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Is Elizabeth Warren really the best pick to run the new consumer finance agency?

By Neil Irwin

Liberals across the land are advocating vehemently for Elizabeth Warren to run the Consumer Financial Protection Bureau created by the soon-to-be-signed financial reform bill. Warren, of course, has been the chief watchdog of the financial bailout, frequent thorn in the side of Timothy F. Geithner and other architects of said bailout, a leading scholar on the rise of--and problems caused by--America's consumer debt overload, and a pioneer of the idea of creating such an agency to begin with.

(For a sense of the pressure from the left that President Obama is facing to appoint Warren, here is a petition in support of her candidacy from, and posts advocating her candidacy from Paul Krugman, Matthew Yglesias, Annie Lowrey, and the Post's own Ezra Klein).

I've talked to more than a few people in the world of financial regulation over the last few months, some of them pretty liberal, who are wary of this idea. Here is some of their thinking--and some of the concerns and questions that Warren's supporters would do well to answer as Obama starts to consider his pick.

There are two questions in play in evaluating candidates for this, or, frankly, any high government job. First is whether their ideology would lead them toward decisions that are good public policy. And second is whether their management abilities and personal styles are a good match for the position.

On the first point, the new consumer financial protection regulator will need to balance the protection of consumers from unscrupulous, exploitative, or dangerous loans and other financial products with the benefits that come from financial innovation. We want a world in which fewer people end up in way over their heads in debt or face ridiculous financial fees. But we also don't want a world in which only rich people can buy a house, middle class families can't handle unexpected expenses by putting them on a credit card, and the 21st century equivalent of the ATM will not be invented because a regulator stands in the way.

Warren understands better than almost anyone else on the planet the first set of concerns. It's less clear how attuned she is to the second set. Of course, the same question needs to be asked about the other reported candidates for the job, the Treasury Department's Michael Barr and Justice Department's Gene Kimmelman, but Warren is the one who is attracting 100,000-plus endorsements through an online petition.

On the second question, about management style and personal qualities: Warren has an exceptional track record as an intellectual and as a public spokeswoman. But those are only a small slice of the responsibilities of an agency head. The leader of the new consumer financial protection bureau will need to hire hundreds, maybe even thousands of people, create an administrative structure from scratch, and oversee what is likely to be a long and arduous process of writing regulations that will govern millions of transactions. He or she will need to be sufficiently savvy in the inter-agency rulemaking process to avoid getting rolled by other regulators, particularly Sheila Bair at the FDIC and a newly named vice-chair for supervision at the Federal Reserve. Then there's the more basic task of maintaining good relationships in the White House and on Capitol Hill.

Looking at Warren's CV, it appears that her current job, as chair of the Congressional Oversight Panel, is her most extensive experience in or around government (she has also served on the FDIC's Committee on Economic Inclusion, among other advisory roles). She may well be an extraordinary manager who can finesse the policymaking process and who would have as deft a touch at managing an agency's internal politics as she is at managing her public profile. But given that she doesn't have that experience--or much policymaking experience at all--on her resume, the burden of proof will likely be on she and her allies to make that case.

By comparison, Barr, held a variety of jobs in the Clinton administration and has been the assistant Treasury Secretary who spent the last 18 months negotiating with Congress over the financial regulation bill. Kimmelman, was the top lobbyist for the Consumers Union for 14 years before joining the Justice Department, and also served two years on Capitol Hill and nine years working on policy matters at the Consumer Federation of America.

In other words, the question that President Obama and his aides are likely to be asking as the president moves toward a decision will be, "Will Elizabeth Warren be as effective as a bureaucrat as she is as a guest on the Daily Show?"

By Neil Irwin  |  July 19, 2010; 9:17 PM ET
Categories:  Consumer Financial Protection Bureau , Financial regulation  
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We are wondering what kind of consumer protection bureau will be able to help us and stop our 5 year ordeal!

We received letter from our Representative Barbara Lee on the day FinReg passed through the Senate, stating that there is nothing her office will be able to help us. Clearly, FinReg means nothing to her. What a joke about rebuilding the integrity of our financial system and protect American general public!

We filed complaints against Wells Fargo 's appraisal and mortgage loan fraud with Office of Comptroller of Currency, Barbara Lee, Dianne Feinstein, Barbara Boxer and Harry Reid in 2006. In 2006, with overwhelming evidence, we were told that Wells Fargo did not commit appraisal and mortgage fraud against us.

We spent 10 months from June, 2006 to March, 2007, trying to convince everyone that Wells Fargo made the mortgage loan to us based on hugely inflated appraisal. No one cared or bother to listen.

