TARP Oversight Elizabeth Warren

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Bank-bailout Congressional Oversight Panel chair weighs in on the foreclosure crisis and the potential of a consumer financial protection agency.

Time named Elizabeth Warren one of the world's 100 most influential people and President Obama selected her to launch the newly created Consumer Financial Protection Bureau. She's devoted much of her career to studying the economics of middle class families and is also a best-selling author of books on credit and economic stress. On leave from teaching law at Harvard, Warren previously taught at Texas, Michigan and Penn and is credited with groundbreaking research on the U.S. bankruptcy system. She formerly chaired the Congressional Oversight Panel.


Tavis: Elizabeth Warren is chair of the congressional oversight panel which was established in 2008 to oversee the Troubled Asset Relief Fund, better known as TARP. She’s also a noted author and a professor of law at Harvard. She joins us tonight from Washington. Professor Warren, good to have you on this program.
Professor Elizabeth Warren: It’s good to be here.
Tavis: Let me start with some issues in the news I’d like to get your take on; then we’ll move to some other things. Let me start in no particular order with the news of a few days ago. We saw the Financial Crisis Inquiry Commission, headed by former California Treasurer Phil Angelides, calling in some big-name persons who had something to do with the mess that we are now in.
I specifically want to talk about Robert Rubin, the former head of Citigroup, a former Treasury secretary himself. I want to talk about Alan Greenspan, former Fed chair, and what you make of the fact – and this is not my read; I think most persons who saw this would agree that they did what they could to back away from taking personal responsibility. How did you read that testimony last week?
Warren: I really read it as “This wasn’t my fault. All I did was run a multibillion dollar company,” or “All I did was run the Fed, this enormously powerful company, enormously powerful agency, but I didn’t really understand what was going on here.” Excuse me – it was your job to understand. I’m not sure whether it’s worse to say yeah, I understood it and I went ahead and broke it anyway, or to admit that you were running something like this and you couldn’t see the most obvious problems that were developing out there. I just find the whole thing amazing.
Tavis: What about that notion, Professor Warren, that both of them promulgated that nobody saw this coming, that everybody was duped? You’ve heard them say this.
Warren: I have, and I have to say to you nobody saw it coming who wanted to keep their eyes tightly closed and their ears covered up, you’re absolutely right. There were many people who were talking about the fact that we were building an entire economic structure with these securitized instruments on home mortgages that were not repayable, families making $36,000 who’d gotten into mortgages that were going to cost them more in monthly payments than they made in a month.
We could tell that, it was there, it was obvious, it was on the face of it, and these folks were raking in the money on the city side so fast, and the other Wall Street banks, they couldn’t hear it, and the Fed just kept saying, “Party on.”
I think part of what gets me about this, though, Tavis, I really want to pause for a minute. You started with a key word, and that’s “personal responsibility.” Citibank, the very same group that went to Congress and said, “You’ve got to change the bankruptcy laws, because when people file for bankruptcy that’s not personal responsibility.”
They say that even though people file for bankruptcy in the aftermath of serious medical problems, when they lose their jobs, when their families break up, when somebody dies in the family. There’s no personal responsibility if you can’t repay Citibank.
Here we are in the middle of this mortgage crisis, and just yesterday JP Morgan-Chase is testifying to Congress, saying, “We have mortgages with these people and they can’t break their mortgages because they need to take personal responsibility.
I don’t get why personal responsibility is a one-way street. It applies to a working person; it applies to somebody who’s struggling, somebody who’s trying to keep a family going. I’m in favor of personal responsibility there.
But why doesn’t that apply to CEOs? Why doesn’t that apply to heads of the most powerful agencies and arms of government? Why don’t they have some personal responsibility?
Tavis: The congressional oversight panel that oversees TARP that you in part oversee put out another report, as you may have heard or know, earlier today on the foreclosure crisis, and I wrote this down because I want to quote it accurately.
They write, “Despite Treasury’s efforts, foreclosures have continued at a rapid pace.” What are we to make of that particular report that foreclosures are not slowing down one bit as yet.
Warren: That’s right. In fact, let me just give you another number on that: 200,000 families are losing their homes to foreclosure every month right now, and here’s Treasury’s response. Treasury’s had a program – remember, we’re now three years into this crisis. To be fair, there’s been change in administration.
This Treasury has had its plan in place for a little over a year now and they have managed – for every one family they’ve managed to get into a modification of their mortgage 10 more families have lost their homes to foreclosure.
So good for the one family, good for Treasury for being able to help one family, but this is a small program relative to the scope of the problem we’ve got, and this problem is not letting up.
