Tomorrow, President Obama will sign the Dodd-Frank financial regulatory reform bill, moving the task of creating a fair, stable financial system from the legislative phase to the implementation phase. And the highest profile step at the moment is appointing the first director of the Consumer Financial Protection Bureau.
Reportedly, the three leading candidates for the post are Elizabeth Warren, a Harvard Law professor and head of the Congressional Oversight panel for TARP; Assistant Treasury Secretary Michael Barr; and Eugene Kimmelman, deputy assistant attorney general in the Justice Department’s Antitrust Division. Warren is easily the highest profile of the three. The Progressive Change Campaign Committee, Sen. Tom Harkin (D-IA) and Rep. Carolyn Maloney (D-NY) have all circulated petitions supporting her nomination.
It’s obvious to see why Warren is the front-runner for the job. After all, the idea to create an agency solely tasked with policing consumer lending was hers, which she laid out in a 2007 journal article. But lately, there’s been a lot kvetching in Congress, not over whether Warren is qualified, but whether she’s confirmable:
“Elizabeth would be a terrific nominee,” said [Sen. Chris] Dodd, the Connecticut Democrat who leads the Senate Banking Committee. “The question is, ‘Is she confirmable?’ And there’s a serious question about it.”
Of course, if she’s a “terrific nominee” then why is there such a “serious question” about getting her confirmed? Dodd doesn’t deign to say.
The main complaint about Warren seems to be that she’s done her job as chair of the Oversight Panel too well, ticking off various members of Treasury and lambasting the financial services industry. But as Paul Krugman wrote, “Warren really is a pioneering expert on household debt and financial distress, who has also shown an ability to work effectively in an official position. Against that, whatever personal quarrels she may or may not have had shouldn’t count at all.”
In fact, the willingness to speak up against the Treasury Secretary (and the other bank regulators) when the occasion calls for it is an asset for the Bureau’s Director, as the Financial Stability Oversight Council, which is largely composed of the current regulators and chaired by the Treasury Secretary, can veto the Bureau’s rules. The Bureau Director has a seat on the council and can’t be too deferential if the Bureau is to actually implement rules with teeth.
Warren will also help in attracting qualified personnel to the new agency, which is another critical ingredient for ensuring that it doesn’t find itself immediately subservient to the already well-established bank regulators. As the Cambridge Winter Center’s Tim Duncan wrote, “the first Director will have to make recruitment from existing agencies and the outside world his or her top priority and be willing to go to the mat with other agency heads to secure experienced, high-quality people. The Bureau should not be tempted into hiring employees simply for the sake of filling in boxes on an organization chart.” The appeal of working for Warren will help a lot in this area.
Of course, Republicans will gripe about Warren’s nomination, and likely mount a filibuster. But they are going to complain about any nominee, since they are fundamentally opposed to the very creation of the CFPB. Just like the Dodd-Frank bill itself got stronger because of a public fight on the Senate floor, picking a fight over the nominee — and forcing Republicans to go to bat for the big banks against an incredibly qualified, consumer focused choice — could pay significant dividends.