The Republican Case for Elizabeth Warren? Here’s the Case against That

Sen. Elizabeth Warren speaks with supporters at a block party in Des Moines, Iowa, January 18, 2020. (Gage Skidmore)
A response to former FDIC chairwoman Sheila Bair

Sheila Bair, who served as the chairwoman of the FDIC in the years just before, during, and after the financial crisis, is a smart and capable woman. She had stronger opinions about bank capital adequacy than her colleagues at the Federal Reserve and the Treasury Department did (even if she waited until after the economic world blew up to say so). She carried herself as a reasonably nonpartisan actor in public life, and never gave a lot of reason to question either her integrity or her competence. What she lacked in boldness as an FDIC bureaucrat she made up for with steadiness, and I have never had reason to publicly attack her.

Until now.

Sheila Bair has published an op-ed in the Wall Street Journal claiming to “make the Republican case for Elizabeth Warren.” Rather than being an Onion article or part of an installment series along the lines of “the Christian case for abortion,” it is (I think) a serious argument for Warren’s economic platform as benign, populist, and admirable. Her exact words are that Warren “is a capitalist and prairie populist, in the tradition of William Allen White and Teddy Roosevelt.”

The article is one series of non sequiturs after another, written with the basic assumption that readers would take Bair’s claims at face value, not bothering to scrutinize them against the testimony of history. I could have passed over her piece as a token gesture of misguided loyalty if it were not for her unforgivable claims about the Consumer Financial Protection Bureau. On this front, one can see the credibility that Warren has as a “market reformer,” and apparently the credibility Bair has in evaluating economic ideology.

Bair writes:

Throughout our working relationship, including the 2008 financial crisis and battles over financial reform, Ms. Warren always took a market-based approach to the issues. She abhorred the generosity of the bank bailouts not because she was a Wall Street–hating socialist, but because she knew that markets can’t work without accountability. She championed the creation of the Consumer Financial Protection Bureau not because she was a bureaucratic regulator, but because she knew that markets need level playing fields, and the field was tilted against working families and in favor of sophisticated banks.

Bair was the chairwoman of the Federal Deposit Insurance Corporation — the regulator-in-chief across our entire national banking system. In 2008, there were 25 banks that Bair’s own agency had to take over owing to insolvency. One of the banks, Washington Mutual, had over $300 billion of assets. Another, Indymac, had a not-insignificant $30 billion of assets. The other 23 of 25 bank failures were tiny banks, some with as little as $19 million in assets. Another 140 banks failed under Bair’s watch in 2009. Again, in no case were these big or sophisticated banks — they were regional, small, and often community banks. Bair need not play the role of outsider studying the data — she was an insider who made the data — to know that the bank failures of the financial crisis were not sophisticated banks hurting working families. Working families were hurting non-sophisticated banks, and Sheila Bair knows it.

Out of Bair’s leadership, JPMorgan (as big and sophisticated as they come) acquired Washington Mutual, helping to avoid one of the biggest bank failures in history at no loss to taxpayers (“You’re welcome” — Jamie Dimon). The financial crisis, no doubt, paved the way for the TARP capital infusion to the country’s investment banks, but what Warren came back with to counter the excessive leverage of the Lehman Brothers and Bear Stearns of our financial system was a non-accountable bureau that imposed strict regulations on debit-card rewards programs and overdraft fees. She and her dream agency did not support working families or hurt “sophisticated banks.” She subsidized sophisticated banks through the greatest subsidy in history: regulation.

The regulations of the Warren-CFPB era have been successful at slamming community banks, encouraging low-quality underwriting in their credit-card businesses, and pushing a massive amount of increased market share on to the top four banks in the country. And if someone tells me these things happened against Warren’s wishes, as unintended consequences of her abysmal policy platform, I would be happy to believe them. But the facts are clear as can be here: The Dodd-Frank, Warren-CFPB regime was a huge success in promoting bureaucracy, codifying “too big to fail,” and damaging small banks. It was a disaster for creating, as Bair claims, a market-based financial system.

Bair goes on to suggest that Republicans are supposed to find Warren’s policy proposals regarding a government takeover of non-monopolistic private businesses to be exciting. She offers a stupefying defense of the wealth tax (that it would incentivize wealthy people to spend their money?). The best example she can come up with, in the midst of a plethora of statist, utopian, Leviathan-like proposals to hint at market sympathy, is a co-sponsored bill to allow hearing aids to be sold over the counter. Milton Friedman, we found you!

Sheila Bair is a former public official and a private citizen, free to support whomever she would like in the 2020 presidential race. But the idea that her candidacy is anything short of a radical paradigm shift away from the basic principles of America’s founding is utterly false. I predicted months ago that a vast marketing campaign would soon ensue to normalize the candidate who has spent years emphatically demonizing prosperity, business, and growth. I just didn’t expect a national spokesperson in this reputation-management effort to be the very bureaucrat who oversaw the banks in 2008.

Life gets more ironic by the day.


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