Advertisement
 
YOU ARE HERE: LAT HomeCollectionsBusiness
(Page 2 of 2)

Elizabeth Warren, touted to lead new consumer protection agency, has powerful enemies

The consumer advocate's blunt questions as head of the TARP watchdog panel have made Wall Street captains squirm. Critics say she favors too much government control.

August 01, 2010|By Jim Puzzanghera, Los Angeles Times

They valued education — "They used good English, and they didn't say 'ain't,'" she recalled — and knew what it was like to struggle financially. When Warren was 13, her father suffered a heart attack. Her stay-at-home mother had to go to work. Warren's father eventually recovered but ended up with a job that paid half his previous salary.

"We lost the car, and there was more talk about what groceries cost and how expensive winter coats and dental visits had become, but no one went hungry and we stayed in our home," Warren wrote in the 2003 book, "The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke," which she wrote with her daughter, Amelia Warren Tyagi.

The book highlighted Warren's extensive research on why people fall into debt. Gathered as part of the Consumer Bankruptcy Project, that data — not ideology — have formed Warren's views, said Kenneth N. Klee, a UCLA law professor who specializes in bankruptcy.

"Liz actually goes out and looks for what's really happening," said Klee, who has known Warren since the 1990s.

The book took issue with the common theory that middle-class families were consuming too much, labeling that idea a myth. Data showed, for example, that the average family spent 44% less on appliances and 21% less on clothing than it did a generation earlier.

Instead, financial problems stemmed from two-income parents trying to provide better lives for their children, such as through more expensive homes in communities with quality schools, she wrote.

"The Two-Income Trap" spawned a slew of media appearances in which, amid the real estate boom, Warren sounded an alarm about the finances of average Americans. Her work led to an invitation from Rep. Rosa DeLauro (D-Conn.) to speak with about 40 House members at a dinner in early 2005.

"She said in my living room, 'We cannot sustain what's going on with housing. It is going to crash,'" DeLauro recalled. "It was prescient."

As the housing market cratered and the deep recession approached in the summer of 2007, Warren proposed a new idea — a financial version of the Consumer Product Safety Commission, which polices household products for defects.

"It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house," Warren wrote in an article for the journal Democracy.

"But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street — and the mortgage won't even carry a disclosure of that fact to the homeowner," she wrote.

Obama used the toaster analogy when he talked about problems with mortgages and credit cards on "The Tonight Show With Jay Leno" in 2009, and he adopted Warren's idea for a consumer agency when he proposed his overhaul of financial regulations.

Warren helped pitch the idea with an elevated public profile as head of the Congressional Oversight Panel for the Troubled Asset Relief Program.

Appointed to the TARP panel in late 2008, Warren has led a series of high-profile hearings tracking how much money was doled out and how it was used.

Her sharp questioning of industry executives and Treasury officials thrilled liberals who believed the Obama administration wasn't being tough enough on Wall Street.

Despite reports that Geithner was not a big fan of Warren because of those hearings, he recently told reporters she was doing a good job.

"She represents to a large part of the country — not just people caught up in the damage of the crisis but people who view this system as being fundamentally broken — ... one of the most compelling advocates for reform," he said.

But not to everybody.

Rep. Jeb Hensarling (R- Texas), who served on the TARP panel, said Warren focused their work too much on policy recommendations and not enough on tracking the money. He also objected to Warren's decision to keep the panel's internal meetings private.

"Is that a harbinger of things to come?" Hensarling said, suggesting Warren could run the powerful new consumer agency with little transparency.

A strong opponent of creating the agency, Hensarling wouldn't comment on whether Warren should run it. He called her "a very smart lady" but said the director shouldn't substitute his or her knowledge for consumers'.

"If you've got someone who thinks they're smarter than the rest of us, someone who believes government has all the answers and doesn't believe that people should have basic economic liberties, that people are too stupid to understand basic disclosures," he said, "that frightens me."

But Warren's supporters said she believed consumers could make the right choices — as long as they have understandable information. Klee, the UCLA professor, said financial firms just didn't like the attention Warren had brought to some of their practices.

"She has a strong drive for truth and justice," he said. "Along those lines, she doesn't have a lot of sympathy for people who obfuscate things or take advantage of people unfairly."

jim.puzzanghera@latimes.com

Advertisement
Los Angeles Times Articles
|
|
|