Harvard professor Elizabeth Warren created the Consumer Financial Protection Bureau that is at the center of the financial overhaul bill nearing final passage in Congress. She specializes in bankruptcy and consumer law. Senate Majority Leader Harry Reid, impressed by her pro-consumer stance, asked her to chair the congressional oversight panel for the Troubled Asset Relief Program in 2008. The program was the $700 billion lifeline the government instituted for the financial industry at the pinnacle of the financial crisis.
In an interview with Christine Dugas, from USA TODAY Money, Elizabeth Warren said she is still critical of the changes made to the bankruptcy law in 2005. She stated that “the best studies out there show that families who most need help cannot get access to the bankruptcy system and that the mortgage foreclosure crisis has been worse because of the 2005 amendments. The big banks made bankruptcy more expensive and helped fence out hundreds of thousands of families who most desperately need its protections. I would be happy if it had turned out that the amendments didn’t make a big difference, but the heartbreaking thing is that they did make a big difference.”
As a professor since the early 1980s, Elizabeth Warren studied bankruptcy. It helped her to comprehend the hollowing out of America’s middle class. She realized the degree to which the business model of selling debt to middle-class families has altered over the last twenty years. According to Warren “the credit card companies and other lenders moved to a tricks and traps pricing model. The fees, the interest rate hikes and all the other surprises in the fine print have left families increasingly vulnerable.” She observed hardworking, law-abiding middle-class families with financial difficulties that had to end in bankruptcy. This is what led her to examine the consumer credit market and to eventually arrive at the idea for the consumer financial protection agency.
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