To say there is no love lost between Treasury and Elizabeth Warren is probably putting it mildly.
Treasury was gunning for her ouster in early 2009; I heard multiple accounts both of how concerted the Administration opposition to her was (recall she was actually chosen as head of the Congressional Oversight Panel before the regime change), with the clear objective of forcing her out. Eventually, after firm pushback from some very influential individuals (I’ve heard variants of the story, but there isn’t any dispute as to who the key actors were), the pressure receded, but only after Warren was semi-neutralized. As I noted in “On Pelosi’s Duplicity and Apparent Sandbagging of Elizabeth Warren“:
So why are we pointing a finger at Pelosi in particular? The next chapter is her appointment of one Richard Nieman to the Congressional Oversight Panel. Under the TARP rules, the House Majority leader selects one of the oversight panel members, so this choice was completely under her control.
Nieman is the New York Superintendent of Banks. He helped Goldman set up its bank holding company.
Nieman fell out with the other Democrats and wrote a joint opinion with John Sununu (see page 88 of the document). If you were somehow ignorant of the fact that the Summers/Geithner programs embody massive hidden and inefficient subsidies to banks (the Public Private Investment Partnership), questionable uses of the FDIC, and the employment of the Fed as quasi-fiscal agent, the critique might sound reasonable. But to anyone with a passing acquaintance with the facts, the dissenting views are absurd. To give you an idea of how far they have to stretch to make their arguments sound plausible, they grasp at the straw of “oh yeah, that over 50 point spread between market price and bank valuation for toxic assets is due to a liquidity discount.”
There is also sophisticated mud-slinging, for instance, suggesting that the panel’s recommendations run against the
…preference for maintaining a private banking system via temporary public support or partnership, which is consistent with this country’s tradition of private rather than government control of business
That’s code for “Warren is a commie”. Didn’t anyone tell these clowns that no private investor with an operating brain cell would give so much money to a private enterprise without demanding a good deal of oversight and control? And at a time like this, the public versus private polarity that they invoke has been blunted. Pretending that wards of the state are entitled to the rights of normal private concerns is absurd, yet that’s the fiction that Nieman and Sununu present.
Maybe I’m too cynical, but this sure looks like the behavior of someone looking for his next, bigger meal ticket.
But then we come back to Pelosi. I can’t imagine that Nieman would have fallen in with the Republicans without at least as a courtesy informing Pelosi in advance. And if she had a big problem, she would have gotten him to back down (either not siding with the opposition or issuing a separate view that was more ambivalent). So Pelosi is at a minimum sitting this one out (which I deem unlikely) or on board with the program to undermine Warren.
Yves again During the period when the COP was openly and effectively critical of the TARP, there was also a full court press in the media against Warren.
Warren is the obvious choice to head the otherwise-guaranteed-to-be-a-joke consumer financial services agency due to set up its shingle at the Fed. She has been a tireless consumer advocate, is trusted and well liked by the public at large, an effective communicator and a respected legal scholar, and is willing to stare down political opponents. All those qualities make her hugely threatening. Banksters and their lobbyist allies have been saying loudly and clearly that they are firmly opposed to having Warren head the new consumer agency. So, predictably, Geithner acts as their water-carrier. As Shahien Nasiripour reported in the Huffington Post:
Treasury Secretary Timothy Geithner has expressed opposition to the possible nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau, according to a source with knowledge of Geithner’s views….
Warren’s persistent oversight is part of the reason for Geithner’s opposition, according to the source.
In addition, her increasing public profile could make it difficult for Geithner, who will oversee the unit until it’s transferred to the Federal Reserve. His role would involve trying to balance her advocacy on behalf of borrowers with the demands of the nation’s major financial institutions, his traditional constituency.
Geithner’s objections to Warren taking over that role also involve her views on Wall Street, sources say. The longtime professor believes the nation’s megabanks are Too Big To Fail and have been among the biggest abusive lenders in the country. Her toughness on giant banks is said to be a longtime source of tension with Geithner.
Obama’s top economic adviser, Lawrence Summers, is also said to have a strained relationship with Warren, though his stance on her nomination is not known.
Yves here. Summer’s position may not be public, but there is no chance he will support her (save as a part of a bizarre kabuki; a show of support by Summers would be proof her candidacy was dead, but the Administration needed to pretend to have dissent, as opposed to unified opposition). He and Geithner are Rubin proteges, staunch supporters of banks uber alles.
Simon Johnson argues the Administration would be well served to support Warren:
With his track record of survival, Geithner and his team apparently feel they can push hard against Elizabeth Warren and give the new consumer protection job to someone closer to their philosophy – which is much more sympathetic to the banking industry.
This would be a bad mistake – trying the patience of already exasperated Congressional Democrats. If the Obama administration can’t even complete the deal they implicitly agreed with Senators over the past months, this will set of a firestorm of protest within the party (and with anyone else who is paying attention).
Financial “reform” is already very weak. If Secretary Geithner gets his way on consumers protection, pretty much all of the Democrats efforts vis-à-vis the financial sector’s treatment of customers have been for naught.
Yves here. But Johnson misses the real calculus for this Administration. It may actually see loss of the Democrat majority in the House as a win (as in is finding creative ways to rationalize its fallen standing as a possible longer-term advantage). First, it allows Team Obama to blame whatever happens (or fails to happen) on the Republicans. Second, it gives the Administration plenty of air cover to become more openly corporatist (recall Clinton’s famed move to the right after the 1994 mid term debacle).
The Administration is not about to change its stripes and suddenly take an action that might actually lead to some effective measures against the financial services industry. It’s clear they will oppose a Warren appointment; the only question is how openly they will do so.
Update 3:30 PM Apologies for the late update. I was off the grid till now (up till 7:00 AM). Our Tom Adams was on a conference call with the Treasury late this AM, and Treasury denied the reports that Geither was opposed to Warren (which apparently started with Reuters), and said he supported her nomination.
Update 3:50 PM Just received this via e-mail from Treasury:
Andrew Williams, Deputy Assistant Secretary of Public Affairs:
“Elizabeth Warren has been a driving force behind the creation of the consumer financial protection bureau, and we have worked very closely with her over the past year and a half to make that idea a reality.
“Given her strong leadership on consumer protection, Secretary Geithner believes that Elizabeth Warren is exceptionally well qualified to lead the new bureau, and, ultimately, that’s a decision the President will have to make.”