Warren on the Bailout

By Ethan Brown, Section Economy
Posted on Sun Apr 12, 2009 at 04:21:00 PM EST
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Must-read interview with Elizabeth Warren in the Boston Globe today.

Numerous critical points from Warren.

1--No clear goals from Treasury for TARP
2--The financial services industry wants to operate in a business as usual environment.

But Warren rightly points out that "their system has collapsed." Worse:[More...]

the insiders don't seem to have appreciated the seismic shift in their world when they need money, gifts, subsidies from outsiders. Anyone who thinks that they can take tens of billions of dollars of taxpayer money and continue to operate business as usual lives in a fantasy world that I don't understand. Culture clash? No! This is not a culture clash. This is not about taxpayers who don't get it. This is about people who think [in a] fantasy, that their world is prosperous and continues to create value that can be parsed out privately, when they are relying on huge subsidies from the taxpayer. It's just wrong!

3-- Warren grasps the huge moral dimensions/implications of the bailout:
Every time I do the paperwork for the panel and note a $10 billion expenditure, I think about how many schools that might have built, how many hospitals that might have updated. Those dollars are not just ink on a page. They're real.
4--A better, more just system can emerge from this crisis or we can go back to the old ways of staggering through boom-bust cycles.
It's the design of the rules going forward that will tell us or that will determine whether we are moving to a cyclical economy with high wealth, high risk, and crashes every 10 to 15 years. Or whether we will emerge, as we did following the new regulatory reforms in the Great Depression, with a more stable economic system that benefits people across the economic spectrum. It's an amazing moment in history.

It is indeed. And Warren is one of the few public figures rising to the moment with real integrity and with the public interest at heart.

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Warren on the Bailout | 48 comments (48 topical)

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Not feeling the amazement (5.00 / 5) (#3)
by pluege on Sun Apr 12, 2009 at 04:57:09 PM EST

I'm feeling Obamadmin in bed with the thieves
I'm feeling corrupt plutocrats with their grubby hands still on all the controls
I'm feeling coverup
I'm feeling the average schmoe, the country, and our grandchildren as far as the eye can see getting shafted
I'm feeling borderless plutocrats "too big to fail" not giving a crap about the country
I'm not feeling the sound of any serious discussion in Washington about bringing anyone to account or putting real controls in place to prevent a recurrence.

As far as I can see, the economic crisis and the TARP giveaway was the ultimate bush gift to the plutocrats and I'm seeing total Obamadmin buy-in to completing the heist.

The heist is the only thing amazing going on.

Welcome Martian (5.00 / 9) (#8)
by koshembos on Sun Apr 12, 2009 at 05:42:21 PM EST

Elizabeth Warren is a highly respected intellectual who has been dealing with problems of poverty and middle class for a very long time. She is more than qualified to criticizes the financial support inept people who work for Citibank and Bank of America get.

Just the other day, JP Morgan Chase has shown profit way overvaluing its toxic assets. It doesn't take an economist to see through the conmanship involved. Furthermore, the "new" behavior is identical to the old one which brought us to the brink of a depression.

For those who criticize Warren, make an argument against her logic; just saying that she doesn't qualify, disqualifies the the commenter. Name calling is not material for space for serious people.

New Accounting Rule (5.00 / 5) (#9)
by BackFromOhio on Sun Apr 12, 2009 at 06:57:56 PM EST

Weren't the banks encouraged to overstate the value of their toxic assets by the recent passage of a new accounting rule, encouraged by the Admin, that eliminated the requirement for banks to mark their assets to market, i.e., they can continue to carry toxic assets on their books at original value without having to mark down their value to reflect the significant drop in market value?
It seemed to me that all in government were all too happy to support the rule change.


This quote supports my point (none / 0) (#21)
by Green26 on Sun Apr 12, 2009 at 10:59:13 PM EST

about lack of qualification:

"Elizabeth Warren is a highly respected intellectual who has been dealing with problems of poverty and middle class for a very long time."

Where in that quote is there anything that indicates she's qualified to oversee US efforts to solve the financial crisis?


Well, she didn't loot the economy... (5.00 / 5) (#22)
by lambert on Sun Apr 12, 2009 at 11:28:05 PM EST

... and then collapse it. I'd say that makes her eminently qualified.

Maybe I should check with geek-esque first, though. Just to be sure.


What would (5.00 / 1) (#37)
by reslez on Mon Apr 13, 2009 at 10:28:13 AM EST

constitute qualifications by your standard? Extensive experience on Wall Street working for cancerous companies? Years behind a desk at the regulatory agencies whose multiple failures have become equally notorious? She teaches bankruptcy and commercial law at Harvard. What does she need to meet your exacting standards, a Nobel prize?

