Potential hard feelings between Treasury Secretary Tim Geithner and Elizabeth Warren aside, the financial services industry is already gearing up to influence the next stage of financial regulatory reform, which is the design of new rules reining in Wall Street and the actual construction of the Consumer Financial Protection Bureau. There are plenty of regulations that have to be made, and plenty of discretion for regulators in crafting them, so bank lobbyists will have ample opportunity to influence a process that will be nowhere near as high-profile as was the regulatory reform fight on Capitol Hill.

But, first things first, the financial service industry is trying to influence who becomes the inaugural nominee for CFPB director:

“This is akin to a Supreme Court nominee for financial services,” Richard Hunt, president of the Consumer Bankers Association in Arlington, Virginia, said in an interview. “We are taking this very seriously.”

“All of that power is in the hands of one person. It’s going to be the closest approximation to a czar that Washington has ever seen,” said Joseph Lynyak, a law partner at Venable LLP who represents financial services companies. This conveniently leaves aside that the CFPB’s rules can be vetoed by the newly created Financial Stability Oversight Council — which is composed mostly of bank regulators — but it’s true that the CFPB’s director is going to have a lot of influence over in which direction the agency sets its initial course.

As Matt Yglesias wrote, “effective, high-prestige public agencies (the United States Navy, the Federal Reserve) attract a lot of motivated applicants and thus get on a self-reenforcing path of effective personnel and high prestige. But when you start something new, everything is wide open.” And as the Bush administration ably demonstrated, appointing heads of regulatory agencies who have no interest in actually regulating anything can turn those agencies into nothing more than a punchline.

For instance, remember SEC Chairman Chris Cox? Under him, the agency meant to be on the front lines of policing financial fraud became an afterthought and then released a laughable response plan long after the financial crisis was already well underway. But that was just par for the course for administration that had no interest in reining in financial services industry excess. The CFPB has the potential to be a game-changer for consumers, but only if it does not come under the thumb of the bank regulators or have a director unwilling to stand up to the banks themselves.

“’There’s always that possibility‘ that Wall Street lobbyists will succeed in weakening the bill’s provisions during the rule-making process,” said Senate Banking Committee Chairman Chris Dodd (D-CT). So in that sense, the work of financial reform is still very much underway.

Foreign oil giant BP is on a spending spree, buying Gulf Coast scientists for its private contractor army. Scientists from Louisiana State University, Mississippi State University and Texas A&M have “signed contracts with BP to work on their behalf in the Natural Resources Damage Assessment (NRDA) process” that determines how much ecological damage the Gulf of Mexico region is suffering from BP’s toxic black tide. The contract, the Mobile Press-Register has learned, “prohibits the scientists from publishing their research, sharing it with other scientists or speaking about the data that they collect for at least the next three years.” Bob Shipp, head of marine sciences at the University of South Alabama — whose entire department BP wished to hire — refused to sign over their integrity to the corporate criminal:

We told them there was no way we would agree to any kind of restrictions on the data we collect. It was pretty clear we wouldn’t be hearing from them again after that. We didn’t like the perception of the university representing BP in any fashion.

The lucrative $250-an-hour deal “buys silence,” said Robert Wiygul, an Ocean Springs environmental lawyer who analyzed the contract. “It makes me feel like they were more interested in making sure we couldn’t testify against them than in having us testify for them,” said George Crozier, head of the Dauphin Island Sea Lab, who was approached by BP.

These efforts to buy silence and cooperation come in addition to the $500 million Gulf Research Initiative, a Tobacco Institute-like program managed by a panel picked by BP to disburse scientific research grants in the coming years. Louisiana State University, University of Florida’s Florida Institute of Oceanography, and Mississippi State University’s Northern Gulf Institute have already accepted $10 million each.

