Elizabeth Warren's Mission is To Restore America's Great Middle Class

Posted on www.alternet.org today is Elizabeth Warren's speech to Netroots Nation 2010. Entitled "My Mission Is To Restore America's Great Middle Class", the author spells out what has become her lifelong academic interest in and her advocacy for the middle class. Virtually, no one in Washington,D.C., who knows Elizabeth Warren, doesn't believe she should lead the new Consumer Financial Protection Bureau. Critics have complained she can't get confirmed but then again none of President Obama's appointees can get confirmed. That is no reason not to nominate the best and Elizabeth Warren with her idealism and her political shrewdness is the best and only candidate for the first person to head the Consumer Financial Protection Bureau. Even conservatives admitted they liked her work overseeing the TARP funds, but then turned against her when the unions came out in full support of her nomination.

Her speech starts with a history of her family in Oklahoma and how her grandmother lived in the America that existed between boom and bust from 1794 until the Great Depression. She writes that just three laws fundamentally altered the course of America's history. The first one, FDIC insurance, made it safe to put money in the banks. The second, Glass-Steagal, tried to separate the risk-taking on Wall Street from your community bank. And the third, SEC regulations provided "some cops to watch the robbers". From those three laws we got 50 years of economic peace, no financial panics, no metldowns and the development of a strong and prosperous middle class in America.

Shortly after her grandmother died at the age of 94 in 1970, Warren writes that we began unraveling. Part of it was that we didn't upgrade regulations that had been put into law in the 1930s and consequently, the regulatory framework began to disappear. The other development was that income and productivity, which were intertwined since WWII began to diverge. Starting in the 1970s, as we saw in my earlier post,productivity continues to rise--indeed rise at a somewhat steeper rate--while incomes flattened out, so that today a fully employed male makes less money than his father did a generation ago, once you adjust for inflation.

With the income side flat, expenses rose. The core expenses for the middle class--housing, health insurance, day care, college--went up by more than 100 percent. Naturally, savings had to decline and families had to assume more debt to make ends meet and to remain middle class. Over time, Warren argues, the business model for lending changed called the "tricks and traps" model where the real plan was to make the money on the back end. So that middle class families could not price out the credit agreements. For example, just last year about $150 billion flowed out of the pockets of ordinary families on penalty rates, on penalty rates of interest, payday loans, credit cards, overdraft for checks, kickbacks on car loans.

That's why the new Consumer Financial Protection Bureau had to be created and why it must be built. Here she outlines her philosophy for this new agency and its fundamental purpose to defend American families. Besides defending families, she wants to create workable, realistic markets that make for a viable, functioning credit system.

One of the most intriguing aspects of her talk was the discussion of how this would be the first agency that would be created in the digital age. It will be an agency that will have the capacity to communicate with millions of Americans by just hitting a button and also where millions can communicate with the agency by pushing the send button.

She reminded the Netroots audience that it took FDR several years to get his economic package into place because of the economic royalists. She reminded the audience that President Obama fought for this and that the banks, who had been bailed out to a tune of $700 billion and a few trillion in guarantees didn't then ask for regulations that would help ordinary Americans. In fact, she recalls banks fighting every inch of the way and lobbyists saying, "We will kill the consumer agency." "We scratched, and we bit, and we hung on. And we didn't give up. And today here's where we are. With a good, strong set of tools to change the consumer market."

It's interesting to remember that the consumer agency was dead on arrival last February.

Will this save the middle class? Warren says no because so much has been broken. "We've got to have changes in labor policy, we've got to have change in health policy, we've got to have changes in education policy. That's what it will take to restore a middle class."