Elizabeth Warren: My Mission Is to Restore America's Great Middle Class

Editor's note: The following is a speech delivered by Elizabeth Warren at Netroots Nation 2010. Check out AlterNet's petition at Change.org urging President Obama to appoint Warren to lead the new Consumer Financial Protection Bureau.

My grandmother, when she was a teenager, drove a wagon in the land rush that settled Oklahoma. Her mother was dead, and her little brothers and sisters were in the back of the wagon. Her father had ridden ahead and tried to find a piece of land that might be somewhere near water--a hard task in Oklahoma. She grew up in that part of the world, she met my grandfather, they got married, they started building one-room schoolhouses and little modest homes across the prairie. They had kids, they stretched, they scratched, they worked hard, they made a little money, and they put it aside, put it in the bank. It got completely wiped out in 1907 in an economic panic. But like many American families, they came back. They started scratching and stretching again, and having more babies--and then the Depression came. And they got wiped out one more time.

You see, my grandmother was born into the world of boom and bust, boom and bust, as it had been from 1794 until the Great Depression. But my grandmother also lived in a world of economic transformation. Because coming out of the Great Depression, just three laws fundamentally altered the course of America's history.

The first one, FDIC insurance, made it safe to put money in banks. The second one, Glass-Steagal, tried to separate the risk-taking on Wall Street from your local community bank. And the third one, SEC regulations, provide some cops to watch the robbers. And so, out of that, what we got was 50 years of economic peace. No financial panics, no meltdowns. And during that 50 years, we built a strong and prosperous middle class in America.

Now, my grandmother, when she died in 1970 at the age of 94, had been part of that. She owned a little house, she had plenty of groceries in the cupboard, and she had some cash in the bank. She was part of the growth of middle-class America. As were her children and her grandchildren. But shortly after my grandmother died, within a few years, we began unraveling that. Part of it was on the regulatory side. We hadn't been clever about regulations. They stayed ossified. The regulations put in place in the 1930s had not been updated. They had not adapted to a new world. And along came a new group of people who said, "Let's just get rid of the regulations. What are they there for anyway? They just cost money. Dump the regulations." And so the regulatory framework, or the "cops," who were on the beat began to disappear. They lost their effectiveness.

Another thing happened in that period of time, and that is the foundations of middle-class America began to erode. Start with income. Income and productivity across America had been intertwined after World War II. So every year, basically, productivity was going up--so were wages. But starting in the late 1970s those two begin to diverge, so that productivity continues to rise--indeed rise at a somewhat steeper rate--while incomes flatten out, so that today a fully employed male makes less money than his father made a generation ago, once we adjust for inflation.

On the income side, they're flat, but on the expense side, these families are not. The core expenses for the middle class--housing, health insurance, day care, college, the things that make a family safer, the things that make a family middle class, the things that let them invest in their children and the future--those went up, adjusted for inflation, by more than 100 percent. Families spent more, but they had flat incomes.

Now, anyone here can figure out what happens next. And that is, savings begin to decline, families who had put money away could no longer do it, and debt begins to rise. And families end up with more mortgage debt, more credit card debt, more car loan debt, more debt of every form. The credit industry then smells an opportunity. It says, "Wait a minute. The old regulations are gone, and middle-class families are under a lot of economic stress. There's money to be made in this situation." And indeed there was.