A Fighting Chance

We had lost the bankruptcy battle, but this war wasn’t over. People were getting pounded, debts were mounting, and the squeeze was getting more intense than ever.

I spent the next few years looking for more ways to fight back. I joined forces with several professors and we launched another study, this one designed to gauge the impact of the change in the bankruptcy law. (The news was bad.) I updated all of the research from The Two-Income Trap. (The news was worse.) This time I had to work the data without Amelia, who had headed off to start another new business and was busier than ever taking care of her two little girls. I helped out on some big lawsuits, and I eventually got to go to the US Supreme Court (as second chair—not the one who actually stands up and speaks to the Justices) on a case to try to get more money for asbestos victims. I wrote more about the crumbling foundations of America’s middle class. I started blogging, posting my own pieces and inviting my students to get involved. I joined a commission set up by FDIC chairman Sheila Bair that was dedicated to helping low-income families gain access to more affordable banking services.

The hard part was figuring out what might actually have some impact. I was restless—restless and anxious. I could see warning signs of a coming catastrophe everywhere, but I couldn’t stop it.





3 | Bailing Out the Wrong People

IT WAS EARLY evening on Thursday, November 13, 2008, and the financial crisis was battering the country like a storm whose winds gathered strength every day. No one was sure what wreckage might wash up next.

In about ten minutes, thirty or so hungry law students were going to show up on our doorstep, ready for an informal discussion over dinner about what life after law school might look like. The doorbell rang, and I let in a delivery guy who was juggling several aluminum pans of barbecue. I’d already made four trays of peach cobbler, and the iced tea was steeping. Otis, now a glorious one hundred pounds, had just settled down for yet another nap when the doorbell roused him and the smell of the barbecue gave him a newfound energy. He was slobbering and running in circles around the delivery guy, who was a little uneasy about the oversize dog. I was trying to write a check and get the fellow on his way when the phone rang. My caller was a soft-spoken man who identified himself as “Harry Reid.”

I could barely hear him. “Who?” I asked.

“Um, Harry Reid.” Pause. “Majority leader, US Senate.”

“Oh.” (Great start!)

Senator Reid got right to the point—no “how are you,” no small talk. The country was in a crisis, and he wanted me to come to Washington to help provide some oversight of the Treasury Department’s handling of the bank bailout. I didn’t know what that meant or what I could do, but everyone I knew was scared about what was happening to the economy and to the nation. I don’t think I’d ever met Senator Reid, and I really didn’t know why he believed that I was the right person for this job. But if he was calling, it meant he thought I could help. So I said yes. No questions, no negotiations. Just yes.

It had been thirteen years since Mike Synar had called and asked me to help him with the National Bankruptcy Review Commission, and it had been three years since Congress had ripped gaping holes in the bankruptcy safety net. My time in Washington had left me fed up with the whole place. But this was an emergency. The financial system had melted down, and millions of middle-class families were getting crushed, so if Senator Reid asked me to help by mopping the floors or licking envelopes, I would say yes. Besides, I thought that in an emergency, surely people in Washington would dial back on political maneuvering and focus on finding ways to help struggling people. So if Senator Reid thought I could make a difference, it was time for me to go back to Washington.

As soon as the barbecue was eaten and the last student had left, I called Bruce. He was out of town at a conference with a bunch of other history professors. Otis was sprawled across the floor, his belly bulging from the bits of meat and cornbread that the students had slipped his way. I put on my telephone headset and my long white apron and cleaned up the dishes while we talked.

I told Bruce that Senator Reid had asked me to join a five-person Congressional Oversight Panel. COP: what a great name! I wondered if I might actually get a badge and a set of handcuffs—okay, no handcuffs, but maybe a badge?

Six weeks earlier, in near panic, Congress had agreed to authorize a $700 billion fund to bail out the financial system—the Troubled Asset Relief Program, or TARP. The bill that set up TARP also created COP, which was assigned the task of monitoring how Treasury handed out the bailout money.