A true friend stabs you in the front

Under the bus

An Excerpt from Ron Suskind’s “Confidence Men” (via Big Pink):

September 17, 2010

On this warm late-summer afternoon, with Congress out of session, Obama has convened the press to announce the launch of a new agency, the Consumer Financial Protection Bureau. It has been designed to protect American consumers from the predations of the financial services and banking industry, which over the past couple of decades has grown vast and insatiable by inventing, for the most part, new ways to market, sell, and invest in debt.

The woman standing awkwardly at Obama’s left hip, Harvard Law School professor Elizabeth Warren, has become the nation’s town crier on the subject of bankruptcy and debt. In the two years since the economic crisis, she has emerged from nowhere to trumpet the story of how debt was turned into a velvety weapon, how engorged financial firms deceptively packaged it, sold it as securities, and extracted usurious profits from American consumers, especially those in America’s once-vaunted middle class. The notion of a consumer financial product agency, a freestanding, independently funded entity like the Federal Communications Commission, was originally hers, unveiled in an article she published in the spring of 2007. The truth is that no one much cared for the idea, until her unheeded concerns turned up at the center of the worst financial meltdown since the Great Depression.

So today is a long-delayed victory for Warren—almost. Somehow nothing in the Rose Garden is quite as it seems. The president praises Warren, whom he says he met at Harvard Law School, as though they are old friends. They’re not, and Warren only became a professor at Harvard Law the year after Obama graduated from it. In fact, over the past two years, while Warren has seen herself lionized on magazine covers and in prime-time interviews as a leading voice for tough, restorative reforms, the president seems to have been studiously avoiding her. Part of the problem, clearly, is that she has been acting the way people expected and hoped that man from Grant Park would.

This has caused discomfort not only for the president, but also for his top lieutenants, including the boyish man in the too-long jacket at Obama’s right hip, bunched cuffs around his shoes, looking more than anything like a teenager who just grabbed a suit out of his dad’s closet. That’s Treasury secretary Tim Geithner, looking sheepish. Only those in his inner circle at Treasury, though, can precisely read what’s behind that expression: a string of private efforts across the past year to neutralize Warren. The previous fall, Geithner huddle with top aides to develop what one called an “Elizabeth Warren strategy,” a plan to engage with the firebrand reformer that would render her politically inert. He never worked out a viable strategy—a way to meet with Warren without drawing undesirable comparisons—and so, like the president, he didn’t.

What the Treasury Department did do, unbeknownst to Warren, was embrace demands from the banking industry to create a bureau under the condition that Warren would not be allowed to lead it. But as the financial-reform bill moved to a vote in early summer, industry lobbyists were so aggrieved at the idea of an agency—they felt it unsupportable under any conditions—that they didn’t bother to call in their chits on Warren.

In fact, they played it just so. The industry managed to get the proposed agency shrunk into a bureau that would live under the auspices of the Federal Reserve, the government’s greatest mixed metaphor of public purpose and private self-regard, representing as it does the dual interests of a sound monetary policy and the health of the banking industry. Beyond that, the bureau’s rules can be vetoed by a two-thirds majority of a panel of other financial regulators—an indignity of institutionalized second-guessing known to few other agencies.

But after financial regulatory reform legislation passed in July, the prospect of Warren at the bureau’s helm quickly grew into a movement: complete with Internet write-in campaigns, online petitions, flurries of editorials, and even a viral rap video—certainly a first in the history of appointing government regulators.

Warren would seem the easiest of choices. Since his earliest days on the campaign trail, Obama had spoken passionately about restoring competent government, and with it competent regulators. With the midterm elections less than two months away, he could have used a confirmation battle over Warren to draw a much-needed distinction between his administration and those, mostly Republicans, who dared to side publicly with America’s big banks and financial firms. Warren’s celebrated ferocity looked tailor-made to revive Obama’s vast grassroots campaign network. Like an encamped army with nothing to do, the foot soldiers of the campaign had fought among themselves a bit, eaten the leftover rations, and then drifted back to private life. Field commanders still in touch with the White House signaled by midsummer that a Warren confirmation battle would rally the troops and, according to one, “at least show what we stand for.” On the other side was the financial services industry, which hurled nonspecific attacks at Warren, claiming she was arrogant, disrespectful, and power-hungry. It had begun castigating Obama as “antibusiness,” a charge the industry asserts would be definitively confirmed by the appointment of Warren.

