Tag Archives: Elizabeth Warren

Karl Rove’s Latest Attack On Elizabeth Warren

Posted on December 8, 2011 by | 47 Comments

By Simon Johnson

Karl Rove’s Crossroads GPS has another ad out attacking Elizabeth Warren (video here).   This is beyond ludicrous – the ad attempts to blame Ms. Warren for the Troubled Asset Relief Program (TARP) and for bank bailouts.  The principle here seems to be that when the truth cannot be slanted in a way you want, just ignore the facts and go all out for disinformation.

I count at least five misrepresentations in the ad, and I suggest the following corrections: Continue reading →

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Wall Street v. Elizabeth Warren

Posted on November 10, 2011 by | 137 Comments

By Simon Johnson

Karl Rove’s Crossroads GPS group has launched the first attack ad against Elizabeth Warren, presumably because she is now running hard for the Senate in Massachusetts.  This ad is not a big surprise, but the line that Mr. Rove takes could well backfire.

The ad states, “we need jobs, not radical theories and protests,” so we can break the argument down into three separate parts.

First, who destroyed more than 8 million jobs in the United States – and plunged us into the deepest and longest lasting recession since the 1930s?  Surely this was not Ms. Warren, who was just a law school professor, in the run-up to 2008.

Mr. Rove is opening the blame game and this is going to go badly for his presumed supporters – the largest banks on Wall Street that took excessive risks, paid their top people well, and then blew themselves up at great cost to the American taxpayer.  By all means, let us have a conversation about jobs and the history of job losses in the United States; “too big to fail” banks do not look good in this context. Continue reading →

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Nominate Elizabeth Warren – Provide The Pecora Hearings We Need

Posted on May 4, 2011 by | 44 Comments

By Simon Johnson

Ms. Warren is helping get the new Consumer Financial Protection Bureau (CFPB) off the ground and remains the leading contender to become its formal head (subject to Senate confirmation).  She summarizes her substantive agenda this way,

We’re trying to make these markets transparent, which makes it easier for community banks to compete both with large financial institutions and with their nonbank competitors.”

She should now be nominated to the CFPB position.  There will be strong Republican opposition and some Democrats who are close to the financial sector may be lukewarm.  But a public hearing on her case represents our best opportunity to experience a modern version of the Pecora Hearings – the Senate Banking Committee hearings in the 1930s that laid bare the inner (and rotten) workings of the biggest financial firms (see Michael Perino’s book on Pecora for details).

These hearings would represent a major step forward towards forging a new consensus regarding how to really establish markets (as opposed to the crazy government subsidy schemes that predominate).  In addition, the administration would win a big victory with Ms. Warren’s confirmation. Continue reading →

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What Is Spencer Bachus’s Game?

Posted on March 30, 2011 by | 12 Comments

By Simon Johnson

Representative Spencer Bachus, Republican chair of the House Financial Services Committee, famously remarked in December,

“in Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.”

With regard to the Consumer Financial Protection Bureau (CFPB), this apparently now implies that Mr. Bachus will use any means possible to change the topic away from substance – how banks treat their customers – to imagined procedural issues.

Specifically, Mr. Bachus is wrongly accusing Elizabeth Warren of misleading Congress with regard to the role of the CFPB in the negotiations over how to settle allegations that mortgage foreclosure practices have been abusive (see also this news coverage). Continue reading →

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Who’s Afraid Of Elizabeth Warren?

Posted on March 17, 2011 by | 61 Comments

By Simon Johnson

The next big political battle in Washington – after the budget debate is declared “over” – will likely feature the Consumer Financial Protection Bureau, in particular the fight to determine whether Elizabeth Warren can become as the agency’s first official head.

But will this fight feature a classic left vs. right set-piece confirmation showdown in the Senate?  Or it will it be resolved with cloaks and daggers closer to the White House – with Treasury Secretary Tim Geithner managing to prevent Professor Warren’s nomination?

There is much to commend the left vs. right scenario.  The Republicans, after all, want to argue that regulation is excessive in general and regulation of financial products is somewhere between unnecessary and dangerous for economic growth in particular.  This theme came up during the Dodd-Frank legislative debate on financial reform last year but it was largely lost in the larger conversation.