Tavis: Now specifically, Professor Warren, to the work that you do, we hear from the Treasury secretary, speaking of Mr. Geithner, that TARP may cost less than originally thought. How do we read that? Is that good news?
Warren: Well, there is some good news. In terms of dollars on the table we’re getting more of the money back from TARP and so it looks like right now we may be down only – you’ll pardon me for saying that – about $100 billion, maybe $117 billion. But – but – let me underline here this isn’t just about dollars, because he world changed when we did TARP.
The largest Wall Street banks now have an implicit guarantee from the U.S. taxpayer, you and me, and so Citi, for example, Citibank, they have a rating in the marketplace for how solid they are financially. They are getting three clicks on their rating, from a BB to an A, not based on their financials.
The rating agency said based on their financials they’d be down here. But because they have an implicit guarantee from the taxpayers, we’re going to rate them a whole lot higher.
I pay for homeowner’s insurance, I pay for car insurance, I pay for health insurance. These guys have don’t go broke insurance, only they don’t pay a penny for it. So you tell me whether or not we’re getting our money’s worth out of TARP.
Tavis: Are we ultimately going to get this Consumer Financial Protection Agency?
Warren: I hope so, but Tavis, I don’t know. Right now this consumer agency is our one hope to try to straighten out a consumer credit market that’s broken. It’s about trying to get us back to two-page credit card agreements that you can actually read, see what the terms are, see how much it’s going to cost you, see what kind of risk you’re taking on so you can exercise some personal responsibility, and so you can compare one card to another.
Same thing on mortgages, same thing on check overdrafts, same thing on payday loans. That’s the goal of this agency – somebody in Washington who works on behalf of the consumers.
Whether or not it’ll go through or not, this is right now a ball that’s up in the air and has not come down. I hate to sound old-fashioned, people tell you about writing your senators, this one is hung in the Senate right this minute. This is the time. Call your senators, write your senators, email your senators, get your neighbors to do that, and say you’ve got to give us a strong consumer agency, because the banks are spending $1.4 million a day lobbying to block this agency.
Tavis: That figure, Professor Warren, does not surprise me. I guess the question – I’m not asking this out of naiveté, obviously – but the question is given all that the American people have said about how disappointed they are about this crisis, given that it’s our money bailing people out, why would something like this not be a priority in the United States Senate?
Warren: I have to tell you, when I first came forward with this agency I thought it was easy. I thought this would happen in a matter of weeks. But you have to remember the power of these Wall Street banks.
Senator Durbin from Illinois said about a year and a half ago the banks really own this town. Now, I hope he’s wrong, and I’m willing – this shows you the optimism of an outsider. I’m not a Washington person. But this is a case where we’ve got families on one side; we’ve got the banks on the other side. They’ve got all the money, we’ve got all the hurting, but we also have the votes.
We’ve got to use those votes, and we’ve got to tell our senators I don’t just want you to vote the right way, I want you to get out there and speak in favor of this. I want you to put some wind in its sails. I want you to make this happen.
This market is broken. These people are ripping our families off; they are hollowing out our middle class. We cannot have that.
Tavis: Finally, before I let you go, I can pretty much guess how you’re going to respond to these two questions, but let me ask. Let me ask anyway. Your name, as if you did not already know, is being circulated around Washington, never mind the fact that you are not a Washington insider. There are those who are suggesting that if we do get this Consumer Financial Protection Agency off the ground that you would be the appropriate person to head that agency, number one.
Then I look in today’s “L.A. Times” and other places and I see your picture as being on the list of persons who might replace retiring Justice Stevens. So your thoughts on either one or both of those positions that you have not yet been offered? (Laughter)
Warren: So let’s – you just hit the key part, Tavis – nobody’s offered me another job. But let me say two things, the first one on the agency – I am really putting every ounce of my energy behind building a structurally strong agency no matter who’s heading it.
For now, I really don’t want to make this about me. I really want to make this about building the right agency that will last not for five years but for 50 years, for 500 years. That’s what I want.
On the Supreme Court, is there anybody who ever went to law school who didn’t think about wow, wouldn’t that be something? It is a profound honor just to be on a list, and I will always remember that. I’m deeply honored.
Tavis: If asked to serve, though, I take it that you would in either of these positions?
Warren: Tavis, no one’s asked.
Tavis: (Laughs) You know what? You ought to be an ambassador, that was so smooth. (Laughter) If you don’t get offered either of these other two spots. I’m delighted that you are exactly where you are at this moment, doing the hard work that you’re doing. Thank you for your courage, for your conviction and commitment, and I’m honored to have you on this program.

Warren: I’m honored to be here. Thank you, Tavis, you’re a real friend.

Last modified: April 26, 2011 at 12:28 pm