It's Elizabeth Warren's first day in the new offices. The walls are bare. The chairs still have manuals attached to them. The pungent odor of new carpeting permeates the entire fifth floor of the downtown Washington office building that houses the under-construction Consumer Financial Protection Bureau (CFPB) that Warren is putting together in her dual position as an adviser to Treasury Secretary Tim Geithner and an assistant to President Barack Obama. The new agency's 54 staffers are still learning how to navigate the maze of cookie-cutter cubicles.
Warren, the straight-talking and populist-minded 61-year-old Harvard law professor who until recently headed the Congressional Oversight Panel monitoring the TARP bailout, is on a conference call with the CEO of a major financial institution. In her first weeks on the job, she has been checking in with the titans of finance—the too-big-to-fail guys—to discuss the initial initiatives of the CFPB. First, the two chat about the firm's call centers. Warren asks why some are based in the United States, not overseas. The CEO explains that his company considers these offices "revenue centers"—because the workers fielding questions or complaints also peddle new services and products to the customers on the line. Basing these facilities in the United States, the CEO notes, gives his company better control. Warren says that the CFPB will eventually have its own call center, and the CEO offers to share tips.
Warren then points out that a lot of Americans "struggle with" credit cards and asks, "What should I know?" The CEO appears to bristle, insisting that almost all of his clients are current. That is, they pay their bills on time. Ticking off all the positive features of credit cards, he maintains that policymakers in Washington only hear the gripes of a limited number of consumers and insists his firm does not receive many complaints. Warren politely raises the issue of credit card agreements loaded with fine print. One of her first policy priorities for the CFPB is to push for "greater simplicity" in credit card contracts. She asks the CEO if he expects his clients to read through the dozens of pages of legalese. As the CEO starts to respond, one of his company's lawyers, who is also on the line, interrupts to say, Of course, we do. The CEO then adds, "I expect them to understand what they've gotten into." But he's being diplomatic. He goes on to say that he would indeed like to work with Warren and the CFPB on how best to simplify these agreements. "You've gotten my attention," he says, asking if he should "wait for your recommendations."
"We're not going to move forward without you," Warren tells him. She adds, "There will be a little delay in following up; the tags are still on all the chairs."
The call ends; a Warren aide happily notes that the CEO had acknowledged a critical point: that credit card agreements should afford consumers "substantive understanding." That's a standard "amenable to testing," he says, with a smile. Warren observes that the CFPB doesn't yet have a credit card team set up.
The bureau, established by the Wall Street reform bill passed this past summer, doesn't have much organized yet, and it won't inherit all its statutory authorities until July, when it will move out of the Treasury Department—its current incubator—and become an independent unit within the Federal Reserve. The organization also has no head. Obama tapped Warren—who first proposed creating such an agency in a 2007 article—to be the CFPB's godmother. She could become its first director—an appointment that would probably trigger a nomination battle in the Senate, given that the financial industry is not keen on seeing her as the new cop on its beat. But her long-term future at CFPB remains a big question. Other more immediate questions hover over the infant agency. What can the CFPB do right out of the box—before it's fully assembled—to start regulating Big Finance? And does Warren represent the past or future of an Obama administration facing a dramatic setback with the pending congressional elections?
As the Obama administration heads into its second half—and braces for what will be a tougher slog in Washington—Warren stands as something of a test for the president. She symbolizes an economic approach different from what the White House has embraced: a middle-class populism that targets the big banks and financial firms for preying on consumers and that seeks to hold these companies accountable for the greed and excesses that precipitated the economic catastrophe that hit the nation. Certainly, the president at times—especially recently on the campaign trail—has pumped up the populist volume. But the main economic pitchmen for the first two years of his presidency have been Larry Summers and Timothy Geithner, who don't exude an "I'm on your side" sentiment.
That's what Warren does so well. She talks economics in real-people terms and comes across as caring more about families than abstract markets, though she clearly understands the connection between the two. As Obama considers his post-election policy and political strategies, he will have to ponder whether to continue to center his economic policies in the conventional world of Summers and Geithner (even though Summers is departing the White House). There is another option: Take true and obvious steps toward a more populist stance and make full use of Warren and her ability to deliver a "we get it" message.
With Republicans on the march in Congress, there will inevitably be calls from pundits and politicos for the White House to retreat from its Wall Street reform agenda. It's not hard to envision business execs and lobbyists arguing that the Elizabeth Warren moment has passed. But by absorbing Warrenism and placing its leading advocate front and center—signaling he's willing to confront the financial pirates and their Capitol Hill allies—Obama might be able to marshal ammo to use in the rough political warfare ahead.