Now Spencer Bachus, Republican chair of the House Financial Services Committee, has Elizabeth Warren firmly in his sights – with the mortgage settlement negotiations as the flashpoint. Continue reading →

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Disinformation About The Consumer Financial Protection Bureau

Posted on February 28, 2011 by | 103 Comments

By Simon Johnson

In Washington, before lobbyists try hard to destroy something, they first spread a great deal of disinformation about it.  Thus the “End Users’ Coalition” (a front for the derivatives dealers) promotes its lobbying points as fake research.  And “fiscal conservatives” attempt to distract from the fact that our largest banks brought us to the brink of budget disaster – this is their preparation for demolishing all vestiges of financial reform.

On a closely related front, there is now a concerted effort to undermine the newly formed Consumer Financial Protection Bureau (CFPB), mostly by spreading disinformation about its supposed lack of accountability.

This disinformation approach contains the standard elements of exaggeration, misdirection, and distraction (all quotes are via Fred Barnes):

  1. Slogans: “If you like TSA at the airport, you’ll love these guys” (Congressman Spencer Bachus).
  2. This is a major step towards dictatorship.  “Its powers are very, very vast….  Who in the world would consider it appropriate to have one person appointed—one person!—to set the rules for the entire financial industry. It’s a tremendous overreach. It’s incredible to think about” (Senator Bob Corker)
  3. And it would be a one-person dictatorship.  “”It would be dangerous to the American economy if Elizabeth Warren were put in that job by a recess appointment, thwarting the will of Congress….  [She would be] accountable to no one” (Senator Richard Shelby)

Naturally, none of this is remotely close to the facts – an important principle of disinformation is that it should create an alternative reality which, through repetition by apparently disparate and supposedly credible people, becomes regarded as containing an element of truth. Continue reading →

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Symbols and Substance

Posted on December 19, 2010 by | 75 Comments

By James Kwak

Arnold Kling wins the prize for the most erudite post of the past week, a review of The Symbolic Uses of Politics, by Murray Edelman. Kling cites not only Sigmund Freud and J.D. Salinger, but Theodor Adorno and Seymour Lipset (with specific books, not just names), among others.

In Kling’s summary, Edelman divided the political sphere into insiders and outsiders (Kling’s terms). Insiders are basically special interests: small in number but well organized and with specific goals. Outsiders, or the “unorganized masses,” are the rest of us: we have some interests, but we are poorly organized to pursue them and therefore are generally unsuccessful. In particular, Outsiders suffer from poor and limited information, and therefore are especially susceptible to political symbols. In Kling’s words:

“Given these differences, the Insiders use overt political dramas as symbols that placate the masses while using covert political activity to plunder them. What we would now call rent-seeking succeeds because Outsiders are dazzled by the symbols while Insiders grab the substance.”

Continue reading →

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The Economics and Politics of Elizabeth Warren

Posted on November 29, 2010 by | 43 Comments

By Simon Johnson

Congressional Republicans are apparently intent on a big showdown with Elizabeth Warren, who is currently building up the new Consumer Financial Protection Bureau (CFPB).

This is very good news for the White House, if they use this opportunity wisely.

Some Republicans seem to think that Ms. Warren is about “big government” or “intrusive regulation”.  But this is not the case – Elizabeth Warren’s approach is much more appealing and already popular with almost everyone on right and left: Transparency. Continue reading →

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The White House Needs Elizabeth Warren, Now More Than Ever

Posted on November 3, 2010 by | 65 Comments

By Simon Johnson

The White House today is under pressure, with insiders asking: After the strong showing of the Republicans in the midterm elections, should the president move to the right or to the left?

This is entirely the wrong way to think about the problem – the administration needs to get beyond its mental framework of early 2009, which led it sadly astray with regard to the financial sector.  The President needs to find people and themes capable of cutting across the political spectrum; specifically he needs to promote strongly the ideas of Elizabeth Warren – what we need in financial services, above all else, is much more transparency.

The premise – and central mistake – of the Obama administration in 2009-10 can be summed up in what the president said to leading bankers on that fateful day, March 27, 2009: “My administration is the only thing between you and the pitchforks”. Continue reading →

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Elizabeth Warren: The Right Appointment At The Right Time

Posted on September 16, 2010 by | 132 Comments

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. Continue reading →

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Republican Nightmare: Putting Elizabeth Warren to Work Now

Posted on September 10, 2010 by | 95 Comments

By Simon Johnson

President Obama is finally looking for bold, creative, and clever ways to change the way the US economy operates – preferably with measures that will take effect by the November midterms and change the tone of the broader political debate.  His tax proposals this week have some symbolic value, but in the broader sense all of these fiscal suggestions are tinkering at the margins.

