Republican Nightmare: Putting Elizabeth Warren to Work Now

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.

Elizabeth Warren’s credentials are impeccable – she came up with the original idea for the CFPB, she pushed effectively for it to become legislation, and she has proved most effective in her oversight role as chair of the Congressional Oversight Panel (COP) for the Troubled Asset Relief Program.  And her manifesto for the CFPB is sensible and actually pro-business – although she naturally opposes the specific ways in which big banks mistreat people.

No doubt Republicans in the Senate would try to derail her nomination to head the CFPB as they have done with numerous other nominations over the past year and a half.  Their motivation would not be her views or expertise – she has earned serious Republican respect as a result of her COP role – just part of their electoral strategy to block the president’s agenda and to undermine an agency they have consistently opposed. 

The Treasury Secretary is explicitly authorized by an Act of Congress to pick an interim head for the new agency – with a view to getting it up and running immediately (in fact, what has he been waiting for?)  Presumably the Senate (and the House) passed this specific measure expressly to expedite the CFPB’s work.

Professor Warren has strong political support and would get the new agency off to a great start.  She would represent the Obama administration’s serious attempt to rein in financial misbehavior – at the same time as keeping the economic recovery on track.  Anyone who thinks she would be bad for American families has not been paying close attention.  And best of all, she is very good at explaining what she is doing and why that makes sense.

The president needs clearer messages and stronger substance – and he needs them fast.  He should move at once to appoint Elizabeth Warren.

95 thoughts on “Republican Nightmare: Putting Elizabeth Warren to Work Now

  1. Elizabeth Warren is to die for. But Obama has unseen masters, I fear. Keep pushing, Simon. Maybe it can happen yet.

  2. We know Obama only appoints those that serve his masters. Simon, you’re living in a fantasy land. I’m surprised by your naiveté.

  3. So what’s the deal with this Obama flackery?

    Obama is finally looking for bold, creative, and clever ways to change the way the US economy operates..

    Simon of course knows perfectly well that Obama’s not looking for any such thing. He hasn’t even been pretending to do so – his proposals are just more of the same, more corporatist trickle-down scamming.

    Similarly, if he appoints Warren it will be purely cosmetic. She’ll be meant to rot ineffectually, mummified in the Fed, spending all her time in pointless bureacratic squabbling.

    A Warren appointment would be a bad thing for the people, since it would probably succeed in fooling a lot of people who are finally starting to wake up. So it would only drag out the process.

    Think of how much better it would be if e.g. Bernie Madoff, or the next best thing, were appointed. How much more honest that would be, how much clarity it would convey, how educational about the true nature of the kleptocracy.

    But the Warren scam is sheer obscurantism and misdirection.

    So is Simon one of the official Astroturfers now?

  4. Yeah,
    The reason it’s not done already is that they don’t want it done. No amount of cheering or encouraging will change that.

    I have this conversation with those who watch TV and get all hyped up about the border being open. It’s not closed because the powers that be don’t want it closed.

    100 Billion per year in Iraq b/c that’s what they want to do. Clearly 100 Billion could build a multi level fence/wall/closed border. But, they don’t want to. So they don’t.

    Same thing with Warren.

    Sorry to keep bringing up the WAR, but you don’t see a six month battle over supplemental war funding authorization. It just gets done. B/c that’s what they want.

    Why doesn’t she call you?
    Because she doesn’t want to.

    Why isn’t EWarren appointed already? Because they don’t want to.

    Coulda been done ages ago. Like closing Guantanamo.
    Obama just does not care to do it.

  5. I think that I’m somewhat disappointed by the idea that Warren is the best choice for the job. Her general understanding of the public as incompetent (rather than simply unwilling) to manage its own financial affairs strikes me as leading her to champion measures that further reduce the need for people to know what they’re doing when it comes to money. Most people are financially illiterate enough as it is – a paternalistic government agency won’t help that – and as soon as that agency drops the ball (and it will) we’re back in the same boat.

  6. The points so eloquently identified in your post are EXACTLY why Obama WON’T appoint her.

    When do those of us who supported Obama get the message???

