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Elizabeth Warren and the CFPB

posted by Adam Levitin

Some of our readers might have noticed that we at Credit Slips have remained remarkably silent about the question of who should head the CFPB. Other bloggers on consumer finance issues have not. Shahien Nasiripour and other HuffPo bloggers (here, e.g.) and Simon Johnson (and here) have declared the nomination of Elizabeth Warren to be a progressive litmus test for the administration. Andrew Leonard and Felix Salmon, among others, have particularly interesting discussions about Professor Warren and some of the other potential nominees. The silence has not been for lack of strongly held opinion, but out of a sense that our opinions would be completely discounted because of our various relationships with Professor Warren and inconsistent with the nature of the blog.

Rather than get into a full-fledged consideration of the nomination, I am just going to comment on the bizarre concern (here) and (here) that has been raised about Professor Warren's alleged lack of administrative experience. For starters, I'm not sure why that would matter. Past administrative experience is hardly something that's traditionally been required for government posts in part because agency heads don't handle administration single-handedly. Indeed, we have a President whose sole administrative experience was running the Harvard Law Review. And no one would ever question the lack of administrative experience if a member of Congress were proposed for an agency post.  

As it happens, Professor Warren has proven administrative experience running a newly-created government agency: the Congressional Oversight Panel. Commentators seem to be unaware of the administrative duties involved in running the Panel or Professor Warren's considerable proven administrative talents.As head of the Oversight Panel, Professor Warren has had to take ultimate responsibility for all of the quotidian tasks of agency operations: HR and contracting decisions, office space and technology, communications, etc. The Oversight Panel's staff is not large (around 50), but the Panel has consistently produced a detailed, 100+ page reports on the use of TARP funds, every month, as well as a number of additional special reports to Congress. The quality of these reports is, frankly, on a much higher level than most government work product. (OK, excluding those I worked on.) 

The production of these reports involves managing a major research operation (just like CFPB will have), as well as conducting oversight hearings and interviews (like CFPB might conduct). The subject matter has spanned an enormous and loosely connected range of topics home mortgage foreclosures to agricultural lending to the auto bailout to the AIG bailout. The Oversight Panel chair's job is also a political one: the Panel is a 5-member, bipartisan group, and there are Congressional and administration pressures to navigate (as with any agency). Finally, overseeing Treasury's activities under TARP is not unlike the relationship the CFPB will have overseeing consumer financial products; as with any oversight relationship there are bound to be some tensions, but that's not a bad thing.  That's just the nature of the regulatory oversight process.

Professor Warren's administrative experience with the Oversight Panel is actually excellent preparation for running the CFPB. How many other people have headed up brand new government agencies? That's a very different task from stepping into a long-standing upper-level administrative position with an existing bureaucratic structure. The scale of the CFPB would be different, of course, but not so much. As this essay by Tim Duncan notes, CFPB wouldn't be a particularly large agency--perhaps 2,250 employees maximum, a fraction of those employed by the Fed or SEC, for example.  

There is an administrative task for which Professor Warren is exceptionally well-qualified. A critical role of the founding CFPB's head will be to establish a culture and esprit d'corps for the agency. Professor Warren has long been an inspirational figure to those who encounter her, be it in the classroom or, more recently, in the media. In this regard, Professor Warren's passion, visibility, credibility, and deep commitment to empirically-based policy (the opposite, as it were, of faith-based financial regulation) would be invaluable in terms of recruiting top quality career staff who will lay the groundwork for the CFPB's activities for decades and make it a premier government agency. The strength of the CFPB will be measured by its personnel, and Professor Warren would be a magnet for talent. 

Ultimately, issues like administrative experience just aren't real concerns. At best, they're baseless, and at worst, they are fronting for objections to the existence of the CFPB and to having meaningful consumer protection in financial services. A strong, vigorous CFPB head might not sit well with Treasury or with Wall Street, but if CFPB is to live up to all of the hopes for it in ensuring fair, transparent, and efficient financial product markets for consumers, that is exactly what is needed, and it's hard to imagine anyone who would perform the job better than Elizabeth Warren. 

Comments

Yes, Adam, on all points. I agree with everything above. I'd add that, back in the 1990s, Professor Warren also served as Reporter for the National Bankruptcy Review Commission, a position that required considerable administrative talents. And, if one looks at the staff, you will see several familiar names who are now very active in consumer issues. Several of these staff members were even volunteers, further reinforcing your point about Professor Warren's ability to attract and motivate staffers.

Bob

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