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Elizabeth Warren may well be the most popular person in Washington.
When she was head of the Congressional Oversight Panel on TARP, her willingness to go after Wall Street, the Treasury Department, and the Fed made her a liberal icon. And her folksy, Midwestern air and her ability to express complex financial issues in simple language turned her into an unlikely media superstar.
Warren is now working to set up the Consumer Financial Protection Bureau, a new government agency inspired by her own work on consumer credit, and in the past couple of weeks almost a quarter of a million people have signed an online petition asking President Obama to nominate her as the official boss of the agency.
Yet Warren may also be the most hated person in Washington.
The banking lobby sees her as its nemesis, congressional Republicans are openly hostile to her, and conservatives decry her as the exemplary "totalitarian liberal." At this point, the only way Warren will run the C.F.P.B. is if President Obama makes her a recess appointment, and Senate Republicans have vowed to try to stop even that.
The core principle of Warren's work is also a cornerstone of economic theory: well-informed consumers make for vigorous competition and efficient markets. That idea is embodied in the design of the new agency, which focusses on improving the information that consumers get from banks and other financial institutions, so that they can do the kind of comparison shopping that makes the markets for other consumer products work so well.
As things stand, many Americans are ill informed about financial products. The typical mortgage or credit-card agreement features page after page of legalese-what bankers call "mice type"-in which the numbers that really matter are obscured by a welter of irrelevant data. There's plenty of misinformation, too: surveys find that a sizable percentage of mortgage borrowers believe that their lenders are legally obliged to offer them the best possible rate. Since borrowers are often unaware of how much they're actually paying and why, the market for financial products doesn't work as well as most markets do. And the consequences of this are not trivial.
The housing bubble was a collective frenzy, but it was made much worse by the fact that millions of borrowers were making poorly informed decisions about the debt they were taking on. If people had known more, they might well have borrowed less