Elizabeth Warren: Unqualified Advocate

During a Congressional hearing Tuesday Elizabeth Warren pointedly asked Treasury Secretary Tim Geithner about the plan for assisting homeowners who have substantially negative value in their homes. So their mortgage is worth $400k, their house worth $300K, and supposedly the government has to help the 'homeowner'. At the very least, this suggests an $100K writedown so the owner has some option value. She also made a statement that simultaneously called for banks reducing interest rates and increasing lending, which nicely highlights her naive view of business and economics.

She's an unqualified advocate for the little guy in the most direct way. So anything that would cost such individuals more, or take away their power in a negotiation, is considered bad. Such thinking is antithetical to economics, because good economics looks at the unseen as well as the seen, indirect effects, which are often effects on future behavior via the incentives of the rules. Her arguments always have the flavor of intelligent but ignorant earnest students in High School sociology classes: businesses should be forced to lower prices and raise wages and benefits. I guess her template is India or Venezuela. She is a caricature of a simple minded do-gooder because the solution to every problem as merely having a large organization write a check or give stuff away. She takes the size of the economy, its production of goods and services, as a given.

She's on TV shows all the time because journalists and left-wingers agree with her conclusions, and she's from Harvard, so she can make an absurd statement and get away with it because we all know Harvard contains only the Best of the Best in thought. She contributed to John Edward's book, Ending Poverty in America published in early 2007, which argued for more home ownership in America via what came to be known as NINJA loans. The consequences of that objective, in her mind, is merely another random opportunity for the government to help the little guy.

Comments

[Leftfield:]

If Wall St. can make up it's mark to magic fantasies, even I can't fault Warren as much as I once would. Proposals to directly help the common person that feature market distortions are no worse in principle than our trillions of aid to the citadel of capitalism, Wall St. and would actually bring real people to solvency.

Apr 23 09:47 AM

[Allan Frain:]

What is often pointed out is that the bailout plan well exceeds the $9 trillion residential mortgage market. The corollary is that for the price of the bailout every mortgage in the US could have been paid off in its entirety. The bailout, engineered by the Banks, their alumnai in the last two Administrations, and their paid-for elected officials is about saving "The Game"--NOT homeowners.

Apr 23 02:35 PM

[rosey99:]

No one is perfect, but I think Warren is doing a pretty reasonable job as chair of the Congressional Oversight Panel. She may have some interventionist ideas when it comes to government, but she does not make policy, and she appears to have a certain degree of integrity.

As for economics and economists, most these days seem to be philosophers (and bad ones at that) wearing the robes of social scientists. We still seem to be caught up in this weird fundamentalist approach to problems - at both ends of the political spectrum. Interesting piece though.

Apr 23 06:14 PM

[Wildhawk:]

Rosey99, I couldn't agree more with your comments. Whatever she has had to say throughout her service as Chair of the Oversight Panel, it's been straightforward, honest, and forthright. That's more than you can say about virtually every other participant in this crisis, from Wall Street, to Congress, to the Fed and Treasury.

Apr 24 08:30 AM

[Filmflam:]

Who is being naive, here?

Her demeanor is simple because the answers are simple and impossible. She, like Simon Johnson, knows what the answers are. And she knows how big the ramifications are. The "complexity" that is always drummed about isn't there. The solution is simple. The banks are insolvent. The oligarchy is blocking reform. I wish we had a world of people like her to drown out the noises from parrots like you. No offense, I am sure you are a nice guy. You are just on the wrong side of reality.

Apr 25 01:58 AM