Protecting American Consumers

There is a battle brewing over who President Obama will choose to fill the position of Bureau of Consumer Financial Protection. This bureau was created by the Wall Street reform legislation that passed recently in Congress.

David Corn points out that there is controversy over who will become the head of this agency.

No sooner had President Obama and his congressional Democrats achieved victory in passing Wall Street reform legislation last week when an internal catfight broke out over who would lead the new Bureau of Consumer Financial Protection created by the bill. The Wall Street reform package is a mixed bag. Former Labor Secretary Robert Reich calls it "a mountain of legislative paper, a molehill of reform." Progressives, though, have generally cheered the new consumer protection board, which will possess the independent authority to pursue and punish abusive lenders, including credit card companies and mortgage firms. But how this outfit operates will partly depend on who runs it. And that's the fight at hand.

An obvious choice.

The obvious candidate for this new financial sheriff position is Warren, the Harvard law professor who first proposed such an agency in 2007 -- before the Wall Street meltdown. As head of a congressional panel overseeing the TARP bank bailout, she's been an outspoken and plain-speaking foe of Wall Street and the big banks. She has denounced shifty credit card companies and shady mortgage lenders. She deserves this position. And progressives love Warren. But Geithner may not. Last week, the Huffington Post, citing one "source with knowledge of Geithner's view," reported that Geithner was opposing Warren for this position.

Geithner's statement.

That story created a firestorm within the world of people who care about such things. The Treasury Department quickly put out a statement: "Given her strong leadership on consumer protection, Secretary Geithner believes that Elizabeth Warren is exceptionally well qualified to lead the new bureau, and, ultimately, that's a decision the president will have to make." But this was only an endorsement of her qualifications. You didn't have to hold inside information to know that Geithner prefers another contender for the post: Michael Barr, an assistant secretary of the Treasury, who was one of the architects of the Wall Street reform measure. Barr fought against GOP efforts to weaken the consumer agency and could well be a strong head of the bureau, but he does lack the prominence and communications skills of Warren, who has already proved herself a media-savvy consumer champion.

Warren, a thorn in Geithner's side.

That Geithner would not be hot on Warren is no surprise. As head of the bailout oversight panel, Warren has fiercely called out Geithner and Treasury on a number of fronts: for providing a backdoor bailout to AIG, for botching homeowner relief programs, for failing to get mega-banks to resume lending. Moreover, she's an articulate and thoughtful populist, who applies a Main Street-first perspective toward financial matters and who has been a scourge of credit card companies and banks. Geithner is a member of the Big Finance establishment; he's no crusader. Whether or not he's actively lobbying the White House against Warren, he obviously would be far more keen on Barr, his department colleague. There's also a third candidate: Gene Kimmelman, a Justice Department official who's worked for numerous consumer organizations. (He'd be a good pick, too.)

Progressives are worried.

This whole dust-up has progressives worried. (MoveOn, the Progressive Change Campaign Committee, and the Project on Government Oversight have each called on the White House to nominate Warren.) On Friday, White House senior adviser David Axelrod told reporters, "Elizabeth Warren is a great, great champion for consumers. She's obviously a candidate to lead this effort." But he didn't refer to her as a leading candidate, and he made it clear there were other well-positioned contenders. And while the Treasury Department was officially praising her qualifications last week, a Geithner aide, speaking on background, said that Treasury has "some concerns about a nomination fight," should Warren be appointed.

Arguments for and against Warren.

That might be Geithner's best argument against Warren: The banks and many Senate Republicans do not like her and a Warren nomination could turn into a battle royal, akin to a contentious Supreme Court fight. But this is also an argument for Warren.

Presently, Obama's economic policies are made and sold by people like Geithner and Lawrence Summers, Obama's chief economic adviser. How many Americans really believe these guys are looking out for them? The president's economic team is short on non-Wall Streeters who can connect with folks at home. Placing Warren in a high-profile position would show that Obama recognizes that protecting American consumers is as important as bailing out big banks and auto companies. He would be adding a vital and clear voice to his administration. And in an election season -- when Obama cannot do much to create 8 million jobs to make up for the ones lost before and after he became president -- waging a fight against the banks and GOPers on behalf of a passionate consumer advocate would have political benefits.

Obama vs Progressives

Though Treasury has tried to downplay the Warren drama, this is an important moment for Obama. Progressive reformers are already defining a potential rejection of Warren as a White House betrayal. Simon Johnson, the former chief economist of the International Monetary Fund, writes,

This can now go only one of two ways.

1. Elizabeth Warren gets the job. Bridges are mended and the White House regains some political capital. Secretary Geithner is weakened slightly but he'll recover.

2. Someone else gets the job, despite Treasury's claims that Elizabeth Warren was not blocked. The deception in this scenario would be nauseating -- and completely blatant. "Everyone was considered on their merits" and "the best candidate won" will convince who exactly?

He adds, "Failing to appoint Elizabeth Warren would be the straw that breaks the camel's back. It will go down in the history books as a turning point -- downwards -- for this administration."

If Obama dumps Warren, the White House will justifiably enrage reformers and progressives -- that is, part of its base. If Obama nominates Warren, the White House will have a major fight with banks and GOPers. "That may be a fight worth having," a Treasury Department official says, "but that's up to the White House to decide." It's a mighty big decision.

Public Citizen believes that Warren is the correct choice.

A real reformer will have the power to crack down on predatory mortgage loans, hidden bank fees, college loan traps and much more. Under a lesser leader, the new agency will quickly degenerate into just another part of the Washington bureaucracy.

There's no doubt who would be the most effective leader of the new bureau: Harvard law Professor Elizabeth Warren.

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