    He is a gutless and traitorous turncoat whose central mission is to deliver the cremains of a once-great country to its ultimate custodians….the Repug-nican “undertakers”!

  7. 1. Get real 2. the economy is growing, though sluggishly 3. vote against your self-interest. 4. no good deed goes unpunished. 5. over-use of the orginal intent of pay-day lending by undisciplined borrowers.

  8. Obama is desperate. He hates Eliz Warren, as does Chris Dodd and (smarmy, wiggle-worming) Barney Frank.
    …as do all the Wall Street entrenched Dems.

    …who knows about the Republicans? We will see.

    Another good reason: never re-elect anybody.
    ..Lady in Red

  9. Lady, a few years back someone from — was it the Phillipines or Indonesia? — told me the people don’t try to kick the established politicians out of office because that would just create a whole new group who would do whatever it takes to enrich themselves just like their predecessors did. They figure it’s cheaper to just leave the present bloated leaches in office . .

  10. Is there a basis in fact that Warren can be appointed rather than nominated? What is the factual source for that?

  11. All the more indication of how interested Democrats
    (and Republicans…?) are in reform.
    …Lady in Red
    PS: I adore the play.

  12. Simon, where do you see any serious attempts by the Obama
    administration to ‘reign in the financial sector’?? Except in the
    Frank-Dodd bill, which has more potential for wholes than our Swiss cheese?

  13. Yep — and cynicism never makes anything better. I mean, there have been some real social advances made in the last couple of centuries and I am sure cynics didn’t have any part in them.

    I do tend to give Obama the benefit of the doubt. Maybe there is a difference between what he HAS to do and what he WANTS to do.

  14. Funny…Obama loves everyone from Harvard yet ignors Warren. He nominates a no-name with no experience sitting on the bench too the Supreme Court…and she gets confirmed for a lifetime…yet Warren from Harvard has shown her mettle time-in and time-out and gets shunned by the administration. Why? Let’s face it…Obama is a “Puppet-on-a-String” with Rahm, Ben, and Larry pulling the strings all choreographed by Axelrod, and Timmy! It’s a pathetic mess, and I don’t think Elizabeth has a chance. This administration is so out-of-touch with the populus they make the Bushies & Reaganite’s seem like missionaries. Just think about it…and ask yourself truthfully what Obama has done in nearly two years? Answer. Nothing…absolutely nothing, other than polarizing the country to the point where the Democrats, and Republicans have been fused into a solid state of default – literally changing the magnetic field in North America known to the inhabinate commoners as the known physical world we call “Democracy” via politics…simply amazing! Sorry…but I just can’t see it happening – and if it were too, Ms. Warren’s ground rules would swiftly be cut from under her feet by the almighty “Fed”! Thanks Simon, and James :-)

  15. Obviously, we don’t know why he is hesitating to put Warren in the job. I suspect it’s because he is looking for a way to appoint someone else. Someone that won’t disrupt potential campaign contributions from the financial sector, or increase the chances of losing a vulnerable seat in congress.
    I think I can understand the political calculations, but for once, I’d like to see our president just do the right thing for a change. He continues to disappoint.

  16. The FinReg Reform law says the Treasury Sec. can appoint the head of the agency. I don’t know how long the 1st head can serve before they have to be nominated/confirmed?

  17. Obama is hedging on both Warren and the expiration of the tax cuts for the wealthiest (he won’t say that he will veto a bill that includes an extension).

  18. I don’t know if it’s flackery but yes, Simon, you should know better than to suggest Obama is looking for bold new ideas. Heck, your next line correctly points out that his proposals just tinker at the margins.

    Obama doesn’t do “bold”. He does “wait for someone to propose something that does as little as possible, thus making it the easiest thing to pass, then sign it”.

    I would like to see Warren get the appointment, and I don’t see how Obama could get away with nominating anyone else. Of course he often seems like he doesn’t want to get away with anything.

