Elizabeth Warren Flays Former Fed Official Who Saw No Evil on Subprime Loans, Currently Peddling Line That Regulation is Too Costly (to Banks, Natch)

Even though I’ve seen Elizabeth Warren repeatedly make masterful use of her very limited time during Congressional hearings to interrogate witnesses, I can’t recall her ever getting angry. But she did yesterday with a completely deserving target, and if anything, her display of ire made her more, not less effective.

The target was one Leonard Chanin who associate director of the Division of Consumer and Community Affairs at the Federal Reserve in the runup to the crisis. As we managed to ascertain by a peculiar bit of synchronicity in early 2007, the Fed then was deeply devoted to the idea that all mortgage fraud was being perpetrated against banks. And it became apparent shortly thereafter that even the bank regulator that is normally the most cronyistic, the Office of the Comptroller of the Currency, took its responsibilities under the Home Ownership and Equity Protection Act, which was designed to curb abusive practices with high fee, high interest rate mortgage loans, far more seriously than the Fed did.

And what was Chanin’s excuse? “No one presented us with statistically valid data.” You’ll see what Warren does with that one.

This excerpt from a May 2007 post gives an idea of how fiercely anti-borrower the Fed’s perspective was:

I happened to meet an official in the Fed’s Banking Supervision and Regulation division at a cocktail party this evening and chatted him up. He helped brief Roger Cole before met with the Senate Banking Committee last month to defend the Fed’s conduct regarding subprimes, so he is up to speed on this topic…

I was taken aback at what this individual said, and while he was not speaking in an official capacity, I have no reason to think his views were unrepresentative.

His view was that the Fed was not at all at fault in the subprime matter. He said that he disagreed with Roger Cole’s statement that in hindsight, the Fed could have done better. He said the Fed had enforced the laws that were in effect at the time (query why then did the OCC read and enforce HOEPA differently?).

He also asserted that there was a tremendous amount of consumer fraud, that the FBI was pursuing a lot of cases (if so, I wonder why this hasn’t been reported, since people like the Fed and the subprime originators would have every reason to present the institutions, rather than the consumers, as victims). In the narrow sense, there clearly was a lot of fraud, since in the “no doc” loans, a very high proportion of borrowers overstated their income by large amounts. But the implication of the Fed official’s statement was that the fraud was “fraud for profit” meaning the intent was to make off with money, as opposed to “fraud for housing” in which one gets to live in a house one shouldn’t on paper have. In “fraud for housing” a sensible lender will come out whole (even in a no-doc scenario, if the buyer makes a high enough down payment and the lender gets a realistic appraisal, it will come out fine even in a foreclosure, unless the local housing market falls out of bed). So despite the Fed guy’s aggrieved tone, it’s hard to see the lenders as victims.

Equally disturbing was his confidence that the markets were working fine. He noted that several banks had taken earnings hits, and that credit issuance was being tightened. He also said that subprimes had enabled a lot of people to buy housing who otherwise couldn’t have. I mentioned predatory lenders and he dismissed the Ameriquest case, in which the nation’s biggest home lender to people with poor credit agreed to pay $325 million to settle charges of fraud and overbilling. Many observers deemed this payment to be trivial when compared to the harm done to borrowers, some of whom lost their life’s savings. Only after some pressing did he accept the point that the products were difficult even for financially literate people to understand, and better disclosure was needed.

This “blame the poor” attitude seems almost Victorian. In the modern world, the rich need to present their wealth as legitimate, as the product of talent and hard work, as opposed to having the deck stacked in their favor. As a corollary, therefore, the poor have to be poor because they deserve it. Otherwise, the whole “wealth makes right” construct fails.

And you’ll see in due course why Warren is so confident about her dim view of this witness.

Circulate widely.

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  1. b2f

    And yet she refuses to endorse Bernie. I have little respect for her. This election is for all the marbles, and she refuses to endorse the only candidate who would go along with her ideas.

    1. Yves Smith Post author

      You are way off base.

      1. She has done everything short of endorsing him.

      2. Her endorsement would make vastly less difference than you think. Her fans are already Sanders fans.

      3. The Clintons have the superdelegates. The odds of Sanders winning are low unless some Clinton shoe drops…which could well happen, between the FBI, Judicial Watch, Unaoil, Panama Papers, and her health. And the Clintons are famously and fabulously vengeful. Warren intends to keep being an effective player in Congress. She’s gone as far as she can afford to in crossing Hillary by refusing to endorse her. You need to put on your Game of Throne hat, and stop imposing naive purity tests on people who live in the ugly world of politics.

      1. wbgonne

        Good grief. How about we stop making excuses for people? Everyone has a reason for cowardice but they’re still cowards. As for Warren’s endorsement not being significant, you don’t know that and I doubt it’s true. Sanders could use a jolt of star power and Warren can provide it. It might even put him over the top. On Warren being “an effective player in Congress,” good luck with that under another neoliberal Democrat president, one who has an even tighter grip on the party than Obama.

