The Warren Drama: Another Missed Opportunity?

For the past several days, people who care about whether financial reform is to be real or sham have been following the drama of whether President Obama will name Elizabeth Warren to head the new Consumer Financial Protection Bureau. The Bureau is the best thing about the financial reform bill that Obama will sign later this week, and its prime architect was Warren, a folksy Harvard law professor who has become a well known and admired public figure championing reform.

It's no secret that Treasury Secretary Tim Geithner doesn't want Warren. As Chair of the Congressional Oversight Panel monitoring the Treasury's conduct of the bank bailout under TARP, Warren turned what might have been an obscure and toothless agency into a feisty forum for challenging the Treasury's coddling of the big banks. She did not pull her punches in asking tough questions of the treasury secretary and demanding sometimes embarrassing documents.

Over the past several days, the Treasury has leaked other names being considered for the job, giving the deliberate impression that Warren is just one candidate among many. White House political adviser David Axelrod, given the chance to clearly deny that Geithner was trying to block Warren's appointment, described her as well qualified but his statement was widely taken as faint praise.

All of this infighting and leaking must be amusing to President Obama, the man who ultimately will make the appointment. It was Obama who personally decided that he wanted a strong consumer protection agency in the financial reform bill, partly to offset the perception that the administration was too cozy with Wall Street.

The provision survived lukewarm support by many in the administration because it was one of the few provisions in which Obama took a direct personal interest. Obama, not Tim Geithner, will choose the first head of the new agency. Strong presidents, like Franklin Roosevelt, tolerate advisers with differing viewpoints.

A reform package that should have been a clear winner politically has turned out to be a political draw because too many voters believe that the Administration has favored Wall Street over Main Street. The best possible antidote to that perception would be the appointment of Warren. She is the rare public official involved with financial regulation seen as a passionate fighter for regular people. The Administration desperately needs a dose of that.

There is a whispering campaign that Warren would be given a rough time in a confirmation hearing. But a contentious confirmation process would be a pure gift to the
White House and the Democrats.

Much of the financial reform package is fairly obscure and technical. Mention the words credit default swap, and it just reinforces the impression that the government is in bed with Wall Street. But consumer protection is the easiest part to grasp. Do we want banks to gouge consumers on overdraft charges, mislead them on the cost of credit cards, and devise deceptive mortgage products? Most Americans would say no.

This is the fight Warren has been waging. If Republican senators want to hold hearings defending the poor misunderstood bankers, and giving the compelling Warren a hard time for protecting consumers, bring it on. It would make terrific television and nothing would be more clarifying about which party is the bigger stooge for Wall Street. This administration needs a few star players who stand up for regular people.

Obama needs to make his decision soon, because the longer this question hangs fire the more annoyed the Democratic Party base becomes with the White House and the more the Treasury invites pressure from the bankers to give the job to anybody but Warren.

This is actually a story not just about Warren, but about three public officials. This is going to sound very down-in-the-weeds, but stay with me because here's where the politics get really interesting. The other two are named Michael Barr and Richard Neiman.

Barr, the assistant treasury secretary for financial institutions, is said to be the Treasury's preferred alternative to Warren. The banks are lobbying hard to get Barr the job.

In fact, Barr worked hard inside the administration to get a strong consumer protection agency, and he and Warren enjoy a good relationship. A University of Michigan Law Professor on leave to work at Treasury, Barr is friendly to some forms of regulation. However, on other key regulatory issues, such as too-big-to-fail, and a strong version of the Volcker rule separating commercial banking from financial gambling, Barr has been very much Geithner's man.

During the final weeks of the legislative fight for financial reform, Barr infuriated progressives in Congress by pressing for weaker rather than stronger forms of regulation. But as someone with credibility on consumer protection and loyalty to Geithner, Barr is seen by the banking industry as the perfect anti-Warren.

There is a third person in this tale, Richard Neiman, who is up for another key regulatory job, the chief regulator of national banks. (That post is known, misleadingly, as the Controller of the Currency.) Neiman's current day job is New York State Banking Superintendent, and he also serves with Warren as one of three Democrats on the Congressional Oversight Panel that Warren Chairs.

Throughout his career, Neiman has been known as a Wall Street Democrat. He spent ten years at Citigroup, and another twelve with the TD Waterhouse group, another large bank holding company. As New York Banking Superintendent, Neiman was seen as so banker-friendly that Goldman Sachs opted to become a New York state-regulated bank under Neiman's supervision.

On the Congressional Oversight Panel, Neiman has often sided with Republicans and bankers against the Panel's two progressive Democrats, Warren and Damon Silvers of the AFL-CIO. He frequently issued separate statements taking issue with the Democratic majority, and even wrote a dissenting report co-authored with Republican panel member John Sununu.

If President Obama names Barr to head the new consumer agency and Neiman to regulate national banks, it will be a signal that Wall Street is still in the saddle, an affront to Warren, as well as a huge missed opportunity.

However, there is an elegant trifecta solution. Give Barr the more technical job of regulating national banks -- he is well qualified and a lot less beholden to Wall Street than Neiman. And then make Warren the head of the new consumer bureau.

It's not just that Warren has earned the job and that the appointment would cheer a progressive base that needs to be energized for November. Daring the Republicans and the financial industry to go after this dedicated and charismatic fighter for regular people would also be terrific politics.

Robert Kuttner's recent book is A Presidency In Peril.
He is co-editor of The American Prospect and a Senior Fellow at Demos.