What could he possibly do that would grab people’s attention, mobilize his political base, and put his opponents on the defensive?  There is an easy answer: Appoint Elizabeth Warren to start running the Consumer Financial Protection Bureau (CFPB) immediately.

And the brilliant part of this idea – as explained by Shahien Nasiripour at the Huffington Post (see also David Dayen’s Thursday coverage)– is that the Dodd-Frank financial reform legislation allows the person charged with setting up this new agency to be an outright appointment, rather than a nomination subject to Senate confirmation. Continue reading →

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Banking Under the Dodd-Frank Act

Posted on July 22, 2010 by | 169 Comments

By Simon Johnson

President Obama’s signing of the financial reform bill yesterday does not end our intense debates over banking – rather it just moves them to a new sphere.  Instead of arguing about legislation, the next arena is the action (and perhaps inaction) of regulators.

Those pushing for more effective regulation of the financial system are looking for progress along three potential dimensions.  The first two – raising capital standards and appointing new regulators – are the most discussed, but powerful interests are blocking real change.  The third – tougher and smarter congressional oversight – holds great promise. Continue reading →

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Treasury Makes A Mistake – Claiming They Are Not Blocking Elizabeth Warren

Posted on July 16, 2010 by | 498 Comments

By Simon Johnson

It’s one thing to block Elizabeth Warren from heading the new Consumer Financial Protection Bureau.

It’s quite another thing to deny in public, for the record, that any such blocking is going on (e.g., see this report; Michael Barr apparently said something quite similar today).

There is a strong groundswell of opinion on this issue from the left – see the BoldProgressives petition.  But the center also feels strongly that, given everything Treasury has said and done over the past few months, it would be a complete travesty not to put the strongest possible regulator in change of protecting consumers.  (See Ted Kaufman on the NYT’s DealBook, giving appropriate credit to the SEC, and apply the same points to broader customer issues going forward.)

This can now go only one of two ways. Continue reading →

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Tim Geithner’s Ninth Political Life

Posted on July 15, 2010 by | 180 Comments

By Simon Johnson

In modern American life, Treasury Secretary Tim Geithner stands out as amazingly resilient and remarkably lucky – despite presiding over or being deeply involved in a series of political debacles, he has gone from strength to strength.  After at least eight improbably bounce backs, he might seem unassailable.  But his latest mistake – blocking Elizabeth Warren from heading the new Consumer Financial Protection Bureau – may well prove politically fatal.

Geithner was a junior but key member of the US Treasury team that badly mishandled the early days of the Asian financial crisis in 1997 and received widespread criticism (Life #1).  He was promoted as a result and thereafter enjoyed a meteoric rise.

As President of the New York Federal Reserve from 2003, and de facto head of the government’s financial intelligence service, he completely failed to spot the problems developing in and around the country’s financial markets; nothing about this embarrassing track record has since stood in his way (Life #2).  He subsequently became Hank Paulson’s Wall Street point person for one of the most comprehensively bungled bailouts of all time – the Troubled Asset Relief Program, TARP, which in fall 2008 first appalled Congress with its intentions and then wasn’t used at all as advertised (Life #3). Continue reading →

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The Ongoing Battle Against Error and Hypocrisy

Posted on March 30, 2010 by | 23 Comments

By James Kwak

With the financial reform bill out of the Senate Banking Committee last week (another good thing that happened while I was away) and fresh off of victory in the health care war, the Obama administration is upping the rhetorical pressure to pass financial reform. This was most obvious in Deputy Treasury Secretary Neal Wolin’s speech at the U.S. Chamber of Commerce last week, in which he called out his hosts with fighting words: “the Chamber of Commerce – funded, no doubt, with a good deal of your money – has launched a lavish, aggressive and misleading campaign to defeat the proposed independent agency.”

Elizabeth Warren, who has never minced words when it comes to enemies of consumer protection, steps up today with an even more withering attack on the flip-flopping of the American Bankers Association, which was for the separation of consumer protection from prudential regulation before it was against it. As Warren says:

“ABA lobbyists now aggressively insist that separating consumer protection and safety and soundness functions would unravel bank stability. Yet just a few years ago, they heatedly argued the opposite—that the functions should be distinct.

“In 2006, the ABA claimed to act on principle as it railed against an interagency guidance designed to exercise some modest control over subprime mortgages.  It criticized the proposal for ‘combin[ing] safety and soundness guidance with consumer protection guidance, creating confusion that is best addressed by separating them.’”

Continue reading →

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