Elizabeth Warren: Why the "Big, Bad Banks" Are Very, Very Afraid--and Should Be

Houston Chronicle business columnist Loren Steffy posted an excellent analysis May 28th on why the "big, bad banks" have a bevy of reasons to be afraid of Elizabeth Warren, the Harvard lawyer, University of Houston graduate and former University of Texas law professor who is charged with setting up the Consumer Financial Protection Bureau (CPFB) established by Congress in the wake of the 2008 financial meltdown.

A decade before the financial crisis, Warren grasped--and warned in scholarly papers and books--that banks are willing to bankrupt their customers for short-term profit and that their short-sighted greed would lead to economic collapse.

Steffy notes: "In 2006, two years before the collapse of Lehman Brothers, she warned that banks' attitudes had shifted so dramatically in the past 80 years that the greatest threat to the economy wasn't customers making runs on banks, but banks making 'a run on the customers.'

"Ruining customers through excessive fees and gimmicks, driving them into foreclosure, default and bankruptcy, would lead to the same economic collapse that bank runs did during the Great Depression, she warned."

Steffy spent the rest of his column mocking the efforts of the banks' Republican lapdogs in the current Congress to badger and embarrass Warren into weakening the CPFB:

The big banks are tough.

They can handle Dodd-Frank. They can handle being labeled a "vampire squid" in the pages of Rolling Stone. They can even outlast the threat of criminal prosecutions for taking the global economy to the brink of collapse.

But what scares them the most is Elizabeth Warren, a Harvard law professor who has spent years learning their secrets.

Last week, the banks' representatives in Congress grilled Warren over the Consumer Financial Protection Bureau, a panel created in response to the financial crisis that might just give consumers a fighting chance against banks' exorbitant fees, debt spiral schemes and outright fraudulent lending practices.

Warren is a veteran of contentious congressional hearings, most recently ones she conducted as head of the oversight panel for the federal bank bailout. During those sessions, she squared off with Treasury Secretary Timothy Geithner over the government's handling of bailout funds and its claims that banks' balance sheets are sound.

So last week, when Warren didn't crumble under his badgering, Rep. Patrick McHenry, a Republican from Bank of America's home state of North Carolina, decided to try to humiliate her. Knowing she had scheduling conflicts that had already been discussed with committee staffers, he tried to delay the hearing and when she protested, he basically called her a liar.

The lack of decorum speaks to the desperation that the big banks feel over Warren and the CFPB, an agency that she is helping to establish and that would have broad powers to act on consumers' behalf.

In other words, the banks fear Warren because she knows their games and she has the data to expose them, and the prospect of Warren running the CFPB has fostered a growing desperation in the industry.

Last week, bereft of other arguments, the congressman from Bank of America resorted to name calling.

Elizabeth Warren isn't a liar. She's one of the few people in Washington with the courage to tell the truth.