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The Consumer Activist
Like Bair, Elizabeth Warren comes from the central plains. She was born and raised in Norman, Okla., with three older brothers and a fierce competitive streak to match. She was the state's top debater at 16; at 19, she was married; at 22, she had her first child. She enrolled in law school at Rutgers and two years later went to work as one of two female summer associates at the oldest continuing law firm on Wall Street. She says, "I still remember one of the partners taking me aside and saying, 'You know, being a summer associate is all well and good, but take a deep breath. Try to figure out if you think these guys are ever going to make a woman partner.'"
Just as she remembers his words, she remembers the brushback stirring her competitive juices. "It made me think, I can do that." But her career led elsewhere, into bankruptcy law. In 1978, Congress passed a revamped bankruptcy code, making it easier for businesses and individuals to start anew. Warren was teaching law at the time in Houston and decided to investigate, initially expecting to find that the system was filled with sleazy debtors. She found instead that most bankruptcies resulted from job loss or illness at home, a situation made worse by banks that were increasingly learning to trap people in costly debt cycles.
How? Partly by just confusing them. "For Bank of America's credit card in 1980, the agreement was 700 words long," she says. "The average credit-card agreement by the mid-2000s was 30 pages long, and it was loaded with 'double-cycle billing' and 'LIBOR-linked' terms no one understood." The effect, Warren concluded, was akin to predation, not just for those with bad credit but for the entire middle class, which she felt was being hollowed out by agreements many of its members didn't understand. Over time, her academic work began to spill over into activism. She appeared on Dr. Phil, giving financial advice to young families; met with bank executives; and with her daughter Amelia wrote a nonacademic book called The Two-Income Trap, which Barack Obama cited before his run for President.
A couple of months after Lehman Brothers collapsed in 2008, she was preparing a barbecue for her students at Harvard Law when the phone rang. "He's saying, 'This is Harry Reid,' " Warren remembers. "Who?" As part of the final wheeling and dealing that led to the passage of the $700?billion TARP, Congress demanded an oversight board. Reid asked Warren to skipper it.
Since then, Warren has wielded her clout like a cudgel, releasing monthly reports demanding more information from Treasury, better investment returns from the banks and greater efforts to help borrowers. Warren's relations with Treasury officials and the banks have often been strained, sometimes by the harshness of her panel's critiques. She remembers talking in early 2009 with an official on Capitol Hill she won't say whom who told her point-blank, "That's not what reports are supposed to look like." She asked, "Why not?" The reply: "The language is far too direct."
At about the same time, President Obama decided to adopt another of Warren's ideas, from a 2007 academic article: a new Consumer Financial Protection Agency that would be devoted to protecting customers from tricky financial products. Bair and Schapiro voiced their support for the agency, even as the U.S. Chamber of Commerce promptly announced a willingness to spend "whatever it takes" to defeat the proposal. At least $3 million in advertising later, the chamber's effort has had only marginal success, though the fight continues in the Senate.
In the meantime, Warren has become something of a public intellectual, always game for interviews with Jon Stewart, Charlie Rose and Bill Maher. Her rising fame has come with added pressure. "It gets me deeply anxious," she says. "Here's this one brief minute, just like the one minute on Dr. Phil. Will I say the thing that needs to be said? Will I get it right? Will Congress make the changes they need to make?" The longer the odds, it seems, the more determined she is to succeed.