Robert Kuttner

The case for Elizabeth Warren for senator

By Robert Kuttner
July 29, 2011

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ELIZABETH WARREN’S picture recently graced the cover of Bloomberg Business Week - festooned with splotches of mud, with such words as, “smug,’’ “arrogant,’’ “entitled,’’ and worst of all, “liberal.’’ It was a nice preview of what Warren can expect, should she decide to challenge Republican US Senator Scott Brown.

This kind of schoolyard name-calling suggests why the financial industry and Republican Party fear the prospect of a Senator Warren. If this is the worst they can throw at her, she will be a formidable candidate.

These adjectives are also far from accurate descriptions of Warren, a woman whose personal lack of pretension balances her toughness and expertise. (Disclosure: last year Warren’s daughter, Amelia Warren Tyagi, became chair of Demos, where I am a fellow.)

I first observed Warren at close range when she was named to head the Congressional Oversight Panel in late 2008. The panel was charged with supervising nearly $1 trillion of bank bailouts.

Several things impressed me. Warren was smart, a terrific listener, had a gift for explaining the essence of arcane financial stuff to civilians, and had an insightful view of the financial crisis.

Warren’s day job is professor of bankruptcy law. What, you might ask, does that have to do with the economic crisis and her political effectiveness?

Bankruptcy allows a failed enterprise to settle its debts and resume operation, often under new leadership. It is an alternative to just closing down an insolvent but potentially viable company while creditors pick over the bones.

In a bankruptcy reorganization, a judge sorts out assets and debts, pays off creditors at so many cents on the dollar, and the enterprise can recover. This is what occurred with GM and Chrysler - and did not occur with Citigroup and Bank of America.

To Warren, failed large banks should be put through a bankruptcy, so they can emerge with clean balance sheets and new management, to serve the rest of the economy rather than hiding their own sorry state.

This view put her directly at odds with Treasury Secretary Tim Geithner, whose strategy was to bail out, prop up, and cover up the condition of insolvent banks, and leave owners and managers in place. To Warren, this course just camouflaged deep damage that would spill over and drag down the rest of the economy for years, maybe decades, as happened in Japan.

So Warren essentially became leader of the progressive loyal opposition to Obama’s economic team and its feeble recovery strategy, while remaining close to Obama himself. She was the one senior dissenter who got to speak directly to the president. That balancing act suggests exceptional political skills.

She also became a champion of consumers, calling for a consumer financial protection agency to vet dubious financial products, just as the Consumer Product Safety Commission recalls everything from hazardous infant car seats to exploding toasters. Warren often said that if such an agency had existed, there would have been no subprime loans, and no crisis.

In the hearings of the oversight panel, Warren was always courteous but pulled no punches. She did not get the job she wanted heading the new consumer agency - not surprising given that Geithner, Obama’s closest economic adviser, was her nemesis.

But why does this history suggest that she would make an effective senator or candidate?

First, in an age of few popular liberal heroes, she has undeniably become one. Second, she is effective, both as an inside player and an outside tribune. She will have no shortage of enthusiastic volunteers and financial support. Third, with her working-class background and personal story, she is about as bulletproofed against being Cambridge-baited as any law professor could ever be. Scott Brown looks far more Harvard than Warren does.

So while Warren enjoys her vacation at Legoland, this Massachusetts voter hopes her contemplation of her grandkids’ future adds up to a Senate run. You can count the number of effective and inspirational progressive leaders on fewer than the fingers of one hand. Her country needs her.

Robert Kuttner is co-editor of The American Prospect, a senior fellow at Demos, and author of “A Presidency in Peril.’’