Who Is This Person?

1
Who Is This Person?
2
Basic Biographical Facts

• Born June 22, 1949 (age 61)
• University of Houston B.S. 1970
• Rutgers LawJ.D. 1976
• Taught at Univ. of Houston and Univ. of Pa.
• Joined Harvard Law School faculty in 1992 Leo
  Gottlieb Professor of Law
• Married to Prof. Bruce Mann, HLS legal historian
• In 2008, nominated by Harry Reid to chair the
  TARP oversight committee
• Nominated as Assistant to POTUS and Special
  Advisor to SecTreas in 2010

3
Additional Details

• Member of the FDIC's Committee on Economic
  Inclusion
• Executive Council of the National Bankruptcy
  Conference
• Former Vice President of the American Law
  Institute
• Chief Adviser to the National Bankruptcy Review
  Commission
• Campaign advisor to BHO

4
More Facts

• Has a credit card and spends money
• Is a capitalist and says she believes in the
  benefits of borrowing
• Understands complex financial products
• Comes from a research background

5
Key Writings

• gt 100 scholarly articles and six academic books,
  including
• Bankruptcy Policy (1987) 54(3) U. Chi. L. Rev.
  775-814
• The Untenable Case for Repeal of Chapter 11
  (1992) 102(2) Yale L.J. 437-479 73
• Bankruptcy Policymaking in an Imperfect World
  (1993) 92(2) Mich. L. Rev. 336-387
• The Bankruptcy Crisis (1997-1998) 73 Indiana L.J.
  1079
• Principled Approach to Consumer Bankruptcy (1997)
  71 Am. Bankr. L.J. 483
• Financial Characteristics of Businesses in
  Bankruptcy (1999) Am. Bankr. L.J. 499
• Illness and Injury as Contributors to Bankruptcy
  (2005) SSRN (with DU Himmelstein, D Thorne and SJ
  Woolhandler)
• The Success of Chapter 11 A Challenge to the
  Critics' (2009) 107 Mich. L. Rev. 603 (with JL
  Westbrook)
• Medical Bankruptcy in the United States, 2007
  Results of a National Study (2008) Am. J. Med.
  (with DU Himmelstein, D Thorne and SJ
  Woolhandler)

6
Pragmatic Market Analysis

• "Bankruptcy Policy," 54 U. Chi. L.Rev. 775-814
  (1987) She writes that she offers "a dirty,
  complex, elastic, interconnected view of
  bankruptcy from which I cannot predict outcomes
  nor even necessarily fully articulate all the
  factors relevant to a policy decision." Warren
  defends her approach as "more realistic and more
  likely to yield useful analysis.
• Warren appears skeptical of claims about
  foundational truths and generally anti-dogmatic
• She is data-driven and appears to believe in
  evidence-based regulation

7
Medical Bankruptcy Writings

• 2/05 report was timed to derail BAPCPA
• Claimed that at least 46 of personal
  bankruptcy filings in 2001 were the result of
  "medical causes," and that this represented a
  23-fold increase over 20 years
• Defined medical bankruptcy to include reported
  uncontrolled gambling, drug or alcohol addiction,
  or the birth or adoption of a child
• Classified a bankruptcy as "medical" if the
  individual had accumulated more than 1,000 in
  out-of-pocket medical expenses (uncovered by
  insurance) over the course of two years prior to
  filingregardless of income, and even if the
  debtor did not cite illness or injury among the
  reasons for bankruptcy

8
Medical Bankruptcy, Part Deux

• 2005 study (using 2001 data) was revisited in
  2008 (using 2007 filings)
• Release timed to support Obamacare
• Authors concluded that 62 of bankruptcy filings
  were the result of medical issues and that the
  odds that a bankruptcy had a medical cause had
  doubled between just 2001 and 2007
• Methodological issues
• Post BAPCPA, bankruptcy filings plummeted
• Medical bankruptcies dropped by 160,000 from
  2001 to 2007

9
Origin of BCFP Idea
10
Making Credit Safer

• The problem lies with the substantial subset of
  consumers who take out multiple advances and pay
  the fee many times over. A customer who
  misestimates her ability to repay the loan in
  fourteen days will likely roll the loan over for
  another fourteen days. Payday lenders target such
  customers, amassing 90 of their profits from
  borrowers who roll over their loans five or more
  times during a year.Source Center for
  Responsible Lending

11
Making Credit Safer, contd.

• The fee structure of payday loans makes it
  difficult for consumers to compare directly the
  costs associated with a payday loan to the costs
  associated with other consumer credit products.
• Perhaps the most dangerous feature of the
  payday-loan product is the loan rollover.
• The design of the payday loan as a short-term
  cash advance that is oftentimes continuously
  renewed for prolonged periods of time responds to
  consumers underestimation of the likelihood and
  cost of loan rollover.

12
Making Credit Safer, contd.

• Inadequate funds on payday results in an
  unanticipated rollover, which means the cost of
  the loan is far higher than the consumer
  initially assessed. The payday loan product is
  arguably designed to take advantage of consumers
  optimism bias and their consistent
  underestimation of the risk of nonpayment. Data
  source for consumers expectation that they will
  repay on payday CRL.
• Extensive discussion about shrouded
• attributes

13
Problems with Making Credit Safer

• Short on data the data regarding optimism bias
  rest largely on either (a) conjectures or (b)
  experiments removed from typical market
  transactions justifying skepticism about their
  probative force
• Problem in safety for financial products
• Consumer lending has positive effects on economy
  and borrowers
• If failure default and BCFP eliminates nearly
  all failures, the gains from eliminating
  financial distress might dwarf the losses from
  economic activity foregone
• No issue if failure means damage from shrouded
  attributes

14
Post-Appointment Statements

• The new consumer bureau is based on a pretty
  simple idea People ought to be able to read
  their credit card and mortgage contracts and know
  the deal. They shouldnt learn about an unfair
  rule or practice only when it bites them way
  too late for them to do anything about it. The
  time for hiding tricks and traps in the fine
  print is over . if the playing field is level
  and families can see whats going on, they will
  have better tools to make better choices.
  Elizabeth Warren, 9/17/10

15
Credit Cards Top Priority

• American Banker, 11/10/10
• Though the Consumer Financial Protection Bureau
  has jurisdiction over a wide range of financial
  products, Elizabeth Warren is making credit cards
  her top priority.
• Warren, the administration official in charge of
  setting up the new agency, said she wants to
  revamp card disclosures in order to make them
  easier to understand, as well as eliminating all
  hidden costs and fees. In many ways, she said,
  the effort is symbolic of the agency itself.
• "Credit cards can help point to an overall
  philosophy for the agency," Warren said in an
  interview. "The main principle is to make credit
  markets work for families. What does it take to
  be able to do that? A family should be able to
  see the price, see the risk and make
  apples-to-apples comparisons among products."

16
Summary

• Elizabeth Warren comes from a research-oriented
  background, is experienced at dealing with
  ambiguous data and has generally been willing to
  follow the facts in her academic writings
• She has been criticized for strong priors and
  the appearance of data manipulation to meet
  political objectives
• Her key writing on payday were (a) probably not
  written by her, and (b) not based on actual
  research
• There is an education/skepticism-induction
  opportunity
• Regardless of who actually runs, BCFP,her
  influence will be enormous