President Obama has decided to name former Ohio Attorney General Richard Cordray to lead the Consumer Financial Protection Bureau, which is set to launch this week. In doing so he bypassed Elizabeth Warren, the Harvard professor who has been one of the nation’s leading champions for reform on behalf of those ripped off by high credit rates and shady mortgages.
Not to mention the bureau was her idea.
It was Warren’s brainchild to put a “cop on the beat” in the wake of the epic failure by federal regulators who fiddled while the economy tanked in 2008. Warren maneuvered the idea of a consumer watchdog regulator all through the congressional marshes last year as part of the Dodd-Frank Act. She took the heat from the banking industry and members of Congress opposed to the regulation of their favored donors. And yet instead of nominating her last fall, Obama merely made her an “Assistant to the President” and a “Special Advisor” reporting to the Secretary of the Treasury, Timothy Geithner, the banking industry’s coddler-in-chief.
And now Obama is naming Cordray to be the bureau’s leader instead of Warren.
There is no doubt that the extraordinarily talented Mr. Cordray can run it, but he would probably be the first to admit that he is no Elizabeth Warren. A 62-year-old grandmother from Norman, Oklahoma, Warren understands with precision the plight of “middle class families,” does not suffer fools and makes the financial industry quake—arguably a job qualification for this position.
Yet one look at last week’s controversial cover of Bloomberg Business Week may hold clues as to why she was passed over. A picture of Warren is surrounded by cartoon blurbs reflecting the whispering war in the corridors of Washington, DC. The blurbs (though not the internal story) label Warren as a “smug,” “arrogant,” “know-it-all.” Warren, who is a rock star on the stump and speaks to sold-out crowds, is too cool for school. Schooling, that is, in the ways of Washington—where you have to kiss up to the Big Boys in charge and go along to get along.
When I met with both Warren and Cordray earlier this year, it was clear that Warren has been a passionate advocate for the bureau. One glance at her schedule, which she posts online, shows her work day and night to meet with stakeholders throughout the country. She is “wicked smart” as they say in Boston, and her brilliance shines through in her vision for how this bureau can work to help the market by providing consumers with better information and by assisting business to reform confusing financial products and practices that have not served our economy well.
Warren, who was in the Treasury building when we met, is one of the few high-profile women in this field with an office there. The milieu in which she operates is exceedingly male, and both Warren and her bureau have been under siege since the mid-term elections. The banking industry went on the offensive in the newly Republican-controlled House to undo or weaken provisions in Dodd-Frank. These assaults on the legislation include an attempt to subject the bureau’s budget to the political appropriations process and an attempt to dilute its regulatory potential by replacing the position of a single director with a five-member commission sure to delay or destroy regulatory initiatives.
And even though the Consumer Financial Protection Bureau is not yet operational, Warren has been hauled up to testify on the Hill repeatedly. One look at the recent May 24 or July 14 House hearings shows the unusual partisan hostility, even by Washington standards, to which Warren has been subjected. One representative practically called her a liar, and others degradingly demanded she answer “yes or no,” not letting her finish her sentences and using her as a human piñata to make their partisan talking points for the cameras. Several members of Congress felt compelled to apologize to Warren for this incivility.
What is the lesson here for people with good ideas who seek to do the right thing and run with their reform all the way to DC? If you are not acceptable to the big banks and their industry lobbyists and if you are an outspoken advocate considered “too arrogant” (query whether they really mean “a smart female”) by some members of Congress, there is no chance that you will be in charge of your good idea. Go home Warren. You have been dismissed by the predominantly male powers that reign on Wall Street and in Washington.
Warren’s dismissal sends two demoralizing messages about change agents in Washington, DC. First, if they are women in possession of both a brain and a backbone, they can be portrayed in the media as a “know-it-all" and handed a pink slip rather than a post. Second, if they get too close to actual authority, Congress and its status quo defending corporate contributors will beat them up and then the president will walk away from them.
This is the same president who came to Washington to change the tone and make things better for “the middle class.” Instead, on a signature issue, he has made a politically weak, substantively bad decision. He has caved to banking interests and fiercely partisan Senate Republicans. And, despite widespread consumer anger and frustration at TARP and the banks, he walked away from a first-rate opportunity to have a high-profile nomination fight over someone who embodies what he claims are his principles, at least those he ran on, to lead this country.
The president, who has a smart wife and two daughters, has chosen a man junior to Warren—who, read the tea leaves, is a too-smart, too-determined woman the financial industry doesn’t want looking out for the American consumer.