s autobiography is persuasive that her political stands draw on her accumulated knowledge: leadership based on being the most knowledgeable person in the room. But presidential candidates must at least appear to be experts on everything. And they must have sharp opinions on why they are so right and their opponent is so wrong. That is a game, and one that Elizabeth Warren may not want to play. But if events happen and she decides to run, we can be reasonably certain that she will have a fighting chance.

[1] Teresa A. Sullivan, Elizabeth Warren, and Jay Lawrence Westbrook, As We Forgive Our Debtors: Bankruptcy and Credit in America, (Oxford University Press, 1989), and The Fragile Middle Class: Americans in Debt, (Yale University Press, 2000).

[2] Elizabeth Warren and Amelia Warren Tyagi, The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke, (Basic Books, 2003).

[3] Elizabeth Warren, Redesigning Regulation: A Case Study from the Consumer Credit Market, and Joseph E. Stiglitz, Government Failure vs. Market Failure: Principles of Regulation, in Government and Markets: Toward a New Theory of Regulation, Edward J. Balleisen and David A. Moss, editors, (Cambridge University Press, 2010).

[4] Martin Gilens and Benjamin I. Page, Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens, in Perspectives on Politics, pp. 564-581, (American Political Science Association, 2014).

[5] Wikipedia, Elizabeth Warren, Political affiliation. Reference is to Samuel P. Jacobs, “Warren takes credit for Occupy Wall Street”, The Daily Beast, Oct. 24, 2011.

[6] Elizabeth Warren, The Vanishing Middle Class, in Ending Poverty in America: How to Restore the American Dream, Senator John Edwards, Marion Crain, and Arne L. Kalleberg, editors, (The New Press, 2007).