It should come as no surprise that a financial services industry powerful enough to water down meaningful reform in the US and internationally (Basel III rules were weakened to allow, for instance, that mortgage servicing rights be included in regulatory capital calculations) would probably have its way in blocking the nomination of Elizabeth Warren as head of the new consumer finance protection agency.
Let’s face it: the plan to deep six the consumer watchdog was set when it was changed from being an independent body as originally proposed and instead moved into the Fed, the most bank friendly and arguably the least industry expert of the US bank regulators. It might have had a hope of being effective had it been housed at the FDIC, which does not like cleaning up bank messes and therefore is less prone to swallow industry BS than the other Federal bank overseers, but it is now clearly meant to be a mere election time talking point (not that that is working either, since a surprisingly large majority, 80%, understands that financial “reform” is merely branding by the Obama Ministry of Truth). So why would Congress do a 180% change and allow someone with the moxie, legal expertise, and profile with the media to make the agency effective take the reins?
In case you missed it last week, Chris Dodd, Chairman of the Senate Banking Committee, washed his hands as far as Warren’s candidacy was concerned. From Bloomberg:
Elizabeth Warren, the Harvard University professor touted to head a new consumer protection bureau, may not have sufficient support to win confirmation to the post, Senator Christopher Dodd said in a radio interview…
“Elizabeth would be a terrific nominee,” said Dodd, the Connecticut Democrat who leads the Senate Banking Committee. “The question is, ‘Is she confirmable?’ And there’s a serious question about it.”
Yves here. Note Dodd employs the time-tested formula of bigots out to cover their footprints: “Personally, I’m all in favor of hiring [fill in minority in question, such as blacks, woman, transexuals, former drug addicts, one-eyed midgets]. But I’m not sure [fill in preferred scapegoat, such as “our customers” or “our organization”] is ready to accept them.”
The Los Angeles Times tonight provides a long-form discussion of the opposition to her candidacy. While the piece is generally positive, it also recites the bank lobby’s talking points against her (and kiss of death, has socialist Bernie Sanders an an enthusiastic backer). It’s also worth noting how her evolution to her current views gets short shrift (although this piece does a better job of covering this ground than most). Warren was originally a Republican; I’ve been told by a people who know her that it was a Republican senator who first asked her, as bankruptcy expert, to investigate the high level of bankruptcies among his constituents and she was surprised and disturbed by what she learned. In other words, her views come not out of an ideological predisposition but study of facts on the ground.
From the Los Angeles Times:
For a soft-spoken, unfailingly polite university professor, Elizabeth Warren has a surprising knack for making people squirm — particularly on Wall Street….
Now Warren has Wall Street executives, bankers and business groups extremely nervous…
Her pro-consumer views on outlawing what she calls the “tricks and traps” in mortgages, credit cards and other financial products — beliefs developed during her three decades of bankruptcy research — have industry officials gearing up for a major confirmation fight if she’s nominated.
They’ve called her an extremist who will put the government in charge of the financial decisions of average Americans, driving up the cost of credit. But Warren’s supporters said Wall Street’s true fear was that she would make the agency a success, eliminating the hidden fees and abusive practices that have been so profitable for the industry.
“There are people who try to portray her as an activist or some sort of ideologue. What they are really troubled by is she communicates very well with the American public,” said Jay L. Westbrook, a University of Texas law professor who has worked with Warren since the early 1980s.
“Her crime here, in the minds of many, is she’s a very effective proponent of consumer protection,” he said.
The story in full is here.