The Warren Retort

Months of agonizing, days of rumors, and plenty of consternation come to an end today with the appointment of Elizabeth Warren, a Harvard law professor and government watchdog, to a new joint position at the Treasury and the White House. She will be tasked with jump-starting the Consumer Financial Protection Bureau (CFPB), a newly created financial regulator that is in many ways her brainchild.

While this is not the appointment -- or a confirmation battle with "plenty of blood and teeth left on the floor," as Warren memorably described a potential congressional fight over the CFPB itself -- that Warren's progressive supporters demanded, the compromise puts Warren in a strong position to influence the agency. It may also be a rare sign that the administration's long-term strategy can mesh with the short-term goals of progressives -- one that might pay unexpected dividends to the president's beleaguered base.

Progressives have hailed Warren as a dogged consumer advocate, unafraid to speak truth to power, but on the right and among business interests, she is considered, somewhat absurdly, a threat to the free market. For centrists and the Obama administration, the decision of whether to appoint her to lead the new agency became not just a question of policy -- how to launch an agency that President Barack Obama made the center of his commitment to financial reform -- but also one freighted with symbolic implications: Does the administration stand with the populist left or with the banks?

News broke late Wednesday that Warren would be appointed to a staff position advising Treasury Secretary Tim Geithner, who is charged with administering the new agency until a permanent head is appointed, and acting as an assistant to the president, a role that, at least on its face, gives her rare "walk in" rights to the president, shared with heavy hitters like Chief of Staff Rahm Emanuel and National Security Adviser Jim Jones.

"We have the most prominent consumer advocate working on this bureau," a senior administration official tells the Prospect. "She'll be working every day to get this agency up and running and give people confidence that it will protect consumers."

Before 2008, when she was appointed to head the congressional oversight panel that watched over spending on the Troubled Asset Relief Program (TARP), Warren was known as a bankruptcy expert at Harvard Law school -- one of Barack Obama's professors, in fact. A longtime advocate for "family economic security," she advocated consumer-friendly policies in books like The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke. In 2007, she wrote an influential article for the journal Democracy calling for a "Financial Product Safety Commission," an intellectual precursor to today's CFPB.

During the long congressional battle over financial reform, Warren became an influential outside advocate for including a consumer-protection agency in what would become the Dodd-Frank bill. Perhaps the most groundbreaking part of the financial overhaul, the CFPB is designed to protect consumers from predatory loans -- including the subprime loans that drove the last crisis -- and make consumer credit easier to understand and access. When the bill was signed, Warren was immediately at the top of the short list of potential directors.

Warren met numerous times with President Obama as well as with senior White House and Treasury officials to discuss the position. While progressive groups and media outlets made her appointment a litmus test of the administration's commitment to reform, Republicans and business interests planned to oppose her nomination at all costs. Some Democrats, including Senate Banking Committee Chair Chris Dodd, fretted unnecessarily about her qualifications and worried more realistically about the backlash that might come with a recess appointment.

Warren, despite her frequent protestations to the contrary, is a savvy political player. In conversations with supporters, she was reluctant to force a confirmation fight. Warren worried that even if a fractious nomination could be a political winner for progressives, the battle might damage the fledgling agency's reputation while leaving it without leadership for the six or eight months it could take to force a vote on the nomination. The agency would be rudderless, and perhaps worse, Warren, the most prominent advocate for consumers and a media regular, would be effectively silenced.

While accounts of how the decision was made differ, both the White House and Warren concluded earlier this week that a nomination battle would work against getting the agency up and running quickly and with a good foundation for the long term. After some negotiation over the shape of her role, with Warren initially asking for a longer-term appointment, her new role at Treasury and the White House was determined. While initial reactions to the decision in the Senate, which by rights has a procedural say about the agency's permanent leader, were negative, administration and congressional sources expect concerns to blow over.

The statute for the CFPB places control over the agency in the hands of the secretary of the Treasury, who can delegate power to administer it until a director is appointed. Warren, who will be working from the CFPB's new offices, is expected to do much of that administration and lead a broad public-relations campaign promoting the agency. Rumors of ill will between Geithner and Warren have surfaced thanks to Warren's tough oversight of Treasury's management of TARP, but sources familiar with both of their thinking have played down "overblown" tensions.

However, the long-term outcome of this position is not clear. Congressional sources expect Warren to remain in place for six to eight months, until a Senate-confirmed director takes over the agency at a transition date that Geithner will announce soon. While it is possible that Warren, who will play a role in picking the CFPB's permanent director, could be nominated herself, it is considered highly unlikely by sources in Congress, the administration, and the consumer community. Some of the CFPB's new enforcement powers will not come into play until a director is appointed, and this decision, in effect, kicks that nomination fight down the road and into what will likely be a much tougher political environment.

"There's a lot somebody in Elizabeth Warren's position can do to get the agency ready to roll and off on the right foot," says Travis Plunkett, legislative director at the Consumer Federation of America. "This is not, however, a director position. For that, somebody needs to be confirmed, and we need to be aware of that."

The silver lining, however, is that Warren's new job makes her the most influential progressive policy adviser in the president's inner circle. While Clinton administration veterans like Geithner, National Economic Council Director Larry Summers, and Budget Director Jack Lew have consistently pushed for liberal economic policies, progressives will consider Warren's full-throated populism a welcome change in the White House -- and perhaps a political boon to the Democrats, who face serious problems in the midterm elections thanks to the disappointment of their activist base.

"There should never be a doubt about the point of any government action: It should always be to help families directly or help markets in ways that help families," Warren told me last December. While obstruction in the Senate has prevented her from formalizing her leadership of the CFPB, it's clear that she and President Obama both believe this is the most effective way to help. And even if she is scheduled to leave as early as next spring, Obama may get used to her advice and ask her to stick around a bit longer. Few observers expected much from Warren's tenure on the congressional oversight panel -- just another blue-ribbon panel -- or that the CFPB would become a reality -- the banks always win. Don't count her out here, either.

You need to be logged in to comment.
(If there's one thing we know about comment trolls, it's that they're lazy)

Connect
, after login or registration your account will be connected.
Advertisement