Judging from the newspapers these last few days, liberal activists seem to have made some progress in their quest to turn to President Obama’s choice to run the Consumer Financial Protection Agency (CFPA) into a proxy for whether or not the transform-Washington, candidate-of-hope-and-change is a just talk or the real deal. Obama will pass the test, in liberal eyes, if he appoints Harvard Professor Elizabeth Warren to the head the agency. He will fail otherwise.
The marks in Warren’s favor are fairly obvious. The entire idea of the CFPA, after all, was her’s, based on years of scholarship about what she calls the “tricks and traps” of the financial industry. (To read her 2007 Democracy article describing the need here for a new regulatory body, click here.) She is indisputably at the top of her field of study. She was a key adviser to the White House during the financial reform fight. She has also shown, as chair of the TARP Congressional Oversight Panel, an ability to adapt her academic talents to the confines of government setting. Say what you will about the oversight panel, but it has certainly been productive, releasing 22 reports since December of 2008.
Warren’s detractors tend to focus on two different areas of critique. First, many in the business community see in Warren’s crusade for consumer protection the mark of ideologue who is unable to appreciate the interests of the financial sector. Second, as Neil Irwin notes, some have raised a question about whether or not she has the managerial talents to handle the task of building and controlling a new government bureaucracy. Both of these arguments against Warren look fine on paper. But I believe they actually conceal a bigger concern about Warren, one I touched on a couple months ago in a cover story for TIME: Warren does not always play by the unwritten rules of Washington.
Just what those rules are is not easy to define with exactitude. But as with any other culture, Washington’s federal bureacracy is most defined by forces that are invisible and unspoken. Whereas taking chances, thinking differently or questioning authority can be assets in places like Hollywood or Silicon Valley, here they are not. You aren’t supposed to step out of line, to create problems for your benefactors, to cause unneeded ripples in the political waters. When possible, you should soften the edges and avoid dust-ups that alert the media. You must always remember your place. In her short time in Washington, Warren has demonstrated a rather principled disregard for such pressures. She does not see herself as a creature of this place. She sees herself as a woman with a job to do.
In late April, I interviewed Warren, and I asked her about her early days as head of the COP, learning the ways of Washington. She began by explaining that Senate Majority Leader Harry Reid, who picked her for the post, had not given her any specific instructions about how to run the TARP oversight panel. “He just said, ‘I want you to do it, and do your best.’” Then things got more exciting. In her first act on the panel, Warren sent a series of questions to then Treasury Secretary Henry Paulson about TARP. Here I will get out of the way and let Warren tell the story herself, from the transcript of our interview:
On New Year’s Eve, Henry Paulson sent back a response that was, basically – that, basically, blew us off just huh, you know, that kind of – so, the January report, January 10th, 10 days later, we issued a report that took the questions we’d asked, and excised the answers from his letter and put it next to them, and then put our comments. We created a grid and just went through and said here’s what we asked, here’s what they answered, or failed to answer, and here are our comments. And made it very clear that Treasury had not answered many of the questions, and had done a cut and paste job on most of the remainder.
So, that was the real – I mean, that’s where it became, you’re not going to do that. The American people have a right to the answers. And when you spit on me, you spit on them. And I’m not putting — I’m not going to put up with it. So, there was this real push back and forth, and at the same time, you may remember, he was out there saying we’re giving out this money only to help the financial institutions, and we’re getting our money back for the accommodation of debt warrants that we’re getting is worth more than we’re getting. So, we were running a complete financial analysis on it, and that’s the one that sure enough, we were getting about 66 cents on the dollar. We, the taxpayers, or the taxpayers were getting about 66 cents on the dollar, on every dollar that Treasury was investing in these Wall Street firms. And that became (inaudible) second time. So, it was not until March that I was on the phone with someone in Washington who said, “That’s not what reports are supposed to look like.” . . . I said, “Why not? Those are the right questions, and it’s the right –” and the person said, “The language is far too direct.” . . .
And it was the first time that it crossed my mind that those reports were supposed to have – that some people who had voted in favor of having a Congressional Oversight Panel thought they were going to get dry routine reports. And this is the truth, it just never crossed my mind that that’s what anybody had in mind. I thought – so, after I talked to this person, I thought, huh, so I called a couple of more people, and said is that right? And they said, yes. They were like what – and I thought oh, this is sort of like my clueless moment. I just couldn’t – than what was the point? If all of this – some people thought that’s all it was going to be, than what really was the point?
Warren may have gotten the message, but she did not change her ways. Just ask Paulson’s successor, Treasury Secretary Tim Geithner, who has had to deal with Warren’s panel for the last year and a half and has been, according to several reports, actively working to prevent Warren from taking the helm at the CFPA. (UPDATE: A Treasury spokesman says the reports are false. Geithner is not opposing Warren for the post.) Warren’s opponents will talk about ideology and management experience. But the real thing many fear about Warren is that she will do things as she see’s fit, not as the Washington-New York power structure would prefer. She is seen, you could say, as too independent for the job of leading an ostensibly independent new regulatory body. In other words, the same qualities that could make her a great fit for the job may prevent her from getting the nod.