        1. Cry Shop

          Many of the people I’ve met in the USA don’t know who their own Senators are, much less who is Warren. Those that do mostly have made up their minds already where they are voting.

          One of the best comments I read in a while was on Radio Paradise.

          I love the internet because it makes people think what they think matters widely; and I hate the internet because mostly it doesn’t matter at all.

          Warren’s a much sharper cookie with a far better understanding of real politic than most of the “operators” here, including myself. She’s a neo-liberal in most of her thinking, but at least she thinks the system should be honest and work for everyone.

        2. Yves Smith Post author

          This is not about cowardice and you are really off base in your charge. Warren is looking at maximizing what she can do to advance her agenda. She is relentlessly focused on that and she’s managed to punch way way above her weight as a lone Senator with very few ideological allies in the Senate. She’s well known to be an extremely effective bureaucratic infighter. You are seriously out of your league in sitting in judgment of her tactical calls.

          And you are just wrong about the impact of an endorsement by her. It’s a one news cycle event, and the overlap of her backers and Sanders backers is just about exact. She will not drive new voters to Sanders, which is the point of an endorsement. She’s an old white intellectual from the East. Her appeal is not as broad and deep nationally as you think. She has fervent support among the sort of progressives who are already keen about Bernie.

          Honestly, you want her to make a pointless sacrifice to please you? She’s made tons of strong statements in support of Sanders policies. Anyone who is a supporter of hers has gotten the memo.

          1. wbgonne

            We are at a crucial moment in the most important presidential campaign in a very long time, maybe in American history. And Sanders actually has a chance. It is time for everyone to step up and do whatever they can to help. Enough with keeping the powder dry. Warren can help Sanders by endorsing him so she should do it. Period. We don’t know how impactful that endorsement might be but it will certainly help. With the campaign at a possible inflection point, Warren’s endorsement now could be yuge.

            As for Warren’s current “effectiveness,” I beg to differ. Speeches are not policies. The only ones who have stopped Obama’s neoliberal predations are the hard Right reactionaries (albeit for the wrong reasons).Warren’s current “power” is as a gadfly and that will be so, or worse, if Clinton wins. If Warren doesn’t get that, she is not nearly as savvy as you posit. And if she does, then she is a coward. IMNSHO.

            1. pretzelattack

              warren supported reagan despite the slaughter in central america, despite the huge buildup in the military, the corruption, despite all the problems with cutting taxes, despite so many other things. i’d like to know how much she has changed on foreign policy. she’s excellent on financial regulation, which is a huge problem, and she does valuable work in the senate.

              i think the times we live in require weighting political courage more heavily than usual. endorsing sanders could have had an effect in massachusetts, and perhaps would persuade some women voters to reexamine their position, imo.

            2. GlobalMisanthrope

              Wait, is Warren important or a gadfly? You’re contradicting yourself.

              Besides, strategy is essential in the long game Warren is playing. Neither Sanders nor Warren gains from her endorsement. Now, she could really help Clinton and she isn’t. Withholding that endorsement is much more effective.

              Some self-congratulatory, titularly progressive catharsis at this point would only serve to take steam out of Sanders’ momentum. Nope, sorry. You’re just wrong on this.

              1. readerOfTeaLeaves


                “…Besides, strategy is essential in the long game Warren is playing. Neither Sanders nor Warren gains from her endorsement. Now, she could really help Clinton and she isn’t. Withholding that endorsement is much more effective….”

            3. TedWa

              I had read that right before Clinton announced her run that she had met with Warren in private for an hour or more. My guess is there were threats or promises made, or more likely both, to keep her from endorsing anyone. Clinton was the sure victor at the time and my guess is Warren is playing her cards close so that she can remain effective no matter who wins. Although, her endorsement right before the Massachusetts primary could have made a difference.

            4. Yves Smith Post author

              How many times can I tell you that Warren’s endorsement is not gonna make any difference for Bernie? Her withholding her endorsement from Clinton (where it WOULD help Clinton burnish her claim to being a progressive) is far more significant. Virtually every other Dem senator has endorsed her.

              Warren has little/no reach for the groups that Bernie needs to get to win, which is low information Democratic voters, particularly of color. Most Dem voters have no idea who she is.

              1. Paul Tioxon


                Tonite, Warren not endorsing Bernie has not held back a reported crowd of 17,000, over 10,000 of which filled to standing room capacity, The Temple University basketball arena in the heart of North Philadelphia. As Bernie has said, and I concur, political revolutions are not top down events but from the grass roots up into the halls of power. Witness the $15/hr min-wage victories that started with hamburger flippers about 4 years ago and now is the law of the 2 largest states in America, not to mention the laws of numerous cities, and municipal and local government controlled agencies and facilities.

                This did not come from Warren or Bernie but the faceless cadre of union organizers, community activists and other democratic power organizers throughout America that have contrary to popular belief, not just faded away.