  19. Hmmmm – the Eastern European and Russian flank have stopped blogging…too much common sense, I guess, and no doubt a cultural misunderstanding about how calling something stupid is actually a sign of respect for the current intelligence level…

    also must have been the suggestion that more “diversity” would be a good thing in a team fixing the problems left behind

    by an omnipotent monetary sovereign, who has turned out to be….

    uh, what’s that other word that sounds like “omnipotent” – wait, let me google Viagra…

    You in or out with the Plan, Earle? (yes this relates to a consumer protection agency – Elizabeth’s job could be shipped directly over to USA consumer if this Amendment passes :-))

    Proposed 28th Amendment to the United States Constitution:

    “Congress shall make no law that applies to the citizens of the United States that does not apply equally to the Senators and/or Representatives; and, Congress shall make no law that applies to the Senators and/or Representatives that does not apply equally to the citizens of the United States.”

  20. Heard an interesting outside the box argument for appointing Warren the other day. Seems she’s one of the only contenders for the job that actually wants the job she’s hired for – protecting consumers. Others want the job so they can sneak-modify financial law and step on the toes of the SEC and CFTC. Creeping legislation at its worst.

  21. Re: @ Annie___ Yes!!! I’m in Annie – I love this courageous woman – Ms. Elizabeth Warren, and I’m with Simon 100%…but these block`heads in Washington just don’t care anymore in what the public wants, or even (and to think were going to put the old regime back in office – something has gone terribly wrong with this picture in the “Dark Room”?) try to get the overheating temperature of the fever running rampantly upstream! Go Rays!!! Goodnight Annie ;-)) PS. I guess you’ve got to be from Chicago`Land to get a nod,..pathetic?

  22. I’ve been predisposed preparing snacks and beer for my toothless cousins and neighbaws to watch tonight’s episode of “Smackdown”. Who is this Elizabeth Warren person again??? I watched a show da other day and Newt Gingrich said if you haven’t had 3 wives/husbands and you have two first names it’s un-American to nominate you.

    Republican Senator John Boehner said he doesn’t even know if she’s had a cigarette before or gotten martian-like looking tans. How can we vote for such a person??? IT IS UN-AMERICAN!!!!!!

    (for those wishing to sue the penniless, the above comments were meant as satire)

    It sure is fun watching a nation’s leader tap dance around the obvious and only choice as Elizabeth Warren as head of CFPB, and until he does nominate Professor Warren, I don’t care if the media grills him like a John Boehner 5 hour sleep at the tanning bed.

  23. I want to know who or what is motivating President Obama to make the decisions he makes.

    I will vote for him and for Democrats only because the alternative would be disastrous. He would get more votes if his motivations were made much clearer.

  24. You are being illogical by saying both that people are financially illiterate and also that they’re unwilling to manage their financial affairs, as an excuse not to have someone in government who would assure that simple vanilla financial transactions are among those offered a client.

    Making sure that there are simple financial instruments available to the public is not paternalistic (or in this case, maternalistic, yah) but rather guarantees a way for people who aren’t good at legalese and financial complexity to enter into the economy of their land without punishment.

    And yes, as soon as the agency drops the ball, we’ll be back in the same boat. That’s why democracy is a living process, requiring constant attendance and movement by it’s members.

  25. I don’t give Obama any more benefit of my doubt–he has proven himself to be of most dubious moral character.

    I agree–let’s vote them all out. And of course the new batch will be largely as corrupt, but not immediately; and later rather than sooner, if we also install some campaign and lobby reform.

  26. I am getting tired of holding my breath, Simon. It’s time for you to call in all of whatever markers you have. We need to get Noriel, Joseph, Mark, Paul, and other econ gurus and nobelists to provide outspoken encouragement. I know that most economists are academic loners, but surely this is something that everyone can get behind.

    We all know that the odds are definitely less than 50/50 in E’s favor, but I was heartened that BHO picked Austin Goulsby to serve as chairman of the CEA. That was a surprise. I tend to think, now that Romer’s gone and Vollker is sitting the back row, if at all, that Austin is, maybe, the only “straight” guy around the WH these days.

    Lastly, appointing Liz would definitely increase the political chances for the Dems this Fall, and send a clear message that we may be seeing a transformation of the President to a man of the people (on this I refuse to hold my breath, sadly). As doubtful as it seems, the charm of appointing Ms. Warrent to the post would cause many progressives to move back toward the President. At this point, he has effectively alienated most, if not all of them.

