Why Obama will nominate Warren

By Felix Salmon
July 23, 2010
nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau seems to be a foregone conclusion at this point. Warren and the large team of Warren enthusiasts have been pushing her nomination aggressively, to the point at which no one in the Obama administration is going to want to face the political firestorm associated with not nominating her.

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The nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau seems to be a foregone conclusion at this point. Warren and the large team of Warren enthusiasts have been pushing her nomination aggressively, to the point at which no one in the Obama administration is going to want to face the political firestorm associated with not nominating her.

This is no horserace: Warren’s running only against a vague conception of not-Warren, rather than against a flesh-and-blood Michael Barr or anybody else. Here’s Charlie Rose, for instance, questioning Tim Geithner on the subject in the very first direct question of his interview:

Charlie Rose: Will Professor Elizabeth Warren be the new director of the consumer agency?

Tim Geithner: Let me just say that she is an incredibly capable, effective advocate for reform. She was way ahead of her time, way ahead of the country in pointing out what was actually happening in the credit business. All the bad stuff that was happening, the looming housing crisis, she was pioneering and pointing out those risks. And she is a — I think probably the most effective advocate of reform we have in the country on these questions. So like I say, I think she’d do a great job in that position…

Charlie Rose: She has the qualities you’re looking for.

Tim Geithner: Oh, absolutely, without a doubt, without a doubt. But that’s the president’s decision to make.

Charlie Rose:

I understand. The other question is whether her nomination will be approved by the Senate if she’s nominated. There’s some political controversy there.

And here’s Floyd Norris, today, saying that “the bureau, more than most new agencies, is likely to be molded by its first boss”:

The new office has a director, not a board, and it is hard to imagine what runner-up position could be offered to Ms. Warren.

The president could choose someone who will not ruffle too many feathers, and in the process avoid yet another Senate floor fight.

But if he names Ms. Warren, and she wins confirmation, she and Ms. Schapiro could become a dynamic duo in reforming Wall Street.

Neither Rose nor Norris so much as mentions Barr, or the other candidate for the job, Gene Kimmelman. And that’s where they fall short, I think. Because it’s far from obvious to me that Barr, Kimmelman, or anybody else would indeed “not ruffle too many feathers” and “avoid yet another Senate floor fight”. And unless you can convince yourself that the Senate would be tougher on Candidate B than on Warren, there’s no Senate-related reason not to nominate her.

The other reasons not to nominate Warren are weak indeed. There’s talk that she doesn’t have executive experience; I doubt that argument will carry much weight with Barack Obama. Megan McArdle doesn’t like the methodology in her research papers; again, this is not a big deal. And Adam Ozimek, in a blog post entitled “The case against Elizabeth Warren”, sums it up like this:

If you’re the type of person who thinks that interest rates of 200% are crazy and shouldn’t be permitted, then you probably will like Warren as head of CFPB. However, if you’re the type of person who thinks that payday lending makes people better off, then you probably don’t want Warren as head of CFPB.

Well, yes.

Warren is known to have powerful friends in the White House, which means that there’s really only one possible obstacle to her getting nominated: Tim Geithner. Dan Froomkin, for instance, reckons that “the only way Warren will get the job is if Geithner is overruled”. But if you look at the tone of Geithner’s comments to Rose, he hardly seems dead-set against her. And no Treasury secretary, least of all Geithner, likes going against the wishes of the White House. Geithner is at heart a technocrat, rather than a fighter or an ideologue, and he’s certainly no master of the dark political arts. If he was ever trying to prevent Warren’s nomination — and I’m not convinced that he was — then he has at this point been convincingly outmaneuvered. The game’s over; her nomination is a done deal.


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Um, does anyone think payday lending makes people better off?

Posted by Curmudgeon | Report as abusive

Megan McArdle? You can’t be serious. Look, this person has trouble with basic math, so I’m not sure why you’re involving her at all in this column. You have read the junk she just wrote about the stimulus for business insider, yes?