In contrast, the federal government has failed to coordinate the massive research program needed to save the Gulf, preventing academic researchers from observing the data collected by the NRDA teams that include both government and BP contractors. “The science is already suffering,” Richard Shaw, associate dean of Louisiana State University’s School of the Coast and Environment said. “The government needs to come through with funding for the universities. They are letting go of the most important group of scientists, the ones who study the Gulf.” (HT: The Independent Weekly)

Yesterday, the Senate passed the Dodd-Frank financial regulatory reform bill on a 60-39 vote, meaning that, among many other things, a new Consumer Financial Protection Bureau will come into being. The agency fixes a critical gap in the regulatory framework, as there is no regulator specifically tasked with policing consumer products and ensuring that banks can’t rip off consumers with (usually highly profitable) predatory products.

A handful of names have been tossed around in the media as to who will be nominated to be the CFPB’s first director. The most oft-mentioned name is Elizabeth Warren, the Harvard Law professor who is currently heading the Congressional Oversight Panel for the Troubled Asset Relief program.

It was a 2007 journal article written by Warren that motivated lawmakers to propose creating the new agency in the first place. “Clearly, it is time for a new model of financial regulation, one focused primarily on consumer safety rather than corporate profitability. Financial products should be subject to the same routine safety screening that now governs the sale of every toaster, washing machine, and child’s car seat sold on the American market,” Warren wrote.

Last night, it was reported that Treasury Secretary Tim Geithner is opposed to Warren heading the agency. Assistant Treasury Secretary Michael Barr refuted that notion today, saying “I don’t know where that (report) came from.” “I believe and Secretary Geithner believes that she’s exceptionally well-qualified to run it,” he said.

Whetever Geithner’s personal feelings on the matter, Warren is eminently qualified to lead the CFPB. She explained her philosophy regarding the regulation of consumer products to me during an interview back in May 2009:

We need to think at the product level. All these lousy mortgages got sold, one family at a time. These were crummy mortgages, like selling plastic spoons that have carcinogens in them or toys that put out little children’s eyes. We sold them one product in a time. If we had had just basic safety standards in place from the beginning, then we never would have fed these into the front end of the financial system, where they then would have been bundled up and then sliced into tranches and rated and rebundled and sold and rated again.

House Financial Services Chairman Barney Frank (D-MA) backed Warren, saying “she is a brilliant advocate. She is sensible. She has a good sense how to operate. She is not some windmill-tilting ideologue.”

Barr himself has also been mentioned as a potential CFPB head, and would be an excellent choice, as he’s been intimately involved with the regulatory reform bill since the beginning. Illinois Attorney General Lisa Madigan, who was one of the first public officials to try to crack down on subprime lending, has also had her name tossed into the ring, but said that she preferred Warren. “She has long understood the need for such an agency to ensure that another financial crisis doesn’t devastate the futures of millions of hardworking Americans,” Madigan said.

BP received a new round of scrutiny yesterday when it admitted that officials had lobbied the British government in 2007 to “conclude a prisoner-transfer agreement that the Libyan government wanted to secure the release of the only person ever convicted for the 1988 Lockerbie airliner bombing over Scotland, which killed 270 people, 189 of them Americans.” BP was “worried that a stalemate on that front would undercut an oil exploration deal with Libya.”

The new details demonstrate that BP was willing to risk international security for pure profit motives. The UK ambassador to the U.S. issued yesterday stated that the British government “is clear that Megrahi’s release was a mistake,” but denied any link with BP. (The UK justice minister at the time, Jack Straw, had admitted that the BP-Libya deal was a factor in the government’s review of Al-Megrahi’s case.) The Senate Foreign Relations Committee will hold a hearing on the issue, and Sen. Charles Schumer (D-NY) said BP should freeze its operations in Libya because it “should not be allowed to profit on this deal at the expense of the victims of terrorism.”