                I loved Liz Warren’s politics before Bernie caught the nation’s attention. But there is NO POLITICAL MESSIAH anywhere, never was one and will never be one. Strong man or Strong Woman political movements, Peronist like or Franco like politics may change things, but it is never a subsititute for democratic tidal wave of the citizenry in action during mass mobilizations for specific political goals. And that is what we are witnessing now. It is more occupy the voting booth than anything and will not likely just disappear without a trace. There is a civil war in the democratic party brewing.

          2. DanB

            For me -and Warren is one of my senators- the revelation regarding Warren will come if Hillary gets the nomination. Will Warren actively and vigorously attempt to veal pen Sanders supporters? Or will she tepidly endorse the party ticket?

        3. diptherio

          Look, how many people do you know who change their votes on the basis of an endorsement? I think the press makes a bigger deal out of these things than is realistic. Besides Warren’s not endorsing Hillary sends a pretty strong message in and of itself, and puts the lie to the “special place in hell” line of argumentation. By remaining officially neutral, she also seems more objective when she’s talking about finance issues, and is thus more influential. If she endorses Bernie, she’ll lose influence with the Clintonista rank-and-file, and thereby reduce her political weight.

          There’s plenty to not be impressed by in Warren, like her conventional-wisdom-based foreign policy views. But I’m not going to hold this endorsement thing against her. She’s just playing smart chess here; I think you might be getting it confused with Obummer’s 11-dimensional variety ;-)

      2. Gaius Publius

        I want to say for the record that everything Yves said below is correct. Every word.

        1. She has done everything short of endorsing him.

        2. Her endorsement would make vastly less difference than you think. Her fans are already Sanders fans.

        3. The Clintons have the superdelegates. The odds of Sanders winning are low unless some Clinton shoe drops…which could well happen, between the FBI, Judicial Watch, Unaoil, Panama Papers, and her health. And the Clintons are famously and fabulously vengeful. Warren intends to keep being an effective player in Congress. She’s gone as far as she can afford to in crossing Hillary by refusing to endorse her. You need to put on your Game of Throne hat….

        This is an immensely consequential game, and the Dems are in it to win or lose with Hillary, period. What happens to the nation as a result will be huge. Trump is now looking more and more like he’s out.

        Clinton-Cruz: +3 Clinton
        Sanders-Cruz: +10 Sanders

        Clinton-Kasich: +6 Kasich
        Sanders-Kasich: +1 Sanders


        If Paul Ryan polls like Kasich, it’s the same problem.

        This is looking more and more like a dance of death the Clintons and the Dem Elites are engaged in — “win or lose, Democrats, it’s us or no one.” Hubris and ambition on steroids.

        We really need to be looking at it this way, and also be looking much further ahead than many of us are.

        As to the above quote, Yves has nailed it. Warren is as good at this as there is, and she’s working it.

        Mes centimes,


        1. wbgonne

          I’m sorry but your logic eludes me. You appear to agree that this is a terribly consequential election but then you say it’s sensible to play the long game. Well, unless we address global warming immediately the long game will be nothing but a death march. And Clinton is not going to seriously address global warming, any more than Obama has. I’m quite sure you know this. The time to win is now and, quite astonishingly, Sanders actually has a chance. So this is the time to act.

          This is the time to stand and be counted, not to play coy. And I just don’t agree that Warren’s endorsement would be meaningless for Sanders. Not at all. Sanders could use a little help from someone with star power. And if Warren really got on board — like Hillary’s endorsers have done for her — Warren would be a wonderful surrogate on the stump. If Warren wants Sanders to win she should help him as much as she can. It’s pretty simple.

          I just don’t understand this excuse-making for Warren. (Frankly, it reminds me of: 1) the Obots’ claims that Obama has been engaged in 11-dimensional chess that no one else is smart enough to understand; and 2) the Clintonistas’ tripe that Warren is more effective in the Senate than she would be as president and therefore shouldn’t run against Clinton). It is time that we demand our leaders and politicians act, and to do that we must stop excusing their failures to do so.

          And there is yet a more sinister view of Warren’s professed neutrality: that she is maintaining her progressive bona fides in order to more effectively sheepdog Sanders’ supporters into backing Clinton if Clinton gets the nomination. I really hope that’s not the case.

          1. Gaius Publius

            You wrote:

            And I just don’t agree that Warren’s endorsement would be meaningless for Sanders. Not at all. Sanders could use a little help from someone with star power. And if Warren really got on board — like Hillary’s endorsers have done for her — Warren would be a wonderful surrogate on the stump. If Warren wants Sanders to win she should help him as much as she can. It’s pretty simple.

            Understood. wbgonne. We do disagree about the above point, however. His problem isn’t enthusiasm among his (and her) supporters. It’s Clinton’s control of the party establishment machinery and auto-voting, especially in eastern and southern states. Warren won’t look any more “establishment” to them than Sanders does.

            Now if he wins the nomination and asks her to be the VP … that would be consequential. IMO.