    Please get on some mainstream media and put the pressure on. Your voice is highly respected.

  27. I agree. Putting Warren in as head of the CFPB is a good move.

    The Republicans ought to get on board and back her, because I think the vast majority of voters believe she’s a straightforward person with truly good intentions.

    But you know the Republicans won’t do that. Sigh. Get ready for a load of BS from Republican pundits and mouth pieces about Elizabeth Warren.

  28. I don’t think there is any longer much difference between the two parties, Fred. Obama’s record on civil rights, for eg., has been to continue and enhance that of Bush. His record for the economy is to give it all to the wealthy. And he has himself apppointed a deficit commission, which meets in secret, filled with people who have made it clear that they believe Social Security needs cutting if not deleting.

    But maybe, just maybe, we have a narrow window here. The tea-partiers are splitting the repub vote. What if we also split the dem vote, by working together on a platform, as loudly as the teapartiers but with more reason and justice-mindedness? We might just be able, if we get off our butts, start a 4 party system. That is what we need, along with campaign and lobby reform.

  29. “simple vanilla financial transactions”
    That is what the triple-A rated securities collateralized with badly awarded mortgages to the subprime sector were supposed to be… pure and simple vanilla.

  30. If Obama doesn’t appoint Warren, the real Democratic base will be completely disgusted. Jesus, she created the idea of a Consumer Protection Agency! Every time I see Warren talk I’m blown away by her passion, her perceptions and her determination to make positive change to the putrid Financial industry.

    I want her on the team or else…

  31. I am surprised so much attention is given to the appointment of who is to run the Consumer Financial Protection Bureau (CFPB) when compared to the little attention given to who and how they run the Basel Committee and that, though it sets crucial elements for the financial sector such as the capital requirements for banks, is not even mentioned in the lengthy Chris Dodd act.

    I wonder could Baseline be part of the cover up apparatus for the Basel Committee?

    By the way, today in a youtube, I posted a type of kindergarten explanation of the financial crisis. If you are interested you will find it here:

  32. Thanks, Per, I don’t mind being in the Kindergarten.

    Kindergarten suggestion – it seems to me that the AAA low risks implemented high risk “business models” after they deregulated themselves. Whereas the high risk small businesses, especially when intruding on energy markets, were forced to operate under regulatory hurdles that the low risk group skirted by being grandfathered in – so the low risk group adopted a riskier “business model” at the same time that it continued to have a RISKIER operations model than the high risk.

    Getting to the suggestion – BOTH groups have to have the same operations regulatory structure – no more “grandfathered” privileges in manufacturing, logging, oil/gas/coal, infrastructure maintenance of water supplies, etc.

    Then recalculate the risk. Starts to even out between the two groups…

  33. I’d like to believe Obama possesses the fortitude to appoint Elizabeth Warren to lead the “Consumer Financial Protection Bureau (CFPB) immediately.”

    Tragically – I suspect there are 13 bankers sitting in Obama’s office right now threatening the tank to DOW if Warren is selected.

    Just like every other finance related appointment, Obama will select another Wall Street/GS insider, who will cloak and protect the predatorclass and the den of vipers and thieves in the finance oligarchs, and work to undermine the peoples best interests.

  34. You’ve got it! If there are going to be privileges then these must be transparent, over the board and measurable in dollar and cents… not the result of a group of incompletely authorized tinkering schemers playing under the table with the markets.

  35. “The Treasury Secretary is explicitly authorized by an Act of Congress to pick an interim head for the new agency – with a view to getting it up and running immediately (in fact, what has he been waiting for?) ”

    What has he been waiting for? Well, of course he’s been waiting for the right time and the right opportunity to appoint someone else. Bernanke, Summers, Emanuel, Dodd, Frank, and Geithner know who the “in” group is. Elizabeth Warren ain’t in it.

  36. I’m concerned that Huffington Post thinks this is a good idea. They’ve been working might and main to ensure a nativist takeover of the House and Senate. Appointing Warren rather than submitting her name for nomination could be an inscrutable move in that direction. Although “inscrutability” and “Huffington Post” aren’t exactly the identical twins of the English language.

