Home -> Law Blog Directory -> Bankruptcy Blogs -> Credit Slips

Bankruptcy

: Credit Slips

Where's the Beef? Elizabeth Warren Edition

By Adam Levitin

Here's what's striking about all the criticism of Elizabeth Warren: there's no smoking gun. No one has been able to point to anything radical in Elizabeth Warren's extensive body of writing. Where's the beef?

As far as I can tell, the objections to her are a perception that she doesn't like banks (neither does Congress or anyone else these days, it seems), that she "doesn't understand the logic of consumer finance" or that she is someone who "fundamentally objects to the wayour financial markets are organized," and that she would overregulate and restrict the availability of some financial products. Where's the evidence for this? 

The only attempt I have seen to peg Elizabeth Warren to a specific regulatory proposal, rather than kvetch about her gestalt is an uninformed suggestion that she might bring back usury restrictions. For starters, section 1027(o) of Dodd-Frank explicitly restricts CFPB's authority to enact a usury limit. Irrespective, I am not aware of any occasion when Professor Warren has ever called for a usury law. There are passages in her work that lament the rise of predatory lending in the wake of the Supreme Court's 1978 Marquette decision that effectively undermined usury laws, but that's a far cry from wanting to return to the state of consumer finance regulation in 1977.

Elizabeth Warren has no problem with banks. She (like anyone else, I would hope) does have a problem with sharp practices, be they by banks, or anyone else. There's plenty of disagreement as to what sort of practices are "unfair, abusive, or deceptive" to use the language of Dodd-Frank, and Professor Warren no doubt takes a more expansive view of this than, say, the American Bankers Association, but that's hardly a radical position.

As for the overregulation bogeyman, let's remember a few things. First, regardless of who runs CFPB, any regulations would have to go through the regular notice-and-comment rule-making process. The bureaucratic and procedural hurdles to enacting a regulation have an inherently moderating effect. Section 1031 of Dodd-Frank places significant restrictions on the CFPB's ability to prohibit practices as unfair, abusive, or deceptive, for example. Second, Elizabeth Warren's whole modus operandi is to make evidence-based policy recommendations, rather than engage in faith-based financial regulation--regulating based on faith that market participants will behave themselves, even if misbehaving is profitable. She is about data, not pushing social theory. And, remember that if the CFPB gets out of hand, Congress (and the new Financial Stability Oversight Council) is free to rein it in.

So let me throw down the gauntlet: can anyone point to anything Elizabeth Warren has written or said that indicates that she would pursue a radical agenda? If not, then this is just a matter of degrees--that Elizabeth Warren (like many others) has a vision of fair play is more exacting than that of the banking industry. And that's not a very convincing argument against her.

Full post as published by Credit Slips on July 23, 2010 (boomark / email).