Harvard Law Prof Gave Up Prescient Blogging for Federal Bully Pulpit
The Harvard law professor who was appointed congressional overseer for the Troubled Asset Relief Program was outspoken about abusive lending practices even before her new position brought media exposure for her cause.
Elizabeth Warren, a possible nominee to run the Bureau of Consumer Financial Protection, was a blogger in her prior life, according to the Wall Street Journal’s Washington Wire blog. She was a founder of the blog Credit Slips, and began sounding alarms in her first posts in 2006.
Washington Wire quotes a Credit Slips post from July 2006 where Warren expressed concerns about the resetting of adjustable rate mortgages for subprime borrowers. The homeowners, she said, are facing the end of two-year teaser rates on their so-called “2/28” ARMS, so they are taking out new ARMs with new teaser rates. “They stay alive for another two years,” she wrote. “And what happens when that one comes due? Evidently they are following the Scarlet O’Hara plan to worry about that tomorrow.”
The prescient blog post warned that these borrowers won’t be able to obtain new teaser rates if housing prices level out, since the value of the home won’t back up the mortgage. When the mortgage rate resets, she wrote, “the odds of making those payments on the new, higher balance are worse than those in any Las Vegas gambling parlor.”
“Could re-refinancing be the knife that will cleave what is left of the middle class?” she wrote. “There will be those who have fixed-rate mortgages, who pay off their homes, and who have something for retirement or savings if a catastrophe hits. And then there will be those who live in houses, paying high rent, always vulnerable to rate hikes, flat real estate markets, job layoffs, etc. That last group will nominally be called ‘homeowners’ just like the first, but they won’t really be. They will play the 2/28 game until they go bust.”
Warren gave up blogging shortly after she was named to head the oversight panel overseeing the TARP program, Washington Wire says.
White House spokesman Robert Gibbs has praised Warren as a terrific candidate to head the new Bureau of Consumer Financial Protection, but there is no word yet on whether she will be nominated, according to the Washington Post blog Political Economy.
