Elizabeth Warren Freak Out, 2: Other things.

Four other complaints I have seen:

Number 3.

Here’s the best smackdown I’ve seen on my piece against McArdle’s piece from a corporate law professor:

Megan McArdle offered up a long blog post criticizing Elizabeth Warren‘s scholarship. This prompted liberal economics blogger Mike Konczal to respond, inter alia, that:

Given that Warren is considered “the leading authority in the country on bankruptcy law,” being called a hack by McArdle, of all people, is something.

If you follow Konczal’s link, you’ll discover that the authority he cites is an unattributed publisher’s blurb for one of Warren’s books. It’s pure PR puffery. Not evidence.

Is Liz Warren the leading authority in the country on bankruptcy? No. If you take citations as the best metric, she’s way behind Bob Scott in Brian Leiter’s latest survey.

Is Liz Warren a leading authority? Sure. By Leiter’s count, she’s tied for third.

I was wrong to quote that press unit, but thankfully the smackdown wasn’t too bad. According to a citation count, Warren is only the third most cited scholar on bankruptcy in the country. Number three is very high, and if you can trust academics to do something well it is navel-gazing gossip about fellow academics pretending to be quantifiable evidence. Are the people ahead properly bankruptcy experts? Warren seems to be the only consumer one. Anyway, I’m more than happy with #3.

Though if Obama nominates Alan Schwartz, the second most cited, perhaps he can split progressives in half. It’s worth a thought if Treasury is reading this.

Deference towards Finance

A problem for Democratic elites more than anything, but our elites more generally, is that Warren has pushed for greater transparency for our TARP funds. There are plenty of Wall Street people who hate this of course. Many want to declare this as having “worked” and move onto the next thing. What went wrong, where all the money went and how, and how do we structure a system that is accountable to the population?

For a field that is accustomed to getting puff pieces about how the financialized economy will lead us to even greater heights, getting treated like war contractors, a field where we now have to assume that the blurring lines and the easy cash breeds bad things requires a higher level of scrutiny, is painful. In fact, I think the biggest hit to the financial sector, more than any regulation, is the greater assumption that something is rotten at the core. The loss of cultural prestige is what I see in a lot of the senior TBTF bankers I’ve talked to since the crisis and bailouts hit. I think Warren gets flack for that, though that’s a nationwide phenomenon.

That whole middle-class thing.

Warren writes a lot about the middle class and the struggles it faces in the 21th century. Here she is in Huffington Post with America Without a Middle Class.

I think this sets people off. There are those who think that once you focus on growth nothing else matters, and that worrying about the distribution is a waste of time. There are those who think that the middle-class is “overrated” – it’s bizarre to believe but they are out there in the economics departments – and the fact that people can get food and electronics really cheap now should more than make up for a two-tiered America. And at the basic level the idea that the fragile American middle-class is collapsing causes such cognitive dissonance among the top 10% (and especially the top 1%) that they’d rather the discussion goes away.

In case you can’t tell, I don’t think a strong and robust middle class is “overrated.” Politically, to the extent that our country is an experiment in liberalism it depends on a subject who exists in the public and participates in the language of liberty, autonomy and rights. Many have noted that liberalism is incomplete, and if you map what is on the outside of that experience – a subject who exists in private and participates in the language of necessity, dependency and needs/duties – you see how women and minorities are excluded. I think we can close that, but as inequality moves hand in hand with increased economic insecurity, when your job traps you for health care, when your home traps you for worthless debt, when your ability to look for a job is hampered through a dense web of observations of your private life, the collapse of the middle class threatens the liberal project. And that’s something a really bitchin’ cheap stereo can’t replace.

Did Elizabeth Warren Cause the Credit Crunch?

Last critique, where it gets bizarre. I could see this being a talking point, so let’s break it down. e21 proposes: Elizabeth Warren Starts a Credit Crunch. Huh? From this:

Though the law was intended to take affect in February of this year, it had an immediate effect as credit card companies raced to raise rates and cut credit lines while it was still legal to do so. For instance, this graph from Robert Hall shows how interest rates paid on credit cards started rising in the first few months of 2009, exactly when the credit card bill was passed. Credit card rates were stable in prior months, when the economy was doing poorly. Interest rates in other categories – such as mortgages and car loans – stayed flat or declined over the same period. This all suggests that the passage of credit card reform resulted in higher interest rates on credit cards.

Three things: (1) The timing doesn’t necessarily work out. From Reuters: “The law largely codifies a set of rules issued by the Federal Reserve last year and puts them into effect in February 2010, five months sooner than the Fed had planned.” The Federal Reserve had already “passed” this previously; Congress just sped it up. So it’s not clear to me why the crunch wouldn’t have gone into effect five months earlier.

(2) Is there anything else going on with credit cards during this time period? From our DIY Stress Test series, the Federal Reserve’s stress test numbers:

Credit cards take an enormous jump in expected losses under the adverse scenario stress case, the case we look more like than the baseline. Those are huge losses! We should expect rates to go up, up much more than they have. There’s other ways to quantify the write-offs, the ratings agencies have them too but I’m not going to dig right now. Credit card writedowns are massive.

Now housing isn’t going down as much, but that’s certainly because of actions taken by the Federal Reserve and the government to keep the interest rates low for housing. (3) Also, and this gets back to the pragmatism in economics thing: I’m not convinced credit card spreads are risk-based. That was an analysis I looked at using jumps and rate movements under the blog microscope of a credit-risk quant last year, and I think there’s all kinds of new evidence I’ve seen since then to make me more of a doubter.

So no. Not seeing it. She didn’t actually pass this law, the Federal Reserve did, but to the general idea of “consumer financial protection” being a sledgehammer on access….don’t see this as an example.

In Conclusion

So we have aggressive with TARP accountability, highly-ranked but not the highest-ranked scholar, maybe a bit *too* worried about the struggling middle-class, and brought transparency to the credit card market without sending a wave of interest rate jumps. Where do I sign up?

Oh right, Progressive Change Campaign Committee (PCCC) has a webpage for that.