This article is adapted from Elizabeth Warren’s book A Fighting Chance, published in April by Metropolitan Books.
My story seems pretty unlikely, even to me. I never expected to run for office—but then again, I never expected to do a lot of things in my life. I never expected to climb a mountain. I never expected to meet the president of the United States. I never expected to be a blonde. But here I am.
Whenever I think of the meltdown, I think of Flora. She was probably in her 80s by the time we spoke in 2007. She and her husband had retired and moved to a small town in the South to be near her family. They bought a modest house. Flora’s husband had passed on, and she was on her own now. Until recently she had been doing fine, getting by on her Social Security check each month.
Flora explained that a few years ago she’d gotten a call from “a nice man from the bank.” He’d told her that because interest rates were low, he could give her a mortgage with a lower payment. She’d asked him what would happen to the payment if interest rates went back up. He’d assured her that “the banks know about these things in advance,” and that he would “call her and put her back in her old mortgage.”
She had taken the deal, and before long her payments had shot up. She paused, then said quietly, “He never called.” The new monthly payments swallowed nearly every penny of her Social Security check. She had tried delaying her payments, borrowing on credit cards, going to a payday lender, but it had all come crashing down.
The Consumer Bankruptcy Project [Warren’s research project on the impact of the law passed in 2005] had promised Flora $50 in return for participating in an hourlong interview. “I’ll be living in my car,” she said, “at least for a while. I don’t know how I’ll get mail, so can you tell me how to get my $50 check? I really need it.”
That’s the real story behind the meltdown: the mortgage market sank, one Flora at a time. Some homeowners made bad decisions or tried to game the system, but many others got trapped by lousy mortgages sold to them by sophisticated financial institutions that should have known better.
The housing crash ripped a huge hole right through the middle class. A home isn’t just a place to live; for most families, it’s their most valuable asset. It’s the savings plan, the retirement plan and the inheritance all wrapped up in one big, bright package. Pay off the mortgage, and a family has a comfortable life raft, come what may. But if the mortgage is “underwater” and a family owes more than their home is worth, that life raft is made of cement.
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For months I assumed that sooner or later some regulator would think to himself: “The banking system just collapsed—I wonder if any banking executives did anything illegal?” I figured it was just a matter of time. But the silence stretched out. No perp walks. No mass indictments.