May 27 (Bloomberg) -- I went to Room 2247 of the Rayburn House Office Building on May 24 expecting aggressive Republican questioning of Elizabeth Warren, the Harvard Law professor now at work establishing the Consumer Financial Protection Bureau. I didn’t expect an attempted mugging.
The occasion was a House committee hearing called to establish Warren’s fitness for leading the bureau.
When Warren, no shrinking violet, had the temerity to remind the chairman, Representative Patrick McHenry, that she and the committee had agreed beforehand that she would leave at 2:30 p.m. for another appointment, McHenry replied: "You’re making this up."
The audience gasped. It was the second time that day that McHenry had called Warren a liar.
The Republican strategy, it seems, is to pile the dung heap so high on Warren that it forces President Barack Obama to conclude that she’s too polarizing a figure to run the bureau she’s creating.
For the president to succumb to such character assassination would both harm the agency he hopes to make part of his legacy and send a terrible message of political weakness. Instead, "No Drama Obama" needs to embrace this Elizabethan drama, and use it to his advantage.
Getting in touch with his inner Theodore Roosevelt -- the impulse that in 2009 led him to push for comprehensive health-care reform over the objections of most of his senior advisers - - would be good for average Americans, good for his conception of the proper role of government and, not incidentally, good for his re-election chances.
I know Elizabeth Warren and think she’s an exceptionally able public servant in the old-fashioned meaning of that term. (Full disclosure: My family was involved in inviting her to Chicago to speak earlier this year for no fee.) But the stakes here go far beyond her personally.
Most Republican lawmakers don’t seem to believe the government has a role to play in protecting the middle class against what Warren calls the "tricks and traps" used for years by big banks and credit-card companies to hornswoggle consumers.
As Warren points out, well-functioning markets and fair competition depend on transparency. Otherwise big banks with big marketing budgets have an unfair advantage over community banks. That’s why many of the latter have no problem with Warren once they hear her out.
Her new draft rules on mortgages, approved by everyone from the American Enterprise Institute to the American Bankers Association, would make it cheaper and less complicated for small banks to do business. Roger M. Beverage, the chief executive officer of the Oklahoma Bankers Association, says he originally thought Warren was "a vision of the Antichrist." But this week he joined Democrats in urging her appointment.
An Old Fight
This is an old fight about how far the government should go in protecting Americans from the excesses of capitalism. Can anyone doubt that if Warren’s critics had been alive a century ago, they would have opposed the creation of the Food and Drug Administration? The same folks who thought that David Kessler (President George H. W. Bush’s FDA chief) was out of line in mandating content labels on food believe Warren is overreaching in requiring that the terms of mortgages, credit cards and bank accounts be written in plain English instead of buried in fine print that even experts cannot decipher.
Fortunately for Warren, Republicans are now overreaching in trying to kill the consumer bureau, just as they did on Medicare. On May 5, 44 Senate Republicans sent a letter to the president saying that neither Warren nor anyone else would be confirmed to run the agency unless the president rewrote the Dodd-Frank financial regulatory law that he fought so hard to enact last year.
The Republicans’ proposed "reform" of the Dodd-Frank Act includes shifting the funding of the consumer bureau from the Federal Reserve to congressional appropriators who can be counted on to starve the agency out of existence.
This attempted legislative blackmail -- no Senate confirmation of any director unless the bureau is gutted -- might impress the financial services industry, which spends $1.4 million a day on lobbying, but it effectively gives Obama no option other than a recess appointment.
That’s a dodgy constitutional prerogative under which, during a Congressional recess, presidents can unilaterally fill executive-branch vacancies. I hear that at first the president figured he might as well use the Fourth of July recess to appoint Warren, as Republicans had said they would block anyone he named anyway.
Then cautious advisers started raising red flags. Many would prefer that Warren, a Massachusetts resident, run for the Senate seat held by Scott Brown; her popularity would give her the best chance of any potential candidate to win back the seat for the Democrats. But Warren’s preference is to lead the bureau that Obama asked her to set up.
The skittishness among administration aides is also a reflection of a larger discomfort with big egos they can’t control. It’s why the late Richard Holbrooke, the most talented diplomat of his generation, almost got fired for having too high a profile. That’s a major weakness of this White House. If Richard Nixon could handle Henry Kissinger, Obama should be able to handle an outsize personality like Warren.
Some Democrats are also nervous that Warren threatens the very financial interests that Obama needs to fund his campaign in 2012. And some feel that although Warren is a great communicator she doesn’t cheer-lead enough for the White House. These are unworthy considerations to use against her.
The most substantive objection from insiders is that the constant controversy over Warren will make it harder to establish the bureau in the long term. The agency’s survival will be too closely tied to her own. If she flames out, a signature Obama achievement will, too.
If Obama rejects her, though, the result would be even worse -- a sign that he’s not fully committed to his bureau. The more visible it is, the less vulnerable it will be, especially after Warren spends the second half of the year selling it around the country.
When Americans learn more about the consumer agency, it’s bound to be popular, in part because voters so dislike Wall Street. In a recent internal Democratic National Committee survey that surprised those briefed on it, Wall Street firms ranked even below oil companies in credibility, with approval ratings below 20 percent.
Finally, there’s the electoral calculation. Once Warren’s bureau starts delivering for the public later this year, and helping consumers understand their own financial lives, it will offer another way for the president to show in 2012 that he’s fighting for the hard-hit middle class, including independent swing voters. That’s critical to his success next year.
(Jonathan Alter, author of "The Promise: President Obama, Year One," is a Bloomberg View columnist. The opinions expressed are his own.)
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