Warren's been an active player in economics for years and a strong advocate for the middle class, something the economy needs if we are ever to return to prosperity. She's a member of the FDIC's Advisory Committee on Economic Inclusion. She's worked with Americans for Fairness in Lending. She was Chief Adviser to the National Bankruptcy Review Commission.

At this point repeatedly questioning her credentials and ignoring her substance makes you sound like a crank. We've seen her output and her willingness to speak to power. Object to that, if you want.


She is a renowned expert on credit issues (none / 0) (#40)
by BobTinKY on Mon Apr 13, 2009 at 12:25:01 PM EST

and bankruptcy. She has been fighting the good fight aginst legalized usury and other banking/financial reforms for a long time.

I would trust her as much as any other source on these matters.


: She is not a reknowned expert on (none / 0) (#45)
by Green26 on Mon Apr 13, 2009 at 01:21:43 PM EST

credit issues. She is a law professor. Bankruptcy, contracts and commercial transactions. She has written mostly on poverty and the middle class. I see nothing in her background that indicates she has any expertise on the financial crisis or Wall St. The only job outside of academia that she's had is working in a public school system with kids with disabilities.
Look through this 2007 interview with her and call our attention to her qualifications to be the chair of the oversight panel she's on.
http://globetrotter.berkeley.edu/people7/Warren/warren-con0.html

hmmmmmmmmmmmmm, (5.00 / 3) (#10)
by cpinva on Sun Apr 12, 2009 at 06:59:17 PM EST

not quite true. the obliquely stated goal is putting the system back the way it was, so it can eventually become the way it is again.
the financial services industry wants to operate in a "give me your money, and leave me the hell alone!" environment. barring that, they'll accept business as usual, with what nominal regulatory oversight that implies.
well, actually, they are just ink on paper, since the treasury doesn't really have this cash to hand out, and is borrowing madly for it daily. whether it would have gone to build new schools, or upgrade hospitals otherwise is a matter of conjecture, but arguably a better use of those resources.
agreed. i'm still trying to figure out how the SEC completely missed the madoff ponzi scheme, every single time. so, not only are better rules needed, but more effective enforcers of those rules.

Money itself is just ink on paper (5.00 / 1) (#17)
by Dadler on Sun Apr 12, 2009 at 09:09:24 PM EST

And that, it seems, is the ultimate irony.


: And everything is based on an oblique asset (5.00 / 1) (#18)
by Militarytracy on Sun Apr 12, 2009 at 09:15:35 PM EST

I give up.........so it is all just a system and it is rigged to where I will always need, I will always experience shortage in getting my basic needs met. And a few priviledged others will never ever know what needing something feels like? Who knew.....but hey....let's keep arguing for the corporations like they are more alive than people are :)

An oblique goal huh? (none / 0) (#13)
by Militarytracy on Sun Apr 12, 2009 at 08:50:42 PM EST

Setting an obscure goal? Isn't that an oxymoron? An oblique goal would need all of these oblique metrics by which we get to measure the oblique progress with too.


: no, it isn't. (none / 0) (#31)
by cpinva on Mon Apr 13, 2009 at 07:20:45 AM EST

Isn't that an oxymoron?
from dictionary.com:
oblique: adjective

6. indirectly aimed at or reached, as ends or results; deviously achieved.
7. morally, ethically, or mentally wrong; underhand; perverse.

in other words, a goal (getting back to where they were), neither stated or aimed at directly. just because you don't know what their goal is, doesn't mean they don't know what their goal is.

Chains you can believe in (5.00 / 1) (#16)
by nellre on Sun Apr 12, 2009 at 09:02:27 PM EST

I'm growing numb.

Warrren is Performing a Valuable Service... (5.00 / 1) (#20)
by santarita on Sun Apr 12, 2009 at 10:28:06 PM EST

She is asking the questions that the American people need the answers to.

To a certain extent her comments are aimed at the previous Administration. A lot of her comments are in the past tense. Paulson was stonewalling the Commission. She has said that Geithner has been more forthcoming. Maybe not as clear and communicative as possible but better than Paulson.

To me the interesting quote is this: "We might have asked a different set of questions; how do we make sure that there are some financial institutions to keep the economy going while we let the failures go?" How does she know that that is not Obama's strategy? And how does she account for the fact that in the past year, Bear Stearns, Lehman, Merrill, Countrywide, Wachovia and Washington Mutual have disappeared? Those institutions were huge and iconic and are gone. Doesn't that suggest that maybe the judgment of Treasury and the Fed is that the remaining institutions are either necessary for the economy of the future or are not failing? Isn't it possible that the Fed is setting the stage for an orderly liquidation of some institutions?