            Mes centimes…


          2. different clue

            “Clintonista’s tripe” . . . ? I remember Yves Smith offering the analysis at least two years ago that Warren would not/should not “run for President” because she could become genuinely effective as a counter FIRE-sector Senator if she stayed in the Senate long enough to aquire power and keep winning particular victories against particular FIRE agents from her Senatorial position. It made sense then and it makes sense now . . . . and translates into not breaking the blade off her counter-FIRE Senatorial knife by making a beautiful gesture of Endorsement for Sanders.

            Purity-demanders’ demands for purity leave me unmoved in this case.

    2. timbers

      Warren is contributing value and lot of it and don’t quite understand some of the harsh comments directed at her, and her value does not reside solely on wether or not she endorses Sanders.

      But I wish she had endorsed Sanders, and yes she is not perfect (her opposition to single payer for example).

    3. sgt_doom

      You are exactly correct, and all the spineless, witless, feckless types who will come to her aid are the very same ones who support the perfidy of the Clinton-Rodham family, and have said wonderful stuff about Carl Levin, the ultimate feckless congressional critter, etc., etc., etc., yadda, yadda, yadda, blah, blah, blah (was imitating Warren’s useless prattling, while voting against an audit of the Fed, while standing by silently when the so-called Consumer Financial Protection Bureau was placed under the authority of the Federal Reserve (those the doods who fired Carmen Segarra for attempting to do an honest job?????), and refuses to endorse Bernie, yet has spoken rather glowingly of Hillary Clinton, who is financially supported by foreign billionaire, George Soros, the head choppers of Saudi Arabia, various and sundry hedge funds, and bringing up the extreme rear at the low financial end, the Pritzker family and Aldeson of Los Vegas.

      Say, is Catherine Mann by any chance Warren’s sister-in-law???

  2. Skippy

    Amazing to see Leonard Chanin argue in favor of woeful underwriting standards in light of historical evidence… yet claim poor for data…

    Skippy…. neoliberal meritocracy at its finest….

    1. JohnnyGL

      The guy works for a law firm that openly call themselves Mofo’s. It doesn’t get more transparent than that!!!

      Sorry, couldn’t resist :)

  3. PlutoniumKun

    Thats a magnificent evisceration. My admiration for her goes up every time I see her in action.

  4. Cry Shop

    Tom Umberg, Drew S. Days, III, and a whole hellish host of legal parasites at Chanin’s firm Morrison & Foerster LLP all bumped their shins on the Bill Clinton administrations revolving door of casino corruption, and they’ve been just as busy with Barry Obama.

    I don’t have time right now to look further, but I’ll be wining no prize for the easy guess who’s stumping up big bucks for Hill-Billy 2016.

  5. Andrew Anderson

    As a corollary, therefore, the poor have to be poor because they deserve it.

    Government subsidies* for private credit creation favor the rich, the most so-called credit worthy, at the expense of the purchasing power and investment opportunity of the poor, the least so-called credit worthy.

    What the poor deserve is not to have their own government sabotage them vis-a-vis the rich yet that’s precisely what has occurred via the money system we have in place. Eg., the so-called credit worthy rich have used the legally stolen purchasing power of their workers to automate their jobs away.

    *A major one is government-provided deposit insurance instead of inherently risk-free accounts for all at the central bank. Thus Social Security recipients, the US Military, US Federal employees, Federal contractors, etc. are FORCED to lend (a deposit is legally a loan) their fiat (aka “reserves”) to one bank or other depository institutionn since only they may have accounts at the Federal Reserve.

    1. Skippy

      Disagree on the money system bit, its more of an agency problem which utilizes an ideological smoke screen to justify the way the system is used. As such no matter what until the fundamental issues is redressed it does not matter what monetary system is used.

      Skippy…. same problems occurred with the gold standard imo..

      1. Andrew Anderson

        Not arguing for a gold standard (a previous form of oppression of the poor) but that everyone be allowed to use their Nation’s fiat the same way the banks and other depository institutions do – via convenient, inherently risk-free accounts at the central bank.

        If/when physical fiat, aka “cash”, is abolished then we’ll have the absurd situation that the citizens of a nation may not use their nation’s money at all but instead be forced to lend to and work through banks, which in the case of the poor, will be working against their interests by, for example, financing the automation of their jobs away.

        Anyway, never said that this was the whole problem but it is one obvious example of grossly unequal protection under the law.

        What do you mean by agency problem? Bad people? But the system is inherently bad since it favors the rich via government privileges.

        1. Skippy

          To over simplify: the agency supplied by post WWII corporatists in advancing MPS ideological preferences as a national societal template w/ exporting in internationally.

          Skippy… see Obama on tele wrt Cuba and stating that some sticky points had to do with perceptions of “universal rights” …

        2. Yves Smith Post author

          You keep thread-jacking. This is a violation of our written site policies and I’ve told you off before. This is the last time. You do this again and I rip out all your comments. All of them. I’ve told you repeatedly why your demand is barmy and you come back and keep broken recording. This is the ONLY topic on which your write here. You have no interest in this community or in good faith discussion. I’m not interested having you use this site to promote your pet obsession.