In March, 2007, after clearly indifference from Wells Fargo and our regulatory agencies, we filed the lawsuit against Wells Fargo and continued to follow up with OCC and senators. After we filed the lawsuit, OCC and all senators told us that they can't make any comments on our complaints since it is in litigation.

The irony is that should Senators made sure OCC do its regulatory job, we don't even need to file lawsuit. On top of it, should OCC take action upon our alerts two years before the housing crisis, how many homes could have been saved. How many wrongful foreclosure could have been prevented?

All our senators voted for FinReg, but none of them cared about homeowners beig defrauded by Wells Fargo and have no intention to protect homeowners like us or future victims or hold Wells Fargo accountable for defrauding homeowners.

Wells Fargo committed prosecutable crime against us. We lost our home. Something is wrong with this picture. Here are the facts.

1. it is illegal for Wells Fargo to make mortgage loan to us based on hugely inflated appraisal.

Fact: - Wells Fargo's fraudulent appraisal valued our home at $718,000
- Wells Fargo's own review appraisal valued our home at $475,000
- Nevada Attorney General's office suspended the appraiser's license for committing appraisal fraud on our home.
- Nevada Appraiser Licensing Board mandated the appraiser to complete appraisal fraud course before regaining his real estate appraiser license.
- Nevada Revised Statue NRS 205.372 states that it's category C felony to make mortgage loans based on fraudulent appraisal.
- Cases of Attorney General's indictments against attorneys, loan brokers for teaming up make fraudulent loans to defraud homeowners.

2. it is illegal for Wells Fargo to wrongfully foreclose our home based on fraudulent appraisal and mortgage loan.

You can find all the facts on our website. www.wellsfargomortgagef

Posted by: WellsFargoFraudVictim | July 19, 2010 9:30 PM | Report abuse

Find out which candidate the Republicans hate the most and pick her.

Posted by: Anonymous | July 19, 2010 9:34 PM | Report abuse

The best thing that Obama could do for the Democrats going into the midterms is to pick someone who stands up for the middle class against the Big Banks and that person is Elizabeth Warren.

What will then happen would be a HUGE FIGHT with Democrats vs Republicans and the American people would see which party is for the people vs the party of Wall Street and special interests.

Picking Elizabeth Warren would RALLY THE DEMOCRATIC BASE for the midterms.

Posted by: Anonymous | July 19, 2010 9:58 PM | Report abuse

She is the one, by far. No contest. The heck with the banks and cc companies.

Posted by: axolotl | July 19, 2010 10:09 PM | Report abuse

She's a Harvard Law professor. It seems the Obama Administration can only appoint Ivy League types. How about appointing someone from the real America - maybe someone from Nebraska or West Virginia (or some similar place) who went to a public university. We've had enough Harvard appointments.

Posted by: index1 | July 19, 2010 10:26 PM | Report abuse

"The leader of the new consumer financial protection bureau will need to hire hundreds, maybe even thousands of people..."

Problem...this will cost millions in taxes. And all those people have to do something to justify their existence, so they'll be drafting regulations, investigating, and costing businesses millions. And then, in the guise of "protecting" people from themselves, they'll make it more difficult for lower middle class people to get loans or other financing. After all, you can't trust THOSE folks to use common sense, right??? I'd hate to be a Pawn Shop owner with this agency looking over my shoulder. (Maybe pawn shops will be prevented from existing...)

In examining the "fraud" documents put together by one of the commenters, Wells Fargo appears to have had an appraisal agency (not a Wells Fargo employee) perform an appraisal. Wells Fargo lent money to the mortgage applicants based on the appraisal....they're complaining that WF shouldn't have approved the mortgage amount. So now they're saying its Wells Fargo's fault that they were lent so much money due to a fraudulent appraisal. Now that's taking responsibility. If they didn't do their own due diligence, shame on them. So if at the time a government agency wouldn't have permitted them the loan, would they have accepted the ruling??? Especially if the housing market wouldn't have collapsed for another year??

Posted by: eeterrific | July 19, 2010 10:30 PM | Report abuse

@whether their ideology would lead them toward decisions that are good public policy. And second is whether their management abilities and personal styles are a good match for the position ...

good for public policy ... hmmm
balance the protection of consumers from unscrupulous .. BALANCE ... I dont want BALANCE I WANT A GREATER WEIGHTING GOING to the PEOPLE not our RULERS the BANKS ..
ELizabeth Warren is a weighted input response from the PEOPLE's perspective ... not the BANKS they own are Politicain' s as it is she is OUR VOICE .

the first thing you need to know ... is that you are in a war .. the BAnks know we are at war .. the People have yet to discover this ...

so the Banks got Bernanke re-appointed int he face of opposition from the people ... the FED audit was beat back by THE Banks .. Financial Reform has been written by the Banks to REgulate the BAnks .. what the People wanted regarding regulations was not included in the Final "reform" bill ...