I think her questions are fair but some are based on some assumptions and those assumptions are rebuttable. It is up to the Obama Administration to offer rebuttals.

Warren's web site (5.00 / 4) (#25)
by lambert on Sun Apr 12, 2009 at 11:48:23 PM EST

Here.

See the report [PDF].

Despite the obfuscations of bankster apologists on this thread, it's perfectly possible to ask informed questions without being experts in the financial engineering -- and it's also interesting to see which questions the administration won't answer. Questions like "What is Treasury's strategy?", for example.


Funny you should mention financial engineering... (5.00 / 2) (#28)
by Romberry on Mon Apr 13, 2009 at 04:00:07 AM EST

AngryBear has a very good post up on a certain financial engineer by the name of Lawrence Summers and how his engineering contrasts with the prescience of Senator Byron Dorgan whose speech on the floor of the senate foretold much of what has come to pass.

I find it remarkable that there remain people here and elsewhere who continue to shill for the policies and prescriptions of "engineers" like Summers, Rubin and Wall Street in general. The idea that these are the only types who can fix the system because they are the ones that brought it down is utter garbage, but as I said in another thread, there is nothing new under the sun.


I find it remarkable that some (2.50 / 2) (#29)
by Green26 on Mon Apr 13, 2009 at 05:10:20 AM EST

believe the only people qualified to fix the financial crisis and Wall St. are people who know little or nothing about the financial system or Wall St.


: Nice straw man you set up there! (5.00 / 1) (#33)
by Romberry on Mon Apr 13, 2009 at 08:39:11 AM EST

Did you have fun knocking it down? I sure hope so.
No one here has said that "the only people qualified to fix the financial crisis and Wall St. are people who know little or nothing about the financial system or Wall St." You on the other hand keep repeating some form of "the only people qualified to fix the financial crisis and Wall St. are people from the financial system or Wall St." And you're wrong, just as the titans of Wall Street and banking (and their defenders) were wrong in the 1930's.
Like I said...nothing new under the sun.

Warren Asking For A ... (none / 0) (#38)
by santarita on Mon Apr 13, 2009 at 10:32:25 AM EST

detailed strategy with metrics for measuring success and charts that explain how each program is designed to achieve goals and how those goals align with the strategy seems a little like asking a fire captain to explain in writing what his or her strategy is for saving a burning house while it is engulfed in flames and what each hose is intended to do and whether it is properly aligned. It has to be done but can he or she put the immediate fire out first?

Warren was upset at Paulson because he totally blew her off. She admits that Geithner has been more forthcoming but she wants more. Fair enough. Let's see his response.

Warren's most recent report shows a much more compliant Treasury Department - not perfect but getting there.


: So, you don't believe in holding people... (none / 0) (#46)
by lambert on Mon Apr 13, 2009 at 01:41:33 PM EST

... accountable?
Wouldn't you be happier living in a financial dictatorship? Oh, wait....

Warren's point are just (5.00 / 2) (#32)
by Slado on Mon Apr 13, 2009 at 08:18:19 AM EST

plain common sense. The same people that brought you this financial disaster (too much debt) are the same ones we are trusting to get us out of it by doing more of the same, aquiring more debt.

Obama is practicing no new policies. Just spending the money and aquiring the debt for new priorities but using the same mechanisms that Bush used during his term.

Not only are we wasting the money but we are also bringing down the worth of any assest we had before this crisis. With so much money being pumped into the economy through printing or borrowing everything that was actual wealth before this crisis is being devalued.

To what end? So that we can prop up a system that has failed. We are effectively trying to save companies and jobs that otherwise would be removed from this economy, and for every job that is saved one or two more jobs are not created becuase it take more money to pay someone to do nothing then it does to pay someone to produce soemthing.

Anyone that argues that someone isn't qualified to state such and opinion is just fooling themselves and doesn't want to hear the truth. Better to believe in the impossible then deal with reality.

Warren's statements indicate (2.40 / 5) (#1)
by Green26 on Sun Apr 12, 2009 at 04:33:16 PM EST

political views more than an understanding of the financial crisis or how to end it, in my view.

She's a bankruptcy law professor appointed by Sen. Harry Reid. She is not qualified to chair a substantive oversight panel. She is a mere extension of Reid and other politicians who are mired in finger-pointing and looking backwards.