She lies to push the “Bush tax cuts are awesome!” meme:
http://www.businessinsider.com/you-wont- believe-how-little-stimulus-well-get-if- we-diverted-the-bush-tax-cuts-into-stimu lus-spending-2010-7

Posted by ohmmade | Report as abusive

The decision to nominate Ms. Warren should be a no-brainer. The fact that it’s not says a great deal about Obama’s biggest weakness, a near total lack of leadership. Regardless of what Geithner may say in public, he and his friends in the banking industry would much rather someone else get the job. Someone they could control. I hope Ms. Warren is nominated but if history is any guide, she will not be. Obama never missses a chance to fold like a lawn chair in the face of opposition. His only guiding principles are his political fortunes. From HCR to FinReg and everything in between, getting something passed that he can sign is far more important to him than whether the legislation will do much to solve the problem at hand. He’s just not interested in policy. He leaves that to others. When the policy succeeds he can take credit and when it fails there’s someone else to blame. In this case, Obama will leave the decision up to his economic team who cater to the bankers at the expense of everyone else. They will do what is best for their banker friends which will likely mean Ms. Warren will not be the choice.

Posted by nynick | Report as abusive

“does anyone think payday lending makes people better off?”

It makes the people doing the lending better off. And I’m sure that’s all that matters to the elements of this administration that want to cap the capital gains tax at 20%, cut Social Security to head off more taxes on the wealthy, etc.

Posted by OscarLeroy | Report as abusive

nynick: if she is appointed, will you eat your words? (my guess is no)

And your “obama’s not interested in policy” nonsense is laughable. In his short time in office, here’s what he’s accomplished, to which you’ll never give him any credit for:

SCHIP expansion
Education Expansion
Ordered Secret Prisons Closed
Cut Missile Defense by $1.4b
Veterans Health Care Budget Reform and Transparency Act
START Treaty
Hate Crimes Prevention Act
Closed Offshore Tax Havens
Extended discounted COBRA
Weapons Systems Reform
Stem Cell Research
Increased Fuel Economy Standards
Fraud Enforcement and Recovery Ac
Credit Card Reform
Lilly Ledbetter Fair Pay Act
Health Care Reform
Successful Economic Stimulus
Sonia Sotomayor
Elena Kagan

Posted by ohmmade | Report as abusive

nynick – I’m thinking that Felix is invoking Ms. McArdle as an example of how pathetic and incoherent the opposition to Warren is. I doubt that he supports her views on any subject, whether it’s economics or the right kind of Himalayan Salt to put in your pantry.

Posted by commieatheist | Report as abusive

“[N]o one in the Obama administration is going to want to face the political firestorm associated with not nominating her”

Uh huh. Tell me another one, Felix. As someone pointed out elsewhere, Geithner’s “she is an incredibly capable, effective advocate for reform” is basically the form of what you say about the person you didn’t hire.

Posted by klhoughton | Report as abusive

“Successful Economic Stimulus”

Don’t make me laugh. Obama’s office said the stimulus would keep unemployment under 8%. Fail.

“Lilly Ledbetter Fair Pay Act”

Which would be nice if there weren’t 5 job seekers for every job opening in America.

“Cut Missile Defense by $1.4b
Weapons Systems Reform”

But still increased the Defense budget, because only by spending more than everyone else in the world combined can stop the 100 al-Qaeda in Afghanistan.

“Ordered Secret Prisons Closed”

Don’t make me laugh.

“Education Expansion”

Yeah, race to the top is working so well.

Posted by OscarLeroy | Report as abusive

Um, does anyone think payday lending makes people better off?

Compared to the neighborhood knee-breaker loan shark, who charges 20% a _week_, the payday lender is a bargain. Elizabeth Warren is not a friend of the lower middle class.

Posted by janon | Report as abusive

The payday lenders ARE the modern day loan shark. you are kidding right?

http://www.consumersunion.org/finance/pa ydayfact.htm

Posted by hsvkitty | Report as abusive

I like the idea of an antagonistic relationship between the banking industry and the consumer protection board. If ever there was a place where tension is needed to maintain balance it is the relationship between people who want a safe place to save and borrow vs. a bunch of vampires trying to get another drop of blood for as little effort as possible.

Payday loans are only needed because banks are all too big to wring enough out of the lower-income folks to make it worth their time, so payday lenders instead of neighborhood banks appeared.

Posted by jstaf | Report as abusive