A Fighting Chance (20 page)

The three of us gathered for interviews and pictures. When the time came to put us together for the cover shot, the shoot director realized that I was considerably taller than the other two women and declared that this “simply won’t do.” But the
Time
people had come prepared. They brought out a box for Mary to stand on and a smaller lift for Sheila. Once our sizes were adjusted for the camera, we were told to look like sheriffs.

The whole situation seemed a little surreal, and we all got a good laugh out of it. In fact, I loved spending that time with Sheila and Mary. We fell into easy conversations about a lot of topics, including why it mattered that the person responsible for the banking insurance fund (Sheila) didn’t have the right lipstick color and whether it was significant that the person fighting to restore the effectiveness of a badly weakened SEC (Mary) was having trouble with her hair. Did guys have to put up with this?

But all three of us knew what this photo shoot was really about: it was an opportunity to deliver a message to a lot of people about why Wall Street needed to be held to a higher standard of accountability. And I suspect each of us felt that the cover story raised a question we’d all thought about, even if we didn’t dwell on it: Given that women were so conspicuously absent from the ranks of top executives in high finance, how was it that three women had ended up in leadership positions when it came time for the badly needed cleanup?

Over the next few years, Sheila, Mary, and I had several variations of that conversation. We always kept it light, but the topic touched a nerve. After all, of the twenty commercial banks listed in the Fortune 500 at that time, only one had a woman CEO. Just one. I’ve been going to financial conferences for a long time, and I’ve never seen a line in the ladies’ room.

And then there’s my little corner of the TARP world. During the nearly two and a half years that COP was in operation, ten panelists would come and go. Out of those ten, all were men except me.

So what is it about finance that makes women so scarce in the corner offices? And why indeed were three women now the sheriffs of Wall Street? I can’t answer for Sheila or Mary, but I do have a thought about why I had ended up in this position: I was an outsider. I had never inhabited the cozy world of high finance, never played golf with a foursome of CEOs, never smoked cigars at the club.

Some people argue that if you’re never in the club, you simply can’t understand it. But in this case, I think not being in the club means never drinking the club’s Kool-Aid. I had studied the banking system from the outside, so none of it was sacred to me. I thought most of the finance guys were smart, but not any smarter than a lot of other people I knew. Sure, they made a lot more money, but that didn’t mean they couldn’t be blind to a catastrophe happening right in front of them or that they wouldn’t be willing to skirt the rules if it would plump up the bottom line.

Late one evening while we were working on a COP report, Damon told me a story he’d heard from someone who had participated in a memorable event. Not long after COP had first come on the scene with our plainly worded ten questions, there was a small, private going-away party for Secretary Paulson, held at some swanky establishment. The stock market had crashed and the economy was teetering, but there were toasts and backslaps over Paulson’s superb tenure as Treasury Secretary and his handling of the crisis. As the evening drew to a close, the conversation turned to COP. After some general harrumphing about our work, someone mentioned my name. Said one participant, “She just doesn’t get it,” and everyone nodded in agreement.

I asked Damon if he knew whether any women had been present. “Nope,” he said. “From what I heard, no women.”

I didn’t think so.

What If She Finds Out?

I stayed with COP until September 2010, when I took another Washington job. In nearly two years of tangling with the Treasury Department and the big banks about TARP, I’d say we came away with a win-some, lose-some scorecard.

The losses were obvious. We didn’t have the power to stop Treasury from flooding the big banks with nostrings-attached TARP funds, and for the biggest financial institutions, Too Big to Fail became the new reality. We didn’t have the authority to launch criminal investigations, and no senior banking executives were marched out of their offices in handcuffs. We were never able to prod Treasury to provide the little banks with faster help, and by September 2010, more than three hundred small banks and credit unions had failed. We were never able to push anyone to get enough credit flowing to small businesses, and 170,000 of them folded as well.

All that was bad enough, but what really ate away at me was that we were never able to get the Treasury Department or the White House to do something meaningful about foreclosures. The president chose his team, and when there was only so much time and so much money to go around, the president’s team chose Wall Street. America had the biggest bailout fund in history, and the Goliaths of banking gobbled it up. Meanwhile, millions of people lost their homes, and even now, years after the crash, millions more are scrambling to pay down underwater mortgages. I still think about Flora, and I still think about Mr. Estrada—and I know there are millions of people just like them.

In my darkest moments, what really shut me down was this: COP couldn’t change a system that seemed hell-bent on protecting the big guys and leaving everyone else by the side of the road.

But we also had some wins, and some of them were big. We blew the BS whistle more than once, a lot of people heard us, and some of those hidden policy decisions moved into public view. COP helped put money in the pockets of the American people. Our July 2009 report about the bonuses owed to the taxpayers helped return billions to the US Treasury. Under Naomi’s capable leadership, we built a world-class team of experts and investigators. As just one more example of their superb work, the team’s analysis of the auto bailout backed up the government, making it clear that the decision to save an industry—and an estimated 1.1 million jobs—was well grounded in both law and economic policy. And although we didn’t stop Too Big to Fail, we sure did make a stink about it. I also think we helped shine a spotlight on a too-cozy, too-Byzantine, underfunded regulatory system that had utterly failed when it was most needed—and that spotlight spurred on those who would later push for real financial reform in the aftermath of TARP.

Maybe there were some other, less visible wins. After I left COP, my next job required that I spend a lot of time in the Treasury Building. Every now and then I’d walk down those hollow, high-ceilinged halls and bump into a member of the staff who would stop to say hello. During some of these conversations, I heard different versions of the following comment: “You don’t know me, but I was working in the XX section during the financial crisis. When we talked about what we should do, someone always seemed to ask, ‘What will Elizabeth Warren say when she finds out about this?’ That usually made people stop and think again.”

