Why the Duel Between Obama and Wall Street Over Elizabeth Warren Isn’t Only About Her Financial Consultant

Why the Duel Between Obama and Wall Street Over Elizabeth Warren Isn’t Only About Her

The brawl over whether President Obama should name Elizabeth Warren to head the Consumer Financial Protection Bureau isn’t over a person — it’s over who controls the terms of financial reform.

Here’s the latest. News surfaced this week that the White House may appoint Warren, the flinty Harvard prof who conceived the new agency, while Congress is out on recess or give her the job on an interim basis. Those maneuvers would avoid a messy confirmation fight in the Senate, where Democrats look to be short of the 60 votes they would need to overcome concerted Republican opposition to Warren. A handful of Dems are also signaling their discomfort with her. These include outgoing Connecticut Sen. Chris Dodd, a last act of fealty to an industry he has served faithfully for many years.

Remove Warren from the picture, however, and bankers would still oppose anyone they regard as dangerous to their interests. In the other corner, industry critics would still throw haymakers at anyone remotely connected with Big Finance. Pick a side: Is Wall Street a cornerstone of capitalism or a malevolent force ravaging the American economy? In my view it’s neither, but how you answer that question probably determines where you come down on Warren.

What can we learn from all of this? First, financial reform isn’t chiefly about fixing finance; it’s about the political limits to fixing it. That axiom applies to all debates over public policy, of course. But this dynamic is worth keeping in mind as we assess whether our prescribed solutions — stronger lending rules, clearinghouses for derivatives, systemic-risk barometers — are up to preventing a repeat of the housing crash.

Second, if the mission of safeguarding Americans from financial abuse lives or dies with Warren’s getting the consumer protection post, then we’re already dead. Yes, she’s uniquely qualified for the job. Yes, her appointment would manifest, not merely symbolize, the Obama administration’s seriousness about reform. And naming someone else would certainly represent yet another timid concession to the power of the financial lobby.

But the breast-beating about Warren — on both sides of the ideological spectrum — suggests a fixation on individual heroes (and villains) that obscures more serious issues. Like, for instance, whether corporations should have the political clout to dictate presidential appointments. Or whether banks should be smaller. Or whether government serves some Americans more equally than others.

Interestingly, the preoccupation with Warren is an outgrowth of the myth of the rugged individualist that’s usually used to venerate CEOs — Ms. Warren, the scrappy, self-made scourge of Wall Street, goes to Washington. We’ll see. My position is that it’s fine to seek out saviors as long as you don’t expect to be saved.

Third, if Warren does get the gig, it will be on the tail of the same economic populism currently sweeping Tea Partyers to victory in the primary elections. Bankers and pols who underestimate the level of public anger both at Wall Street and Washington do so at their own peril.

Fourth, if Warren doesn’t get the gig, whoever does might surprise us. As his first SEC chairman, for instance, FDR chose not attorney James Landis, a disciple of former Supreme Court justice and progressive firebrand Louis Brandeis, but former rum-runner and prominent businessman Joseph Kennedy. Liberals howled. Roosevelt was attacked as a sell-out to Wall Street. But Kennedy went on to do an admirable job, striking a fair balance between tightening financial regulations and giving banks the room they need to help power the economy.

I still hold out hopes that Warren gets the nod (and my bet is she does). If she doesn’t, after the wailing and cheering are over, let’s give whoever does get the job the post a chance.

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