There’s been much discussion of late regarding President Obama’s appointment to head the new Consumer Finance Protection Bureau (CFPB). It’s no secret that Tim Geithner has made it clear that he doesn’t want Warren to receive the appointment. So, everyone knows that the President will sign the finance “reform” bill into law sometime later this week, but as of right now, nobody knows who he will appoint to head the CFPB.
This appointment will be a watershed event for the Obama administration. President Obama has repeatedly chosen compromise over reform, even when there was nothing to gain from compromise. On the topic of Wall Street, it initially seemed that the President would fight for common Americans, but that hope was soon dashed. With the appointments of Tim Geithner and Larry Summers, it became difficult to see how a president who surrounded himself with Goldman insiders could actually have the people’s best interest at heart.
From the beginning of the effort to “reform” Wall Street, President Obama supported the formation of the CBPB. In the face of conservative attacks attempting to place blame for the subprime disaster on the average people who overleveraged themselves, Obama stood fast and promoted an agency that would prevent lenders from misleading and otherwise abusing unknowledgeable borrowers. But where President Obama has been stringent in his support for the CFPB, Elizabeth Warren is its intellectual mother.
Of course, it’s easy to see why Geithner doesn’t want Elizabeth Warren. First of all, they just didn’t get along very well as Warren routinely raked him over the coals regarding the TARP payout. But more importantly, the finance “reform” bill leaves its eventual effectiveness almost entirely in the hands of the regulators who will enforce it. That means that the strength of the CFPB will rest squarely in the hands of its chair. Geithner has thus far been able to avoid an audit of the Fed; the last thing he wants is a real regulator watching over its inner workings.
It’s also possible that Tim Geithner’s concerns don’t end with the mere presence of a regulator. John R. Talbot expressed the potential for deeper issues in a Huffington Post article this morning. According to Talbot, the plan proposed by Geithner and Summers to restore profitability to the banks requires that they slowly write off their bad debts instead of taking a major hit. This enables them to offset the losses with profits as they move forward over time. Talbot states that, “the trillions of dollars of underwater mortgages, CDO’s and worthless credit default swaps are still on the banks books.” He then suggests that Warren’s type of oversight may prove detrimental to the bank’s ability to “find increasing sources of profitability in their business segments to balance out their annual loan loss recognition from their existing bad loans.” Of course, the sources he’s referring to are new methods of extracting fees and other payments from small retail customers.
In the end, the decision belongs to President Obama. He has the choice to either renew the belief that he is the president of The People, or conversely, to remove all doubt that his loyalty is actually to Wall Street and big business. If he appoints Elizabeth Warren, he will send a message to all middle class Americans that somebody in Washington is looking out for our interests. Alternatively, he can again follow Geithner’s advice and prove for once and for all that he’s just another corporatist in Democrat’s clothing.
From my perspective, this is a litmus test for the President, and I don’t think I’m alone in that position. President Obama’s choice will finally reveal his true colors: American red, white and blue or Wall Street green.
If you want to help make sure Elizabeth Warren is appointed to head the new consumer finance protection agency, please take a minute and sign this online petition that will be presented to the President and then use the accompanying email opportunity to invite your friends to do the same.