Tuesday, August 17, 2010

We need a new sheriff ...

This remarkable populist video promotes the hope that President Obama will appoint Dr. Elizabeth Warren as the founding head of the Consumer Financial Protection Bureau created by the new financial reform law. What kind of ordinary looking, white, academic woman inspires this kind enthusiasm?

For starters, Warren came up with the idea of the CFPB. But perhaps even more to the point, though she teaches at Harvard, she can explain the financial facts of life for the ordinary U.S. middle class family in a way we can all understand. For example, in 2005 when times were supposed to be good, she wrote this deconstruction of how so many people found themselves helplessly mired in credit card debt:

Today there are five times as many families filing for bankruptcy as there were in the early 1980s. Home foreclosures have more than tripled in less than 25 years. Nearly half of families with credit cards report that they cannot afford to pay more than their minimum monthly payments. One in every three families with an income above $35,000 reports owing medical bills they cannot pay. ...

The over-consumption story dominates every discussion of the financial condition of America’s families, but when all the changes in family spending over the past generation are added up, a very different picture emerges. Families are spending less on luxuries and more on the basics of being middle-class. Even with two people in the work force, today’s families trail those of a generation ago in the struggle to make ends meet—to pay for their homes, health insurance, transportation, and child care. ...

Why does the over-consumption myth persist? Why does a story of misbehavior and irresponsibility win out over a story of hard-working people who get caught up in job losses, medical debts, and family breakups? Why is there no acknowledgement that financial misfortune is often a matter of bad luck, and that the long lines at the bankruptcy courts and the high rates of credit-card default have little to do with irresponsible spending?

One explanation is political. High-interest credit-card issuers and sub-prime-mortgage lenders operate only because a careful combination of deregulation and protective regulation permits creditors to charge fees and interest rates that would have landed them in jail less than 25 years ago. If millions of Americans believed that families were losing their homes because of deceptive marketing and oppressive contract terms, there would be a public outcry to change the regulations that favor banks over consumers. But as long as Americans believe that the only people in financial trouble are the spendthrifts, there is no reason to restrict the lenders. Everyone is getting just what he deserves.

Boston Review, October 2005

It's easy to see why the credit card companies don't want this woman in a regulatory role -- and why progressives will applaud if President Obama appoints her to the job.

Do read this the entire article. It's the most understandable explanation of how ordinary families are squeezed in the real world that I've seen anywhere. Warren's got the scene covered.


Betty Johanna said...

Not only can "she can explain the financial facts of life for the ordinary U.S. middle class family in a way we can all understand," but she's got a great sense of humor and can hold her own on The Colbert Report and The Daily Show. (I'm genetically unable to embed URL's but search for "Elizabeth Warren Colbert Report" and "Elizabeth Warren Daily Show.")

Darlene said...

Go Elizabeth ! The working guy needs you.

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