The BIS/IMF/FED SDR printing BANKS need to be kept in check with a voice from the People as the politicians are purchase ... supporting on a % basis the BANKS and not the People .. and you call for BALANCE ... show me the Balance is what has been so that it makes sense that we need balance now ...
we need a weighted input response from the People pushing back against the BANKS.
We need and want her voice is not like WE THE PEOPLE can
amend to the Constitution allowing for referendums on the Federal Level .. allowing us a voice at the table as we recenter what is ...
everything changed after 911 and everything changed after the US taxpayer was REQUIRED to bailout the WORLD economy ... we will have a voice in time .. if not now when if not Elizabeth Warren who ?

Posted by: AmericanSpirit | July 19, 2010 10:59 PM | Report abuse

"But we also don't want a world in which only rich people can buy a house"

What on earth makes you think this is a risk? As another commenter said above, it's the CONSUMER advocate. Pretending she would endorse regulations like that is just a straw man argument. Even "just asking" the question is silly.

"and the 21st century equivalent of the ATM will not be invented because a regulator stands in the way."

Huh? I'm pretty sure that no financial regulator could stand in the way of some tinkerer in a garage somewhere inventing a way to make a machine spit out money. If you meant "getting it approved," well, I haven't noticed a lot of new inventions getting suffocated by regulations lately.

If banks want to push a new "innovation" like adjustable-rate mortgages, let them go ahead and make their case! I trust Elizabeth Warren to decide whether a new product is like high-fat ice cream or more like a nuclear bomb.

Posted by: AmandaWB | July 19, 2010 11:30 PM | Report abuse

Oh, and Elizabeth Warren is from Oklahoma. I'd say she has a pretty good grasp of *both* Americas -- the rural and the elite. And isn't that what we want in Washigton?

Posted by: AmandaWB | July 19, 2010 11:48 PM | Report abuse

to the author--re: your concern that Warren doesn't understand that we don't want only the rich to have nice houses and that middle class families should be able to handle unexpected expenses, etc.--Warren's book (written years before she was a public figure) is called "The Two-Income Trap". Her experience is in protecting the middle class more than anything else.

to index1--Before she taught at Harvard, she was a young married mother helping to put herself through college and law school. She was also a Methodist Sunday School teacher in Oklahoma. And though she *taught* at Harvard, to my knowledge, she does not hold a degree from any Ivies. She's a great (lower?) middle class/rural success story. So your comment basically described Ms. Warren. .....shouldn't you be championing her??

To eeterrific--You bemoan the evaporation of pawn shops? Really? Do you know what they do? (or are you a troll who owns one??) Because, yeah, HEAVEN FORBID. Additionally, Wells Fargo regularly issues lines of credit to institutions who do not themselves adhere to...I can't remember the acronym/bill, but essentially those with interest rates it would be illegal for WF themselves to apply to loans. It may be allowed under the letter of the law, but that clearly violates the spirit, and they do this knowingly. So mind their bedfellows.

Posted by: greenspencer | July 20, 2010 1:05 AM | Report abuse

Appointing Elizabeth Warren as head of the new Consumer Protection Agency is definitely the right thing to do. What any agency of this type needs is a leader who speaks for the weakest of us all and provides a counterbalance to the powerful banking lobby. Ms. Warren's command of the financial industry and ability to explain it in layman's terms are vital to the American people.

As with any great leader of her intelligence I'm sure that she will surround herself with a team who have the skills that she may be short in. The very fact that there is such hostile opposition to her is proof enough that she's the "man" for the job. To appoint anyone else would be a shame . . . and a sham.

Posted by: skviles | July 20, 2010 6:49 AM | Report abuse

A mainstream Washington Post hack writes an anti-Warren piece. Didn't take long.

Posted by: kingsbridge77 | July 20, 2010 7:02 AM | Report abuse

If anonymous sources are concerned about Warren's management experience, then appoint an assistant director with a strong management background. That's what assistant directors are for.

Posted by: gdcassidy1 | July 20, 2010 8:37 AM | Report abuse

The administration that made their first staff pick to be Rahm Emanuel has never seriously considered picking Elizabeth Warren, and she will not be picked. Did you ever seriously think she would be picked? Do you believe in the Tooth Fairy?

Posted by: Anonymous | July 20, 2010 11:13 AM | Report abuse

It behooves our Iowa Senator Harkin to back E. Warren for the appointment to head the Consumer Protection Agency, in spite of the Treasury Sec's negative response to her.