  37. Elizabeth Warren has spoken highly of consumer protection laws in Canada. Mixed reviews on how accurate her perception is from a Canadian. I live in British Columbia where the wireless industry is exempted from consumer protection laws. Telecom hell is alive and well north of the 49th.

  38. Here is a juicy quote from the history of capitalism:

    In the 18th century Saint-Domingue (now Haiti) was a brutal slave colony, with an estimated 500,000 slaves and 32,000 colonists, and the most lucrative possession in the French overseas empire; producing sugar, cotton, coffee, tobacco, cocoa and indigo. Much of the wealth and glory of 18th century France came from the slave plantations of “la perle des Antilles” Saint-Domingue.

    Plan B

  39. Re: @ Per Kurowski___Yes indeed Per…as Former Fed Chairman Paul Volker said yesterday, “somethings wrong with this picture when $60Tn. of CDS’s are floating about with $10Tn. in actual assets”!

  40. I’m sorry – but there is no “way for people who aren’t good at legalese and financial complexity to enter into the economy of their land without punishment.” That’s the point. A government agency that is designed to make it painless for people to be ignorant is doomed to failure – if for no other reason than those self-same people won’t know that it isn’t working until it’s too late.

    That’s why I’m not really in favor of a “Protect Consumers From Business Bureau.” I’d much rather see a “Teach Consumers to Know Enough to Protect Themsleves Bureau.” But to implement something like that, you have to assume that the public is educable, and I don’t think that Warren sees the public as being capable of protecting itself when given the right tools.

    As far as “Plain Vanilla” goes – MY bank offers them, that’s why I bank there. If other people were willing to make the same choice, you’d see much more plain vanilla out there – no need for government to try and force it.

  41. That was me, as Anonymous – forgot to fill out the form…

    My last year of college, I did a term paper, from the operations side, noting the inequality between established and new business with regards to licenses, regulations, and funding.

    The “grandfathering” became official after myself and an entire generation of idealists who actually KNEW how to “change the world” without politics (our biggest mistake, eh?)

    no doubt provided the “legislators” with a ready made list of how to protect the “establishment” :-) – professors have to augment their incomes somehow.

    The amount of wanton destruction of the environment since then is hard to deal with as fact – for a NORMAL mind, anyway. It never had to be like this.

    One again, both “politics” and “business models” created the maximum amount of damage to Human Beings and Planet Earth possible. We definitely need a new math formula for “profit”.

    Some small radio stations still have a daily dumb criminal story – seems like Stupid is a requirement to be enlisted in the ranks of Evil.

  42. We definitely don’t have a national sense of humour anymore. THAT certainly causes problems.

    Cocktail moment with Alaskans didn’t go well. He flipped up his shirt to show a scar where a kidney went in, and his wife chimed in that some woman donated hers. Okay, I had a glass of wine and being a lightweight, I expressed my amazement (in vino, veritas), I asked if she did it for money, wife said, no we were blessed. Amazed even more, I noted that no one in my family would even dream of asking each other for a kidney in the first place – hey, we all have to go sometime – but if you did end up having a heart string tugged into donate an organ, you’d expect the receiver to do something spectacular with the rest of their lives like get a Nobel Prize for Physics or Peace or something. Another open-mouth, insert foot moment for me. Sticking to club soda when its a mix of “cultures”…I believe in India they are still giving the donor SOMETHING ($$$) besides the belief that the recipient was “blessed by god”…

  43. Clever censorship on the Huffin’ and Puffin’ site – the only posts showing up in the comments are from people who have “fans” – 100s of “fanned”. One big echo chamber of propaganda – drive by tweets is the new plan for preventing a recognition of financial anarchy?

    I totally don’t get the 3rd world social engineering schtick she has been sent out to do by the plutocrats.

    Teaching people how to be “poor”? Is she giving out pills to help erase the memories of the “social structures” that were in place that helped a middle class to be created and thrive?