          Go get your own damned blog and quit polluting mine.

      2. diptherio

        “The money system” and “the way the system is used” are functionally identical. You two aren’t disagreeing. Allowing citizens to open up accounts directly with the Fed (or maybe a Postal Savings Bank?) is something I think we can all agree would be a step in the right direction.

        Changing the way we use our money system (i.e. changing the money system) will, of course, require the exit of agents who are working for the Dark Side.

        1. Skippy

          Human tool user problem acerbated by erroneous beliefs about humans in the first place… if the humans are not ethical the tool has zero agency to compel otherwise…

          Skippy… I’m more concerned about how productivity is arrived at and then dispersed before how to store its value…

  6. Clive

    The fact that there are so few Warrens and so many Clintons (or there ilk — if it wasn’t Hillary, it would be something just like her) goes to the heart of our political dysfunction.

    Oh, and the Chanin hokum that the CFPB must somehow make nice to the banks because otherwise they’d shut up shop (“limit access to finance” in his words) is such an outrageous crock of horse hooey I coughed with a mouth full of coffee. Alcohol, tobacco, prescription drugs, gasoline, pesticides, and those are just a few things that come instantly to mind, are all way heavier regulated than consumer credit and yet I don’t have any problems at all obtaining them as quickly and as easily (sometimes too easily I think) as I need.

    Chanin is like the president of the Pimps Professional Trade Association who’s bemoaning that intrusive law enforcement is making it way too much hassle for the people he represents to be able to supply the crack whores they are exploiting with what they “need”. And then saying that though members of his Association beats them up and lets them be abused by others, there’s a lot worse out there than those who, after all, abide by the Association’s Code of Conduct so the crack whores should be grateful they aren’t being even more exploited than they already are.

    1. Skippy

      Yeah but…. that would screw with “some peoples” freedoms and liberty’s….

      Skippy…. as they are want to say…. people need to be responsible for their own actions when force is not applied…. freewill thingy…

      1. Clive

        Yep, I’m completely aligned to the logic that would have us believe it’s just like deciding to become a crack whore is a lifestyle choice…

  7. Rob Whitman

    We miss the larger point. Warren has endorsed neither Sanders or Clinton but has several times made very positive comments about Sanders positions. She came under tremendous pressure to endorse Clinton when all other women senators came out for her but still withheld her endorsement. Clinton has tacked relentlessly left in order sound like Bernie. See the SNL skit where she turns into Sanders. If Clinton wins the movement Sanders is building will not go away. Warren and Sanders will be in the senate holding her feet to the fire. Clinton will probably be a one-term neoliberal (neocon foreign affairs) president. Warren will be positioned to run and win 2020

    1. diptherio

      I think people place far too much weight on endorsements. How many times have you been talking politics with someone and they told you that they were going to vote for someone because so-and-so endorsed them? I don’t think I ever have, to be honest.

      Warren has plenty to lose by outright endorsing Sanders and the potential benefits are minor. So long as she doesn’t endorse Hillary, I’m not going to hold this one against her.

      1. JohnnyGL

        Both these comments are good. More importantly, I recall she made a comment defending his right to run when the calls really escalated for him to drop out after 3/15. She’s done enough, in my book.

        I’m not going to sweat the lack of a grandstanding endorsement for Sanders. As Yves pointed out, little upside for her or Sanders, lots of downside potential Clinton wrath.

        At best, she could have swung maybe 5 points to Sanders in the MA primary. That’s a rounding error. He’s doing fine without her.

  8. RabidGandhi

    Amateur question: can anyone ‘splain to me whether this is just feel-good theatre or if there is some kind of tangible outcome to these sort of senate hearings?

    While I definitely think it’s phenomenal that lowlifes like Chanin are humiliated publicly (for the micro-portion of the pop that watches senate hearings), I do nevertheless remember similar hearings for folks like Dimon, Mozilo, Greenspan… all of which seemed to result in a few senators getting to play the outraged Jefferson Smith while the perp smirks in the background and then happily returns to her/his pillaged loot.

    So would a dressing down of this sort have any negative ramifications for Mr Chanin, or does it turn out to be a net positive for both himself and Sen. Warren?

    1. Yves Smith Post author

      I don’t think you get what this is really about. You are not going to see real change unless you change perceptions about the deference to bankers and banking expertise, and the perceived importance of finance in DC and the media. Warren (and others) are deligimating finance. That’s a long but necessary process, far more important than tactical wins.

      It’s not a plus for him to have him now best known as the guy who pretends he really could not have seen that there were problems in the housing market in 2006-2007 at the Fed when that was his job. It’s an admission that he was incompetent. There were also better excuses he could have made, but “no one handed me the data on a silver platter” is really lame given the Fed’s reach and research staff.

