Elizabeth Warren after Megan McArdle was done with her. Elizabeth Warren is portrayed by an actor, not the real Elizabeth Warren, but that's okay because the role of economics blogger is being played by Megan McArdle, not a real economics blogger.
At last, Megan McArdle has unleashed her Chicago Boyz mojo on Elizabeth Warren, offering what must be* Part II of her slapdown of the woman who would do the unforgivable--protect consumers from the bad faith of the financial industry. Let's look at her argument, for not since Jonah Goldberg wrote his Pulitzer-winning book Liberal Fascism has an argument been made in such detail or with such care.
You could simplify offerings--outlaw [any mortgages that are] faintly exotic. Negative amortization loans, of course, and anything with a balloon payment--but many people got caught out by more ordinary ARMs, so maybe those should go too. The less martial version of this thought is embodied in the "plain vanilla" default option that Elizabeth Warren, among others, has been pushing.
Damn! That's gotta hurt! It seems Warren doesn't like mortgage innovations like ARMs, for no reason whatsoever. And after McArdle told us all that fixed rate mortgages helped create the housing bubble!
The second part of McArdle's exhaustive takedown:
Everything that ever disadvantaged someone is automatically assumed to be a terrible product feature that ought to be eliminated. That instinct is what most worries me about the new CFPA.
Doesn't Warren know that if banks aren't allowed to create ARMs, financial innovation will be destroyed and millions of mortgages will die horrible deaths? Doesn't the woman realize that the US mortgage market depends on the money made from balloon payments to finance more innovation?
McArdle saved her best for the comments, however, delivering the decisive blow to Warren's reputation.
#1 The "Plain Vanilla" option was voted down by the House. It wasn't in any of the bills.
#2 The "Plain Vanilla" option referenced CREDIT CARDS not mortgages.
#3 It wasn't even invented by Warren. It was invented by the other CFPB choice, Michael Barr.
I understand there is opposition to Warren on behalf of some folks here, but just as I am attacking those who are obsessed with her (mostly on the left), those who try to take her down should look at facts too.
It wasn't a "takedown", it was a statement--she likes the plain vanilla option--and where idd I say it was law?
Liking something and applying it, are two different things. She's not going to be nigh unstoppable. There are clearly going to be bureaucratic and regulatory restraints on anything she'd do. This would be one of them.
You are reading hostile intent into a declaration of fact; this is an idea that she supports. My later concerns about the CFPA aren't particularly related.
Ouch! How could Warren ever look the world in the face again after such a devastating attack?
McArdle promised to explain Warren's paternalism as well, but perhaps she is saving that for Christmas. We can hardly wait.
*It's been two weeks, after all.