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.
Whether or not Warren becomes a major strategic initiative of the administration, she has much to do. In her role as a presidential assistant, she has been discussing with the White House how to tackle the ongoing foreclosure crisis. She won't reveal the advice she shares with the president and his aides, but she notes that this foreclosure debacle is a "full-fledged scandal" that warrants a national state-by-state investigation and tougher enforcement of existing regulations. The way she talks about the president suggests they can develop a solid working relationship. They do not know each other personally. But Warren fondly recalls the first time she met Obama. There was a gathering at the home of one of Warren's Harvard law colleagues for a young Illinois state senator considering a campaign for the US Senate. Warren entered the house and saw a tall fellow with an athletic build, who quickly took her hand. The first words out of his mouth were "predatory lending," and he proceeded to tell her that he realized that the states were limited in dealing with the most outrageous lending practices and that one reason he wanted to become a senator was to halt such financial scamming. When he finished, Obama smiled and said, "What do you think?" She replied, "You had me at 'predatory lending.'"
In recent weeks, besides advising the president on yet another financial mess Warren has been poring over resumes, looking for talent to staff the CFPB; hundreds of people (including the chief) have to be hired in the next few months. She's been in meetings all over Washington—she maintains a prestigious office in the Treasury building for her most important one-on-ones—with the heads of the seven federal agencies transferring authority to the CFPB, with senior Democrats and Republicans on the Hill, with consumer advocates, and with the bankers. She's continued her never-ending media blitz, appearing on various cable shows and The View. She's been talking to state officials about how to respond to the mortgage-servicing scandal, and trying to figure out how the bureau can immediately pursue its campaign to simplify mortgage and credit card agreements—even before the agency is fully formed.
Before Obama selected Warren to be the CFPB's midwife, the plan at Treasury, according to one administration official, "was to build another bureaucracy, replicating itself, go dark for a year, and then unveil something small regarding a policy that it was sure it could win." Warren, obviously, has another approach in mind. And despite previous reports of tensions between Warren and both Geithner and Summers, a friend of hers says, "So far, it's been pretty drama free."
After her chat with the credit card CEO, Warren muses about the job ahead. No new consumer agency has been started up since the 1970s. The Wall Street reform bill does dictate much of the new agency's shape. (For instance, there must be divisions to deal with military families and senior citizens.) But there's no roadmap; the CFPB doesn't come with complete how-to-assemble instructions. "We're creating the first 21st century agency," Warren says. She doesn't want to form a new government entity that will "disappear into the faceless government void with regulations that don't make sense. Our political enemies have already said that. They assume that the agency will sit on the mountain top and roll down expensive, complicated regulations that won't help anyone." Instead, she's looking to build an agency that engages its consumers and finds a way to get its job down without generating unnecessary red tape and rules based on bureaucratic goobledy-gook.
Later, aides hustle Warren to a staff party in a conference room. Practically every employee of the bureau is present: 45 people. One staffer asks the gathered what they should dub this room and lists possible options: the Dodd-Frank Room (in honor of the two legislators who shepherded the legislation establishing the bureau), the Full Disclosure Room, the Accountability Room, or the Boomer Sooner Room. The last is a reference to the fight song of the University of Oklahoma. Warren, who grew up in Oklahoma, laughs and says, "It will quickly be abbreviated to the BS Room."
Warren then gets serious. She tell the staffers in the room, some who have been pulled into the bureau from Treasury, the Fed, and other government agencies, that the CFPB they are creating started from an idea—she doesn't have to point out that this idea was hers—and that this simple notion became an administration white paper that was turned into a statute. "In their whole lives," she says, "for people dedicated to public service, this is a journey they don't get to make." She vows they will together build the CFPB in "a different way."
Moments later, Warren is back in her barren office—one book shelf does hold three volumes: Rick Warren's The Purpose Driven Life, Andrew Ross Sorkin's Too Big To Fail, and a biography of Nelson Mandela—and she's talking again about what she doesn't want to do.
"The whole point here is to understand that the way government relates to people and people relate to government can be different in a wired world. The old model of doing agencies was that experts who were pretty much nameless and faceless and way, way distant collected information went though the rule-making process…[and] mostly handed things down from the agency. It's a model that works in a lot of contexts. But not here and not now." Her goal, she insists, is to create an agency that provides a model for transparency and citizen engagement.
Warren notes that political opposition to the agency remains. (During the legislative fight over the Wall Street reform legislation, business lobbyists tried to smother or emasculate the CFPB.) "There are those who would like to kill this agency," she says, adding, "if we make the ownership of this agency as clear as we can" and the "American people are invested in this agency" and "see it acting on their behalf," the bureau "will be able to withstand a lot of political and economic opposition."
Does she want to run it herself? After all, if the agency is supposed to be operating independently by next summer, it will need a chief soon. "It's just not today's question," she replies, saying she is working over 14 hours a day—"using every brain cell I've got, every erg of energy I've got"—to "stand this agency up." But, she adds, the head of the agency will have to ensure that "what happens to American families becomes woven into the agency" and that person must be willing to go on the offensive "to defend his agency against those who would want it to be less independent." That sounds a bit like Elizabeth Warren.
For now, when Warren discusses the CPFB's opening moves—such as pushing financial companies to simplify their agreements—she does talk in personal terms. She notes she is prepared "to be collaborative" in working with industry. She also says, "I'm prepared to be confrontational, if that's what's needed." No doubt, Warren—as a White House official and/or the first CFPB head—is also prepared to lend her populist, families-first, tough-on-the-Street cred to help Obama define the back half of his initial (and perhaps only) term. But is the president going to help her to help him?