      1. Ishmael

        On target Yves! With the little data I had but lots of experience I could see in approx 2004 we were heading for a real housing disaster. House prices were going up exponentially in CA. How could that have been sustainable. I remember telling another finance person around that time we were heading for a real housing disaster and he later on told me he thought I had lost my mind. Why, because how could I know that when the Fed and govt did not. Besides everyone thought the Fed and govt would not let that happen. These people should not have a job anywhere!

      2. RabidGandhi

        Yeah I can see that. A lot of it will depend on how much diffusion a video like this gets (props to NC for posting it). Changing perceptions is going to be a long slog, and Warren is doing what she can, far better than most anyone else in the senate.

        That said, I was watching Inside Job again the other day, and you get this parade of criminals admitting they are incompetent (Mishkin, Hubbard, Feldstein…), and most of them don’t seem to have been hurt at all in their careers by being outted as incompetents/thieves– and that was a well-circulated documentary which I’m sure is viewed by millions more people than this senate hearing. There is an impunity in the economics/pundit class that allows people to make blatantly incompetent errors, and still be a “respected authority” (eg, Larry Summers, William Kristol…) .

        This to me means there is a danger on over-focusing on gotcha moments. It’s good to be taking these baby steps, but the audience whose perception really needs to be changed is not the ones watching C-Span; it’s the ones who allow the people on C-Span to stay in power.

  9. Jason

    For some reason, the German word Backpfeifengesicht keeps coming to mind whenever that guy is on camera.

    1. diptherio

      Google translate tells me that means “slaps face.” Am I to understand “facepalm” or “I want to punch that guy”?

      1. hunkerdown

        From memory, “A face that needs a fist in it” is a translation that had some currency here a while ago.

  10. craazyman

    This stuff is so complicated it’s easy to get confused. I’m not a data scientist so I’m going off dim memory, but wasn’t there in fact no data, in terms of broad performance in loan pools in 2005/2006 that suggested the loans were a problem?

    Isn’t this like a man falling from the top of the Empire State Building and halfway down he says “I don’t have any data that suggests I’m in trouble, although it is a bit windy.”

    Maybe the problem is you need to think about data in a different way?

    It’s hard to be a flat earher on a round planet, but people try every day.

    1. diptherio

      Wasn’t there, if fact, an FBI paper warning about the boom in “liar’s loans” around ’04/’05? Didn’t Romer & Akerloff write the book on those in the 90s?

      1. craazyman

        It’s not there if you don’t look for it. That’s like somebody saying the sidewalk is approaching at 120 miles per hour. That’s only a theory! LOL Probably some bearish doomer & gloomer. The real data says everything is fine, although it’s a bit windy.

        1. TomD

          I’ve been falling for seconds now and I haven’t hit anything. There’s no data it will happen.

      2. mk

        yes, I remember that, I was working in a real estate sales office in 2004, (got my re sale license in 2005) and brought in a post about the FBI warning to show people at the office, no one cared. Also, brokers were telling agents that next will be a wave of foreclosures and that agents who were most prepared to deal with them would be the most successful. BROKERS KNEW THEY WOULD NOT BE INVESTIGATED OR CONVICTED, they somehow got the message.

    2. djrichard

      I have to imagine the Fed Reserve of all places has to know how much money is flying off the shelf (or off the printing press as it were).

      If they looked a little further, I’m sure they could have figured out whether it was sustainable or not. This wouldn’t have been the first bubble that banks (or central banks) turned a blind eye to.

    3. RabidGandhi

      Just a slight modification to your analogy:

      This is like a man who has been THROWN off the Empire State building, and those who threw him are saying “We don’t have any data that suggest you’re in trouble, though it’s a bit windy”

      Last I saw it wasn’t Chanin and his confederates who went splat on the sidewalk.

    4. Ishmael

      Ohh my, no data. You could look historically and see that mortgage debt was growing at an unhistorical rate. Anyone that knows anything about the loan business, they would know when loans start growing above trend either at a financial institution, regional or in the economy in general there can be only one reason — loans are being made to poor credit risks. Historically, good credit risks stay rather stable. You can not all of a sudden have a surge in good credit risks. Also, all bank crisis are brought about by surges of liquidity rising both good boats and bad boats. That is why when the tide goes out you see who was swimming naked. So, the Federal Reserve has no knowledge of something I learned 30 plus years ago!

  11. Steve

    “Blame the poor” – Seriously!

    1. FBI mortgage fraud epidemic warning OF 2004 and no one got the memo, pretty scary.

    2. The borrower signs the 4506-T form granting the lender to verify the income through the IRS but somehow the victim lender forgot.

    3. Two years of taxes and a few bank statements are required so the broker can establish a loan amount. Somehow all these borrowers mastered that little bottle of white out to fool the broker.

    4.” He also asserted that there was a tremendous amount of consumer fraud, that the FBI was pursuing a lot of cases ”

    ‘ Audit of the Department of Justice’s Efforts to Address Mortgage Fraud ‘ – March 2014 – that the FBI DOES NOT address individual home mortgages.

