Who Is This Person?

Hilary B. Miller 11/12/10

1

Basic Biographical Facts

Born June 22, 1949 (age 61)University of Houston– B.S. 1970Rutgers Law—J.D. 1976Taught at Univ. of Houston and Univ. of Pa.Joined Harvard Law School faculty in 1992 –

Leo Gottlieb Professor of LawMarried to Prof. Bruce Mann, HLS legal historianIn 2008, nominated by Harry Reid to chair the

TARP oversight committeeNominated as Assistant to POTUS

and Special Advisor to SecTreas in 2010

Hilary B. Miller 11/12/10

2

Additional Details

Member of the FDIC's Committee on Economic Inclusion

Executive Council of the National Bankruptcy Conference

Former Vice President of the American Law Institute

Chief Adviser to the National Bankruptcy Review Commission

Campaign advisor to BHO

Hilary B. Miller 11/12/10

3

More Facts

Hilary B. Miller 11/12/10

4

Has a credit card and spends moneyIs a capitalist and says she believes in the

benefits of borrowingUnderstands complex financial productsComes from a research background

Key Writings

> 100 scholarly articles and six academic books, including:

Bankruptcy Policy (1987) 54(3) U. Chi. L. Rev. 775-814 The Untenable Case for Repeal of Chapter 11 (1992) 102(2) Yale L.J.

437-479 73 Bankruptcy Policymaking in an Imperfect World (1993) 92(2) Mich. L.

Rev. 336-387 The Bankruptcy Crisis (1997-1998) 73 Indiana L.J. 1079 Principled Approach to Consumer Bankruptcy (1997) 71 Am. Bankr.

L.J. 483 Financial Characteristics of Businesses in Bankruptcy (1999) Am.

Bankr. L.J. 499 Illness and Injury as Contributors to Bankruptcy (2005) SSRN (with

DU Himmelstein, D Thorne and SJ Woolhandler) The Success of Chapter 11: A Challenge to the Critics' (2009) 107

Mich. L. Rev. 603 (with JL Westbrook) Medical Bankruptcy in the United States, 2007: Results of a National

Study (2008) Am. J. Med. (with DU Himmelstein, D Thorne and SJ Woolhandler)

Hilary B. Miller 11/12/10

5

Pragmatic Market Analysis

Hilary B. Miller 11/12/10

6

"Bankruptcy Policy," 54 U. Chi. L.Rev. 775-814 (1987): She writes that she offers "a dirty, complex, elastic, interconnected view of bankruptcy from which I cannot predict outcomes nor even necessarily fully articulate all the factors relevant to a policy decision." Warren defends her approach as "more realistic and more likely to yield useful analysis.“

Warren appears skeptical of claims about foundational truths and generally anti-dogmatic

She is data-driven and appears to believe in evidence-based regulation

Medical Bankruptcy Writings

2/05 report was timed to derail BAPCPAClaimed that “at least” 46% of personal

bankruptcy filings in 2001 were the result of "medical causes," and that this represented a 23-fold increase over 20 years

Defined “medical bankruptcy” to include reported uncontrolled gambling, drug or alcohol addiction, or the birth or adoption of a child

Classified a bankruptcy as "medical" 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

Hilary B. Miller 11/12/10

7

Medical Bankruptcy, Part Deux

2005 study (using 2001 data) was revisited in 2008 (using 2007 filings)

Release timed to support ObamacareAuthors concluded that 62% of bankruptcy

filings were the result of “medical issues” and that the odds that a bankruptcy had a medical cause had doubled between just 2001 and 2007

Methodological issues: Post BAPCPA, bankruptcy filings plummeted “Medical” bankruptcies dropped by 160,000 from

2001 to 2007

Hilary B. Miller 11/12/10

8

Origin of BCFP Idea

Hilary B. Miller 11/12/10

9

“Making Credit Safer”

Hilary B. Miller 11/12/10

10

“The problem lies with the substantial subset of consumers who take out multiple advances and pay the … fee many times over. A customer who misestimates her ability to repay the loan in fourteen days will likely roll the loan over for another fourteen days. Payday lenders target such customers, amassing 90% of their profits from borrowers who roll over their loans five or more times during a year.”[Source: Center for Responsible Lending]

“Making Credit Safer,” cont’d.

Hilary B. Miller 11/12/10

11

“The fee structure of payday loans makes it difficult for consumers to compare directly the costs associated with a payday loan to the costs associated with other consumer credit products.”

“Perhaps the most dangerous feature of the payday-loan product is the loan rollover.”

“The design of the payday loan as a short-term cash advance that is oftentimes continuously renewed for prolonged periods of time responds to consumers’ underestimation of the likelihood and cost of loan rollover.”

“Making Credit Safer,” cont’d.

Hilary B. Miller 11/12/10

12

Inadequate funds on payday “results in an unanticipated rollover, which means the cost of the loan is far higher than the consumer initially assessed. The payday loan product is arguably designed to take advantage of consumers’ optimism bias and their consistent underestimation of the risk of nonpayment.” [Data source for consumers’ expectation that they will repay on payday: CRL.]

Extensive discussion about shrouded attributes

Problems with “Making Credit Safer”

Hilary B. Miller 11/12/10

13

Short on data: the data regarding optimism bias rest largely on either (a) conjectures or (b) experiments removed from typical market transactions justifying skepticism about their probative force

Problem in “safety” for financial products: Consumer lending has positive effects on economy and

borrowers If “failure” = default and BCFP eliminates nearly all

failures, the gains from eliminating financial distress might dwarf the losses from economic activity foregone

No issue if “failure” means damage from shrouded attributes

Post-Appointment Statements

Hilary B. Miller 11/12/10

14

“The new consumer bureau is based on a pretty simple idea: People ought to be able to read their credit card and mortgage contracts and know the deal. They shouldn’t learn about an unfair rule or practice only when it bites them — way too late for them to do anything about it…. The time for hiding tricks and traps in the fine print is over …. if the playing field is level and families can see what’s going on, they will have better tools to make better choices.” – Elizabeth Warren, 9/17/10

Credit Cards: Top Priority

Hilary B. Miller 11/12/10

15

American Banker, 11/10/10:

Though the Consumer Financial Protection Bureau has jurisdiction over a wide range of financial products, Elizabeth Warren is making credit cards her top priority.

Warren, the administration official in charge of setting up the new agency, said she wants to revamp card disclosures in order to make them easier to understand, as well as eliminating all hidden costs and fees. In many ways, she said, the effort is symbolic of the agency itself.

"Credit cards can help point to an overall philosophy for the agency," Warren said in an interview. "The main principle is to make credit markets work for families. What does it take to be able to do that? A family should be able to see the price, see the risk and make apples-to-apples comparisons among products."

Summary

Hilary B. Miller 11/12/10

16

Elizabeth Warren comes from a research-oriented background, is experienced at dealing with ambiguous data and has generally been willing to follow the facts in her academic writings

She has been criticized for “strong priors” and the appearance of data manipulation to meet political objectives

Her key writing on payday were (a) probably not written by her, and (b) not based on actual research

There is an education/skepticism-induction opportunity

Regardless of who actually runs, BCFP,her influence will be enormous