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July 16, 2011

Warren Ruled Out as Consumer Agency Head

Posted in: Uncategorized

We saw this coming for a while, particularly after Barack Obama headlined a $2.5 million fundraiser on Wall Street. But now it’s in print:

President Barack Obama has chosen a candidate other than Elizabeth Warren as director of the new Consumer Financial Protection Bureau, according to a person briefed on the matter.

The president’s choice is a person who already works at the consumer agency, the person said today. Obama may make the nomination as soon as next week, another person briefed on the administration’s plans said.

A separate article in the Wall Street Journal said the short list was narrowed to Raj Date, Richard Cordray and Jennifer Granholm. But Granholm already turned down the job, saying Warren deserved it, and she doesn’t work at CFPB. So it’s probably down to Cordray and Date, and in all honesty, I’m fairly sure Date will be nominated. The fact that nobody would leapfrog Warren and take the job was working to constrain the Administration’s options for a time, but once Date expressed willingness, Warren couldn’t very well say no to someone she hired.

Date will be described as an “ex-banker,” a contextless appellation that means about as much as saying Barack Obama is an “ex-community organizer.” But I’ve had enough consumer advocates tell me that they’re concerned by Date’s appointment to know that it doesn’t measure up to Warren by any stretch. Cordray, on the other hand, has a lot of integrity and drive; he was the first Attorney General to sue a mortgage servicer over foreclosure fraud. Not having Warren at CFPB means the agency suffers no matter the replacement; but I would say that Cordray would be a lot better than Date.

That said, let me make a prediction. Whoever gets nominated for the position of CFPB Director will not actually become a confirmed CFPB Director. At least not under an agency that’s constructed the way it is currently. Republicans have said that nobody will get confirmed without major changes to the agency. I don’t think they’re kidding. The agency transfers to the Fed on July 21, and without a Director at the helm, it loses the ability to regulate non-bank financial institutions like payday lenders and mortgage brokers. It will still be able to regulate mortgage servicers and credit card companies and banks. But this really gives the nonbank institutions a leg up, and it’s enough leverage for Republicans to get at least some of the changes they seek.

This is why any impression of this nomination of Date as an olive branch to Republicans is fanciful. I know that bipartisanship and compromise is devoutly to be wished and all, but in this case, Republicans haven’t been shy about stating their intentions. They will not confirm anyone to the Director position. So the only way to get an actual director is through a recess appointment. Whether the White House uses its power to adjourn Congress and make recess appointments is unknown. But in nominating someone other than Warren, the Administration is certainly not bowing to political realities. There isn’t a soul on earth who would be acceptable to Republicans for this position. So you can be pretty clear that their pick is who the Administration wants to run CFPB.

This comes just a day after Warren appeared again as a pinata for the House Oversight Committee, where she questioned the lack of an investigation by state Attorneys General trying to settle with the banks over foreclosure fraud. That’s just not the kind of thing the banks want to hear. And in case you haven’t heard, they own the place.

As for Warren herself, there has been substantial credible speculation that she’ll try to defeat Scott Brown in a race for Senate in Massachusetts. Over the past several weeks, she has had multiple meetings with the likes of DSCC head Patty Murray, Chuck Schumer, John Kerry and even David Axelrod, as well as a number of Congressmen from the Bay State. That is certainly suggestive that she either wants to run or those other people want her to run.

If Elizabeth Warren runs for Senate, I’d be happy to see it. But she’s shown herself over the past several months to be a really excellent agency head. She built a federal agency from scratch, made it accessible to the public, created a theory of principles-based reform that made sense, constructed some early documents for mortgage disclosure that looked good, won the support of community bankers and the grudging respect of even some on Wall Street, and made some great hires. We can hope that the agency will be better off for her participation. She should have been allowed to carry through her mission.

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