    5. ” Only after some pressing did he accept the point that the products were difficult even for financially literate people to understand, and better disclosure was needed.”

    Disclosure yes. Someday I’d like to see my signature on the final loan application. Why? Because it never happened.

  12. RUKidding

    Thanks for the post. Most interesting.

    Elizabeth Warren is about as good as it gets these days. Like nearly everyone else in our Fed system, she’s a Republican. But of course, the GOP is so nutso due mainly to the Kochs and probably the Waltons, that Warren’s form of sanity just doesn’t fit within the GOP.

    I have my own “issues” with Warren, but I have donated money to her because, frankly, she does fight for the little people. Somewhat thin gruel these days, but I’ll take what I can get.

    While there would be some satisfaction – and perhaps a bump for Bernie – in Warren endorsing Sanders, I’m not so sure it would make that huge of a difference. At this point, the fact that Warren has, uh, “prevaricated” (not the exact word I want to use but for lack of anything else I can think of now) on this issue doesn’t upset me. Warren is playing the game to the best of her abilities. So it goes.

    1. diptherio

      Pretty sad state of affairs when we end up rooting for bigger cages and longer chains. Still, better than smaller and shorter, I suppose…

      1. RUKidding

        Yeah, well, we’re on the same page. I don’t know what else to do about it. Warren’s the best of a pretty putrid bunch. Take “my” Senators – Please! Gah. Babs Boxer & the Hydra DiFi.

        In comparison, Warren’s looking mighty fine.

        What can I say? It’s no bed of roses, and that’s for sure.

    2. meeps

      RUKidding @ 11:17 am

      I’d say yours is a pretty cogent assessment of the Senator at this point in time. She’s smart when it comes to financial oversight/regulation and should stick to that because that’s where she can best serve the public. That said, her record in other regulatory areas (voluntary labeling of GMOs, for one) slants neoliberal and should be kept in perspective.

      The endorsement issue is fraught with risk that she is better positioned to judge than I. For a long time in this campaign her speeches seemed ever-so-artfully to buttress Bernie. In the last month, though, her ideas about student loan ‘reforms’ appear to be pivoting toward Hillary. Whether Warren is whistling another tune or not is vague because she’s keeping it that way. The voters, however, have tired of kabuki and want the masks to come off. If she doesn’t want to endorse now, fine, but maintaining ‘wave form’ at every opportunity invites skepticism.

    3. Spring Texan

      Agreed. Warren can’t “deliver” her voters to someone else any more than Sanders can “deliver” his to Clinton, despite Clinton’s fantasies on that. These aren’t cults of personality, they are people who support the POLICIES and those discriminating enough to support Warren are mostly going to be supporting Sanders anyhow. So she’s playing the game right, in my opinion, and in a way which maximizes what she can do.

    4. Ishmael

      E. Warren is a Republican? What are you smoking? She is a Democrat from Mass! Also what is that comment about Warren and Reagan above. Warren was probably getting her law degree around then. Who knows what she supported back then and who cares. She had no influence

      Sometimes I like Warren and sometimes I don’t. This is one of the cases where she is on target.

      1. pretzelattack

        no this was after she became a professor at various law schools. she said she voted republican till 1995 because she thought that was the best party for markets. she would have been around 45 then.

        i don’t mind former republicans seeing the light. i do hope she doesn’t get beyond senator if the main consideration is which party is best for markets.

  13. Susan the other

    nice clip. I’d love to see Liz do that more often. Like the way she imagined-out-loud Timmy’s teeth all over the floor. Chanin is creepy; had the nerve to tell her how to question him – and lectured her on the CFPB! Consumers have been used and abused since the 90s. This argument could spin out in all directions. Just thinking about Dean Baker’s funny commentary on the TPP – about how to make it an honest free trade agreement – eliminate all the protections for rich vested interests. It’s such a cesspool out there. And the despised consumer is still the only thing keeping it contained. Despised until they really need us. Interesting this has coincided with Hillary’s big boast that she will “protect consumers”. But not ever that she would create an equitable economy… that’s too progressive.

  14. ke

    The 24/7 Police State is only new to those just waking from the illusion. You might want to be able to generate your own power, because the majority cannot change course, from genetic degeneration (light intensity, spectra, and TIMING).

    The majority in this country doesn’t work. Young people get involved in the political process, are (dis)illusions, and become part of the empire clock. Old Man Kennedy enforced the irrational market theory at cost to his own children.

    Elizabeth Warrens policies make sense to those conditioned to live on consumption time by prevailing healthcare and education, to chase RE inflation, but the horse is already out of the barn, making the cure, time wasted, worse than the disease. Kids need parents working for them, not the redistribution of consumer power, on appeal to corporate consumers controlling power.

