Published on
The Boston Globe

In Fight Over Credit Rules, Elizabeth Warren Wields a Plan

Michael Kranish

TARP chairwoman Elizabeth Warren stands in the Congressional Oversight panel's offices on Capitol Hill. (Cliff Owen/MCT)

CAMBRIDGE - Her critics portray her as an ivory tower elitist intent on disrupting the American Dream. But to her legions of fans in the Democratic Party, Harvard law professor Elizabeth Warren is the nation's leading economic David, fighting to protect middle-class families from corporate Goliaths.

Her critique of the lending practices of big banks and mortgage companies is drawing plenty of attention, airing on everything from CNN to "The Daily Show'' and Dr. Phil, even winning a cameo in Michael Moore's latest movie, "Capitalism: A Love Story.''

And she is chief architect of a new government agency to protect consumers from predatory lenders, a central element of President Obama's efforts to avoid another economic meltdown. That makes her a big target.

"I have dubbed it the ‘Restrict the American Dream and Job Destruction Act,' '' Representative Tom Price of Georgia, chairman of the Republican Study Committee, a group of 110 GOP House members, said in an interview about Warren's proposed Consumer Financial Protection Agency. "I have no doubt that as a Northeast elite academic it is difficult for Ms. Warren to appreciate that, but that's exactly what it will do.''

Another critic, George Mason University law professor Todd Zywicki, said, "Bluntly put, she hates banks.''

Warren, whose beliefs stem in part from her upbringing in a financially pressed Oklahoma family, counters: "That is just wrong. What I hate are banks that cheat people.''

Warren, 60, has researched the issue of risky credit practices and bankruptcy for years, as she worked her way to Harvard Law School through a handful of university teaching jobs. Deceptive lending practices, she said, were at the root of the 2008 financial meltdown and have devastated the middle class.

While business groups are opposed to the consumer agency, they are even more worried about the possibility that, if it is created, Warren will be put in charge.

"We believe the most effective director would be one with real-world experience,'' said Scott Talbott, senior vice president of the Financial Services Roundtable, which represents many large banks. Warren said it is premature to discuss whether she wants to head an agency that doesn't yet exist.

Warren's proposal still faces major hurdles. Having passed through the House Financial Services Committee, led by US Representative Barney Frank of Massachusetts, a Warren friend, it must now pass the full House and then the Senate, where Republicans have threatened to filibuster against it.

The US Chamber of Commerce has launched an intensive campaign to kill the idea, using the theme: "Stop the Consumer Financial Protection Agency.''

Warren's route to the center of the nation's debate over financial regulation has taken a more complicated path than many of her backers and critics may realize.

She was once a registered Republican who believed that most families who filed for bankruptcy or had their homes foreclosed were irresponsible. It was only after years of study, she said, that she determined that many families were not primarily at fault.


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The youngest of four children, Warren grew up at the edge of a wheat field in what she called a "cheap little crackerbox on the end of town'' in Norman, Okla. Her father had a series of financial reversals and became an apartment maintenance worker; her mother took telephone orders for Sears to bring in much-needed funds.

Living with three older brothers, she developed an assertive manner that led her to join her high school's debate team, which in turn led to her winning the Oklahoma debating championship and a college scholarship. Married at 19, she had a young daughter by the time she entered law school and was pregnant with a second child when she earned her degree. A stint as a work-from-home lawyer was followed by teaching positions at Rutgers School of Law, University of Texas School of Law, University of Houston Law Center, University of Michigan, and University of Pennsylvania School of Law, leading in 1992 to her initial arrival at Harvard.

But Warren left Harvard after a year, due in part to what she called a "hostile environment'' for women. Three years later, convinced that the environment had improved and desiring a bigger platform for her ideas, she returned to Harvard and has been there since.

She became a student favorite, relying on a rapid-fire version of Socratic teaching and a flair for the dramatic. In one recent class, she used some biting humor to chide a student who failed to respond correctly to her query. Casting herself as Vanna White, she pretended her blackboard was the Wheel of Fortune, twirled her arm in the air, and asked: "Do you want to buy a vowel?'' Her students appreciate the tough-love approach; one class gave her a poster that shows a comic book version of a Wonder Woman-type character who says, "If I want your opinion, I'll beat it out of you.''

Warren says she never envisioned herself as someone who would become a nemesis of corporate America. But after working on several bankruptcy studies, she concluded that most people who declare bankruptcy are undone by a combination of questionable banking practices and outsize medical expenses. She coauthored a book with her daughter, Amelia, called "The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke,'' which countered the belief that many families were squandering their money on unnecessary luxuries. She argued that many such families were going bankrupt and losing their homes to foreclosure because the cost of necessities had skyrocketed to unsustainable levels even when both parents worked.

But it wasn't just statistics that shaped her view. For years, she pondered why her parents had gone from a seemingly secure middle-class existence to more difficult circumstances.

"It is a story like my own family's story, of people who had the aspirations of the middle class, who often had ‘made it,' had gotten a decent education, married, had kids, gotten good jobs, but something had gone wrong, and they were now on the economic down slope,'' Warren said. As she described her parent's financial difficulties, she said, "This comes from my heart.''

By the time Warren returned to Harvard in 1995, she had switched her political affiliation to the Democratic Party because she was convinced that "the Republican Party had left me'' and left behind the middle class. At the same time, she became an academic adviser to a congressional panel that was studying bankruptcy law. To her dismay, Congress in 1997 voted for a law that made it harder for families to declare bankruptcy. Determined to stop the measure, she met then-first lady Hillary Rodham Clinton. Using charts and forceful language, Warren won over Clinton, who got her husband to veto the bill.

But in 2005, Congress once again approved the measure, with support from many moderate Democrats, and President Bush signed the law. In Warren's view, the imposition of tougher bankruptcy laws made it more difficult for many people to forestall foreclosure on their home loans and played a role in the subsequent financial meltdown.

Warren met Obama at a fund-raiser for the future president's campaign for US Senate in Illinois. Obama had heard about Warren and approached her, greeting her with the phrase: "Predatory lending.''

Obama then spoke at length about why he wanted to go to Washington to stop financial institutions from cheating consumers. Warren sought to reassure the future president that he didn't need to convince her.

"You had me at ‘predatory lending,' '' she said.

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