  44. Hey Jon, I’m out of the loop. Who exactly are Obama’s “masters”? Al Qaida? The Evil Liberal Elite? The big socialist conspiracy? SPECTRE?

    Bigotry is politics for the mentally lazy. And conspiracy theories is bigotry for the *really* lazy!

  45. The title should be changed to: “Geithner Nightmare….” The greatest opposition to Warren is reportedly coming from Geithner. There are probably a few Republican Senators, including the pair from Maine, who might vote for Warren’s confirmation, so the Republicans are not the most dangerous anti-Warren force at the moment. According to the new law, Geithner could hire Warren as interim head today if he wanted to, but he won’t, and Obama could also designate Warren as interim head during a Congressional recess. Even if Warren were only interim head for a year or so, she could still oversee the creation of the basic stucture of the agency and the writing of its all-important rules and regulations. The first year is crucial, which is no doubt why Geithner — and probably Obama — are resisting.

    The administration is once again pretending it is for something it actually opposes. If the administration is allowed to continue its easy-going hypocrisy, without sharper criticism from pundits and prominent economists, it won’t matter that much if Warren becomes head of the agency or not, since Geithner and Obama will be able stifle and circumscribe the work of the agency while claiming to be striving for balance and fairness. Mr. Simon, please call a spade a spade.

  46. It’s really dispiriting to read these comments which, by and large, express a profound disappointment with Obama. Yet, I can agree with them. I didn’t think that anybody could be worse than Bush 2 but Barack still has 2 years to go.

    The decision to hire Warren is obvious to a kindergartener. Why can’t Geithner and our president see it?

  47. They see it. They just don’t DO it. Kinda like when some person or group with a cause is saying “How can we get government to HEAR us about this ?” — I have to sigh at their naivete.

  48. Isn’t it obvious by now that the 2008 election moved the political discourse too far to the left (for the elites)? Obama has been slow to do anything so that this election can move things back right in favor of elites. To elect Warren would be a move left that this administration does not want. So they are talking big about her to stall until after the elections where they can say “the people have spoken (repubs regain majorities) and we can only get ‘such & such’ nominated because Warren is too controversial”. Even if the people voted 95-2 for Warren, hypothetically, they would still find excuses to NOT nominate her. Follow the money.

  49. If Elizabeth Warren can fix our economy, I’m all for it. This stagnant economy has been plaguing us for the last 3-4 years. We need someone who can really help us fix this.

  50. 98 Senators are millionaires. Many, multimillionaires. Two thirds of all Congress persons are millionaires. Many multimillionaires.

    Timmy is just waiting for a million dollar job at Goldman Sachs.

    What else do you need to know?

    P.S. A confession; I am completely in love with Elizabeth Warren and would follow her anywhere. It’s O.K. with my wife. She says that would at least get me out of under foot.

  51. The best and worst job in the world: being the POTUS.

    The second worse job is being a bank teller at any bank (large and small) of having to put up with whiney, spoiled, delusional customers.

  52. From Basel III: The finance officials agreed that banks would maintain a core “Tier 1″ — which refers to a bank’s main reserves — capital ratio of at least 6% of their risk-bearing assets, well higher than the 2% banks (4% including common stock) they had maintained prior to the financial meltdown. There would also be a 2.5% common equity buffer requirement. The G20 nations are expected to ratify the Basel III agreement at its meeting in November.”

  53. Why hasn’t Geithner named an interim head to the CFPB? Why hasn’t Obama named his pick?

    Because neither wants Warren. We know conclusively that Geithner doesn’t like Warren. Geithner is an obedient little lapdog for Goldman Sachs…. The Wall Street banks certainly don’t like Warren.

    Obama picked Geithner. He picked Summers, kept Bernanke and was welcomed Rubin back. Obama is a Clinton-style neo-Liberal. He doesn’t want Warren to head the CFPB. But he’s in a bind. He knows that anybody but Warren would be the nail in the coffin for any hopes he might have of re-energizing truly liberal voters.

    The basic fact is that Obama is not a liberal. He may not be much of anything but a low political opportunist.

