Senator Warren's Autobiography to be Published

Jill Lepore's review of Senator Elizabeth Warren's new autobiography, A Fighting Chance, in the current issue of the New Yorker, makes for fascinating reading.  Lepore compares Warren's book with Louis Brandeis's Other People's Money and How the Bankers Use It, which was published in 1914.  "Brandeis was concerned with Gilded Age plutocrats' use of people's bank savings to build giant, monopolistic conglomerates answerable not to the people but to shareholders."  The writings of the future Supreme Court Justice, well known for his "ability to enlist data in the service of a legal argument," which came to be known as the "Brandeis brief," were instrumental in the effort to reform antitrust law and regulate the financial industry.  Lepore argues that these reforms "in the middle decades of the [twentieth] century, made possible the growth of the middle class."

Unlike Brandeis, who focused on saving and monopolies, Warren focuses on borrowing and debt.  She is concerned about the collapse of the middle class.  Warren blames the rise in personal bankruptcy on credit card companies that "lured borrowers in with 'teaser rates,'" and on mortgage companies that sold "'mortgage products,' with low down payments, ballooning rates, and prepayment penalties."  After home prices skyrocketed and then plummeted, the middle class was left holding the bag.  Brandeis and Warren share the Progressive distrust of "legislatures and courts that have allowed the nation's social and economic policies to be made by corporations and bankers."

Warren shares some of her compelling personal story with her readers.  One vignette to which I could easily relate occurred in 1978.  Warren was holding her baby son on her hip trying to calm him down, while frying pork chops and keeping one eye on her daughter, who was coloring on the floor.  In the midst of this controlled chaos, she received a call from the University of Houston Law Center about a possible teaching position.  Somehow she made it through the conversation and got the job, the start of her academic career.

Like Brandeis, who worked to abolish child labor and to establish maximum-hour and minimum-wage laws for men and women, Warren is concerned about women, in particular "the unintended economic consequences that arise when women rearing children enter the paid labor force ... earning money has made women who are mothers more economically vulnerable, not less."  The two-income family has been hard hit--with two wage earners and low down payment requirements, middle-class families assumed larger mortgages than they could afford.  If one wage earner loses a job and the family is forced to live on one income, bankruptcy is the almost inevitable result.  The situation is aggravated if the family includes children.

A Fighting Chance will be published next week.  Warren denies that she is planning to challenge Hillary Rodham Clinton for the Democratic presidential nomination, but the publication of her autobiography is fueling the rumor machine.

Debtors' Prison Makes a Comeback

Debtors' prisons were outlawed early in the nineteenth century because people realized that debtors couldn't work and pay back their debts (or support their families) if they were behind bars. However, debtors' prisons may be making a comeback in the early twenty-first century. Newsweek published a short article this week entitled "The Return of Debtors' Prisons in Louisiana," by Joel Schectman. Schectman concluded that

[W]hile poverty is no longer a crime, at least not officially, two new studies suggest that the practice of locking up debtors is becoming more common. In separate efforts, the American Civil Liberties Union and Brennan Center for Justice at New York University spent a year observing court cases and interviewing hundreds of defenders, prosecutors, and the accused. The results, copies of which were released early to Newsweek, show a troubling pattern of incarceration in at least 16 states, where even minor, nonviolent offenses such as speeding and loitering result in prison time for the poor.

This is because courts fine poor defendants, "triggering an endless cycle of legal jeopardy." New Orleans Municipal Court is "particularly hard-nosed," according to Schectman, and jails indigent defendants who miss court dates; of the group studied, two thirds spent sixty days in jail. The same ratio was observed in Charlotte, North Carolina, although the number of days spent in jail was much lower.

The debate over bankrupty is sometimes colored by issues of morality--should people be allowed to walk away from obligations they freely agreed to assume? In this case, however, the issue is not morality but economics. As state funding for courts has dried up in the last few years, states have turned to fees as a way to pay for running their court systems.

In a memo obtained by the ACLU, the Michigan courts administrator is brutally clear, reminding judges of "tough economic times" and urging a "culture shift" toward pay-or-prison collection tactics.

In New Orleans, fee collection underwrites 40 percent of the costs of the city courts, and Judge Paul Sens says he's not running a debtors' prison but initially gives every defendant the option of community service. Clearly, however, many people who come before Judge Sens are being sent to prison. To me, this approach seems counterintuitive. It is by no means cheap to incarcerate people. To save money, it would seem to make sense to keep people out of prison. Furthermore, as was recognized in the nineteenth-century, people can't make money while in jail, further exacerbating their poor financial situation.

Professor Warren Takes on the Credit Industry

I had the pleasure of serving as the library liaison to Professor Elizabeth Warren when I worked at the University of Pennsylvania Law School. She has since moved on to Harvard Law School, where she specializes in commercial law and bankruptcy law. Her treatises on bankruptcy have been very influential, drawing as they do on empirical methods to paint vivid portraits of real people caught in the web of debt. Threee of the best known are As We Forgive Our Debtors: Bankruptcy and Consumer Credit in America, The Fragile Middle Class: Americans in Debt, and The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke. Through her scholarship, she has helped to change the image of debtors, sometimes characterized as wastrels and spendthrifts, to that of victims of predatory lending practices. During the current debate over health care reform, one of the themes has been the number of people who have declared bankruptcy because of medical debt caused by lack of health insurance. Professor Warren has been instrumental in bringing this issue to the forefront of the debate.

She is the subject of an entertaining article in today's Boston Globe. Professor Warren came from a family that struggled after a series of financial reversals. Both of her parents worked, but things were always difficult for them. This experience helps her to empathize with other families that are struggling despite hard work. She has proposed a new federal agency, the Consumer Financial Protection Agency, which is the subject of a bill, H.R. 3126, that was introduced on July 8 by Representative Barney Frank. It passed the House Financial Services Committee on October 29, but faces opposition in the full House and Senate. If approved, the new agency would regulate consumer financial products, and is vehemently opposed by business groups. Some in the business community accuse Professor Warren of positioning herself to be the director of the agency if it comes into being, but she feels any such discussion is "premature." In the meantime, she continues to teach and to serve as TARP overseer.