Don't trust Elizabeth Warren

The new head of the Consumer Financial Protection Bureau is another in a long line of radicals appointed by President Obama to oversee an important agency.

And that's the good news. The bad news is that she was shoehorned into her new position without senate confirmation and in the most blatantly political way imaginable. Worse, the new agency she will be running may turn out to be the most powerful regulatory agency ever created by the federal government.

There is very little in the way of financial commerce that will escape the lash of this new bureau. The powers of the chairman will be considerable as she will have the ability to initiate investigations into any complaint from any consumer. The politicization of this office means that her fellow bureau members will be in her (and the president's) hip pocket.

An example of what this woman is capable of, this Wall Street Journal piece by Todd Zywicki shows how she cooked the books on a bankruptcy study to make it appear that almost half of people declaring bankruptcy did so for medical reasons:

Consider Ms. Warren's much-ballyhooed study on the alleged link among health problems, medical expenses and personal bankruptcy filings. Published in the February 2005 issue of Health Affairs, the report was timed to head off bipartisan bankruptcy legislation that was enacted later that year. Ms. Warren and her co-authors claimed that "at least" 46% of personal bankruptcy filings in 2001 (the year from they collected the data) were the result of "medical causes," and that this represented a 23-fold increase over 20 years.Both conclusions are extremely suspect. First, the study provided an implausibly broad definition of "medical bankruptcy"-including any filer who reported uncontrolled gambling, drug or alcohol addiction, or the birth or adoption of a child.

Equally dubious, the authors classified a bankruptcy as having a "major medical cause" if the individual had accumulated more than $1,000 in out-of-pocket medical expenses (uncovered by insurance) over the course of two years prior to filing-regardless of income, and even if the debtor did not cite illness or injury among the reasons for bankruptcy.

In 2001, average per capita out-of-pocket medical expenses were $683. During the two-year period Ms. Warren and her co-authors studied, in other words, Americans spent an average of $1,366 on uninsured medical expenses, or 30% more than their threshold definition of a "major medical cause." There was no larger context for their threshold figure: A debtor with $1,001 in uncovered medical expenses and $50,000 on a Saks card would constitute a "medical bankruptcy" in their study.

I'm sure you recall this study being thrown in the face of Obamacare opponents time and time again during the debates. Somehow, knowing that the author of that study has her finger on the financial regulatory trigger does not engender a lot of confidence in her ability to be fair.

 

Hat Tip: Ed Lasky





The new head of the Consumer Financial Protection Bureau is another in a long line of radicals appointed by President Obama to oversee an important agency.

And that's the good news. The bad news is that she was shoehorned into her new position without senate confirmation and in the most blatantly political way imaginable. Worse, the new agency she will be running may turn out to be the most powerful regulatory agency ever created by the federal government.

There is very little in the way of financial commerce that will escape the lash of this new bureau. The powers of the chairman will be considerable as she will have the ability to initiate investigations into any complaint from any consumer. The politicization of this office means that her fellow bureau members will be in her (and the president's) hip pocket.

An example of what this woman is capable of, this Wall Street Journal piece by Todd Zywicki shows how she cooked the books on a bankruptcy study to make it appear that almost half of people declaring bankruptcy did so for medical reasons:

Consider Ms. Warren's much-ballyhooed study on the alleged link among health problems, medical expenses and personal bankruptcy filings. Published in the February 2005 issue of Health Affairs, the report was timed to head off bipartisan bankruptcy legislation that was enacted later that year. Ms. Warren and her co-authors claimed that "at least" 46% of personal bankruptcy filings in 2001 (the year from they collected the data) were the result of "medical causes," and that this represented a 23-fold increase over 20 years.

Both conclusions are extremely suspect. First, the study provided an implausibly broad definition of "medical bankruptcy"-including any filer who reported uncontrolled gambling, drug or alcohol addiction, or the birth or adoption of a child.

Equally dubious, the authors classified a bankruptcy as having a "major medical cause" if the individual had accumulated more than $1,000 in out-of-pocket medical expenses (uncovered by insurance) over the course of two years prior to filing-regardless of income, and even if the debtor did not cite illness or injury among the reasons for bankruptcy.

In 2001, average per capita out-of-pocket medical expenses were $683. During the two-year period Ms. Warren and her co-authors studied, in other words, Americans spent an average of $1,366 on uninsured medical expenses, or 30% more than their threshold definition of a "major medical cause." There was no larger context for their threshold figure: A debtor with $1,001 in uncovered medical expenses and $50,000 on a Saks card would constitute a "medical bankruptcy" in their study.

I'm sure you recall this study being thrown in the face of Obamacare opponents time and time again during the debates. Somehow, knowing that the author of that study has her finger on the financial regulatory trigger does not engender a lot of confidence in her ability to be fair.

 

Hat Tip: Ed Lasky





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