Simon Johnson asks “Who is Afraid of Elizabeth Warren?” Zach Carter finds that editorial writer Mary Kissel is leading the Wall Street Journal’s opinion column’s attack campaign against Elizabeth Warren. Here’s their argument: “The consumer bureau is essentially a bureaucratic rogue. We’d like to see Congress kill the agency entirely. But at the very least Congress should remove it from the Fed, make it part of the Treasury and subject it to annual appropriations.”
Jesus wept. Listen, the Federal Reserve had an agency called “Division of Division of Consumer and Community Affairs.” We know this because on January 20th, 1998, the Division of Division of Consumer and Community Affairs circulated to the Governors a memo urging them to vote to “adopt a policy to not conduct consumer compliance examinations of, nor to investigate consumer complaints regarding, nonbank subsidiaries of bank holding companies.”
They followed this advice of the consumer affairs division of the Fed. Which juiced the subprime market through a regulatory arbitrage; regular banks had a rule that shadow banks did not, and bank holding companies suddenly were given a push to find creative ways to create nonbank subsidiaries off-balance sheet hidden from investors. This is a matter of fact. The Federal Reserve has always been involved with consumer protection; it’s just that they’ve done a terrible job of it, always treating it as subservient to making bankers happy and we need to re-conceptualize the role of it as it being the priority mission.
You know who else is involved with consumer protection? Everybody. The OCC, OTS, NCUA, Federal Reserve Board, FDIC, FHFA, HUD, VA, FTC and DOJ all have consumer protection in their mission. For all (except possibly the FTC, which lacks massive jurisdiction) it’s an orphan and subordinate mission. By consolidating regulators lenders that deal with consumers have a single, straightforward regulator to deal with, reducing burden and increasing clarity by providing a level-playing field. From the Roosevelt Institute’s Make Markets Be Markets conference, graphs courtesy of the Consumer Federation of America, you can either have this:
or this:
Also, quick: How many mortgages are there in the country? Put away the google, the short answer is that nobody knows. There’s terrible data in general, and terrible public data in particular, on the consumer lending market. Most of the debt data we have are aggregate data that the Fed puts together for macro models. For people like me who think we have a balance sheet recession, where the distribution of debt matters, having a BLS-like set of resources to pull trusted and consistent data would be awesome. And here’s another interesting thing about the CFPB: it has a mandate for research and data collection.
This anti-Warren rage never ends, though it always surprises me. This Tim Noah article is the best I’ve seen about the CFPB: Phantom Rogue: How can the CFPB be raging out of control when it hasn’t done anything yet? Read all of it. The GOP is going crazy accusing Warren of doing things when (a) the CFPB doesn’t exist and/or (b) the CFPB can’t do that specific feature anyway. The CFPB’s actions are subject to a veto vote from the FSOC. If anything, that makes its not independent enough, and certainly not a rogue institution.
I still think Warren is the best candidate for the job. The past several months have gone very well. So what causes this level of freakout?
Is it that she’s critical of Wall Street and the way bailouts were handled? That’s pretty representative of the country. Is it that she doesn’t assume entry-level convex optimization math proves that markets always work perfectly in a world with bad information, bailed out too big to fail institutions shaking hands with the government, in a world with power, in a world where capital structure and debt matter in a critical way, etc.? Warren uses economic analysis, and uses it well, but as the beginning of the discussion, not the end of it. I still don’t get it.
Aside: For those discussing if economics is a science, and are frustrated that educated people think there’s something shady about the way economics as a science is deployed in elite conversation, this post of Warren’s from a while ago about whether an economic statement is a question of fact or of law shows a sophistication in terms of working through the implications of economics.
Rortybomb 
Wasn’t it not so long ago that the same Republican interests who are now launching the joint attack on the CFPA and Elizabeth Warren were bemoaning the maze of regulation our poor financial institutions have to comply with?
Perhaps the problem is that Warren is far from the pliable non-entity they’d prefer leading this streamlined regulatory agency?
What a silly comment! Someone slap me – it’s pretty clear this is simply the Party of The Super Rich (and wannabe super rich) lobbying for laissez-faire capitalism again.
Despite the global meltdown these same, tired, old policies have just subjected us to – and continue to subject us to – apparently it’s still Groundhog Day.
It’s the maze of regulations and agencies that provides cover for corporations and lobbyists to create their loopholes. They like it that way. Simplicity will cost them money, either opportunity to boost it from consumers or avoid taxes.
What Lucy said.
And what you said: “Warren uses economic analysis, and uses it well, but as the beginning of the discussion, not the end of it. … shows a sophistication in terms of working through the implications of economics.”
Unlike so many others– at random, say my new governor who refuses to allow us to tax Marcellus shale gas production and (purely by coincidence of course) got many hundreds of thousands in campaign contributions from gas producers– Warren isn’t bought and paid for.
You said it: When your model for increasing quarterly “earnings” depends on finding loopholes and relying on regulators to wink and look away, someone like Warren is scary.
You are Lucy are both correct. The GOP, and Wall Street, don’t want to change the way the operate. To them, any rules at all are a sham of a travesty. They really want to take us back to 1840(or the age of the Robber Barons). And they won’t be happy till they get there. And they don’t care of they destroy the country in the process.
