Elizabeth Warren is someone to watch, and not because she has become the “heroine” of Michael Moore’s newest documentary.
“…the real economy is still in a perilous state.”, and “…the middle class became a resource to be pulled from; they became the turkey at the thanksgiving dinner, who could carve off a piece…”
A few money quotes from the entire transcript; Washington Post: Voices Of Power
ROMANO: There’s a wonderful moment when he asks you where the $700 billion is, and you look at him and you say, “I don’t know.” So the question is: why don’t you know?
WARREN: Well, we don’t know where the $700 billion is because the system was initially designed to make sure that we didn’t know.
When Secretary Paulson first put this money out into the banks, he didn’t ask “what are you going to do with it?” He didn’t put any restrictions on it. He didn’t put any tabs on where it was going to go; in other words, he didn’t ask. And if you don’t ask, no one tells. And so we have a system that originally put more than $200 billion into the financial institutions basically saying just take it.
ROMANO: And that money is gone. You have not been able to track where that money is?
WARREN: Well, we don’t know where the money went from the financial institutions.
The big conversation at the time was that the credit markets are frozen; if we put money into the financial institutions, they will start lending it because that’s what they do when they receive money. And you may remember we tend to have forgotten what the name of the program was initially. It was called the “Healthy Banks Program,” because the allegation was Secretary Paulson kept saying, over and over, these are investments in healthy financial institutions, no one needs any subsidy.
And so we put it in on the claim by Secretary Paulson that that money was going to be used in lending to small businesses and consumers and kind of get our whole credit market going again. That didn’t happen.
ROMANO: Do you agree with Michael Moore’s basic premise that capitalism as it is now has destroyed the country’s middle class?
WARREN: Well, I believe that the middle class is under terrific assault. And I don’t want to play this as a capitalism issue.
When we compare middle-class families today with their parents a generation ago we have basically flat earnings-a fully employed male today earns on average about $800 less, adjusted for inflation- than a fully employed male earned a generation ago. The only way that houses could increase or families could increase their household income was to put a second earner into the workforce, and, of course that’s now flattened out because there aren’t any more people to put into the workforce. So you’ve got, effectively, flat income in this time period with rising core expenses; housing; health insurance; child care; transportation, now that it takes two cars to get everywhere, two jobs to support; and taxes, because you’ve got two people in the workforce and we have a somewhat progressive taxation system. So that families are spending a lot more on what you describe as the basic nut.
The third leg to the triangle, and that is families, to deal with this, stopped saving and started going into debt.
And the debt side of where families both spend more money and are made much more vulnerable on mortgages, on credit cards, on check overdraft fees, all this side of it, the credit side of it really means that we have a middle class that a generation ago we would have described as solid, secure, dependable. If you could just get into the middle class, you could pretty much count on a fairly comfortable life and all the way through to a comfortable retirement.
That’s been hollowed out. Sure, there are people who are going to make it through just fine, but the vulnerability of families in the middle class has just it has gone up enormously.