In mid-August, Warren was finally called in to meet with the president. Obama began their sit-down saying, “This isn’t a job interview.” It wasn’t. The president had already decided what he was going to do, in a managerial style that had become his trademark: integrating policy options and political prognostication into a prepackaged solution— announced before the game even started.

Combatants over a Warren nomination will never take the field. Shuffling papers on the lectern in the Rose Garden, Obama says, with a few passive locutions, that Warren will be on the search committee to find someone to run the bureau:

“She was the architect behind the idea for a consumer watchdog, so it only makes sense that she’d be the, um . . .” He stumbles briefly, as though the text is pulling him off balance. “. . . She should be the architect working with Secretary of Treasury Geithner in standing up the agency.” He adds that she’ll be an adviser to both him and Geithner and “will also play a pivotal role in helping me determine who the best choice is for director of the bureau.”

That’s basically it. None of the troops are energized, and anyone who feared the financial debacle might produce a true innovation, a rock star regulator, is left unruffled. The press conference ends with reporters shouting as the president turns to leave. One yells above the rest, “Why didn’t you put her up for confirmation?”

All the attention about Suskind’s book so far has gone to allegations of sexism in the White House. While that is an important issue, this passage reveals something much worse – regulatory capture.

In economics, regulatory capture occurs when a state regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure, as it can act as an encouragement for large firms to produce negative externalities. The agencies are called “captured agencies”.

In addition to Lily Ledbetter and Obamacare, we’re supposed to kiss Obama’s ass be grateful for the financial reform bill.

But as you can see, the foxes are guarding the henhouse.

BTW – Don’t be surprised to see Warren’s senate campaign get undermined and sabotaged.

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41 Responses to A true friend stabs you in the front

  1. votermom says:

    What I wonder about Warren is – does she realize what she’s up against? Can she go rogue against the WH in her campaign? If she does that she can win.

  2. Murphy says:

    Jesus christ.

  3. Pips says:

    From the Suskind piece:

    He stumbles briefly, as though the text is pulling him off balance.

    Because of the content, that I’m sure he sees for the first time? Or because of the constant swirling between the two teleprompters? Could put anyone off their balance. 😉

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  5. Mary says:

    Elizabeth Warren: the “new” Brooksley Bjorn.

    The BOYS always sideline and then ridicule them to give their sponsors (boys/big banks) exactly what they want.

    And no one personifies that more than Larry Summers & Timmy Geithner.


  6. murphy says:

    Just made my first donation to Warren’s campaign. Felt great. Link if you’re interested:


  7. elliesmom says:

    I’ve been called a wet blanket by my friends here in MA when I say that they shouldn’t get excited about Warren’s senate run just yet. Yes, she’s beginning to poll well against Brown, but we haven’t even had the primary yet. We don’t know which congresscritter is going to lose his or her seat yet. Will Barney Frank lose his very liberal Newton base? Will TPTB protect Nicki Tsongsas, our only woman in the delegation? Will Mike Capuano let them tinker with his mostly minority district in exchange for a full court press effort by the DNC for another run for the senate? And if Warren does get the nod, will we see her get “Coakleyed”? She’s going to need the resources of the DNC to run against Brown. She might be able to raise money on her own, but she has no troops on the ground from a previous run, and Brown does. What will she be willing to say or do to get them? I admire and respect her, but I used to admire and respect Coakley, too. Not so much anymore. If Warren sells out, too, what little idealism I have left about women succeeding in political office in MA will be completely snuffed out.

    • votermom says:

      I have heard that the Tea Party is not happy with Brown, so he probably won’t have the same amount of small donor money coming in that he had last time.

