Voice of the Middle Class

When Elizabeth Warren first met Barack Obama, a strange kind of seduction took place. The encounter occurred at a fundraiser, hosted by a fellow Harvard professor who was supporting his former student, Obama, in his campaign to become a U.S. senator. Warren walked into the house and peered down a long corridor. Obama was standing in a glass-enclosed room with the afternoon sun glowing from behind, silhouetting him: "He was backlit!" As she walked down toward him he turned, stuck out his hand, and said, "Predatory lending! We have to do something about predatory lending!" He raved on as she stood and stared at him, dumbstruck. When he paused, she smiled and said, "You had me at predatory lending."

Several years later, Obama is president and Warren has been transformed from mild-mannered Harvard professor to the sharp-shooting, feisty head of the Congressional Oversight Committee, with the difficult task of tracking how the bailout funds have been spent. She has also been urging politicians to create an independent agency to protect consumers from predatory lending by making financial contracts shorter and more comprehensible. (Obama has supported this, though the bill that passed in the House is now, frustratingly, stuck in the Senate.) Warren is concise, logical, and angry about the lack of transparency in Washington; the lack of accountability on Wall Street; and how Americans are more, not less, vulnerable as a result of the trillion-dollar bailout.

Over a lunch of eggplant pasta and iced tea, Warren explains why she has been called an "evil, power-hungry, ignorant lady" who is out of her depth and hated by Wall Street. She has engaged in heated exchanges with radio hosts who insist she has "an agenda" and is out of step with "all the serious thinkers" because she believes that to fix the economy you need to focus on the middle class first. "I don't have the right background," she says with a shrug (having come from Oklahoma). "I don't have the right sex. And I can't keep my mouth shut. It is like a physical pain for me." Warren has been studying families in financial trouble since 1976, and, in a landmark study, found that more than half of all people who declare bankruptcy cite medical reasons. In her book The Two-Income Trap: Why Middle-Class Parents Are Going Broke, she argues that bankruptcies shot up not because families were consuming excessively but because basic costs—housing, health, education—have soared since the 1970s. Struggling families were offered easy credit with high fees and mortgages they could not afford, and debt mounted.

Because of her plain-speaking insistence that things must change, Warren may be the closest thing ordinary Americans have to a people's voice. In February a Pew survey found that while the public is wary of big government, a clear majority favors strict regulation of major financial institutions. Only 25 percent have a positive view of the major banks. "American families live with the unfairness of the system every single day," says Warren. "There is no one left in America who does not have a bad credit-card story [or] a bad overdraft story." A Consumer Federation of America poll found that almost six in 10 support the creation of a consumer financial-protection agency. Nine in 10 want banks to disclose mortgage fees up front and ATM screens to tell you if a withdrawal will exceed your balance. Which makes perfect sense. Warren's argument is simple: do we want lead in our paint, toxins in our water, rat poison in our antibiotics, infant car seats that crumple on impact? No, we want these things regulated. So why take similar chances with convoluted mortgages and credit-card contracts that conceal terms and could lead to ruin? Bad mortgages, after all, helped to prompt the near collapse of the economy recently.

Warren grows most animated when talking about taking her granddaughters to the Princess Pavilion at Disneyland. After waiting for hours, they were "transfixed" by the "young, calm princesses," Sleeping Beauty and Snow White. "It's just [sighs]…It's America. It's about dreams. And it's fabulous." Presumably those dreams don't include the fact that if you and Prince Charming have babies, you will be around 75 percent more likely to default on credit-card payments than a family with no kids. Or that you might have to foreclose on your house if the prince gets prostate cancer. Warren leans forward intently: "That's why I am there, in Washington. Because of my grandchildren."

Yep. We really should do something about predatory lending.

Julia Baird is the author of Media Tarts: How the Australian Press Frames Female Politicians.
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