I have no idea whether President Obama plans to nominate Elizabeth Warren as director of the Consumer Financial Protection Bureau. If you’d asked me a year ago whether he should, I’d have probably said no, on the grounds that she was too much of a lightning rod. Better to install somebody with a lower profile who can get confirmed, I’d have argued. And, besides (as I wrote in September), she had no real management experience.
Now I think Obama should nominate Warren. Partly that’s because Warren, in her six months as de facto CFPB director (ahem, I mean “special adviser to the secretary of the treasury and assistant to the president”) has demonstrated sufficient political and managerial skills (inasmuch as anyone can demonstrate such skills while running an agency that hasn’t actually done anything yet). But mostly it’s because Republicans have talked me into it.
On July 21, seven federal agencies will transfer their regulatory authority to the CFPB. Even if President Obama were immediately to nominate Jesus Christ to be CFPB director, the Prince of Peace likely couldn’t win Senate confirmation in the space of four months. That makes it virtually certain Warren will continue to preside over the CFPB as de facto director once it’s empowered to issue regulations. Warren may even issue some. According to a letter from the Inspectors General of the Treasury department and the Federal Reserve, a leaderless CFPB is permitted, via Treasury Secretary Tim Geithner (Warren’s boss), to exercise whatever regulatory authority existed elsewhere in the government before passage of the Dodd-Frank financial reform bill, which created the CFPB. A leaderless CFPB is not, however, permitted to exercise whatever new regulatory authority was created under Dodd-Frank.
In practice, this means that after July 21 Warren can issue rules governing banks, but she can’t issue rules governing nonbank mortgage originators (whose lack of government oversight helped crash the financial system in 2008). That won’t be an ideal situation for anybody. Republicans and the banks will be angry that the unconfirmed Warren is able to regulate banks, while Democrats and consumer groups will be angry that Warren is unable to regulate nonbanks. Clearly, it will be in everybody’s interest that a new director be installed as soon after July 21 as is humanly possible.
Will President Obama give Warren the nod? Depends on whom you ask. The U.S. Chamber of Commerce’s “CFPB Spotlight” said last week that Warren was “likely to get the nomination.” But Rep. Barney Frank, D.-Mass., asked about Warren’s chances a few days later, said “I think the president is too unwilling to make the kind of fight that you don’t necessarily win.” The Chamber doesn’t want Warren to get the nomination; Frank very much does. The administration reportedly approached former Michigan Gov. Jennifer Granholm about the job, but she said no. Former Ohio Gov. Ted Strickland was said to be under consideration, but he told Bloomberg News that he hadn’t been contacted about it. Former Treasury official Michael Barr, who was under consideration for the job last summer, took himself out of the running.
How has the GOP persuaded me that Obama should nominate Warren? Partly by demonstrating its disinclination to let anybody be director of the CFPB. In a House oversight hearing last week, one Republican member after another berated Warren over the CFPB’s very existence. Rep. Spencer Bachus, R.-Ala., chairman of the House Financial Services Committee, has introduced a bill dispersing the duties of CFPB director among five commissioners representing both parties, making it doubtful that even the Man from Galilee could win his support. A similar attitude has taken hold among Republicans in the Senate, at least half a dozen of whose support any nominee will need to win confirmation. “I have more of a problem with the position than with her,” Sen. Lamar Alexander, R.-Tenn., admitted earlier this week.
Such stubborn rigidity ought to remove from the president’s mind any muddled impulse to appease the Republicans with a more “reasonable” nominee than Warren. They can’t be appeased. That means nothing would be lost in nominating Warren.
Meanwhile, there’s a strategic advantage to be gained. Whenever a president nominates somebody to a high-profile post, there is always the risk that some skeleton, real or imagined, will emerge from the nominee’s closet and doom the whole enterprise. Warren has the advantage of having already been subject to months of constant attack by highly motivated enemies. They have pathetically little to show for it. She’s persecuting banks for trying to impose a little efficiency on the foreclosure process! Actually, no, she merely provided some advice to the Justice Department at Geithner’s request; she won’t be party to any foreclosuregate settlement. She hates bankers! Actually, she’s met with a lot of politically influential community bankers, who “are warming to her,” according to the Wall Street Journal, and a few representatives of the larger banks, too. She’s even hired a few bankers. OK … she’s meeting with too many bankers! Isn’t she supposed to regulate them? Actually, meeting with bankers is part of a bank regulator’s job, and, anyway, that’s a pretty weird accusation coming from Crossroads GPS, a nonprofit advocacy group created by Karl Rove and former Republican National Committee chairman Ed Gillespie. Crossroads GPS’ “Wikicountability” project received, through the Freedom of Information Act, Little Miss Transparency’s personal schedule for September through December and posted it online. It made for deadly dull reading, and it isn’t up to date. If you want to see Warren’s schedule through February, she’s posted it on the CFPB website. January and February aren’t any more exciting.
At least one Senate Republican, Scott Brown, might have a personal reason to throw his support behind Warren and try to win over some other Republicans. If Warren becomes CFPB director, that will remove her as a potential Senate challenger in 2012. If she doesn’t get the job, she’ll be free to run against him as a populist martyr vanquished by a Republican party in thrall to the banks. That’s a pitch that might prove highly saleable in Massachusetts (and it sounds like more fun than teaching contract law). Ted Strickland poses no comparable threat.
Last week’s House oversight hearing was not unlike a Senate confirmation hearing; you might say it was a kind of dress rehearsal for Warren. I thought she handled the steady stream of Republican attacks with grace and common sense. Other coverage of the hearing reached the same conclusion. Warren has established herself as a known quantity and a capable administrator. It wouldn’t just be unfortunate for Obama to pass her over for director. It would be strategically unsound.