Treasury Secretary Timothy Geithner has expressed opposition to the possible nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau, according to a source with knowledge of Geithner’s views.
The financial reform bill passed by the Senate on Thursday mandates the creation of a new federal entity charged with protecting consumers from predatory lenders.
But if Geithner has his way, the most prominent advocate for creating the agency may not be picked to lead it.
Warren, a professor at Harvard Law School whose 2007 journal article advocating the creation of such an agency inspired policymakers to enact it into law, has rocketed to prominence since the onset of the financial crisis as one of the leading reform advocates fighting on behalf of American taxpayers.
Warren has been an aggressive proponent for the bureau in public and behind the scenes, working regularly with President Barack Obama’s top advisers and the Democratic leadership in Congress. Since 2008, she has overseen the Congressional Oversight Panel, a bailout watchdog created to keep tabs on how two administrations spent hundreds of billions of taxpayer dollars to bail out Wall Street while struggling to keep distressed homeowners out of foreclosure and small businesses from collapsing.
Yet while her work on behalf of a federal unit designed solely to protect borrowers from abusive lenders has been embraced by the administration, Warren’s role as a bailout watchdog led to strained relations with the agency her panel has taken to task with brutal reports every month since Obama took office: Geithner’s Treasury Department.
It’s no secret the watchdog and the Treasury Secretary have had a tenuous relationship. Geithner’s critics have enjoyed watching Warren question him during his four appearances before her panel. Her tough, probing questions on the Wall Street bailout and his role in it — often delivered with a smile — are featured on YouTube. One video is headlined “Elizabeth Warren Makes Timmy Geithner Squirm.”Story continues below
While her grilling of Geithner in September, over what members of Congress have called the “backdoor bailout” of Wall Street through AIG, inspired the “squirm” video, just last month Warren pressed Geithner on the administration’s lackluster foreclosure-prevention plan, Making Home Affordable. Criticizing him for Treasury’s failure to keep families in their homes, she questioned Treasury’s commitment to homeowners.
Warren’s persistent oversight is part of the reason for Geithner’s opposition, according to the source.
In addition, her increasing public profile could make it difficult for Geithner, who will oversee the unit until it’s transferred to the Federal Reserve. His role would involve trying to balance her advocacy on behalf of borrowers with the demands of the nation’s major financial institutions, his traditional constituency.
Geithner’s objections to Warren taking over that role also involve her views on Wall Street, sources say. The longtime professor believes the nation’s megabanks are Too Big To Fail and have been among the biggest abusive lenders in the country. Her toughness on giant banks is said to be a longtime source of tension with Geithner.
Obama’s top economic adviser, Lawrence Summers, is also said to have a strained relationship with Warren, though his stance on her nomination is not known.
Democrats in Congress have been among her most enthusiastic supporters. House Financial Services Chairman Barney Frank is one of many influential members who hope she’ll get the nod.
And while labor and consumer groups often butted heads with Geithner on various aspects of the financial reform legislation, they have lauded his support for strong consumer protections. Warren, however, has been referred to as a “rock star” among consumer advocates. Many have told HuffPost they’re hoping Obama picks her to head the new bureau.
Geithner’s opposition could have political implications for a White House determined to prove it’s gotten tough on Wall Street. Since March, Obama has devoted four of his weekly Saturday addresses to highlight and promote the consumer agency.
In March 2009, in response to a question during a town hall event in Southern California about the bailout for Wall Street firms and whether Obama supported tougher consumer protections on credit cards, Obama promoted Warren’s academic work:
“The truth of the matter is that the banking industry has used credit cards and pushed credit cards on consumers in ways that have been very damaging,” Obama said according to a transcript. “There’s a woman named Elizabeth Warren who’s a professor at Harvard who did a great deal of study around this. And she made a simple point. You know, if you bought a toaster, and the toaster blew up in your face, there would be a law, a consumer safety law, that would protect you from buying that toaster. But if you get a credit card that blows up in your face, that starts off at zero-percent interest, and once they kind of suck in the — buying a bunch of stuff and suddenly it’s 29 percent; and if you’re late two days, suddenly, you know, you just paid another $30, and all kinds of fine print that a lot of folks didn’t understand — well, somehow that’s okay.
“I think generally having some consumer safety, some consumer protection around credit cards, is important,” Obama added.
Three months later, the administration released its blueprint for how it wanted to fix the nation’s broken financial system. Warren’s idea for a consumer agency was a heavily-promoted part of it.
Warren, a Treasury Department spokesman and a White House spokesperson all declined to comment for this article.
Treasury Secretary Timothy Geithner is trying to block President Obama from appointing one of the best consumer watchdogs in the nation to lead the new Consumer Financial Protection Bureau created by Congress to rein in Wall Street.