The New, and Old, Attack on Elizabeth Warren’s Congressional Oversight Panel

Here’s a new Karl Rove funded attack ad on Elizabeth Warren, arguing that when she was on the Congressional Oversight Panel she bailed out the banks:

Robert Kuttner, Ari Berman and Simon Johnson have responses, noting, correctly, that Warren has been a big critic of the bank bailouts and a defender of the middle class.

To me, the most amusing thing about Karl Rove’s attack ad on Elizabeth Warren is that it shows how adaptable conservative attacks on liberals are.  Because I’m old enough to remember the attempts, mostly by conservatives but by several others, in early 2009 to say that Warren’s Congressional Oversight Panel was way too hard on the banks.

Doubt me?  Wayback machine back to Megan Mcardle, TARP Cops, April 22nd 2009:

As head of the TARP Congressional Oversight Panel, Elizabeth Warren has massively extended her mandate, using the office as a sort of forum for broad-ranging commentary on the financial crisis.   Rather than tracking the expenditure of the funds, she’s increasingly using the oversight board to push her own ideas about what should be done with the banks…Moreover, this isn’t her job.  Her job is to watch where the TARP funds go and monitor their effectiveness, not lecture Congress on how hard to punish wayward bank executives.

Mcardle, who has written thousands and thousands and thousands and thousands and thousands and thousands and thousands of words about Solyndra being the end of capitalism as we know it, seems somewhat contemptuous over the idea that people are going out of their way to demand accountability at the trillions of Fed lending and guarantees that were given out in the bailouts, while trying to find options on what can be done that aren’t decided in private rooms of Treasury officials and bankers.

Thomas F. Cooley, NYU Stern School of Business professor, went to his Forbes magazine column at the same time to attack Warren’s COP as being too hard on the banks:

The COP, however, apparently decided that its mission was too narrowly defined. It didn’t need to do more evaluation of what the Treasury was doing with the TARP funds. Instead, it should hold forth on how financial crises at large should be addressed…Clearly, this is Elizabeth Warren’s particular crusade against the banks…Her letters to Secretary Geithner and Chairman Bernanke stop just short of attacking them for trying to restart the market for asset-backed securities.

Needless to say, the meme that it was a terrible thing to demand more accountability from the Federal Reserve and Treasury Secretary Geithner about the bailouts and what options were available to the public never caught on with most voters.

I can say, as someone who watches the foreclosure market, that the only reason we know what we know about HAMP and other foreclosure mitigation efforts – especially their disastrous numbers – back then was because of Warren and the Congressional Oversight Panel.  That alone was amazing work, and they did a bunch of other crucial reports, necessary for the public to understand what was happening between the government and the banks.  They did heroic work getting to the bottom of what was going on, when the administration and the Fed was trying hard to hide information.

My favorite “Warren’s COP is too hard on the banks” moment was this aggressive Planet Money interview of Elizabeth Warren by Adam Davidson from May 2009. Lambert at Corrente wrote out some of the exchange (my bold):

ADAM DAVIDSON: What it feels to me is what you are missing is that — I think we put aside your pet issues…

ELIZABETH WARREN: …This crisis will not be over until the American family begins to recover. [More Davidson sputtering.] This crisis does not exist independently —

DAVIDSON: That’s your crisis.

ELIZABETH WARREN: No it is not my crisis! That is America’s crisis! If people cannnot pay their credit card bills [Davidson tries to interrupt] if they cannot pay their mortgages —

DAVIDSON: But you are not in the mainstream of views on this issue. You are not —

ELIZABETH WARREN: What, if they can’t pay their credit card bills the banks are gonna do fine…Who is not worried about the fact that the Bank of America’s default rate has now bumped over 10%?

DAVIDSON: The American families are not — These issues of crucial, the essential need for credit intermediation are as close to accepted principles among every serious thinker on this topic. The view that the American family, that you hold very powerfully, is fully under assault and that there is — and we can get into that — that is not accepted broad wisdom. I talk to a lot a lot a lot of left, right, center, neutral economists [and] you are the only person I’ve talked to in a year of covering this crisis who has a view that we have two equally acute crises: a financial crisis and a household debt crisis that is equally acute in the same kind of way. I literally don’t know who else I can talk to support that view. I literally don’t know anyone other than you who has that view, and you are the person [snicker] who went to Congress to oversee it and you are presenting avery, very narrow view to the American people.

History has proven Warren correct, and Davidson wrong.

The amusing thing is that since that interview the hottest research on the crisis has been on the concept of unemployment being driven through “deleveraging” as household-balance sheets have too much debt.  It’s what is driving interest rates into the zero-lower bound in Krugman and Eggerston’s theoretical models – see Debt, deleveraging, and the liquidity trap, or Sam, Janet and Fiscal Policy. We covered three distinct ways of thinking about deleveraging and other expansionary policy at this post.  More importantly, it is what is driving unemployment in the empirical work – here is Atif Mian and Amir Sufi of the Federal Reserve Bank of San Francisco:

Atif Mian and Amir Sufi have a Bloomberg column – titled “How Household Debt Contributes to Unemployment” (!) – summarizing their latest research in the balance-sheet effects of this recession. Here’s Calculated Risk covering their research.  I’m going to have an interview about this research up next week – so stay tuned.  You can’t go 10 yards in these current debates over the economy without someone mentioning or reacting to the idea of “deleveraging.”  Davidson can no longer “literally” not know anyone who thinks this is part of the crisis, and his idea that backstopping the TBTF banks – even if it constrains or ignores our ability to deal with the debt overhang – is more important is barely spoken.

But yes, to recap.   Back then Warren was on a mad campaign to demand too much accountability for the bailouts and a crazy crusade about household balance sheets that no respectable person would care about because she cares too much about working families.  Now Rove funds attack ads saying Warren is a bailout queen who throws working families under the bus.  Even though every respectable person has caught up and knows the consumer balance sheet is important topic of discussion in this recession.  Amazing how shameless the Right’s attack machine is.