The Magazine

Elizabeth Warren, Closet Conservative

The most misunderstood woman in Washington.

Aug 1, 2011, Vol. 16, No. 43 • By CHRISTOPHER CALDWELL
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But Warren’s understanding of our present predicament has a second part that is less archetypally right-wing, and this is the part that got more notice after the crash of 2008. It concerns the belief that banks are ever doing their best to rip people off and cheat them out of their money. Invited by the late Oklahoma Democrat Mike Synar to work on a congressional bankruptcy commission, she discovered some of the ruses banks used to trap people in punitive lending arrangements. No one who has applied for a credit card recently will be inclined to disagree with her, and the ruses have grown worse since then. Consider those 7.9 percent credit card rates that increase to a 29.9 percent “penalty rate” once you miss a payment by a day. Or those 18-page Bible-paper documents with all sorts of important account changes written in 7-point type, one of which explains that your account is about to be cleaned out via hundreds of dollars in arbitrary fees.

The real heyday of subprime had not yet begun when Warren wrote her book, but its principles were already in place in the banking industry. Almost anyone who uses a bank will have a story of making a $1,000 deposit drawn on a bank across the street, meant to cover four $200 checks written two days later and cashed four days after that​—​and seeing the bank put a hold on the deposit just long enough so they can collect $35 “bounce” fees on each of the four checks (although the checks do not actually bounce!). 

Warren was outraged at such chicanery long before the economy tanked. That is why she retains so much credibility among neutral observers, and why her approach to the finance crisis took the consumer-protection form that it did. It may not have been the most effective way of approaching the finance crisis, but it was the way most Americans understood. You could tell there was a finance crisis because real banking​—​i.e., borrowing at low interest and lending at high​—​was disappearing from the American system, replaced by this sneaky game of devious tricks and arbitrary penalties.

Unfortunately for Warren, no one was in a position to promote her politically for her pains. She was the only white working-class Democrat left in captivity. Republicans saw her as a Naderite and also someone who might steal a bit of their own thunder. Democrats saw someone who was quite possibly a Democrat only through Ivy League peer pressure or lack of self-knowledge. Almost every step the Obama administration took in the early stage of the crisis pitted its own heavy hitters against her. When Warren was involved in the congressional TARP oversight panel, she quarreled with Treasury Secretary Tim Geithner over why the insurer AIG was bailed out in such a way as to make whole all of its creditors​—​notoriously including Geithner’s friends at Goldman-Sachs. She was right and won the argument. Geithner was more strident and won the battle.

There were good reasons for the president not to nominate Warren, including the ones advanced by congressional Republicans. That anyone should run a bureau of his own design is an affront to the spirit of separation of powers. Warren understood economics less well than many of her congressional interlocutors, and she understood diplomacy less well than any of them. But she understood the finance crisis better, she was the first to see it coming, and she did so by the simple means of listening to the American middle class. That is not nothing.

Christopher Caldwell is a senior editor at The Weekly Standard.

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