I never thought that comment was about me. I believed it was about all of the panelists who served on COP, as well as our great staff. But I also thought the comment was about democracy. To me it was another way of saying, “What if everyone knew what we were up to?” I didn’t need any better proof that speaking up—and speaking up loudly and clearly—was worthwhile.

Before Harry Reid called me on the night of the student barbecue, I had never thought much about government oversight. With COP, we had a chance to involve the American people in events as they were happening. Our job was to give regular folks a window into the decisions that would shape their economy and their lives—and ultimately to help them have the information they needed to decide whether their leaders were taking the country in the right direction.

My time as a COP changed me. I still didn’t have a badge or a set of handcuffs, and I was still nervous about going on television (although I never threw up again), but I learned a couple of important lessons. I learned that insiders don’t appreciate questions from outsiders, including pesky professors who don’t know the unwritten rules of Washington. I also learned an essential truth: When you have no real power, go public—really public. The public is where the real power is.

Those long days and weeks on the oversight beat weren’t always fun. But Otis didn’t complain: he ate a lot of cornbread and began to put on weight. I poured my troubles out to Bruce, often over fried clams and beer. Sometimes I wanted to shout curses at the gods of finance over what I couldn’t accomplish. But the fury was tempered by the sadness I felt when I thought about all the injustice and all the heartbreak that so many families had suffered. Despite how awful the crash had been, I was not sorry that I had been part of the fight to improve the government’s response to it. I was deeply grateful for the chance to serve our country, to do whatever I could, at such a critical time.

Our oversight of the bailout wasn’t perfect, not by any stretch. But I saw what was possible. We took an obscure little panel that could have disappeared without a trace and worked hard to become the eyes and ears and voice for a lot of people who had been cut out of the system. And every now and again we landed a blow for the people who were getting pounded by the economic crash.

That felt good. It felt really good.

4 | What $1 Million a Day Can Buy

I
N THE MIDST
of the COP work, I took on another project, one that came at me sideways. The project had nothing to do with congressional oversight but everything to do with the financial meltdown. It grew out of an idea that had been knocking around in my head for a while, and when the opportunity arose to make the idea a reality, I couldn’t hold back. I guess it was like holding a missing puzzle piece and seeing right where it fit in the jigsaw—almost impossible to resist trying to put it where it belonged.

Ideas grow in lots of ways, and my idea was born of years of wonky research and teaching technical details of the law. But it wasn’t enough to have a good idea. I also needed to explain it, and one way to do that was to recall one of the times when I nearly set my kitchen on fire.

When we lived in New Jersey in the 1970s, I liked to make toast for breakfast. One morning when Amelia was little, probably three or four, she was sitting in a booster chair at the kitchen table, eating cereal. I popped a few pieces of bread in our toaster oven, got busy doing six other things, and quickly forgot about the toast. When I saw smoke pouring out of the toaster oven, I grabbed the handle and pulled out the tray, exposing four slices of bread that were on fire. Always a quick thinker, I screamed and threw the tray at the kitchen sink. Three pieces of toast hit the target, but the fourth went high—setting the cute little yellow curtains on fire.

I screamed again, then grabbed Amelia’s cereal bowl and threw it at the burning curtains. The milk doused most of the fire, and I calmed down enough to realize that throwing things was probably not my best strategy. Then I noticed that the toaster itself was shooting sparks and seemed to be on fire. (How long had the darn thing been on?) I got a glass, filled it with water, and poured the water on what remained of my flaming curtains. Then I grabbed a towel and beat on the toaster until everything seemed quiet and I could unplug it.

That may have been the year I started so many kitchen fires that Daddy gave me a fire extinguisher for Christmas. Oh, happy day.

Back then, our toaster oven had an on-off switch and that was it. On was On, which meant that it was possible to leave toast under the little broiler all day and all night, until the food burned, the wiring melted, and the whole thing burst into flames. At some point—I have no idea exactly when—someone had the bright idea of adding a timer and automatic shutoff. This simple change made it a whole lot harder for distracted mothers, or anyone else, to leave the broiler running until it set the kitchen on fire.

Thirty years later, while working on an article about how the government could protect consumers from predatory financial companies, I thought about those old toaster ovens. By then, it was all but impossible to buy a toaster that had a one-in-five chance of bursting into flames and burning down your house. But by the 2000s, it
was
possible to refinance a home with a mortgage that had a one-in-five chance of costing a family their home and putting them out on the street. In fact, it wasn’t just possible; those mortgages were bursting into flames all over the country.

Likewise, it wasn’t possible for a manufacturer to change the price of a toaster oven after someone had purchased it. (Imagine getting the bill in the mail: “Send us another $100 immediately or else your toaster will stop toasting your English muffins!”) But long after the papers had been signed, it
was
possible for a credit card company to double or triple the interest rate on a balance that someone had already taken out. (“Send us more money immediately or else your credit rating will be destroyed!”) Read the fine print: it was all perfectly legal.

Why the difference? The United States government was—and is—the difference. By 2007, the year I was writing my article, a government agency actually monitored toasters for basic safety, and if anyone tried to sell a toaster that had a tendency to burst into flames, the agency would put a stop to it. In fact, government agencies ensured the basic safety of pretty much every product offered for sale. The agencies worked to keep us safe: No lead paint in children’s toys. No medicines laced with rat poison. No cars without functioning brakes. And no exploding toasters. But in 2007 there was no government agency that would stop the sale of exploding mortgages.

Despite their name, financial products were
not
treated like products. They were regulated as contracts—which meant that two sides, supposedly negotiating as equals, could form pretty much whatever agreement they wished. And this meant that when it came to dealing with the giant banks, consumers were mostly on their own.