On Monday, a top congressional Democrat became the latest person to cast doubt on the potential nomination of Elizabeth Warren, the bailout watchdog and ardent consumer advocate, to lead the new Consumer Financial Protection Bureau. The CFPB is a centerpiece of the Dodd-Frank financial reform bill that passed the Senate last week and is due to be signed into law as early as this week.
Appearing on The Diane Rehm Show on NPR, Sen. Chris Dodd (D-Conn.), one of Congress' architects of financial reform, was somewhat skeptical on whether Warren—who's also a Harvard law professor—would win the approval of enough US senators to allow her to take over the bureau. "The question is, 'Is she confirmable?' There's a serious question about it," Dodd said. Dodd's comments aren't the first doubts that have been raised about Warren's viability as a nominee. Last Friday, the Huffington Post reported that Treasury Secretary Tim Geithner opposed Warren as CFPB chief. While the Treasury department quickly issued a statement that "Secretary Geithner believes that Elizabeth Warren is exceptionally well qualified to lead the new bureau," the signs are clear that a fresh controversy—is Washington ever without one?—is brewing.
As MoJo's DC Bureau chief David Corn wrote today, appointing Warren does have clear political risks. But it could also provide a much-needed boost to the Obama administration:
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.
[Update: The Treasury Department sends a response to the Huffington Post article, which is included below.]
Citing a single "source with knowledge of Geithner's views," the Huffington Post led its homepage this morning with a story that says Treasury Secretary Tim Geithner doesn't want Elizabeth Warren, a top bailout watchdog, Harvard law professor, and tough consumer advocate, to lead the new Consumer Financial Protection Bureau. The independent Bureau, to be housed in the Federal Reserve, is the centerpiece of the Dodd-Frank financial reform bill, passed Thursday afternoon, and its leader will be a presidential appointee confirmed by the Senate.
Up in arms with the non-revelation of Geithner's opposition, the Progressive Change Campaign Committee (PCCC) blasted out an email this morning asking supporters to sign a petition urging President Obama to appoint Warren. The PCCC also said it was "launching ads today targeting Geithner" for opposing Warren.
OK, everyone take a deep breath. The news that Tim Geithner, joining several other Obama economic advisers, isn't keen on Elizabeth Warren and might not want her as CFPB head (even though the Bureau was her idea) is hardly breaking news, no matter how big HuffPo's headline is. Indeed, anyone who's followed the work of Warren's Congressional Oversight Panel could tell you that. After all, Warren's public grillings of Geithner have taken on an almost ritual quality—not a month goes by, it seems, without the blunt, Oklahoma-raised Warren bashing Geithner for AIG's backdoor bailouts or the Treasury's botched homeowner relief programs or the failure of megabanks to resume lending again, despite trillions in government assistance. Little wonder Geithner might not like Warren.
Moreover, comparing Treasury's economic policies with Warren's ideas, you can easily see where the conflict arises. If there's one quality that characterizes Treasury's economic relief programs—especially its homeowner programs—it's that they don't rock the boat much, don't rattle the status quo. (Had they done that, they would've required, say, principal reductions in the HAMP program or actually cracked down on mortgage servicers whose HAMP performance has been miserable—something Treasury has yet to do.) Warren, however, has done just that and she'd no doubt shake things up as CFPB head, which surely could make people in power a bit uneasy. In past testimonies and commentary, Warren was an advocate of "plain vanilla" financial products—making credit card contracts two pages long and simple to read, selling mortgages without hidden interest rate clauses and explosive terms. In financial circles, those are radical ideas—so radical, in fact, that Congress killed the plain-vanilla provision in its financial reform bill.
The differences between the Geithner and Warren are clear. It doesn't take a single anonymous source who supposedly knows what Geithner's thinking to know that.
The Treasury Department sends Mother Jones this response to the Huffington Post article:
"Elizabeth Warren has been a driving force behind the creation of the consumer financial protection bureau, and we have worked very closely with her over the past year and a half to make that idea a reality.
"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."
On Thursday afternoon, the Senate passed the sprawling Dodd-Frank financial reform bill, the culmination of more than year of hearings, debates, negotiations, backroom deals, bickering, and an onslaught of lobbying by everyone from consumer advocates to the world's biggest banks. But despite the bill's 2,300-page length, Dodd-Frank leaves huge questions unanswered in the future of financial markets in the US. Here are five of the biggest unknowns in the bill, which now heads to President Obama's desk for signing next week.
1) Who Will Lead The CFPB?
The Dodd-Frank bill will create a new Consumer Financial Protection Bureau, housed in the Federal Reserve, solely devoted to combating consumer abuses in the marketplace. Think predatory mortgage lending, payday lenders, check cashers, and so on. (But not auto dealers.) The independent bureau will have a budget of around $450 million to $500 million, and more importantly, will be led by a presidential-appointee confirmed by the Senate. The first leader of the CFPB is crucial: It's could mean the difference between a tough, successful agency and a dud.
The creation of the Securities and Exchange Commission, in the 1930s, offers a telling example. President Franklin D. Roosevelt chose Joseph Kennedy as the SEC's first chairman, and while the two men weren't exactly friends, FDR couldn't have made a better choice. Kennedy quickly established the SEC as a regulatory force to be reckoned with, and set up the SEC for decades of success. (At least until that Madoff guy came along...)
[Update:Mother Jones reached out to Julie Domenick, the lobbyist mentioned in the New York Times' story today, who says the circumstances surrounding the event for Rep. Joe Crowley were much different from how the Times reported them. Her response is below.]
