The New York Times has posted an article that discusses the interesting case of Ms. Elizabeth Warren, who is a law professor and bankruptcy expert and is responsible for setting up the Consumer Financial Protection Bureau. In a House hearing in March, Republicans accused Warren of overstepping her credentials and legal authority by helping state attorney generals come up with settlements for mortgage servicing cases.
The accusations are pretty vague, as it’s not illegal for a federal official to give advice to state officials. Rather, it seems that the accusations against Warren might be to prevent her from actually being able to help and protect consumers.
And Republicans were clearly also hoping that if they threw enough mud, some of it would stick. For people like Ms. Warren – people who warned that we were heading for a debt crisis before it happened – threaten, by their very existence, attempts by conservatives to sustain their antiregulation dogma. Such people must therefore be demonized, using whatever tools are at hand.
Let me expand on that for a moment. When the 2008 financial crisis struck, many observers – myself included – thought that it would force opponents of financial regulation to rethink their position. After all, conservatives hailed the debt boom of the Bush years as a triumph of free-market finance right up to the moment it turned into a disastrous bust.
About 10 years ago Ms. Warren was also one of the few people who realized that household debt had doubled for the 30 years preceding the current housing crisis. Later she became and advocate for financial reform, saying that too many problems came up when lenders pushed their borrowers into “taking obligations” they didn’t fully understand.
Given Ms. Warren’s prescience and her role in shaping financial reform legislation – not to mention her effective performance running the Congressional panel exercising oversight over federal financial bailouts – it was only natural that she be appointed to get the new consumer protection agency up and running. And it’s hard to think of anyone better qualified to head the agency once it goes into action.
The fact that she’s so well qualified is, of course, the reason she’s being attacked so fiercely. Nothing could be worse, from the point of view of bankers and the politicians who serve them, than to have consumers protected by someone who knows what she’s doing and has the personal credibility to stand up to pressure.
The interesting question now is whether the Obama administration will see the war on Elizabeth Warren for what it is: a second chance to change public perceptions.
The bizarre allegations against Ms. Warren are actually offering the government the perfect opportunity to continue the debate for financial reform and to focus on crooked Wall Street practices.
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