In November, Harvard Law School Professor Elizabeth Warren was appointed to a five-member Congressional Oversight Panel to monitor the Treasury’s economic rescue plan. Warren was one of three experts nominated to the bipartisan panel by House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid.
The panel, charged with examining the Treasury Department’s plans for the $700 billion economic bailout package, known as the Troubled Asset Relief Program, has issued five reports on the effectiveness of the regulatory structure now governing the country’s financial system. The panel also submitted a special report on regulatory reform to Congress at the end of January.
In testimony before the Senate Finance Committee on March 31, Warren said the Treasury Department must do more to address the lack of oversight of its economic rescue plan to ensure that taxpayers’ dollars are properly spent. She said a framework of accountability needs to be in place in order to measure the success of the TARP. She blamed the Treasury Department for not cooperating with Congress.
“In a crisis, transparency, accountability and a coherent plan with clearly delineated goals are necessary to maintain the public confidence and the confidence of the capital markets. Sophisticated metrics to measure the success and failure of program initiatives are also critical. Assuring that the TARP reflects these elements underlies all of our oversight efforts,” Warren testified.
In February, Warren told a Senate panel that Treasury had overpaid by $78 billion for TARP-related bank stocks and warrants. She said that the group’s valuation study on the $254 billion in TARP transactions in 2008 found that Treasury received assets worth only about $176 billion.
TO READ REPORTS and testimony of the Congressional Oversight Panel, go to www.cop.senate.gov.
Warren helps create Financial Product Safety Commission
In March, Elizabeth Warren, a leading bankruptcy expert, was on hand as U.S. senators advocated for legislation to create a new government agency, the Financial Product Safety Commission, to help regulate financial products and services and to protect consumers from predatory or deceptive financial practices. Warren conceived of the idea for the commission several years ago, and modeled it after the Consumer Product Safety Commission.
Sens. Richard Durbin (D-IL) and Charles Schumer ’74 (D-NY) introduced the measure in the Senate. The commission would have rule-making authority and would coordinate enforcement with other federal and state regulators. According to the senators, the commission would not take powers away from existing agencies. It would be responsible for identifying practices that undermine sound markets and would educate consumers on the responsible use of financial products and services.
In the essay “Protect Financial Consumers,” published in the Nov. 7, 2008, issue of Harper’s Magazine, Warren wrote: “Go into any appliance store in America and look for a toaster with a one-in-five chance of exploding. You won’t find one. But at any mortgage brokerage in the country it has been possible to purchase a loan with a one-in-five foreclosure rate, and the broker doesn’t even have to tell you the odds.”
President Barack Obama, on “The Tonight Show” in March, backed Warren’s financial product commission and used the same terms: “When you buy a toaster, if it explodes in your face, there’s a law that says your toasters need to be safe. But when you get a credit card or a mortgage, there’s no law on the books that says if that explodes in your face financially, somehow you’re going to be protected. So this is the need for getting back to some common-sense regulations.”