Monday, December 15, 2008

Elizabeth Warren: From Bankruptcy CLE Speaker to the National Limelight as Chair of the Congressional Oversight Panel for Economic Stabilization

By Andrew Toth-Fejel, Bankruptcy Litigation Support for Attorneys,

For years bankruptcy practitioners have known Elizabeth Warren, a professor at Harvard Law School, as a regular speaker at bankruptcy CLE's all over the country. But last month she stepped into an infinitely more visible role by accepting a position on the 5-member Congressional Oversight Panel for Economic Stabilization ("COP"), and then at its first meeting a few days later being elected the Panel's chair. She has in the weeks since then become the very public face of this new assertively public body.

COP's Establishment
COP was mandated by the Emergency Economic Stabilization Act, the $700 billion "bailout," enacted on October 3, 2008. The five members of the panel are each appointed, respectively, by the House speaker, the House Republican leader, the Senate Democratic leader, the Senate Republican leader, and one jointly by the House speaker and the Senate majority leader. This gave Democrats a 3-2 majority in choosing members.

A recent press release lays out COP's mandate and its work thus far:
Section 125 of EESA created the Congressional Oversight Panel to “review the current state of financial markets and the regulatory system” and gave the Panel power to hold hearings, review official data, and write reports that review the TARP program and provide recommendations for regulatory reform. In November, Congressional Leaders began appointing Panel members, and the Panel’s first meeting was held on November 26, 2008. In the two weeks since the first meeting, Panel members met with representatives of the Treasury Department, the Federal Reserve Bank, and the GAO.
The First Report
Although its first members were only appointed in mid-November (John Sununu, the Republican former Senator from New Hampshire, was just appointed on December 17), it has already issued a 38-page report: Questions About the $700 Billion Emergency Economic Stabilization Funds.

As Elizabeth Warren stated in the accompanying press release on December 10:
We are here to get answers to the questions Americans have a right to ask: who got the money, what have they done with it, and how has it helped this country? . . . . This first report not only lays out the questions that will drive the Panel’s work, but demonstrates our determination to bring a broad spectrum of independent input and expertise to ensure that public actions are built on firm foundations that will help stabilize markets and strengthen our economy for America’s families.
The Report includes in its introductory remarks a helpful summary of the use of the "bailout" funds so far:
Treasury has used its authority under the Act to provide 87 banks with $165 billion in exchange for preferred stock and warrants. Treasury further used its authority to provide AIG with $40 billion in exchange for preferred stock and warrants, and to provide Citigroup with an further $20 billion in preferred stock and warrants. As part of a program to guarantee approximately $306 billion in Citigroup's troubled assets, Treasury receives [sic] $4 billion of Citigroup preferred stock and warrants. Together these disbursements constitute approximately $1,900 per American family, or almost 3% of the typical family's pre-tax income.
The ten questions discussed in detail in the report are:
1. What is Treasury’s strategy?
2. Is the Strategy Working to Stabilize Markets?
3. Is the Strategy Helping to Reduce Foreclosures?
4. What Have Financial Institutions Done with the Taxpayers’ Money Received So Far?
5. Is the Public Receiving a Fair Deal?
6. What is Treasury Doing to Help the American Family?
7. Is Treasury Imposing Reforms on Financial Institutions that are taking Taxpayer Money?
8. How is Treasury Deciding Which Institutions Receive the Money?
9. What is the Scope of Treasury’s Statutory Authority?
10. Is Treasury Looking Ahead?

The Panel approved the first report with a 3-1 vote on December 9, with the Republican Congressman Jeb Hensarling of Texas dissenting. (John Sununu had not yet been appointed to the Panel.)

Future Oversight Activities

According to its first Report, "COP will hold a series of field hearings to shine light on the causes of the financial crisis, the administration of TARP, and the anxieties and challenges of ordinary Americans." The first of these is to be held on December 16 in Las Vegas, one of the cities hardest hit by residential foreclosures.

In January 2009 "COP will release two public reports," on January 10 one "that examines the administration of the TARP program, including the impact on the economy to date," and on January 20, one "providing recommendations for reforms to the financial regulatory structure." Its establishment statute requires the Panel to issue reports to Congress during every 30 days of its existence, which is currently scheduled to be until

COP just started a public website to provide resources about its efforts, and to give opportunity for citizens to provide input.

Warren's Press Offensive
Warren has in the last week been appearing on national radio shows publicizing this report and COP's work, including National Public Radio's Fresh Air and American Public Media's Marketplace. She concluded her remarks in the December 10 Marketplace interview as follows, clearly presenting her own concerns and the seriousness of the problem:
There has to be an overall notion that we're going to deal with the genuine economic problems in the United States right now. So, for example, we're having a problem -- a real, visible problem -- in the housing market right now. And we've got, potentially, $700 billion commitment of American dollars out there for which, right now, it's not being used. There's not even a hint that it's going to be used to address any part of that problem. That tells me there's not a coherent strategy here. You know, if the American family fails, then there won't be any banks to save. This isn't about saving banks individually. Ultimately, this is about saving our economy, saving our country. But most of all, saving our people.

by Andrew Toth-Fejel
Bankruptcy Litigation Support for Attorneys

Please note that this writer is not licensed to practice law in Oregon. This means that he is not legally permitted to give any legal advice or provide and legal services. This Bulletin and the entire contents of this website is written only for attorneys. and is not intended for the public. If any non-attorney is reading this, you must consult an attorney about ANYTHING you read here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.

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