: And I'm Coo Coo for Cocoa Puffs (5.00 / 2) (#15)
by Militarytracy on Sun Apr 12, 2009 at 08:51:51 PM EST

: See... (5.00 / 4) (#27)
by Romberry on Mon Apr 13, 2009 at 03:48:06 AM EST

here.
I believe Pecora had people who think like you in mind.
You can repeat your "Warren is not qualified" mantra a million times a million times over if it makes you happy. It will still not be true. Apparently, you are still of the belief that only Wall Street insiders, the very 'Masters of the Universe' that paved this road to hell we are on, are "eminently fitted to guide our nation, and they would make a much better job of it than any other body of men."
Sorry, but no.

: She is honest (5.00 / 1) (#41)
by BobTinKY on Mon Apr 13, 2009 at 12:27:47 PM EST

and in this day and age that overqualifies her for an oversight position in our government.

This is my theory. (2.14 / 7) (#2)
by Green26 on Sun Apr 12, 2009 at 04:53:44 PM EST

Warren has little or no experience in this area, i.e. finance, and is in over her head generally. She tends to view things more in political terms than she should. Some in the agencies may not respect her. The agencies certainly doesn't trust her. She doesn't have much authority. Thus, she's getting the stiffarm.

This quote of hers makes me laugh. She's supposed to be overseeing part of the program to resolve the financial crisis, and all she can think about is schools and hospitals.

"Every time I do the paperwork for the panel and note a $10 billion expenditure, I think about how many schools that might have built, how many hospitals that might have updated."

Really sucks doesn't it. (5.00 / 13) (#4)
by nycstray on Sun Apr 12, 2009 at 05:12:54 PM EST

I mean lets get real here, we can't have anyone actually looking at or caring about the billions we're handing over with no questions asked and no accountability . . . . that just wouldn't be right.


Green26 didn't say (2.00 / 2) (#12)
by ChiTownMike on Sun Apr 12, 2009 at 08:09:02 PM EST

no one should be overseeing the money. You are making a false accusation. What Green 26 said was Warren was not qualified. And she isn't. She is a consumer advocate who has little or no real world experience on the other side of the issue which is the banks and talks only in terms she understands. She doesn't have a clue of the worldwide ramifications of the banking crisis. A qualified chairman would have experience in both spheres so they would have understanding and balance. This committee is a sham anyway. They have no real power. They are a PR stunt by congress at best.


LOL (5.00 / 4) (#14)
by inclusiveheart on Sun Apr 12, 2009 at 08:51:43 PM EST

The banking rules we had from the time of the Great Depression were all consumer oriented and they prevented this kind of collapse from happening until they were gutted.

I knew the man who saw that those laws were written and passed. The whole system was designed to focus on the many and not the few because they understood that the aggregate wealth of the United States was far more powerful than that which was held by an elite (and admittely wealthy) few. Further, that framework drew investment from all over the world because it gave our system credibility - our rules were good - our system therefore trustworthy - and a depositor or investor could expect that our system would be a "safe" investment. When you take the safe out of a safe market, you give up your edge.

I don't know if you've ever lived outside of this country, but I have. People like to send their money to this country because they perceive the system to be fair - well they used to think that.

And by the way, where are the great bankers without consumers anyway? The answer is: NOWHERE.


: Sorry I am not sure what (2.00 / 2) (#19)
by ChiTownMike on Sun Apr 12, 2009 at 09:36:48 PM EST

you were reading. Not my post. I said nothing of banking laws. LOL. I posted regarding Warren's lack of qualifications to understand both sides of the issue.
I also said that the committee was a sham. And it is. Other than give people on blogs something to add to their screams the committee does nothing. I'm quite certain that Warren will get a book deal out of it though.

Wow, tag team (5.00 / 1) (#23)
by lambert on Sun Apr 12, 2009 at 11:33:11 PM EST

Axelrod's giving out OT tonight?


Probably time and a half (5.00 / 1) (#24)
by caseyOR on Sun Apr 12, 2009 at 11:42:10 PM EST

Today is a holiday, after all.


: Possibly triple time (none / 0) (#26)
by nycstray on Mon Apr 13, 2009 at 12:00:30 AM EST

Holiday and Sunday. When I worked Union in college and had enough seniority, holidays rocked. Holiday Sundays even more! Both days really helped me make it through college . . . .

Yes, it's so very droll, isn't it? (5.00 / 12) (#5)
by sj on Sun Apr 12, 2009 at 05:13:22 PM EST

Imagine! Taking into consideration the societal costs of the taxpayer funded bailout! What is she thinking? Maybe if she demonstrated more moral ambivalence you would be happier.

You really don't want a non-insider taking a long look a this, do you? Not your kind, is she? Well, neither are the rest of us that are bearing the cost and paying the price of all that insider greed and moral ambivalence.