  54. If you read Basel III you will find that most of the capital requirements are “in relation to risk-weighted assets (RWAs)” and since what is most wrong with Basel II are precisely the risk-weights, which for instance counts any investment or loan to a private triple-A rated client at only 20%, and which was precisely what drove the banks to stampede after the triple-A rated securities collateralized with lousily awarded mortgages to the subprime sector… and the risk weights have not been modified at all let me assure you that the Basel Committee still has no idea about what they are doing. Frightening!

    Basel III does mention that “These capital requirements are supplemented by a non-risk-based leverage ratio that will serve as a backstop to the risk-based measures described” but since that supplement seemingly will be small and what really counts are the marginal capital requirements for different assets Basel III does not provide a solution.

    Fact is that if a bank lends to a small business then it needs 8 percent in capital but if it instead lends that money to the government of a sovereign rated AAA to AA then the bank needs no capital for the risk-weighted assets since the weight is 0%… this is sheer lunacy!

    The members of the Basel Committee are all still so fixated with the gorilla called “perceived risk” so as to completely lose track of the ball.

  55. Now? You think he and Pete Peterson put out this blog because they’re just really nice guys?

    Sorry, I admire and respect your commentary, but it’s as if you haven’t been paying attention for the last year when you ask a question like this.

  56. More proof that this blog is just a cog in the propaganda machine, a pipe in the Mighty Wurlitzer: Simon has moved even more “populist” now. Not just working with Huffpo, but now Alternet too:


    Has anyone come up with the full text of this brief yet? Who asked her to write it to begin with?

    “Federal Communications Commission v. Nextwave Personal Communications, Inc. (2002) (brief in support of Official Creditors Committee)”

    Click to access Warren_CV.pdf


    (Anyone know how much Nextwave actually ponied up? How much they’ve made selling off the spectrum? Years ago the reports were talking about a $5M deposit. In the discussion above it looks like they might have received ultimately $6B worth of Spectrum)

    Why is this all very important? Our motherly hero, Mrs. Warren, the expert on bankruptcy, wrote a document for the Supreme Court that from all outward appearances (we haven’t seen it yet) looks like it supports the creditors of Nextwave. The short version is that they used the trick of bankruptcy to buy billions of dollars worth of wireless spectrum with money they didn’t have.

    Again, why was she involved with this? Who asked her to write the brief? Is it as bad as it looks?


  57. Quite frankly, I don’t CARE about the financial shenanigans you can cough up on Warren.

    From here on in – either you address the financial shenanigans that emptied out the savings of the 5 ladies I know to the tune of 1.5 million –

    MULTIPLE that by the thousands of others I KNOW have the same story even though I do not know them by name because they litter the USA landscape from sea to shining sea

    And then, maybe then, you’ll be credible as a ANALYST of the “problem”.

  58. Obama on Warren: “She’s a dear friend of mine. She is a tremendous advocate for this idea,”

    Those are things you say when you are **not** going to appoint somebody. :(

    But they are also things you say when you want to test reactions. If you want Warren appointed, write the White House.

  59. is she going to collect everybody’s financial records that were scattered around the world? didn’t think so

    what other country outsourced that kind of information?

    how did that help protect our security?

  60. The sad thing is that even if Warren is actually appointed as a shiny political bauble right before the election in order to get “liberal” votes, it will not matter that much in the long run, since the new consumer protection agency will not be independent but under the thumb of Geithner and the Fed. Even if Warren wanted to act like a true muckraking reformer, which is very doubtful, she wouldn’t be able to under the restrictive conditions of the new agency. Above all, the limited powers of the agency alone will never be strong enough to prevent another financial meltdown, so this is basically much ado about nothing, as Obama, Geithner, and Dodd know very well.

  61. Even the most financially literate of us can’t compete with contracts written by the armies of attorneys employed by the banks.

    Throwing someone in the water as a method of teaching him to swim – on pain of death – is a useless solution.

  62. @ Per Kurowski

    I agree with your industry comments but there is also a demand component to the subprime boom-bust that often goes overlooked—demographics with the baby boom generation becoming older than 60 years of age. Given a 60+ investing profile based on if “God doesn’t trust it (AAA); you do not invest in it,” the financial alchemist had to turn questionable subprime paper into AAA with the aid of compliant rating agencies and a lack of due diligence. There are no subprime innocents. One of Ms. Warren first tasks should be to qualify investors as to both capacity and capability. Getting rid of the “noise traders” will get rid of the “financial alchemist” as it would deprive them of critical mass.

