Issue of the week: Picking a consumer watchdog

last updated 8 January 2015

She hasn’t been nominated yet, but just the possibility that Elizabeth Warren could head the Consumer Financial Protection Bureau is already stirring passions, said Michael Scherer in Time. The new agency was first proposed by Warren, who currently serves as Congress’ chief overseer of the bank bailouts. It’s central to the Obama administration’s financial reforms, with a mandate to monitor the marketplace for misleading or predatory financial products, while ensuring that credit keeps flowing to consumers. Of the three most likely nominees—Warren, Assistant Treasury Secretary Michael Barr, and Justice Department attorney Eugene Kimmelman—Warren, 61, is by far the most polarizing; she’s “as beloved by progressive activists as she is distrusted by business lobbyists.” And that gives great pause to a White House that’s anxious to make peace with the business community.

Bankers are right to be nervous, said Floyd Norris in The New York Times. This is the woman who once wrote that “merchants of financial products have shown themselves very willing to take as much as they can by any means they can.” But comments like that are precisely why the White House should pick Warren, even at the risk of a bitter confirmation fight. As the bureau’s first head, the blunt-spoken Warren would set a tone of aggressive consumer advocacy. She certainly has made “all the right enemies,” said Andrew Leonard in Salon.com. Alabama Sen. Richard Shelby, who “opposed the creation of an agency looking out for consumers in the first place,” recently accused Warren of—horrors—“trying to change everything.” Nominating Warren would show that the administration is serious about the rights of financial consumers, which certainly would cheer the dispirited Democratic base. In the long run, the White House would win politically from this fight, even if Warren isn’t confirmed.

No one wins if the nominee can’t do the job, said Neil Irwin in The Washington Post, and Warren may be in over her head. Even some “pretty liberal” financial regulators have serious doubts that Warren, a Harvard law professor who has never managed a large organization, has the skills to “hire hundreds, maybe even thousands of people” and “create an administrative structure from scratch.” Then there’s the question of her ideology. She’s undoubtedly keen to warn consumers about “unscrupulous, exploitative, or dangerous loans and other financial products.” But this is someone who has written that “financial innovation” has produced only “incomprehensible terms and sharp practices.” That sort of mistrust of creative lending could create an excruciatingly tight credit market where “only rich people can buy a house” and “middle-class people can’t handle unexpected expenses by putting them on a credit card.”