Aha - so what you're saying is that (5.00 / 12) (#6)
by inclusiveheart on Sun Apr 12, 2009 at 05:23:52 PM EST

anyone who thinks that taxpayer dollars were supposed to be going to things like schools and hospitals all these years was just ignorant about the fact that they really should have been going to filling the coffers of bankers and speculators on Wall Street. That we don't understand the "new" financial order which is I guess in your mind that this government exists not to serve the people, but rather to enrich a few elite people in the financial sector.

That's an interesting take on how things are supposed to work.


And, a really good thing for the (5.00 / 3) (#7)
by Inspector Gadget on Sun Apr 12, 2009 at 05:30:27 PM EST

folks who pulled this heist on the American people aren't viewed with the same disdain as the pirates. Otherwise, we'd have to arrest someone, or worse.


Resolving the financial crisis and (2.00 / 2) (#30)
by Green26 on Mon Apr 13, 2009 at 05:16:24 AM EST

overhauling the financial system on a going forward basis has nothing to do with money spent on schools and hospitals.

Someone who serves as the chair of the oversight panel ought to be focusing on the task at hand, instead of whining about schools and hospitals. Warren is obviously unable to move beyond being an advocate for certain constituencies.


Well (5.00 / 1) (#34)
by CST on Mon Apr 13, 2009 at 09:35:03 AM EST

"Warren is obviously unable to move beyond being an advocate for certain constituencies"

Thank God for that.

Many of us think that is the task at hand. Making sure the money is spent on things we actually need.

Also - long term financial growth has everything to do with money spent on schools and hospitals.


Spending money on education (2.00 / 1) (#35)
by Green26 on Mon Apr 13, 2009 at 09:41:53 AM EST

and hospitals will not resolve the financial crisis.


: Argument by assertion (none / 0) (#36)
by Romberry on Mon Apr 13, 2009 at 09:57:46 AM EST

You're very good at engaging in the commission of logical fallacies 101. Wanna try again?
You think pouring money in the top is gonna fix the financial crisis? Do you know what the root causes of the crisis are? And please, no blather about frozen markets, 'cause that ain't it.

: and neither will TARP (none / 0) (#44)
by BobTinKY on Mon Apr 13, 2009 at 12:33:58 PM EST

except the personal financial crises ocurrently faced by well heeled individuals in the financial industry.

Her job is to insure monies are prudently spent (none / 0) (#43)
by BobTinKY on Mon Apr 13, 2009 at 12:32:45 PM EST

and understanding the opportunity costs would seem a prerequisite for the job.


: +1000000 (none / 0) (#48)
by lambert on Mon Apr 13, 2009 at 01:43:57 PM EST

Exactly.

She's the only one (5.00 / 7) (#11)
by joanneleon on Sun Apr 12, 2009 at 07:19:24 PM EST

talking real sense.


: There are plenty of others (none / 0) (#39)
by Slado on Mon Apr 13, 2009 at 11:48:22 AM EST

They're called economists from the Austrian school that doesn't worry about politics.
Like this guy
The problems that caused this crisis was poor management by government, both parties. They removed the real factor of risk (essential to basic capitalism) by propping up Fannie and Freddi, printing money, aquiring debt on and on and created credit driven financial economy that benefited guess who? The same experts we are now relying on to get us out of this.
Peter Schiff often says..."President Bush says that Wall Street got drunk. Well who supplied the alchohal?". The gov't did through Greenspan, Bernacke and the low intrest rates that made all this bad lending and debt creation possible.
Now the government, who incentivised the bad lending wants to change the rules of economics and not allow the losers to lose. Instead it is bailing out the very people who created this crisis because it's want to keep the debt balloon blown up.
It's insanity and it doesn't take a biased financial expert to explain it. Just sound economics from any political strip be it Krugman, Schiff, Warren or anyone that can apply basic economic priciples to a basic economic problem.

Makes you laugh, why? (none / 0) (#42)
by BobTinKY on Mon Apr 13, 2009 at 12:31:05 PM EST

I think the same thing. I also thought and continue to think about lost opportunities with the trillions wasted in Iraq and the half trillion annually that is allocated to the Pentagon without any debate.

Sounds to me like at least one person resonsibile for overseeing the trillion dollar corproate handouts is viewing this with their head on straight. Thank you Prof. Warren.


That's not a "theory" (none / 0) (#47)
by lambert on Mon Apr 13, 2009 at 01:42:56 PM EST

That's ... Well, this is a family blog.

I like this quote the best:

all she can think about is schools and hospitals.

And that would be bad why?
