By Simon Johnson
The case for appointing Elizabeth Warren to set up the new Consumer Financial Protection Bureau (CFPB) was, at the end of the day, overwhelming. She had the original idea, she helped build political support, and her own credentials have been only strengthened by her work as head of the Congressional Oversight Panel for TARP. On Friday, the president will reportedly appoint Professor Warren as an assistant to the president and special adviser to the Treasury Secretary, with the task of setting up and initially running the CFPB.
Some of Ms. Warren’s supporters think this move is something of a half-measure – they would have preferred a conventional nomination, with all the fanfare of a classic confirmation battle in the Senate. There is something to be said for that, but the interim appointment route is by far the best way forward for three reasons.
First, this form of appointment puts Elizabeth Warren to work right away – on the issues of consumer protection that are first order both for ordinary families and for the macroeconomy. You really cannot build a sustainable economic recovery on the back of exploitative or abusive behavior by the financial sector. These issues are urgent and need resolution as soon as possible.
Second, the president finally has an adviser who understands the financial sector and who has healthy skepticism about its intentions and actions. As we documented at length in 13 Bankers, too many top policy people – both in this administration and all its recent predecessors – have been overly inclined to accommodate the interests of finance, particularly the big banks. In this regard, putting Ms. Warren directly into the White House with the highest possible level of access is exactly the right thing to do – much better, for example, than making her purely a Treasury appointment.
Third, this step does not avoid a debate in the Senate – it merely postpones it to a more advantageous moment. Presuming that Ms. Warren is nominated as for a five year term as head of the CFPB, she would go before the Senate Banking Committee with a real track record of achievement as interim head. The debate would not be about what the agency could do, but rather what it has already done – and what it is set up to do next. These are exactly the right terms on which to bring out into the open all those who think that the financial sector only ever behaves well – or that enforcing sensible rules on lenders would somehow bring the economy to its knees.
Barney Frank has the right overall assessment, telling the New York Times:
“I congratulate the administration on its creativity. There’s no possibility she would take something like this unless she was fully empowered to do the job.”