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Miriam Valverde
By Miriam Valverde April 30, 2019

Elizabeth Warren says she warned about the financial crisis before it happened. That's True

Democratic Sen. Elizabeth Warren warned about the financial crisis of the 2000s before it happened, she claimed during a CNN town hall where she pitched herself as the best option for president in the 2020 election.

Warren, a former Harvard Law School professor, told an audience of college students that her whole life’s work has been "about what's happening to working families."

"And starting in the early 2000s, the crisis was coming. I was waving my arms, ringing the bell, doing everything I could. I said families are getting cheated all over this country," Warren said April 22 in Manchester, N.H. "It started when the mortgage companies targeted communities of color. They targeted seniors. They targeted Latinos. They came in and sold the worst possible mortgages and stripped wealth out of those communities, and then took those products across the nation. I went everywhere I could. I talked about it to anyone who would listen, a crisis is coming."

But nobody wanted to listen, Warren said, "so the crisis hit in 2007, 2008, and just took us down."

We confirmed that Warren did raise the alarm about the looming housing and financial crisis. She spoke about debt, financial lending practices and other factors affecting families and the economy years before the financial crisis peaked in 2008.

Sounding the alarm when Warren was a Harvard professor

Millions of people lost their jobs and homes during the recent Great Recession, generally regarded as happening from late 2007 to mid 2009. Experts say the financial crisis resulted from a number of colliding factors, including an unsustainable housing boom partly driven by an easy availability of mortgages, banks taking on too much risk, government policies and lax regulation.

Subprime loans — loans at higher interest rates made to people perceived to be at greater risk for defaulting on loans (including families with low and moderate income and poor credit histories) — played a key role in the housing crisis.

Warren’s presidential campaign cited several blog posts and comments to media outlets in 2005 and 2006, and Warren’s 2003 book, "The Two-Income Trap," co-authored with her daughter, Amelia Warren Tyagi, as examples of Warren warning about subprime lending and an imminent housing crisis. Warren has represented Massachusetts in the U.S. Senate since 2013. Before going to Congress, she taught law at the university level for more than 30 years, most recently at Harvard, specializing in commercial law, contracts, and bankruptcy.

Subprime lenders defended their business practices by saying they were helping more families own homes, Warren’s book said, but that’s "little more than public relations hot air."

"In the overwhelming majority of cases, subprime lenders prey on families that already own their own homes, rather than expanding access to new homeowners. Fully 80 percent of subprime mortgages involve refinancing loans for families that already own their homes," Warren said in the book. "For these families, subprime lending does nothing more than increase the family's housing costs, taking resources away from other investments and increasing the chances that the family will lose its home if anything goes wrong."

In a June 2004 interview with PBS’s NOW host David Brancaccio, Warren spoke about growing household debt, against risky mortgage lending practices and what she regarded as bad advice to Americans by then-Federal Reserve Chairman Alan Greenspan. Warren said Greenspan encouraged families to borrow against their house to pay for basic expenses.

"I think what the landscape shows is the middle class is under assault in a way that has not happened before in our history," Warren said. "Stagnant wages, rising costs, wildly rising debt. It's in everyone's interest to turn that back around."

Warren’s campaign noted that The New York Times quoted Warren in an October 2005 article that said homeowners in suburbs were taking on more and more home-equity debt to stay out of bankruptcy.

The article said: "Professor Warren of Harvard believes that disaster lurks as homeowners borrow against their homes to forestall bankruptcy. When the stock market tumbled five years ago, people in trouble could sell stocks to stay afloat, she said. But home equity doesn't work the same way. As she put it, ‘You can't sell a part of your home like you could a stock in the stock market bubble.’"

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Warren told the newspaper that after a new bankruptcy law went into effect that month, filing for bankruptcy would become more difficult: "And that means more families are set up to lose their homes."

Warren was "substantially correct" in her assessment that home prices were going up rapidly relative to incomes (particularly for households with a one wage earner), said Ed Pinto, co-director of the Housing Center at the American Enterprise Institute, a conservative think tank.

But Pinto disagrees with Warren about what caused the crisis. Warren "blames banks and lenders, when in fact Congress and government policies aimed at making homes ‘more affordable’ are the root cause," Pinto said.

