Few people got a career boost from the recession. But Elizabeth Warren, the Harvard law professor who had little name recognition before the economic crisis, has. Not only was she appointed by Senate Majority Leader Harry Reid in 2008 to chair the Congressional Oversight Panel (COP), she is now under consideration to be nominated to head the Consumer Financial Protection Bureau (CFPB) – a new bureaucratic arm created by the financial reform bill.
Championed in the press as a warrior for reform — a May 2010 Time magazine cover story named her one of the “new sheriffs of Wall Street” — Warren’s charge at the COP is to investigate TARP, provide oversight for the Treasury Department and ensure transparency. But even more than that, her job is to make sure taxpayer money wasn’t wasted by the bank bailout.
In other words, Warren is, according to the narrative, the ultimate advocate for consumers. With such a noble image, it’s no wonder many think she is the ideal candidate to head the CFPB. A quick Google search of Warren produces headlines like “Elizabeth Warren: Wall St.’s Public Enemy No. 1,” and “There are Zero Good Arguments for Blocking Elizabeth Warren.”
Since her appointment to COP, Warren has been a media hound, appearing on the Daily Show twice, the Colbert Report, PBS and myriad other news programs. She’s been profiled in Rolling Stone, Fortune, the New York Times and Newsweek. One raving piece in Slate dubbed Warren the “TARP Queen,” and attempted to explain “why we should all bow before Elizabeth Warren.”
One thing mentioned less often is that to those in the financial and business world, Elizabeth Warren is anything but the ideal candidate. And not for reasons one might assume.
For them, Warren gets far too much credit when it comes to consumer protection. Some say she is the cause of the very thing she is fighting. One industry expert explained that her work has made it easier for consumers to bring suit against financial service providers, leading to banks having to cover themselves with extensive legal safety nets.
On the surface, Warren’s resume is impressive. Prior to joining Harvard Law in 1995, she taught commercial law at the University of Pennsylvania, the University of Texas, the University of Houston Law Center, the University of Michigan and Rutgers University.
One former student, Katherine Porter, now a law professor at the University of Iowa, told The Daily Caller that there is no real reason to oppose Warren. “The criticisms about her lack of experience in management are just a front for other concerns,” she said.
“There is some fear about her lack of willingness to compromise, but she’ll do what it takes to do what she thinks is right,” said Porter. “She’s not going to back down because it would be easier to give in.”
Moreover, her teaching background allows her to have what Porter called a “different vision of public engagement. That is the key difference between her and the other candidates.”
“She is absolutely the ideal candidate, based on her experience, her expertise, and passion for this area,” Tim Duncan, Chairman of the American Business Leaders for Financial Reform, told TheDC.
“Most appointments for agencies like this come from the banking industry,” said Duncan. “It’s very important to have a candidate that represents consumers. She’s done that for three decades in a reasonable way.”
He continued: “She’s not anti-bank, she’s anti-bad financial products.”
According to Harvard’s website, Warren has written more than 100 scholarly articles, six academic books and two bestsellers. What is probably her most well-known book is 2003’s “The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke.”
But is Warren’s career as an academic preparation enough for entering a position of oversight and policy making?
According to some industry insiders, the hype surrounding Warren and her almost assured position at the CFPB is more than a little unwarranted. “I don’t feel comfortable that she has a grasp on what it takes to run a small bank,” George Beattie, president of the Nebraska Bankers Association, told TheDC.
Beattie, who said he’s against the CFPB in general, said that now that it is law, he is against Warren specifically and had been lobbying against her nomination. “What she fails to understand is that most creative ideas come from small banks that cater to borrowers,” said Beattie.
“We don’t oppose her personally,” Roger Beverage, the president of the Oklahoma Bankers Association, told TheDC. “I have the highest respect for Elizabeth Warren, but she is somebody I could not support for this position. She doesn’t see the world the way traditional bankers do.”
A source close to the banking industry told TheDC his own fears went deeper than that. According to him, authority that was given to the CFPB and its director is unprecedented. He even went so far as to question Warren’s credentials.
“People give credit to Elizabeth Warren [for the idea of the CFPB], but I’m not sure if that’s right,” he said. “The idea predates legislation that came out of the White House. People don’t really understand the genesis of the agency.”
According to Anthony Randazzo, the director of economic research at the Reason Foundation, “Elizabeth Warren has been the longest visible advocate for consumer financial protection ‘reform,’ but it’s partly because of people like Warren that there is confusion for consumers in the first place.”
That point was raised by numerous financial experts who said that the problem with having strong consumer advocacy is that is shifts the weight of responsibility away from consumers. In the end, that promotes a culture where the public doesn’t have the incentive to pay attention to banking rules or the consequences of missing a credit card payment.
But even Warren’s academic laurels which much of her reputation rests on have come in to question. Indeed, for all her scholarly credentials, said Randazzo, “she has been debunked a lot.”
“Try and find a 30-page checking account guide like she claims, the longest you’d find is probably 13 pages,” said Randazzo, referring to a 2007 essay Warren wrote about complex credit card contracts. In it, she claimed that “30 pages of incomprehensible text” were designed to confuse the consumer.
One such Warren “debunker” is Megan McArdle, the economics and business editor at the Atlantic magazine. In numerous blog posts, McArdle has challenged the academic work Warren has been so highly praised for throughout her career.
In a post dated June 4, 2009, McArdle took on what was then a very recent report published by Warren and two other colleagues that argued that high medical costs had become the biggest reason for bankruptcy filings:
Yet upon closer examination, it turns out that it is not just wrong, but actively, aggressively wrong. Warren and her co-authors have obscured important and obvious facts that call the integrity of the work into serious question.
According to McArdle, what Warren purposely obscured is the fact that between 2001 and 2007, bankruptcy filings decreased dramatically — a fact that essentially invalidates the report. In another post published just last week, McArdle accused Warren of skewing her studies to reinforce already held beliefs by the left.
“Her work gets so much attention because it comes from a Harvard professor,” McArdle wrote. “And this isn’t Harvard caliber material — not even Harvard undergraduate.”
That may sound harsh, but as McArdle points out, if Warren obscures inconvenient facts in her studies, what else is she hiding from the public? It’s an important question for someone who could have an enormous impact in shaping the financial and consumer landscape in the coming years.