Eight members of Congress, Democrats and Republicans both, are under investigation for—get this—taking special interest money at the same time they write and pass major legislation. Which is to say, business as usual. The investigation, which the New York Timesreports on today, is something of a head-scratcher.
On the one hand, there's no denying the huge conflict of interest when lawmakers take money from, say, auto dealers while writing a bill that may or may not impose new oversight on those same dealers. (As you might've heard, the dealers got what they wanted.) But, sad to say, that's how Washington operates. The only way House or Senate members can really get in trouble is if there's a clear quid pro quo. But here's the catch: proving that campaign funds (or some type of perk) directly resulted in some (in)action by a lawmaker is very hard to prove.
Nonetheless, the Office of Congressional Ethics is investigating Democratic and Republican congressmen for receiving big-time financial sector money and attending industry-tied fund-raisers within 10 days of the House's December 11, 2009, passage of its version of financial reform. According to the Times' story, the eight members under investigation collectively hauled in $140,000, and seven of them held fundraisers during that period, too:
For example, on Dec. 10, one of the lawmakers under investigation, Representative Joseph Crowley, a New York Democrat who sits on the Ways and Means Committee, left the Capitol during the House debate to attend a fund-raising event for him hosted by a lobbyist at her nearby Capitol Hill town house that featured financial firms, along with other donors. After collecting thousands of dollars in checks, Mr. Crowley returned to the floor of the House just in time to vote against a series of amendments that would have imposed tougher restrictions on Wall Street.
That same day, Representative Tom Price, a Georgia Republican on the Financial Services Committee, scheduled what he called a “Financial Services Luncheon” at the Capitol Hill Club, as part of a fund-raising push that netted him nearly $23,000 in contributions from the industry in a two-month period around the vote.
In an area where the rules are murky, the investigators are taking an aggressive stance on what constitutes unethical conduct. The independent ethics office, led by a former federal prosecutor, has clashed repeatedly with lawmakers on the House Committee on Standards of Official Conduct, who have accused it of over-reaching. Given this history, observers believe it is unlikely that the committee will admonish any members, even if the investigators recommend action.
From all the press reports I've read, I'd have to agree. It's deeply troubling to see members of Congress ducking out of floor debates to attend fundraisers with lobbyists representing the very industry they're talking about regulating—but is there clear quid pro quo there? Is there hard proof that Crowley's fundraiser on December 10 resulted in his votes against new amendments that would've cracked down on Wall Street? Not on the face of it. (In a statement, a Crowley spokesman told the Times, "Congressman Crowley has always complied with the letter and spirit of all rules regarding fund-raising and standards of conduct.")
The Times article also mentions that ethics investigators have requested "all files, correspondence, e-mails, receipts, notes, and any other documents" on the fundraiser for Rep. Crowley from the lobbyist who hosted the event, Julie Domenick. If there's a smoking gun to be found, that's likely where investigators will find it. And maybe investigators do have an ace up their sleeve here, a damning email or letter that links money to votes that clinches the investigation.*
If they don't, though, it's hard to see how this probe will result in anything other than some embarrassing press clippings for the eight lawmakers under investigation.
*Mother Jones spoke with Domenick today, who said the Times' depiction of the event for Crowley was inaccurate and unfair. According to Domenick, whose clarifications were also reported today by the Center for Public Integrity, the Crowley fundraiser was scheduled for December 10 more than a month beforehand, in a set of emails in early November. As such, Domenick says, it was impossible for the event to be connected to the House's financial reform vote because no one knew a month in advance when the vote would occur, and she told CPI the event "had nothing to do with what was going on the House floor."
On Wednesday the US Chamber of Commerce hosts its much-anticipated jobs summit here in Washington, dubbed "Let's Talk Jobs," and to keep things feisty, the Chamber's president previewed the event by ripping the Obama administration for stifling job creation and generally being anti-business. In an open letter to the White House set for release today, Chamber president and CEO Tom Donohue says the administration has "created an economic environment that is fundamentally incompatible with our desire to expand investment and create jobs." The letter, excerpted by Politico, goes on to say, "Uncertainty is the enemy of growth, investment, and job creation. Through their legislative and regulatory proposals—some passed, some pending, and others simply talked about—Congress and the administration have created an economic environment that is fundamentally incompatible with our desire to expand investment and create jobs."
At the same time, Stan Anderson, who leads the Chamber's Campaign for Free Enterprise, told the Wall Street Journal that "We are not going to engage in a debate over whether the White House is pro- or anti-business. We really want to talk about policy." From the looks of it, however, there's no debate needed—huge swaths of the business community, fairly or not, already believe the White House is anti-business.
The administration, predictably, responded today by releasing a report laying out the number of jobs saved or created through the White House's efforts to jump-start the economy, like the hundreds of billions of dollars in stimulus funds. By the end of June, the report says, the stimulus had boosted employment by 2.5 million to 3.6 million jobs and raised the nation's GDP by about 3 percent. Christina Romer, one of the president's top economic advisers, will also hold a conference call at noon hammering away at the White House's job creation efforts and pushing back against the Chamber and Donohue.
The Chamber's event today certainly won't sing the praises of the stimulus. Its roster of speakers includes fiscal conservatives like Sen. Judd Gregg (R-RI), Rep. Paul Ryan (R-Wisc.), and Erskine Bowles, who co-chairs Obama's National Commission on Fiscal Responsibility and Reform. The solutions tossed out will probably be revolve in some way around tax cuts—in other words, liberal economist Paul Krugman's worst nightmare. But at a time when there's a 9.5 percent unemployment rate, there are nearly six jobless workers for every one available job, and nearly half of all unemployed have been out of work for six months or more, any discussion of how to get the American job machine chugging again is worth having.