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What's Eating Todd Zywicki?

posted by Adam Levitin

It's no secret that there's no love lost between Todd Zywicki and Elizabeth Warren.   But Todd's latest salvo in this feud is simply filled with inaccuracies.

Todd goes after Elizabeth for (1) her medical bankruptcy research, (2) the Two-Income Trap, and (3) the treatment of strategic defaults in Congressional Oversight Panel reports.  Todd's charges in (1) and (2) are just rewarmings of his past critiques of Elizabeth's work and of Meghan McArdle's botched hatchet job of Elizabeth in the Atlantic for which she was taken to the woodshed by numerous observers (see also here and here, for example).

But what about the Congressional Oversight Panel's treatment of strategic defaults? Here, Todd's claim is demonstrably false.

Todd alleges that:

Similarly, reports of the Congressional Oversight Panel of the Troubled Asset Relief Program (TARP)—a panel of which she was chair—uniformly treated home foreclosures as the result of bank fraud and the bullying of helpless homeowners. Fraud and bullying there was, but her panel consistently ignored the many foreclosures that have resulted from a homeowner's strategic decision to walk away from a house whose value has fallen below the amount still owed on the mortgage. Economists and housing analysts widely agree that a substantial number of defaults occur for this reason. That reality is largely absent from the TARP panel's reports.

Having worked on the Panel's foreclosure reports, I don't know what Todd is possibly talking about. The Panel's reports are drafted by a bipartisan professional staff, and are consensus documents, not the views of any single panelist.  To impute the reports to representing the personal views of Elizabeth Warren or any Panelist is as silly as imputing a piece of legislation to every member of Congress who voted for it. The reports are compromise documents, but who on the Oversight Panel do you think was pushing for greater coverage of the negative equity issue?  

To cite every time in the Oversight Panel's three foreclosure reports to date that has discussed negative equity or strategic default would involve a post several screens long. Just a page count of the number of times the reports discuss the negative equity/strategic default problem irrefutably shows that Todd's statement above is false:

  • The Mar. 6, 2009 report discussed negative equity on 21 of its 70 pages, including two whole sections devoted to the issue.  
  • The Oct. 9, 2009 report discussed negative equity issues on 30 of its of 128 pages. 
  • The April 14, 2010 report discussed negative equity or strategic default on 24 of 174 pages including a whole section on strategic default entitled "strategic default."  

Over 20% of the page production of the Congressional Oversight Panel's foreclosure reports has addressed negative equity and strategic defaults.  And I'm lowballing the number because I'm counting title pages, etc.  

The Oversight Panel has been leading the charge on the negative equity issue, rather than burying it. Todd really owes a retraction, at least on this point.    


I can't figure out what Prof. Zywicki is talking about, either. As you point out, strategic defaults are all over the reports. The bigger question, in my mind, is how Austro-Chicagoans like Zywicki can complain about strategic defaults with straight faces. For decades they've pounded the drum that breach should be an economic decision, not a moral one, but here they are, screaming about morally deficient borrowers walking away from mortgages. I guess you only get to make economic decisions if you can fund scholarly research. As for motivation, I can only heed the advice of Sam Clemens: Show me where a man gets his corn pone, and I'll show you where he gets his opinions. Personally, I find his testimony while Conyers was questioning to be intriguing. He unequivocally said he hadn't received a dime from "those sorts of people" who want more bankruptcies, but when talking about money from creditors, he quickly switched from "I haven't received any" to "my research is not sponsored by". I wish Conyers had followed up with that.

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