If Sen Harkin does not respond with some help for E. Warren, I can see considerable erosion in his support from Middle Class Iowans.

Posted by: Anonymous | July 20, 2010 11:54 AM | Report abuse

We need Elizabeth Warren to stop CitiMortgage from foreclosing on homes that were promised reduction in high interest rates then continued to collect from homeowners, followed by foreclosure. What happened to mortgage bailout money designed to help homeowners who were deceived by banks? No one is paying attention.

Posted by: Anonymous | July 20, 2010 12:13 PM | Report abuse

What we need is someone who can help to lead this country financially. It'd be great if people could just go about their daily lives without having to take the extra time to become educated with the mortgage, banking and house industry. But right now that's not the way it is. Although it's difficult to find right sources of information out there. I myself use and feel it gives me the best of knowledge and that's what this country needs.

Posted by: Anonymous | July 20, 2010 12:16 PM | Report abuse

RE: Someone needs to not think about the children

EEEEK EEEEK EEEEEK. Oh my goodness. Oh my goodness. What we need is another milquetoast, or right-of-center type at the top - just like the Milquetoast-in-chief, Don't we, WP?

Posted by: Anonymous | July 20, 2010 4:44 PM | Report abuse

As other commenters have noted, the rote "thinking" of . . .

"But we also don't want a world in which only rich people can buy a house, middle class families can't handle unexpected expenses by putting them on a credit card, and the 21st century equivalent of the ATM will not be invented because a regulator stands in the way."

. . . is silly.

Silly also characterizes the snark . . .

"'Will Elizabeth Warren be as effective as a bureaucrat as she is as a guest on the Daily Show?'"

Neil Irvin ought to be ashamed of himself.

Posted by: fredbrack | July 20, 2010 5:03 PM | Report abuse

In this glib and unflattering posting, Neil Irwin demonstrates his allegiance to politicians and bureaucrats rather than the American public. One of the primary qualifications for the head of a Consumer Protection Agency should be independence from the very systems, commercial and government, which allowed the consumer abuses which the agency is enacted to curb. None of the other posers being discussed for this post would have even considered such a bold agency were it not for Professor Warren. To nominate anyone else but the author of the concept is folly, a further capitulation to an all-powerful banking industry lobby and a slap in the face to the American Public. -- Jim Wells

Posted by: Wellspring | July 20, 2010 10:26 PM | Report abuse

The concerns about the appointment of the Administrator for the Consumer Financial Protection Bureau arise because of the bill that is likely to become law delegates too much authority to the Bureau. To maintain the rule of law, the requirements in the law should be clearly defined. Authority granted to the executive branch should also be clearly defined with clearly defined limitations. When broad discretion is given to the executive branch, the legislation undermines the rule of law and public policy is established by the rule of men (people). Experience shows that over time, the rule of men fails to produce the intended results.

One need only look at the Glass-Steagall Act (commercial banks and investment banks must be separate). For 60 years, this requirement prevented banks from becoming "too big to fail" without an army of bureaucrats. Responding to pressure from the larger banks, Congress repealed the requirement in the late 1990s. Result: some of the very banks that lobbied for repeal were among those that were bailed out. The rule of men (the bureaucrats) were helpless. Yet, restoration of Glass-Steagall wasn't even offered as an amendment to the 2300+ page bill.

We now appear to be making the same misstate with the Consumer Financial Protection Bureau. Consider Mr. Irwin's statement, "First is whether their ideology would lead them toward decisions that are good public policy." Good policy should be established in the law (rule of law), not by the burearcrats. This is a legitimate concern because public policy is not established in the law.

The ironic part is that Professor Warren clearly pointed out the problems in the lending industry which inferred the obvious requirements (should have been in the law) to the inherent "race to the bottom" in adhesion contracts. However, I have not found any recommendations from Professor Warren for requirements in the law that would maintain rule of law in addressing the consumer protection aspects.

The problem is with the legislation, and maybe the mindset of Congress to grant such broad discretion to the executive branch.

Posted by: DonN2 | July 21, 2010 11:33 AM | Report abuse

Has anybody examined Michael Barr's record
with regard to his 18 months negotiating with Congress over the financial regulation bill.
His only public utterances seem to be dismissive of major issues involved in the financial regulation. Regulation of derivatives and too big to fail were in his words not "White House priorities" . Most recently he has stated that the Financial Protection Agency would not be established for another year
It would lead one to believe if you want to deep six this agency pick Michael Barr

Posted by: info45 | July 22, 2010 10:40 PM | Report abuse

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