Elizabeth Warren should thank the GOP.

How to protect your pockets.
March 24 2011 7:30 PM

The Vetting

How the Republicans cleared Elizabeth Warren's path.

Elizabeth Warren. Click image to expand.
Elizabeth Warren

I have no idea whether President Obama plans to nominate Elizabeth Warren as director of the Consumer Financial Protection Bureau. If you'd asked me a year ago whether he should, I'd have probably said no, on the grounds that she was too much of a lightning rod. Better to install somebody with a lower profile who can get confirmed, I'd have argued. And, besides (as I wrote in September), she had no real management experience.

Now I think Obama should nominate Warren. Partly that's because Warren, in her six months as de facto CFPB director (ahem, I mean "special adviser to the secretary of the treasury and assistant to the president") has demonstrated sufficient political and managerial skills (inasmuch as anyone can demonstrate such skills while running an agency that hasn't actually done anything yet). But mostly it's because Republicans have talked me into it.

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On July 21, seven federal agencies will transfer their regulatory authority to the CFPB. Even if President Obama were immediately to nominate Jesus Christ to be CFPB director, the Prince of Peace likely couldn't win Senate confirmation in the space of four months. That makes it virtually certain Warren will continue to preside over the CFPB as de facto director once it's empowered to issue regulations. Warren may even issue some. According to a letter from the Inspectors General of the Treasury department and the Federal Reserve, a leaderless CFPB is permitted, via Treasury Secretary Tim Geithner (Warren's boss), to exercise whatever regulatory authority existed elsewhere in the government before passage of the Dodd-Frank financial reform bill, which created the CFPB. A leaderless CFPB is not, however, permitted to exercise whatever new regulatory authority was created under Dodd-Frank.

In practice, this means that after July 21 Warren can issue rules governing banks, but she can't issue rules governing nonbank mortgage originators (whose lack of government oversight helped crash the financial system in 2008). That won't be an ideal situation for anybody. Republicans and the banks will be angry that the unconfirmed Warren is able to regulate banks, while Democrats and consumer groups will be angry that Warren is unable to regulate nonbanks. Clearly, it will be in everybody's interest that a new director be installed as soon after July 21 as is humanly possible.

Will President Obama give Warren the nod? Depends on whom you ask. The U.S. Chamber of Commerce's "CFPB Spotlight" said last week that Warren was "likely to get the nomination." But Rep. Barney Frank, D.-Mass., asked about Warren's chances a few days later, said "I think the president is too unwilling to make the kind of fight that you don't necessarily win." The Chamber doesn't want Warren to get the nomination; Frank very much does. The administration reportedly approached former Michigan Gov. Jennifer Granholm about the job, but she said no. Former Ohio Gov. Ted Strickland was said to be under consideration, but he told Bloomberg News that he hadn't been contacted about it. Former Treasury official Michael Barr, who was under consideration for the job last summer, took himself out of the running.

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