Why Elizabeth Warren is Dr. Phil’s Go-To Economist

Elizabeth Warren, the Harvard law professor charged with monitoring the Treasury Department's bank bailout, has spent a lifetime defending what she calls "play-by-the-rules families," or "play-by-the-rules, heart of middle class" Americans who happen to be in debt. Her best-selling books on personal finance are populated by good people, frequently described as "ordinary," and bad people, frequently described as "predatory." In speeches, congressional testimony, and talk-show appearances, Warren tells and retells the same woeful tale of "respectable and dependable" families who suffer unforeseeable tragedies, only to be pounced upon by scheming creditors.

So when Sen. Majority Leader Harry Reid called Warren last fall and asked her to oversee the $700 billion bailout of ailing financial institutions, it was something like asking Sinclair Lewis to oversee the plant. Indeed, Warren's Congressional Oversight Panel reports sound a lot like her books. Asked to assess the health of American banks, she delivers a sweeping history of financial crises worldwide. Asked to assess the efficacy of TARP disbursements, she declares that American families are "awash in debt." Her fellow panel members tend to react with puzzlement: "The central part of the April report... is consumed with discussion which, although interesting to many readers, is at the edge of-and outside the core mission of the Panel," writes panel member and former Republican Sen, John Sununu.

But it would be a mistake to conclude that Elizabeth Warren is an ineffective watchdog; her ability to frame the economic issues in terms of right and wrong can make things very awkward for a treasury department trying to quietly transfer billions of taxpayer dollars. Timothy Geithner's tepid guarantees of accountability aren't reassuring. It's comforting to have someone on the inside attacking the treasury for its failure to explain itself or to convey even the most basic information to the taxpayers whose money it is giving away. (What, for instance is the justification for attaching different conditions to the money earmarked for various financial institutions?) Plenty of educated Americans suspect that banks and government are colluding against them. Warren is a woman capable of explaining, in precise and uncompromising terms, how severely they are getting screwed.

Washington is full of monitors-cubicle-bound bureaucrats at the Government Accountability Office and the Office of Management and Budget-who spend their days writing reports even their bosses won't read. Elizabeth Warren, on the other hand, is a regular on Dr. Phil. She has taken a potentially dreary job-explaining the complexities of the Troubled Asset Relief Program (TARP), and turned it into a platform for sexy media appearances on The Daily Show, Squawkbox, and NPR. She cultivates the image of a scholar-sensible hair, collared shirts, utilitarian glasses-and uses it to establish herself as resident star professor, working hard for You.

The unifying theme of Warren's popular work is the "collapse of the middle class," and she is capable of casting nearly any economic indicator in support of her core thesis. The entry of married women into the workforce massively increased household incomes, and would seem to therefore increase economic stability. Warren argues that it left families more insecure because they now lack an "extra" worker who could, in theory, fill the gap if dad's hours were cut or he fell ill. The fact that clothes, food, and appliances have gotten far less expensive, and therefore eat up smaller percentage of any given families budget, would seem to be good news. But Warren sees only more insecurity; families could once salvage their budgets in tough times by making relatively painless cuts in these expenditures. Cutting back on clothes and food won't help much anymore, because so little of the total budget is devoted to such things.

Warren's rhetoric-"And then it happened," is a favored locution, closely followed by "nobody's safe"- betrays a fear for the stability of a certain kind of traditional American household. It's not a poor household; one could easily finish The Two Income Trap [2] and come away with the idea that the poor are making out like bandits in terms of social welfare and news coverage, while the middle class suffer, un-helped and ignored. It's not necessarily a progressive household, either; Warren derides left feminists in the same book, and laments the pressure women feel to work in order to render their families financially competitive. Nor is she above stretching the numbers to suit an agenda; she has famously claimed that 50 percent of all bankruptcies are caused by medical debt, a number that involves absurdly generous definitions of "medical" and "caused."