As BP was privately lobbying the UK government, it was also publicly trying to improve the country’s image and extolling how beneficial an oil relationship between Libya and BP would be for Britain. ThinkProgress found an old BP Magazine (Issue 4 2007) that ran an entire article titled, “Libya: A Commanding Presence on the World Stage.” In the piece, a BP official essentially brushes aside the Lockerbie bombing:

“When you talk to people outside about Libya, Lockerbie is often the first thing they think of — terrorism. In actual fact, it’s probably one of the safest places I’ve been to with BP,” says BP Libya’s business support manager, Ian McGregor.

“Initially, most people ask about security. They think it’s very unsafe, or there are a lot of army and guns everywhere. To be honest, it’s the absolute opposite.” [...]

Speaking at the signing, Hayward hailed the agreement as the start of an enduring and mutually beneficial partnership, which will allow BP and Libya to deliver on their aspirations for growth.

“With its potentially large resources of gas, favourable geographic location and improving investment climate, Libya has an enormous opportunity to be a source of future energy for the world.”

BP is poised to begin deepwater drilling in Libya next month, a deal potentially worth $20 billion. Jim Mitchell of the Dallas Morning News writes, “I’m not so naive to think that BP is the only company that has put profits and business opportunity ahead of justice, but this is stunning especially since Lockerbie was such as heinous act and Abdel Basset Ali al-Megrahi the only convicted perpetrator for a crime that has provided little closure to families of victims.”

With the legislative calendar starting to dwindle, lawmakers are paying more and more attention to the scheduled expiration of the Bush tax cuts at the end of the year. Republicans across the board are advocating for the extension of all the cuts, and have explicitly said that extending the cuts for the richest 2 percent of Americans (which would cost $678 billion) does not have to be paid for.

President Obama has called for letting the cuts for the very richest expire, allowing the rates to reset to where they were under the Clinton administration. In an interview with Bloomberg News’ Judy Woodruff, former Federal Reserve Chairman Alan Greenspan went a step further, calling for all of the tax cuts to expire, essentially sending the tax code back to 2001:

WOODRUFF: On those tax cuts, they are due to expire at the end of this year. Should they be extended? What should Congress do?

GREENSPAN: I should say they should follow the law and let them lapse.

WOODRUFF: Meaning what happens?

GREENSPAN: Taxes go up. The problem is, unless we start to come to grips with this long-term outlook, we are going to have major problems. I think we misunderstand the momentum of this deficit going forward.

Greenspan’s right that addressing the long-term structural deficit is going to require raising some taxes, as getting the budget anywhere near balance entirely on the spending side would mean draconian cuts to popular programs that Americans support and rely on. But Greenspan was able to call for allowing the cuts while conveniently leaving out his role in getting them enacted in the first place.

As Matt Yglesias has pointed out, “in 2001 Alan Greenspan warned the country against the prospect of budget surpluses and debt reduction and argued that only large regressive tax cuts could save the country from this specter.” It is “far better, in my judgment, that the surpluses be lowered by tax reductions than by spending increases,” Greenspan said. Of course, the Bush tax cuts are now one of the biggest drivers of the country’s long term deficits, amounting to more than $3 trillion in deficits over the next ten years.

While Greenspan is now expressing concern that “we misunderstand the momentum” of the deficit, less than a decade ago, he was claiming that we misunderstand the momentum of the surplus. In fact, as the New York Times reported at the time, Greenspan said that “without a tax cut the surplus might be so big that it would force the government to begin buying stocks and bonds on Wall Street in as little as five years, a development he said would be harmful to the free enterprise system.”

In 2005, Greenspan said that “it turns out that we were all wrong” when it came to his 2001 support for the tax cuts (to which then Sen. Hillary Clinton shot back “just for the record, we were not all wrong, but many people were wrong”). He has also famously repented for his deregulatory zeal during the 1990′s, saying “those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.”

So, Greenspan at least seems to be coming around to the notion that the conservative economic philosophy is a big sham that doesn’t work in practice. Will the rest of the GOP ever follow?