“… there’s something shady about the way economics as a science is deployed in elite conservation … in a way that moves the conservation forward.”
Was this a Freudian slip? Maybe a subliminal comment by Autocorrect? Pretty funny in either case.
Sigh. Spelling mistakes like this is why this blog can’t have nice things.
Good to know conservation was on your mind … ; )
Didn’t want to be a scold. Just thought the mistaken spelling was more meaningful than the intended one. And more amusing.
I came to this post late, but find it very informative and alarming. I respond to address some of the commenters: While I agree that the GOP is behaving true-to-form about this matter, I strongly disagree with the line that the the GOP alone is the party of the super-rich. The Administration, with Turbo Tim as the vehicle, has been attempting to marginalize Warren from the get-go. Reason: Obvious. The Dems are captives of Wall Street just as much as the GOP. As some wit put it once, the GOP wants the rich to have it all. The Dems want the rich to leave just enough crumbs to keep the peasants from revolting.
Well put, and I agree completely. Both Dems/Reps are falling all over themselves to prove each is a better sycophant.
The examples are manifest, but witness the near hysteria over deficit spending, the debt – and the tragic consequences. … and yet, we persevere in our perverseness. God Forbid we don’t bow low enough to the bondholders. BTW can someone explain to me what they WOULD buy if not US debt? Is there a real alternative? I think not.
What ever happened to job creation? I thought it was all about jobs, stupid … or maybe that was just an election-season Hymn. ; )
I agree that most politicians are Wall Street captives because a lot of campaign money comes from that sector. But where is the solution? We need a president that doesn’t care about being re-elected and is only concerned about the wellbeing of the people of the United States.
Who in the past have we had like that? I really can only think of 1 or 2 – FDR and maybe JFK – though JFK was concerned about being re-elected, if he wasn’t then he wouldn’t have been in Dallas that fateful day.
Federalize all election campaign funding.
There was a Professor of Urban Studies/City Planning at MIT named Kevin Lynch who wrote that a lot of bad behaviors/policy occurs because they think that there is an “away” that they can go to.
There is no away, but obviously some people think that there is.
Is it that she’s critical of Wall Street and the way bailouts were handled? That’s pretty representative of the country.
True, but is it representative of finance industry insiders? Maybe the industry is evaluating her value over replacement nominee assuming that the replacement nominee is someone more like Bernanke or Geithner. In which case they may well be accurate in concluding that her VORN is negative (for them) — i.e. positive for consumers. (The interaction is not strictly zero-sum but the most politically salient parts are. Avoiding Pareto-damaging regulation is mostly a matter of pointing out how it is Pareto-damaging; after that, nobody wants it. But most regulation, especially the controversial sort, is Pareto-incomparable; it helps some people but imposes costs on others.)
Especially if it’s widely perceived that the finance industry were the ones to block her nomination — that would be almost guaranteed to move Obama in the direction of someone more industry-friendly for the next try. He doesn’t score any political points with a succession of failed nominees, after all. (Well, he might, but only if he can defend them publicly and use the obstruction to demonize the industry’s defenders. He doesn’t seem too keen on that sort of economic populism.)
Chris, if you’re astroturfing, you’re going to have to make more sense before anyone pays attention. If you’re not astroturfing, I’ll pray for you.
Warren is the only nominee for this job. But that has no bearing on her actual appointment – Berwick is being held up as the nominee for CMS head for similar gratuitously political reasons.
Competent government just isn’t in style.. Fun fact of the day: The FY11 cost of GWB’s Medicare Part D is double the cuts proposed by Republican politicians.
Warren is the only nominee for this job.
Now, sure. Obviously that wouldn’t continue to be true if her nomination were successfully blocked, so I don’t understand why you seem to think this is some kind of point, or that people thinking about the desirability or undesirability of confirming Warren don’t think about who else would be nominated if Warren is not confirmed. Of course they do.
I don’t understand all the math, but if there are other agencies that also protect consumers, I would like to know what the corporations fear Elizabeth Warren will do that the other agencies won’t do. There’s usually a good reason for a sustained smear campaign.
For instance, Carl Rove and the Chamber of Commerce poured a million dollars into the 2010 California Attorney General’s race alone, against a relatively unknown democrat candidate. I asked myself the same thing. In the same election there was also an initiative, paid for by the Koch brothers, that would have eased or removed many of California’s strict pollution laws. It looked to me and many others as if they were poised to move in large corporate polluters, whom, if sued, would have an attorney general at their beck & call. These sociopaths poured other millions into various California seats, dreaming they would soon move in and set up shop, poisoning our water and air, raping the environment and plundering what is left of our economy before going on to greener pastures. But they were foiled at the voting booths.
Now sock puppets hired by them through New Media Strategies and other such online “reputation control” groups are on the online discussion groups to voice the corporate point of view, as if there were anyone behind the smear Elizabeth Warren campaign other than the corporate wealthy and their sluts in the republican party.
Beautifully, truthfully stated. I think a special prosecutor should be enpaneled to investigate all of this treasonist unamerican behavior by the sluts in congress and their backers.
I don’t think they ever will. Please read the following entire thread, carefully, especially comments by mikej77 and tell me what you think. http://goo.gl/XoUSo