Hill fight in­ten­si­fies over con­sumer czar

The Washington Times Weekly - - Politics - BY PA­TRICE HILL

A long-sim­mer­ing dis­pute over a pow­er­ful new con­sumer pro­tec­tion agency cre­ated in last year’s land­mark Wall Street re­form law broke out into a fullfledged po­lit­i­cal battle two weeks ago as Se­nate Repub­li­cans moved to pre­vent the White House from in­stalling a new czar at the agency.

With Democrats and their lib­eral al­lies urg­ing Pres­i­dent Obama to use the Me­mo­rial Day re­cess to ap­point con­sumer ad­vo­cate and Har­vard pro­fes­sor El­iz­a­beth War­ren to head the Con­sumer Fi­nan­cial Pro­tec­tion Bu­reau to avoid a Se­nate con­fir­ma­tion fight, Repub­li­cans on May 26 moved to pre­vent the Se­nate from re­cess­ing, mak­ing it im­pos­si­ble for Mr. Obama to in­stall her or a num­ber of other con­tro­ver­sial nom­i­nees to un­filled posts.

“Pres­i­dent Obama has been pack­ing agen­cies with left-wing ide­o­logues, but thank­fully he won’t be able to for at least the next week,” said Sen. Jim DeMint, South Carolina Repub­li­can, af­ter he and other Se­nate con­ser­va­tives con­vinced the House Repub­li­can lead­er­ship not to send the Se­nate an ad­journ­ment res­o­lu­tion. “No con­tro­ver­sial nom­i­nees will be al­lowed to cir­cum­vent the con­fir­ma­tion process dur­ing the break.”

Just be­fore the Se­nate block­ade, 43 House Democrats had writ­ten Mr. Obama urg­ing the re­cess ap­point­ment of Ms. War­ren, who has been work­ing be­hind the scenes for a year to pre­pare the pow­er­ful new agency for its launch in July.

Lib­eral groups had gath­ered more than 100,000 sig­na­tures on a pe­ti­tion and thou­sands more fans on web­sites back­ing Ms. War­ren, whose an­tag­o­nis­tic re­la­tion­ship with the bank­ing in­dustr y has pro­voked Repub­li­cans.

Be­fore agree­ing to ap­point her or any­one else to head the new con­sumer bu­reau, Repub­li­cans want to re­struc­ture the agency to be less au­ton­o­mous and pow­er­ful. Cur­rently, it is slated to be­come a staunchly in­de­pen­dent new arm of the Fed­eral Re­serve, funded from earn­ings on the Fed’s mar­ket op­er­a­tions rather than through con­gres­sional ap­pro­pri­a­tions, thus in­su­lat­ing it from over­sight and pres­sure from Congress.

The House is mov­ing to pass leg­is­la­tion to turn the bu­reau into a com­mis­sion more like the Se­cu­ri­ties and Ex­change Com­mis­sion or the Fed­eral Trade Com­mis­sion, which have five mem­bers di­vided be­tween the par­ties, are funded by Congress and are con­sid­ered more ac­count­able to the leg­is­la­ture.

Se­nate Repub­li­cans are seek­ing to use their lever­age over the ap­pointee to head the agency to strike a deal with the White House to re­struc­ture the agency along those lines as a com­mis­sion.

But lib­eral groups are itch­ing for a po­lit­i­cal fight with Repub­li­cans over the bu­reau and its cham­pion, Ms. War­ren, ar­gu­ing that the pres­i­dent would ben­e­fit in next year’s elec­tions.

Mr. Obama would be seen as de­fend­ing home­own­ers and con­sumers burned by Wall Street dur­ing the eco­nomic cri­sis, they say, while Repub­li­cans could be tarred for do­ing the bid­ding of big banks that are highly un-

He ac­cused Repub­li­cans of “do­ing the bank­ing in­dus­try’s dirty work” and “try­ing any lowrent tac­tic” to op­pose Ms. War­ren and the agency she helped cre­ate.

Ms. War­ren was grilled by Repub­li­cans at a House Over­sight and Gov­ern­ment Re­form TARP and fi­nan­cial ser­vices sub­com­mit­tee hear­ing on May 24 at which sub­com­mit­tee Chair­man Pa­trick T. McHenry, North Carolina Repub­li­can, ac-

For­mer House Bank­ing Com­mit­tee Chair­man Bar­ney Frank, Mas­sachusetts Demo­crat, has urged Pres­i­dent Obama to ap­point her, not­ing that 44 Repub­li­can sen­a­tors pledged in April to block any­one the pres­i­dent nom­i­nates un­less the agency is re­struc­tured, re­mov­ing any in­cen­tive for the White House to try to name some­one more agree­able to Repub­li­cans.

pop­u­lar with the pub­lic.