Warren was born in 1950s Oklahoma to parents whose memories of the depression were still weighty enough to impress deeply upon their children. Before her time, her father had lost the family's savings to a crooked business partner, and he later suffered a heart attack that forced Warren's mother into the workforce. Warren overcame the economic instability of her home life by winning a full debating scholarship to George Washington University at the age of 16. Warren's male friends would go from GW to law school, while she quit working to have her first child. Her husband encouraged her to stay home and care for the children-"You'll love it," he said-but she was restless. She enrolled at Rutgers School of Law. After having a second child, she went on to teach at the University of Houston, UT Austin, the University of Pennsylvania, and finally Harvard.

"Isn't that a great story?" Warren charmingly asked Berkeley's Harry Kreisler after relating the events of her early life. And indeed, Warren's career can be read as fierce loyalty to a narrative-that of the struggling, decent middle-class family fighting to pay the bills. But the credit economy Warren rails against involves many stories, of which her favorite is only one. There is, for instance, the story of how much the poor suffer in the absence of credit, and, unable to obtain Mastercards, turn to far more expensive layaway plans or loan sharks or pawn shops. There is the story of liberal activists fighting to extend credit to the poor, rather than activists trying to take it from them.

Nor can a serious analysis of the banks, and the TARP money they've accepted, merely focus on middle class households that were tricked into signing a subprime mortgage. And some of Warren's reports feel like pointless sermons, and some are unintentionally hilarious-such as when she asks treasury a bunch of pointed questions to the effect of "Where are our billions of dollars going?" and proceeds to lay out treasury's non-answers in chart form.

But then, no one reads the reports. People watch television. And on television, Elizabeth Warren emanates the intelligence of a scholar, the Manichean morality of a preacher, and the fluidity of a debater. Her penchant for distilling incredibly complex economic forces into simple morality tales serves her well in public appearances; there are some very simple, sound bite-sized tales to be told. The Treasury Department has been misleading Americans about the costs of its programs, has failed to require those to whom it gives money to account for how it is spent, and has failed to adequately explain its standards for assessing the deservingness of any entity receiving billions in taxpayer funds. The current head of the congressional oversight committee can explain all of this to you in terms of simple rules, and the need to follow them.

"I've spent four weeks now looking for someone who can give me the details of the stress test so that we can do an independent evaluation of whether the stress test is any good," she told the Boston Globe. "'We get: ‘someone will call [you] right back.' Only the call doesn't come.'"

Warren has told this story several times in print and on television, and every time it has the same effect: Here is a woman being treated exactly the same way any of us would expect to be treated were we to dial up treasury asking for answers. Whereas most discussions of the Troubled Asset Relief Program veer toward a jargon impenetrable to the taxpayers funding it, Warren is very good at establishing the Treasury Department as a physical entity, staffed by human beings, spending actual American dollars. She pulls abstract talk of TARP back into her own grounded sense of obligation, constantly reminding her audience that treasury has a responsibility to demonstrate that it has done something other than swell corporate coffers with billions in taxpayer cash.
Soon after joining the panel, Warren ordered an assessment of treasury's claim that it had received $254 billion worth of assets for $254 billion it had pumped into banks. Her investigation found that treasury had in fact overpaid by $78 billion. Warren didn't wait for journalists to get around to reading the report; she made her way round the news networks, telling taxpayers that their $254 billion "investment" was more like a $78 billion transfer. During an episode of Greta Van Susteren's On the Record, the shortfall was illustrated with graphics of freefalling dollar bills, red, downward pointed arrows, and a torn American flag. "I'm scandalized," Van Susteren sputtered. If they're going to give away billions, "they have to tell us!"

"That's the deal," Warren replied. She sighed deeply, brow furrowed. "If what we're going to do here is subsidize these banks, especially with that kind of money, you're just gonna have to belly up and tell the American people. Nothing justifies not being straight with the American people. You have to tell the truth."

Blurb Image: 

Large Image: