The Debt Crusader

Over time, Warren began to see herself less as a dispassionate analyst and more as an advocate. By 2003 she'd enlisted her daughter, a former McKinsey consultant, to coauthor "The Two-Income Trap," a mass-market book largely focused on how dual-income couples were stretching too far to buy houses. The book struck a nerve, and Warren began appearing on talk shows —including an interview on "Dr. Phil" that led her to rethink her life's work.

On the show, a struggling family described how they'd taken out a second mortgage to consolidate their debts. Then Dr. Phil turned to Warren. "Suddenly the bright lights are in my face," she recalls. "I said, 'Dr. Phil, when a family is in financial trouble, putting a second mortgage on the house is about the worst possible move'," because it puts them at risk for foreclosure. "Afterward I thought, I've been doing scholarly work for more than 20 years, and I may have just done more good in the last 90 seconds than I ever accomplished with anything else I wrote," she says. "I began to think that instead of writing one more thing to impress other academics or to reassure myself that I'm a serious scholar, I should [focus] on the question of change, of real impact, of how to be helpful."

That's why, when Senator Reid asked her last fall to chair the new board overseeing the bank bailout, she didn't hesitate. On a typical morning, Warren sits center stage in a Senate hearing room. As C-Span cameras roll, she calmly urges a Nobel Prize–winning economist to cut to the chase of his prepared testimony. During a January hearing, Warren asks Yale economist Robert Shiller what regulations might have prevented the financial collapse. Shiller responds by praising the regulatory idea Warren has been advocating. Up on the dais, she can't help but smile.

Warren's big idea is to create a Financial Product Safety Commission modeled after the Consumer Product Safety Commission, which ensures the safety of small appliances and toys; such an agency would have kept the poorly designed mortgages that caused the credit crisis off the market entirely. "This crisis started with the cheating of American families, and [solving it] has to begin there, too," she says. It's just one of the ideas she's promoting in her new role. Each month, her committee's reports create controversy. For February's missive, the panel hired an outside investment firm whose analysis concluded that the Treasury Department had overpaid by one third for the ownership stakes it took in big banks last fall. In a report released last week, the panel explored how, in previous financial crises, liquidating insolvent banks and sacking their managers led to a quicker, cleaner resolution of the mess.

Some of her ideas have sharp critics. "A credit card is not an exploding toaster," says Todd Zywicki, a law professor at George Mason University, because unlike faulty consumer products, complicated loans are actually suitable for some borrowers. Zywicki says Warren's views are extreme because she views every lender as exploitative and every borrower as a hapless victim. Financial-industry lobbyists are even more critical, slamming her for shoddy scholarship and radical ideas (though they decline to do so publicly). Critics also question just how much influence her committee will have. "It has no authority, it doesn't have any enforcement power, it [only] makes suggestions—it's a pulpit at best," says one lobbyist.

Still, her ideas are gaining traction. In March, Sen. Dick Durbin introduced legislation to create a Financial Product Safety Commission along the lines Warren has suggested. And Barney Frank, chairman of the House Financial Services Committee, says Warren's views will be influential as Congress works to rewrite financial regulation. "Elizabeth is a great countervailing pressure in offsetting the temptation of the people running the [bailout] to focus entirely on the financial community," Frank told NEWSWEEK. "I'll be consulting her."