Staffing Up FinReg Right

Shahien Nasiripour has a plausible-but-thinly-sources HuffPo story about Timothy Geithner trying to block any talk of nominating Elizabeth Warren to head the new Consumer Financial Protection Bureau. I wouldn’t put a ton of stock in a story based on “a source with knowledge of Geithner’s views” but the two of them have clashed in the past so this could be the case. For example, speaking on the record earlier today Assistant Treasury Secretary for Financial Institutions Michael Barr said Narisipour’s report was wrong, and that he and Geithner both regard her as “exceptionally well-qualified.”

I’m firmly of the view that nobody is indispensable ever, and Warren is no exception to that, but there’s a good prima facie case for her. That’s because good agencies not only need good people at the top, they need good people in the middle and the bottom too. Once an agency’s been up and running for a while, this is largely a question of lock-in. 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. Launching the agency with someone like Warren — a reasonably well-known high-status individual whose status among people interested in consumer financial protection is very high — will draw other committed people into the new bureau.

This isn’t the only relevant consideration, and she’s not the only person who could do a good job, but if he ends up going in a different direction — someone like Barr himself, perhaps, a former CAPer who’d also be very good — then it’s important for Obama to take action to elevate the profile of the new bureau and make sure its culture starts off in the right place.



I suppose it’s worth saying that Barr didn’t say the story was wrong, per se, he said she was qualified twice, also called her “terrific,” a bunch of other complimentary things, etc., etc.