Here's a test: have a news novice take a quick glance at the Wikipedia entries for, say, Lawrence Summers and ask them to sum up who he is: economist? Policy maker? Academic administrator? Hedge funder? Or try Robert Rubin -- Ex-Citigroup executive? Former Treasury Secretary? Think tanker? Goldman alum? Now try Elizabeth Warren. Your novice is guaranteed to find the resume-reading a lot more simple: law professor, consumer activist, before assuming the TARP oversight role in 2008.
The difference of course is that Rubin and Summers are the ultimate insiders, and Warren is a far less peripatetic outsider. Rubin and Summers are archetypal flexians, Janine's term in Shadow Elite for those at the pinnacle of a new system of power and influence. Always operating from the inside, Rubin and Summers have worked together in myriad state and private roles (at Treasury, Harvard, and business) in the service of their own agendas--with all the interests, understandings and history that flows from that interrelationship. And they are the very embodiment of the fusion of state and private power. Warren stands squarely outside of this.
President Obama will reportedly name Warren this week to a special advisor role to get the new Consumer Financial Protection Bureau off the ground. And we began to think about how important outsider status is when it comes to challenging economic policy dogma and entrenched practices within the banking industry.
Outsiders Don't Know Insider Customs
According to Time Magazine, Elizabeth Warren's TARP critiques were a bit too scathing for one Capitol Hill official she won't name. She quotes the official to Time this way: "That's not what reports are supposed to look like." When she asked "why not?", the official said, "this language is far too direct." Why not, indeed? Her response shows why the outsider's ignorance of the dominant group's customs can be a powerful weapon. Not knowing the implicit codes or rules, not knowing whose feathers shouldn't be ruffled means the tough questions are more likely to be asked.
Insiders Normalize Bad Behavior
Outsiders have fresh eyes that insiders do not. Questionable behavior became commonplace in innumerable corners of the financial industry over the past 20 years. And at key moments, it was an outsider who had the common-sense perspective to cry foul. They avoided the group-think that told them these practices were business-as-usual -- to them, these activities just seemed shady and reckless. There was Brooksley Born at the Commodity Futures Trading Commission who looked at ultra-risky derivatives and wanted them regulated; Sheila Bair at the FDIC who was shocked by subprime lending; Jim Leisenring at the Federal Accounting Standards Board who saw companies using stock options to pay executives and workers, and, in the process, underestimating their expenses; and Warren, who saw surging bank fees and byzantine credit card agreements for what they were: predatory.
Outsiders Challenge Ideological Conformity
Leisenring made a telling comment to Frontline about the fight to properly account for stock options:
It wasn't an accounting debate...We switched from talking about, 'Have we accurately measured the option?' or, 'Have we expensed the option on the proper date?' to things like, 'Western civilization will not exist without stock options,' or, 'There won't be jobs anymore for people without stock options.' ... People tried to take the argument away from the accounting to be just plainly a political argument.
We would go a step further and say that the Wall Street-Washington power elite of the past 2 decades believed in more than a "political argument" - it was an encompassing economic worldview that featured both Democrats and Republicans as adherents.
They believed that banks could self-regulate and should be allowed to "innovate" into new businesses; that "aggressive" lending was good for the American homeowner and the banks; that rock-bottom interest rates were ideal and budget deficits were the enemy; that hedge funds should stay largely unregulated; that the explosive growth of executive or banker compensation was not an economic concern; that what's good for a company's stock price is good for the American people.
The result was that individual policy questions would get filtered through the prism of that worldview. That's why to the insider, questioning how a company accounted for its options-filled pay packages seemed like an attempt to drive a stake into corporate dynamism. The outsider, Leisenring, wasn't encumbered by that worldview - there seemed to be an obvious, common-sense answer to the debate: painful as it might be short-term, options needed to be properly accounted for.
Brooksley Born also had the outsiders' clarity, which her adversaries, the elite troika of Alan Greenspan-Larry Summers-Robert Rubin, apparently considered naivete. After clashing with them about whether to even raise the question of dark-market derivatives regulation in a "concept paper", a Born deputy quotes Summers' now infamous, disproportionate and very revealing response: "I have 13 bankers in my office and they say if you go forward with this you will cause the worst financial crisis since World War II."
Outsiders Are Dogged
Profiles of Warren, Bair and Born portray them as unusually dogged and relentless and each of them has at least one moment of being denied entry into elite quarters. Born, who first aspired to medicine, was told by a Stanford University counselor in the early 60's that a woman who wanted to be a doctor, and not a nurse, was just in it for money. Bair told Time that her mentor and long-time supporter Senator Bob Dole blamed her failed 1990 House run on the fact that she was an unmarried woman. And Warren told the magazine that in one of her first law jobs - at an old Wall Street law firm - a partner said to her:
You know, being a summer associate is all well and good, but take a deep breath. Try to figure out if you think these guys are ever going to make a woman partner.
Warren's insider opponents within the banking business and among those in Washington who get their lobbying dollars tend to suggest that Warren "just doesn't get it", which is essentially code for "hands off our entrenched interests." As the Times put it in an editorial endorsing Warren for the CFPB job: "the banks don't oppose Ms. Warren because she doesn't get it. They oppose her because she does."
Richard (RJ) Eskow: After Summers, Which Path Will the President Take?
On a slightly different subject, I would like to suggest that let us not adopt the entire vocabulary of the right wing, calling people who are educated, experts in their fields ‘elite’. Wall Street – Main Street distinction, in a society too sensitive to talk about class division, and such other characterizations are necessary, but not demonizing education and intellect. This country already has a very strong anti-intellectual tradition and we need not reinforce it by siding with the Tea Baggers' speech. Language has its consequence and we can not be careless about it.
Franklin D. Roosevelt
But let's not fall victim to the GOP's and tea parties' predilection for choosing anti-intellectuals, amateurs, and unqualified outsiders, simply because of their "outsider" status. No matter how corrupt the modern medical industry may be, I'd rather be treated by a real medical doctor than by a chiropractor, a faith healer, or an interested amateur. We should take politics and governance no less seriously.
Personally, I'd much rather return to the days when doctors made the medical decisions, rather than the Madison Avenue ad firms whose job it is to persuade the public to demand the newer, more expensive drugs.
Seriously?
I really do hate to be this guy, but come on. I have two college degrees (one in philosophy, one in journalism) I've worked as a writer, editor and teacher, I have an IQ in the 150+ range and fabulous vocabulary, and I still had to look up two words in this sentence and a half.
The most perfectly descriptive words are meaningless when people don't know what they mean.
That would be like saying that aviation owes more to a couple of bicycle mechanics than it does to the scientists and engineers who studied compressible flow.
Celebration of mediocrity under the guise of populism is a mistake, whether in 1932 Berlin, or 2010 America.
If she'd only been given direct supervision powers as Interim Director of the bureau, I'd believe she'd have a chance to take the actions that need to be taken, hire the people who need to be hired, and write the policies, procedures, and regulations that need to be written.
If she just gets to send reports that won't be read, I hope she'll have the courage to resign quickly.
They are very good at converting the newbies now after having decades of practice...
Ms. Warren is the most refreshing, honest and compelling figure to come along in my lifetime.
We shouldn't be talking about a Palin campaign in 2012. We should be drafting Ms. Warren. Democrats should take heed. What you need most is right under your nose.