      • elliesmom says:

        The Tea Party isn’t very strong in MA despite our heritage. While Brown may not get as many out of state dollars as he did last time, he has experienced feet on the ground. Elizabeth Warren has never even run for dogcatcher. She’s going to need the party regulars. Because women’s groups aren’t very well organized in the Bay State either.

    • And if Warren does get the nod, will we see her get “Coakleyed”?

      Obama acts like a good sport and comes out and endorses her. So all the PUMAs stone her for not publicly slapping him.

      Obama’s kiss of death power. Let’s not fall for it again.

  8. murphy says:

    I hear your concerns Elliesmom, and pretty much agree with your description of the challenges Warren is facing. That’s why I’m going to work as hard as I can for her.

    • Mr. Mike says:

      Donating helps Elizabeth Warren get her campaign going and at the same time sends a message to the Obama-crats. I don’t expect her to call out Obama for the republican that he is but to continue espousing real Democrat values. As long as her campaign does that I’ll send another donation.

      It wouldn’t hurt to let your Obama-crat Senators and Representative know that the contribution they are expecting from you is going to the likes of Warren this year.

      A bit of history, Ned Lamont was the firs victim of the Dem “elite”. Let do our best that that doesn’t happen again.

    • elliesmom says:

      I’ve been heartbroken too many times in the recent past. When and if she separates herself from Obama, I’ll jump in. Until then, it’s just wait and see for me. I already support one woman who is a WINO. If Warren goes along to get along despite her past, then pfft! Why not leave Brown there? At least he’s a thorn in the Democrats’ side.

  9. hannah says:

    I saw her announcement video on her website and she mentions how GE didn’t pay a dime in taxes. I hope that that is the beginning of a great unraveling of the WH, win or lose, put out what you saw in your tenure there.

  10. WMCB says:

    Yep. When a lot of “progressives” were cheering the Frank Dodd bill, many of us were saying it was a whitewash and a mechanism for permanent bailouts.

    I will never get the stupidity and gullibility of jumping on any and every “reform and regulation” bandwagon before you even know what it’s going to do. Or worse, acting as if it doesn’t even matter what it actually does, because 1000 more pages of “regulation” is a holy and good thing in itself.

    The same goes for the commission that they kept Warren off of as goes for Frank Dodd.

    Morons. Regulations can be either a way to reign in abuses, or a way to get corp and state even deeper in bed with each other. And if you look at the details, and who’s writing the regs and heading the boards, it’s pretty clear which they’ve been doing.

    • Three Wickets says:

      Yup, not sure how Dodd-Frank has reigned in derivatives trading, commodities gambling, private equity and hedge funds, capital requirements, mark-to-market accounting enforcement, mortgage servicing fraud, high frequency trading, swaps, shorts, etc. The main change seems to be TBTF banks winding down their in-house proprietary trading operations, which is the Volcker Rule.

    • Right. When they want to increase power of big money, they put up a bill and label it “reform.” Obamacare “reforming” health care. And before Obama, the 2005 bankruptcy that made it harder for individuals to file was labeled something like “Reform and Consumer Protection.”

  11. Three Wickets says:

    Elizabeth Warren and her deputy on the Congressional Oversight Panel Neil Barofsky got absolutely smothered and kicked under the bus by Tim Geithner. Similar to what happened with Meredith Whitney in the financial sector. Truth tellers who needed to be shut down because god forbid they might rattle investors in TBTF banks. No matter that these TBTF banks should have been broken up into Glass Steagall pieces to begin with, and we’re seeing that truth again these days. Bernanke also took on (reluctantly) a lot more regulatory authority in the financial sector during the crisis. From what I could tell, he didn’t give much cover to Elizabeth Warren either. Ultimately the head of the Consumer Financial Protection Bureau (the agency Warren created but was rejected from leading) reports to Bernanke.

  12. Dario says:

    Jesse’s Café Américain:

    Elizabeth Warren on the election circuit in Massachusetts.

    She left out any discussion of the financial bailouts, probably in the interest of simplicity and brevity. But she ought not to do so.

  13. DandyTiger says:


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