    You can’t fix yesterday, but you can wire around the controller today, in anticipation of tomorrow. Global warming began generations ago. Trump isn’t threatening to let the cat out of the bag for the sake of working people, and Hillary may as well be deaf, dumb and blind.

  15. Jack Penelope

    You’re missing a key component here. Leonard Chanin came over From the Federal Reserve at the onset of the agency and was Assistant Director for Regulations under Warren in 2011. The point being; they have a history.

    1. Yves Smith Post author

      I’m not “missing that”. It’s clearly in the video and I felt no need to stress that. She made it clear she hired him under duress. NC readers are smart enough that they do not have to be spoon fed information.

      The issue is his performance at the Fed and that he’s still not recanted for that.

  16. Paul Tioxon

    Warren asks Chanin; “Are your eyes stitched shut?”.

    More like classic denial in the form of eyes wide shut. Denial so massive from a shocking event too unbearable to witness but so overwhelming that you can not look away, possessed by the power of the awfulness, you have eyes but do not see, you have ears, but do not hear.

    All of this as if to answer, will the republican party explode, die and never be heard from again? No, already, the status quo ante has resumed the regular broadcast, the poor are cheats if given the chance, they are poor because they will not leave their culture of poverty and work like the decent people of the middle class. And if given the chance, will lie on loans designed to accept lies as perfectly acceptable information.

    And that this accommodation made for lying loans was forced on the hapless bankers by the Community Investment Act without which only decent people who can afford loans would ask for them, not poor people willing to commit fraud with loans that do not ask for income, assets, employment and provide 100% financing.

    It was government interference into the market that enabled fraud by borrowers who saw an opportunity to lie and took it. What was Chanin supposed to do about that? How could he possibly know that loans without any underwriting at all, except for the fat commissions of the loan officers, would end so badly for all. Were his eyes stitched shut? Yes, they were.

  17. Jack Heape

    Sen. Warren is doing her job as Senator. I agree with Yves that her endorsement of Sanders would make little difference, while her NOT endorsing Clinton says a lot. What I find even more intriguing is that Warren is not endorsing Clinton after signing a letter along with 15 other Senators in 2013 I think it was urging Clinton to run for President. Lets not forget as well that Warren was given a leadership position as a first term Senator, something that is very unusual. In fact, the position of “Strategic Policy Advisor to the Senate Democratic Policy Committee” was specifically created for her. I think Senator Warren takes her duties as a Senator, and as a progressive watchdog, very seriously, and doesn’t want to get compromised by throwing her endorsement hat into the ring. I also think she is smart enough to keep her powder dry for when it will really do some good.
    Right now, most everyone’s attention is focused on the ongoing battle between Sanders and Clinton, and not so much what is going to happen when one or the other wins the nomination. The Clinton supporters have their blinders on about their candidates drawbacks in my opinion. They conveniently ignore the huge amount of baggage she carries with her, her vulnerabilities on so many points, and her past record of skirting on the edge of ethical behavior. And really, only someone like Clinton would have the hubris to run for President with so many possible legal difficulties hanging over her head. I guess her and Bill have gotten away with so much for so long they figure they are teflon. If Clinton does get the nomination, the Republican smear machine will go after her with a vengeance. And unfortunately for the Dems they will have a lot of material to work with. I think Warren wants to stay distanced from all this, conserve her legitimacy, and become a force in the Senate.

  18. Jim Young

    “…the Fed then was deeply devoted to the idea that all mortgage fraud was being perpetrated against banks…”

    Amazing how so many people who didn’t have a clue about how to conduct such a fraud were able to do it, huh?

    How did they get so clever, and allow the enablers to make so much more than they did?

    Why did they allow anyone to lend so much of what should have been realistically insured deposits so recklessly, along with the “notional value” of fairy dust derivatives?

  19. John Potamites

    All the Bernie and Warren hearts and smarts in the comments…ever thought of battles, feints and flanks, advances, threats, even withdrawals (let the other go too far.) Tactics and strategy, cousins,? Think of boxing…jabs and punches. Jabbing with both hands at one time doesn’t work; punching with both hands doesn’t work. One, then the other works. Think baseball: a batter with four arms doesn’t work; or two batters at the plate at the same doesn’t work. There are ways to score or get on base or advance the runner: get hit, get a hit, walk, bunt. You don’t want a designated hitter in the fourth inning. Oh, think of your own sports analogies. I’m sure you can find the ways that games can be won and games can be lost…will be won or will be lost… your ways. And it’s fun to do. But I think it’s timing that works. And that what coaches are for. We’re fans who applaud or boo, or commentators who analyze, hopefuls and forecasters. But the game’s not over. And we have no idea what the players and the coaches will do, or when. But guessing is more fun than waiting. Has Sanders asked Warren to endorse him? Will she? Has she offered to?———(Oh, I want Bernie to win. If he doesn’t, I’m going third party. I don’t care who ruins the country. Maybe the ruined can change things. It’s the casualties—the ones that are here, the ones that will be here—that I care about. Sympathy? Empathy? A casualty, myself?)

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