Elizabeth Warren: Riding Herd on the Bailout

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From a public relations perspective, though, Warren has been a success. She has taken to the spotlight like a seal to water and has smoothly made the cable-TV rounds to chide the close-knit club that determined financial policy in the past. She argues that now, finally, taxpayers "have a seat at the table." If this sounds like advocacy, that might be exactly what Democratic Party bosses had in mind when they selected her. Since a special inspector general was also appointed to investigate Treasury's actions, Warren's oversight panel was left with little actual power. But it performs a much more public function. Though some of the panel's reports have been less than revelatory, there have been some worthy and newsmaking insights, like the suggestion that for every $100 Paulson spent buying stakes in troubled banks, the government received assets worth only $66. The panel's most recent report, released June 9, concludes that the government's "stress tests" of banks should be repeated under more stringent conditions in the future. (See the top 10 bankruptcies.)

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In recent days, 10 top banks have begun to repay some $68 billion in TARP funds. According to Warren, knowing exactly what happened to money spent under TARP is less important than simply keeping the pressure on. "We certainly haven't achieved perfect transparency," she says.

When asked whether it was even possible to determine what happened to all the money Congress rushed last fall to financial institutions, she said, "It's a wonderful irony, isn't it? Once Paulson gave this money away on a no-strings basis, it became effectively impossible to trace it." But, she says, it won't happen again: "It's a $300 billion mistake that we will not repeat."

Warren's concern for the middle class is the prism through which she sees every economic indicator. It is also the driving force behind her work with the oversight panel. The first two reports it issued, in December and January, criticized Paulson's department for its lack of transparency and argued that its policies were doing little to help reduce home foreclosures or alleviate stress on families. Even if accurate, those early pronouncements did not help to pave the way to a functional working relationship between Warren and the people she was supposed to oversee. Former Treasury officials seem to despise her and complain that Warren is only trying to advance her own agenda by using the panel for — gasp! — social good. "When a person in that position doesn't really try to reach out and communicate and then goes out and gives interviews, it becomes clear this is going to be an antagonistic relationship," says a former Treasury official. "She's coming at this in terms of a gotcha approach."

Warren's dealings with Geithner hit some bumps early on too. After he took office, the panel requested for months that Geithner testify before it; he ignored the request at first but eventually relented. "The most generous interpretation would be that he was staggeringly busy, and to be well prepared for a hearing takes time," Warren says of Geithner, who testified in April. "The less generous interpretation would be that ... we were not on the best of terms." She insists that things are now going more smoothly.

When asked what the biggest challenge is, in terms of getting important data, former New Hampshire Senator John Sununu, the second Republican on the panel, pauses for a long time. "Working with Treasury is like working with any other government entity," he says. "If you're talking to the right person and have a good relationship with them, you can get access to information in a timely way. If you're not successful at making your request a priority for them, it may take a while."

Mrs. Smith Goes to Washington
Warren was an unlikely choice to head the oversight panel, not least because of her lack of familiarity with Washington parlor games. Her academic specialty is bankruptcy law, especially as it pertains to the American middle class. She emerged on the public stage in 2003, when she published the book The Two-Income Trap: Why Middle-Class Parents Are Going Broke, co-authored with her daughter. The book argues that women and middle-class couples were driving themselves to ruin trying to buy houses in good public-school districts: "Having a child is now the single best predictor that a woman will end up in financial collapse."

The ensuing media frenzy led to Warren's testifying a few times on Capitol Hill, where she caught the eye of Senate majority leader Harry Reid. When asked how she ended up on Reid's short list, Warren says, "I took away from the conversation that my presence was about American families having a stake in the outcome of these powerful decisions that are being made. So I've never apologized for caring about and raising issues that relate directly to them."

As Washington debates how to reshape the regulatory system to prevent economic shocks in the future, Warren hopes to see some of her ideas translate into policy changes. And she vows to continue as long as Congress will have her. "I'm not hanging on to this job. I'm here at the pleasure of the Senate that appointed me," she says. "But having said that, I'm not looking over my shoulder. I'm here to do what I think is right."

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