(Check out our 2008 in-depth analysis on the causes of the financial crisis and how that issue was debated in the 2008 presidential campaign. Then, both Sens. John McCain and Barack Obama said they sounded warnings, and both blamed the other for helping cause the crisis.)

Consumer advocate groups credit Warren for alerting about the crisis

Warren was also a vocal opponent of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, because she thought the law would hurt consumers, said Deborah Goldstein, an executive vice president at the Center for Responsible Lending, which advocates for consumer financial protections.

Rising credit card debt hurt Americans already struggling with mortgage payments.

"I remember (Warren) talking about credit card abuses and how they were harming families," Goldstein said. "People were using credit to manage basic daily expenses."

Goldstein said that her group, also concerned about the imminent financial crisis, in the early 2000s communicated with Warren on what could be done about it.

"I'd give then-professor Warren the credit for banging the drum and ringing the bell early on unfair financial practices," said Ed Mierzwinski, senior director of the Federal Consumer Program at the U.S. Public Interest Research Group. Warren was the "No. 1 go-to academic expert" in the mid-to-late '90s and 2000s in the debate over changes to the bankruptcy code, he said.

Warren in January 2007 testified before the Senate Committee on Banking, Housing and Urban Affairs, saying that the credit card market was broken and hurt consumers.

Warren was chosen in 2008 to lead the Congressional Oversight Panel, established by Congress to review the state of the financial markets and the regulatory system.

Warren also helped create the Consumer Financial Protection Bureau. The bureau emerged from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, designed to enforce federal consumer financial laws and protect consumers. In 2013 and 2014, Goldstein's group collaborated with the CFPB in drafting payday lending rules.

Our ruling

Speaking of the financial crisis that gained traction in 2007, Warren said, "I talked about it to anyone who would listen, a crisis is coming."

There is documented evidence that Warren spoke against risky mortgage lending practices, rising debt and other factors that contributed to the financial and housing crisis years before it materialized.

We rate Warren's claim True.

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Speaking of the financial crisis that gained traction in 2007, "I talked about it to anyone who would listen, a crisis is coming."
in a CNN town hall
Monday, April 22, 2019

Our Sources

CNN Transcripts, CNN Presidential Town Hall with Sen. Elizabeth Warren, April 22, 2019

Email interview, Chris Hayden, Elizabeth Warren spokesman, April 23, 2019

Email interview, Ed Mierzwinski, senior director of the Federal Consumer Program at the U.S. Public Interest Research Group, April 25, 2019

Phone interview, Deborah Goldstein, an executive vice president at Center for Responsible Lending, April 26, 2019, Congressional Oversight Panel (COP)

Senate Committee on Banking, Housing and Urban Affairs, Elizabeth Warren testimony, January 25, 2007

New York Times, Consumers Feel the Next Crisis: It’s Credit Cards, Oct. 28, 2008, Consumer spending and U.S. employment from the 2007–2009 recession through 2022, October 2014, The Financial Crisis Five Years Later: Response, Reform, and Progress In Charts, Sept. 11, 2013

PolitiFact, What caused crisis? No one thing, Nov. 30, 2008

Internet Archive, Elizabeth Warren - Talking Points Memo Cafe blog posts, Dec. 29, 2005, May 26, 2005, April 21, 2006

Google Books, Excerpt from The Two-Income Trap, by Elizabeth Warren and Amelia Warren Tyagi, Flashback: Elizabeth Warren (Basically) Predicts the Great Recession, June 25, 2004

The New York Times, Holding Off Bankruptcy, But Draining Home Equity, Oct. 2, 2005, Excerpt from The Two-Income Trap, by Elizabeth Warren and Amelia Warren Tyagi

Politico, Emails reveal consumer protection agency’s cozy ties, Nov. 19, 2015

Email interview, Ed Pinto, co-director of the Housing Center at the American Enterprise Institute, April 30, 2019

American Enterprise Institute, Government Housing Policies in the Lead-up to the Financial Crisis: A Forensic Study, Feb. 5, 2011

Politico, Emails reveal consumer protection agency’s cozy ties, Nov. 19, 2015

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More by Miriam Valverde

Elizabeth Warren says she warned about the financial crisis before it happened. That's True

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