With Steven Gray
For the supposed bane of Wall Street, an ex-professor whose critics like to cast as an overzealous regulator champing at the bit of Big Government, Elizabeth Warren is actually quite fluent in the language of Big Business. “Rules should be focused, and those that are not useful should be revised or eliminated,” she told the U.S Chamber of Commerce’s Capital Markets Summit on Wednesday, pledging that the newfangled Consumer Financial Protection Bureau she’s setting up for the Obama administration would heed the corporate lobbying group’s call to “prevent duplicative and inconsistent regulation of Main Street business.”
That friendly appeal to big biz chiefs isn’t really new — it’s exactly what Warren has been doing for months as she tours the country, meeting with bankers to try to convince them the CFPB is a worthy pursuit. She’s also made several high-profile hires of ex-Wall Streeters, including former Deutsche Bank managing director Raj Date, now the bureau’s associate director for research, markets and regulations, and community bank liaison Elizabeth Vale, formerly of Morgan Stanley. But Warren’s insistence that all she wants is “a regulator with limited powers and the independence necessary to execute its authorities effectively” was a tough pill for the Chamber crowd to swallow.
Though it’s not up and running yet, many in the banking sector would like to see the CFPB’s power pared back. Republicans have proposed legislation to make the new agency’s budget subject to Congress’s appropriations and oversight, rather than the independent position it was designed to have under the umbrella of the Federal Reserve. But that legislation is unlikely to go anywhere. And the industry has kept most of its jockeying and complaints out of the spotlight. Wednesday was an exception.
Jamie Dimon, CEO of JP Morgan Chase and a long-time foe of the CFPB, was on hand at the Chamber confab to offer an opposing view to Warren’s. He called the talk of increased transparency in the financial system “bugaboo,” accused regulators of “using fear to justify [their] position,” said new capital rules could be the “nail in our coffin of big American banks” and railed against the regulation of swipe fees. “We had a system of too many regulators, too much overlap and too many gaps,” he said. “Instead of simplifying and strengthening, we added more. It’s even more complicated now.”
But there were few, if any, jabs directed at the CFPB specifically. There might be a good reason for that. It’s rare for Warren and Dimon to appear in the same forum. TIME’s Steve Gandel once wrote of the former:
This is also the woman who makes Dimon, the head of the largest bank in America, shake with fear at night. How do I know this? Because I called and asked. I tried to set up a debate on the topic between Warren and Dimon. My pitch was, If you feel strongly about the topic, defend it in the pages of TIME magazine, and your side of the argument will be better for it. My proposal was that Dimon and Warren go on a foreclosure bus tour together. Take a look at the damage that has been done by option ARM loans and 2/28 hybrids, and then make the case as to why the proposed consumer financial protection agency would or would not have stopped the problems that led to the financial crisis.
Warren said yes. Dimon said no. To be fair to Dimon, I can’t find anyone of any stature (bank CEO or otherwise) willing to debate Warren on the issue. Ed Yingling of the American Bankers Association won’t stand up for the banks on the topic. Even the U.S. Chamber of Commerce’s Tom Donohue, whose organization runs a website dedicated to trying to stop the CFPA, is too much of a wimp to debate Warren. What’s more, I realize that the setting of a foreclosure bus tour (during which you look at houses that have been lost by borrowers to banks) might put Dimon on the defensive, but I said that Warren and I were flexible with the location. He could name his home court. Even so, Dimon said no. The p.r. person who was the go-between said Dimon and his team decided that arguing against consumer protection in the banking industry would make the CEO look bad.
There were few sparks Wednesday, in part because Warren’s appeal was so banker-friendly. “You can ask any student who took one of my classes, whether at Houston or Michigan or Harvard, whether they liked me or not, whether they got an A or a C,” she said in closing. “And they’ll be able to tell you about my deep belief in the importance of marketplaces, in the marketplace of ideas.” You might interpret that as a signal that she’s open to suggestions or a reassurance of her capitalist values. But a better translation might be: “My idea for a consumer protection bureau won out in the public forum and you, dear bankers, will have to live with it.”