Raj Date Is The Best Thing To Happen To Consumers Since Elizabeth Warren

The New York Times should be embarrassed. This morning, the paper of record published an outrageous hit-piece on Raj Date, one of the most effective consumer advocates in the nation [1]. The article completely misconstrues Date's work on financial reform, ignores his years of work pushing for stronger consumer protection, and falsely portrays Date as some kind of nefarious subprime hooligan. When Elizabeth Warren hired Date as an adviser for the new Consumer Financial Protection Bureau, it was the best possible hire she could have made, and activists continue to celebrate the decision with good reason. The Times owes both Date and the public an apology for this egregious smear.

As the Wall Street overhaul moved through Congress, Date was one of the strongest voices for serious reform. He conducted powerful research demonstrating the need for new safeguards in everything from auto loans to proprietary trading, and advised members of Americans for Financial Reform (disclosure: I joined AFR's steering committee in August of this year) on just about everything that mattered during the legislative debate.

Date did all of this work for free through the Cambridge Winter Center for Financial Institutions Policy, a pro-reform think-tank that he founded. In fact, Date himself funded many of Cambridge Winter's operations. The think-tank took on everything, and was universally critical of the Wall Street establishment and regulatory infrastructure that had driven the economy off a cliff. Even better, it proposed concrete solutions to complex problems, and provided detailed, technical financial research to back it all up.

The Times story doesn't even bother to link to the Cambridge Winter site [2], so I'll do them several better. Here's an article Date wrote [3] criticizing excessive Wall Street pay. Here's a report he wrote [4] (.pdf) about how to regulate the shadow banking system (note that the report was co-written by Mike Konczal [5], a major reform advocate and widely respected economics blogger). Here's a report [6] (.pdf) Date penned slamming abusive auto lending. And here's Date's June 2009 essay [7] praising the proposal to create the CFPB, at a time when such praise was profoundly unpopular on Wall Street. I could go on forever. They're all available for free on the site. A reporter for The New York Times ought to be able to figure out how to do this stuff.

For Wall Street reform advocates, there has been no better resource of thorough, objective research than the work Date produced for Cambridge Winter (on his own dime). But you wouldn't know any of this from reading the Times story, which portrays Cambridge Winter as some kind of nefarious Wall Street lobbying firm, saying it was "active in the Dodd-Frank debate," and then noting that Date previously worked for both Capital One and Deutsche Bank.

Date has indeed had a very successful career in finance, and the revolving door between Wall Street and Washington is a major problem. But Date is not part of that problem. He's used his first-hand industry expertise to take on the bank lobby directly. He was involved in the Dodd-Frank debate by pushing hard against Wall Street.

"Raj Date was a true ally of consumer protection groups in our fight for meaningful financial regulatory reform," says Cora Ganzglass, legislative director of the National Association of Consumer Advocates. "As someone who has worked within the financial service arena (which he always fully disclosed) Raj could aptly describe how the system was broken and why it needed to be fixed."

The Times story—which is going to be a permanent blight on reporter Edward Wyatt's career—further tries to portray Date as a subprime lending miscreant by misconstruing an uncontroversial lending practice known as peer-to-peer lending. Until he joined the CFPB, Date served on the board of a company called Prosper Marketplace. For a detailed explanation of Prosper's business, see this Wall Street Journal article from 2008 [8], but here are the basics.

Prosper links individuals who are interested in lending money with other individuals and businesses who want to borrow it. They do small loans—almost always less than $25,000—mostly for small businesses. The process is designed to be pro-consumer—the company sets up an auction-style bidding mechanism, and whoever offers the best terms for the borrower makes the loan.

It's not obvious that the Prosper experiment has been successful, but it is obiviously not shady subprime lending. Subprime mortgages were a problem because they saddled consumers with unaffordable loans. But the whole point of Prosper is to make affordable credit available, and it's designed to create attractive terms for borrowers.

This is not to say that Prosper hasn't had its share of troubles. The Securities and Exchange Commission views its lending platform as the sale of securities, so it's filed actions against the firm for failing to register securities with the SEC (that happened before Date joined the board, by the way). But the problem is a technical one that you'd expect to see with an actual financial innovation. Instead, the Times implies that Prosper is a predator that the SEC has cracked down on for consumer abuses.

There's a reason why consumer advocates attack subprime mortgages and payday loans but don't go after peer-to-peer lending. It's just not controversial. Maybe someday the business will take a wild turn for the worse (many of the shady loans offered during the housing bubble were loans that once had been designed for limited, useful purposes), but if so, it will have nothing to do with Raj Date.

There is no ethics scandal here. All of Date's work with Prosper has been disclosed. He recused himself from any Cambridge Winter activities regarding peer-to-peer lending, and he stepped down from Prosper's board when he joined Treasury.

The Times story is really horrible. It doesn't just smear Date, it mischaracterizes Elizabeth Warren's work on behalf of consumers as work for the financial industry. Check out this laughable paragraph:

Mr. Date is not the only official at the new agency whose background in the financial industry has attracted attention. Ms. Warren, an assistant to the president and a special adviser to the Treasury secretary, Timothy F. Geithner, disclosed in government filings that she earned more than $100,000 over the last two years for consulting work on bankruptcy law and for providing expert-witness research in a class-action lawsuit involving the credit card businesses of major United States banks.

This is inexcusably sloppy. Warren was a consultant for consumer groups! The class-action lawsuit Wyatt references was a lawsuit filed on behalf of consumers against credit card companies!

Shame on Edward Wyatt, shame on The New York Times, and bravo to Raj Date for his years of dedicated and thankless work on behalf of American families. The fact that he'll be working closely with Elizabeth Warren at the CFPB is great news for consumers, and very bad news for predatory lenders.

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