FYI – Elizabeth Warren

25 Jul FYI – Elizabeth Warren

Elizabeth Warren is being proposed by some as the best choice to head the new Bureau of Consumer Financial Protection, as discussed here in a New York Times editorial, as well as here at a USA Today article. Who is she? The short answer is that she’s a bankruptcy expert at Harvard Law School, and she cares.

My bankruptcy practice in New Mexico is mainly with middle class clients who are choosing bankruptcy over poverty. (This is Chip Parker’s phrase and I think it’s appropriate and needs to be stated more often.) Ms. Warren early on identified this situation, which she wrote about in her 2003 law review article, The Growing Threat to Middle Class Families. The article was published in 2003 before the radical changes made in bankruptcy law in 2005. The study was a product of the 2001 Consumer Bankruptcy Project made possible through funding from the Ford Foundation and grants from Harvard Law School and New York University Law School.

As she states there:

Our research eventually unearthed one stunning fact. The families in the worst financial trouble are not the usual suspects. They are not the very young, tempted by the freedom of their first credit cards. They are not the elderly, trapped by failing bodies and declining savings accounts. And they are not a random assortment of Americans who lack the self-control to keep their spending in check. Rather, the people who consistently rank in the worst financial trouble are united by one surprising characteristic. They are parents with children at home. Having a child is now the single best predictor that a household will end up in financial collapse.

The statistics in 2003 were shocking (and I believe they are worse today). As she states in her article:

In 2003, more people will end up bankrupt than will suffer a heart attack. More adults will file for bankruptcy than will be diagnosed with cancer. More men and women will file for bankruptcy than will graduate from college. And, in an era when traditionalists decry the demise of the institution of marriage, Americans will file more petitions for bankruptcy than for divorce. Heart attacks. Cancer. College graduations. Divorce. These are markers in the lives of most American families. And yet, we will soon have more friends and coworkers who have gone through bankruptcy than any one of these other life events.

She introduced the idea for the governmental agency just being created in her 2007 article, Unsafe at Any Rate.

For some more about her, see Russell DeMott’s post here, linking to a video clip of her interview on The Daily Show; Douglas Jacobs’ post here about Warren’s Bill Mahor’s interview about credit card legislation; and here with Chip Parker’s post on American’s choosing bankruptcy over poverty.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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