The White House and Trea­sury Depart­ment, which aides note al­ready have their hands full this year man­ag­ing ma­jor dis­putes with Repub­li­cans over the bud­get, health care and taxes, have been mum about who they plan to ap­point to the agency and never openly com­mit­ted to a re­cess ap­point­ment of Ms. War­ren.

But Ms. War­ren, who has been set­ting up the agency as a spe­cial as­sis­tant at the Trea­sury for the past year, is the only can­di­date who has been con­sis­tently dis­cussed pub­licly and even some bank­ing lob­by­ists think she is des­tined to head the agency.

For­mer House Bank­ing Com­mit­tee Chair­man Bar­ney Frank, Mas­sachusetts Demo­crat, has urged the pres­i­dent to ap­point her, not­ing that 44 Repub­li­can sen­a­tors pledged in April to block any­one the pres­i­dent nom- inates un­less the agency is re­struc­tured, re­mov­ing any in­cen­tive for the White House to try to name some­one more agree­able to Repub­li­cans.

Richard Eskow, a fel­low at the Cam­paign for Amer­ica’s Fu­ture, said Mr. Obama has a “civic duty” to ap­point Ms. War­ren, given that the agency was her brain­child and that she has shep­herded it from its leg­isla­tive be­gin­nings to its im­mi­nent launch of op­er­a­tions. cused her of ly­ing about her role in try­ing to me­di­ate a global set­tle­ment over fore­clo­sure ir­reg­u­lar­i­ties be­tween banks, reg­u­la­tors and state at­tor­neys gen­eral.

Ms. War­ren and Mr. McHenry, in an un­usual dis­play of con­gres­sional spleen, also got into a heated ar­gu­ment over whether she had agreed to tes­tify for more than an hour at the hear­ing.

The testy ex­change only stim­u­lated lib­eral groups sup­port­ing Ms. War­ren, with some call­ing for a re­trac­tion of what they said were un­doc­u­mented and un­war­ranted charges by Mr. McHenry.

Mr. McHenry, for his part, rued Ms. War­ren’s “sense of en­ti­tle­ment.”

“Who is ask­ing Chair­man McHenry to rough up El­iz­a­beth War­ren?” Mr. Eskow asked, not­ing that big banks such as Wells Fargo and Bank of Amer­ica were among Mr. McHenry’s top con­trib­u­tors.

But Repub­li­cans see their at­tempts to ham­string the White House’s pow­er­ful new reg­u­la­tor as heroic and aimed at sav­ing the econ­omy from a heavy dose of bu­reau­cratic over­reach.

Banks for sev­eral years have been ex­tremely cau­tious in lend­ing to con­sumers and busi­nesses, mostly be­cause of bur­geon­ing losses on de­faulted loans, but also out of concern about an on­slaught of heavy new fed­eral reg­u­la­tions. Econ­o­mists say this is one ma­jor rea­son that eco­nomic growth has failed to gather steam.

“Fail­ure to en­sure proper checks and bal­ances will al­ways re­sult in reg­u­la­tory over­reach and de­ci­sions that miss the mark, which in turn sti­fle risk-tak­ing, in­no­va­tion and ul­ti­mately jobs,” said Sen. Bob Corker, Ten­nessee Repub­li­can, a key mem­ber of the Se­nate Bank­ing, Hous­ing and Ur­ban Af­fairs Com­mit­tee who worked with Democrats last year to try to draft a bi­par­ti­san bank­ing re­form bill.

He noted that last year’s com­pro­mise ef­forts were stymied pri­mar­ily be­cause of dif­fer­ences about how pow­er­ful and in­de­pen­dent to make the con­sumer agency, with Democrats opt­ing to in­su­late the agency from con­gres­sional pres­sure by putting it within the Fed.

“While we all be­lieve con­sumer pro­tec­tions need to be strength­ened, whether Repub­li­cans or Democrats are in charge, no one per­son should have the power the di­rec­tor of the bu­reau is cur­rently given,” Mr. Corker said.

Sen. Richard C. Shelby, Alabama Repub­li­can and rank­ing mem­ber of the com­mit­tee, called the changes rec­om­mended by Repub­li­cans “com­mon-sense checks and bal­ances on this mas­sive new bu­reau­cracy.”

Brian Gard­ner, Wash­ing­ton an­a­lyst at Keefe, Bruyette & Woods, said the Repub­li­can tac­tics could back­fire and lead to an open war that car­ries through to next year’s elec­tions.

“Repub­li­cans have made it eas­ier for the White House to pick War­ren and en­gage in a fight,” he said, al­though they have blocked that pos­si­bil­ity for now by pre­vent­ing any re­cess ap­point­ments.

But Mr. Gard­ner also thinks Repub­li­cans are open to a “grand com­pro­mise” where they would agree to Ms. War­ren’s ap­point­ment in ex­change for re­struc­tur­ing the agency.

Czar wars: El­iz­a­beth War­ren

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