  63. Stephen I completely agree with your comment but would like to add though that the prime reason why the alchemists sat down to work with such enthusiasm for producing the Potemkin triple-As was that juicy fruit of extremely low capital requirements for banks hung low before them by the Basel Committee.

    And if the Basel Committee intends to go on creating such temptations there is no Elizabeth Warren or anyone else that could stand in the way of such irresistible forces.

  64. @ Per Kurowski

    Yes—compliance is a reflexive proposition. Like his predecessors, W-Bush knew that a surplus of cheap capital could turn a porch carpenter into a developer to solve his economic problem.

    All policy proposals have consequences, however.

    I argue that rather than manipulating the cost of capital through the banking system, the same could have been accomplished by qualifying investors through the regulatory system in a manner similar to lowering the cost of insurance by taking drivers’ education.

  65. Obama hasn’t named his CFPB pick
    Geithner doesn’t like Elizabeth Warren
    Obama isn’t a real liberal

    Some of you need to realize that you’re going nuts. Warren will probably get the job and it will be during the next correction (which will be in the next two months). Best case, she won’t live up to expectations and the same excuses will be made. Worst case, she won’t see the coming inflation and her appearances will turn into sound bites for 2012.

  66. Change we can believe in? Seems I’ve heard that somewhere before. Of course Warren would be the best choice, but the question is whether the amount of change would be anywhere near enough, given the ratification of TBTF by the financial reform bill. In addition to regulatory capture and pressure from above, there will also be a lot of conscious and unconscious self-censorship by the new head because of his/her position in the administration hierarchy. The head will be hobbled from the very beginnning. And then, under a Republican administration, the agency head will have the job of Public Obfuscator. Regulation alone can’t prevent another meltdown. The creation of the new agency may even have the dangerous result of making many people relax too much and lose their vigilance. That’s certainly how Obama and Geithner will try to use Warren if they should choose her.

  67. If I interpret this correctly, she now has been appointed – or will be formally so next wk.

    Good news say I.

  68. Elizabeth Warren to lead Consumer Financial Protection Bureau, unofficially

    9/15/2010 09:22:00 PM – CalculatedRisk on

    From the NY Times: Warren to Unofficially Lead Consumer Agency

    “Elizabeth Warren, who conceived of the Consumer Financial Protection Bureau, will oversee its establishment as an assistant to President Obama, an official briefed on the decision said Wednesday evening.

    The decision, which Mr. Obama is to announce this week, would allow Ms. Warren, a Harvard law professor, to effectively run the new agency without having to go through a potentially contentious confirmation battle in the Senate.”

    “I think Ms. Warren is an excellent choice.”

  69. ” Warren would report directly to the president and the Treasury Secretary, a senior administration official and a Democratic official told CNN.”

  70. Yes, in other words, she will be a TOOL. Timmy and GANG, will see to that. She will have as much real power as Putin’s enemies in Russia. This move is analogous to BHO voting ‘PRESENT.’ How not to be cynical at this juncture. Utter disgust.

  71. you can’t directly report to two people

    and if you capitalize “Treasury Secretary”, shouldn’t you have capitalized “President”?

    she’ll run out of the WH like a 4 year old out of a disney ghost mansion soon enough just like Gov. Meg Whitman of NJ did when Bush put her in charge of the EPA (Bush just wanted to suck up Meg’s electrical fortune into the Enron scheme)

    Who knows what “secret” experiments the CIA will conduct in their fortress of the WH…are you hearing the voice yet, Liz?

  72. If I were her, I’d decline the “job”. They’ll end up writing and launching computer programs that do the opposite of what she will want to do before any “protection” department gets up and running….

  73. Warren is indeed a nightmare. Unvetted, unqualified, and not approved. Just another czar for the new regime. What is it now 45 or 46?

    Do you miss Carter yet?

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