Exclusive reporting for FinReg21 by Darrell Delamaide
It only took a toaster to convince President Barack Obama that Elizabeth Warren had a good idea.
Warren, a Harvard law professor and longtime consumer advocate, likes to say that consumers have more protection for toasters they buy than the products they invest their life savings in.
“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 a 2007 article. “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.”
Obama picked up the analogy when he appeared on the Tonight Show with Jay Leno in March. “If you get a toaster that blows up in your face,” he said, “there is a law that says your toaster has to be safe.” There needs to be the same kind of law if a mortgage blows up on you, he said.
So it was no surprise that when the administration put out its white paper on regulatory reform in June that it prominently featured the consumer financial protection agency that Warren has advocated to make financial products as safe as toasters.
Last week, the Treasury Department released its draft legislation to create the new agency and House Financial Services chairman Barney Frank pledged to have a bill out of committee before the August recess.
Under the administration plan, a five-member board will head the new agency, with one of those members designated as director and chief executive. Odds are fairly long in Washington that the first director will be Elizabeth Warren, who has gained a number of fans in Congress with her chairmanship of the Congressional Oversight Board for the bank bailout.
For the 60-year-old Warren, who was born in Oklahoma of Dust Bowl-era parents, it would mark a new stage in a long odyssey.
The precocious Warren graduated from high school at age 16 and won a full scholarship to The George Washington University in Washington, D.C. for debate. She got her degree in speech pathology and audiology and worked with children who suffered from brain traumas.
But when she went back to Oklahoma one Christmas her former debate partners who had gone to law school urged her to try it. She was accepted at both Rutgers and Columbia law schools but had to choose the New Jersey state school because she couldn’t afford the price tag at Columbia.
“I took to law school like a pig takes to mud,” she colorfully told one interviewer. With her law degree, she taught at a succession of universities as her family moved around, ending up at Harvard, where she is now Leo Gottlieb professor of law.
While pursuing her academic career in commercial and bankruptcy law, Warren has focused much of her attention on the middle class financial situation. She has co-authored two books with her daughter, Amelia Warren Tyagi: The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke, in 2003, and All Your Worth: The Ultimate Lifetime Money Plan, in 2006.
It was this focus on middle class families that prompted Senate majority leader Harry Reid of Nevada to name Warren the chairman of the oversight panel for the Troubled Asset Relief Fund. Warren has not hesitated to use the post as a bully pulpit for drawing attention to what she feels are anti-consumer practices at banks. The two Republican members of the panel have criticized her for going beyond the scope of TARP oversight.
But Warren is unapologetic. She says that the lobby interests are so powerful in Washington that she will take every opportunity she has to promote her views and influence the political agenda.
As she told Harry Kreisler in a Conversation with History at the University of California, Berkeley: “I believe now in guerilla warfare. I'll go anywhere, I'll do anything to talk about these issues, and it's a lot more than bankruptcy. It's about the economics of the family, it's every part of it.”
If the Consumer Financial Protection Agency becomes a reality, it’s likely that Warren will graduate from being a guerilla to being a general in her fight for consumer rights.
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