The Democrats in Congress and the Administration have succeeded in doing what they set out to do. After long months of shadow boxing and pontificating, they finally produced a financial reform that has a patina of real reform without unduly intruding on the gimmicks endlessly employed by Wall Street’s self-serving cash machines.
This legislative product, party strategists hope, is so modest in its outlines that Wall Streeters will continue to pour money into Democratic coffers — money that can be used to purchase TV ads for the upcoming mid-term elections in which Democratic candidates say naughty things about Wall Street. With Tim Geithner, The Street’s man at The Treasury, put in charge of writing the regs that will turn new reform law outlines into day-to-day regulation, such a hope will almost certainly become reality.
But there’s still a problem. The problem is that one part of this tepid reform might actually end up having enough teeth to seriously force a change in Big Bank ways of doing business, and horror of horror, significantly cut into their bottom lines. Their bottom lines! This problem’s name is Liz Warren.
A bit of background here. Part of the new financial reform package is a consumer protection agency. This in itself is not a problem for Wall Street and financial services businesses generally. Washington and state agencies of all kinds, supposedly established to offer needed protections of one kind or another, have proven easy to manipulate.
Beginners fight regulation. The pros have learned to turn regulatory agencies to their own advantage, acting as useful beards that give the public the illusion that government is serving their interests, and not the interests of those supposedly being regulated.
We saw this clearly with the SEC over the years. The EPA. And most recently, very clearly with the agency that was supposed to make sure oil drillers didn’t mess up the environment too badly. Whatever the original mandate of these agencies, their leadership quickly tended to come from the industries being regulated, or the leaders were given sinecures in these industries after their “public service” was completed in order to make them compliant and amenable.
A new consumer protection agency to regulate the financial services industry and its Wall Street upper crust? No big deal. Except when it might be run by someone like Liz Warren.
Ms. Warren, though a professor at Harvard, hasn’t fallen under the spell of the best-and-brightest like our current President and that Larry Summers person who for incomprehensible reasons Mr. Obama continues to listen to on economic matters. Elizabeth Warren is thus the real deal when it comes to protecting consumers, unsullied and not snookered by the twaddle that holds economic policy generally in thrall in this country today. The twaddle that says more and more has to flow to a few at the top before any can safely and sensibly be allowed to be distributed among the rest of us.
She is not just a vocal consumer advocate (something not unusual inside the Beltway Bubble these days). She is a real advocate for consumers, a person who if heading a new consumer protection agency would work hard to really protect consumers from the machinations of financial sharpies.
What, then, from the Beltway perspective, is the specific challenge represented by a Liz Warren as head of a new consumer protection agency? It was summed up nicely in a story about her chances for getting the job that appeared in a recent Bloomberg web site story. Here’s the skinny as noted in this story:
“Warren has drawn opposition from…financial industry representatives who…say her consumer advocacy would make it difficult for her to negotiate fairly. Senator Christopher Dodd warned that a decision to nominate…Warren to head a new consumer agency could [thus] produce a protracted confirmation fight.”
Think about this. Think what it means. Even a largely bought and paid for congress has recognized that a financial industry that badly hurt so many consumers so badly over time has to be far more seriously regulated. But this same congress isn’t willing to fight to put a person in charge of this new agency who might offend the industry that needs more serious regulating.
And think about this as well. Inside the Beltway they now believe, as they have been taught to believe, as they have been bought to believe, that the job of regulatory agency enforcers is not enforcing but negotiating. Think hard about this particular worldview.
A cop catches a thief breaking the law, robbing a bank. The robber has stolen $10,000. The robber says OK, you got me, I’ll only keep $5,000. The cop, a local government negotiator, says no way, pal. You can only keep $3,000. Don’t be unreasonable, replies the robber, it required a lot of work to set up this heist, $4,500. Uh, uh, answers the cop. $3,850 and you’re getting a bargain. Jeez, says the robber. You’re killing me. $4,250 and I’m dying here. And they settle on $4,100.
That’s how Beltway types view regulations these days. As the starting points for negotiation. While the likes of Liz Warren might actually simply enforce the regs.
This woman and her kind are what the Norwegian playwright Henrik Ibsen had in mind with his 1882 play, “An Enemy of the People.” These enemies of a political establishment so mired in hypocrisy and self-deception and deeply rooted bad policies that anyone working honestly and honorably for the public good is seen as an irritant at best and an outright danger at worst.
I hope I’m wrong. But I don’t think Elizabeth Warren is going to make the cut. I don’t think she will get the agency head appointment for which she is so obviously qualified and so badly needed.
But know this, Ms. Warren, if you chance upon posts such as this one. Your worth is recognized by many. Your efforts on our behalf much appreciated. And one day soon, if not very soon, the kind of integrity and devotion you represent will again hold sway in Washington.
More from this writer at wallstreetpoet.com