Ms. Warren is helping get the new Consumer Financial Protection Bureau (CFPB) off the ground and remains the leading contender to become its formal head (subject to Senate confirmation). She summarizes her substantive agenda this way: "We're trying to make these markets transparent, which makes it easier for community banks to compete both with large financial institutions and with their nonbank competitors."
She should now be nominated to the CFPB position. There will be strong Republican opposition and some Democrats who are close to the financial sector may be lukewarm. But a public hearing on her case represents our best opportunity to experience a modern version of the Pecora Hearings -- the Senate Banking Committee hearings in the 1930s that laid bare the inner (and rotten) workings of the biggest financial firms (see Michael Perino's book on Pecora for details).
These hearings would represent a major step forward towards forging a new consensus regarding how to really establish markets (as opposed to the crazy government subsidy schemes that predominate). In addition, the administration would win a big victory with Ms. Warren's confirmation.
Elizabeth Warren has worked long and hard to build a working relationship with reasonable people in the banking community. These investments now seem to be paying off, with the president of the American Banker Association saying this week that his organization would support Professor Warren if she is nominated (although he later backtracked and said he meant they would be supportive "if she is appointed"). Community bankers have already expressed support in various ways.
Her arguments are very hard for Republicans on the Senate Banking Committee or more intransigent bankers to refute in any kind of public setting -- because there is very little of the "market" in our currently predominant banking sector arrangements.
A proper Senate confirmation hearing would be the perfect platform for Ms. Warren to explain, (a) not only do "too big to fail" banks now constitute and hugely dangerous government subsidy scheme, but (b) based on these subsidies, they are becoming larger and acquiring more market power that can be -- and has been -- used to abuse consumers in a nontransparent fashion.
All attempts so far to construct some form of Pecora Hearings have failed -- partly because the issues are complex and partly because of partisan fighting. The Financial Crisis Inquiry Commission made some progress but could reach no consensus (or bring anyone to justice). Senator Levin's hearings into Goldman Sachs grabbed attention and were most helpful in the Dodd-Frank reform debate but again no one is going to jail -- and few people even grasp what were the real issues at stake. And the Department of Justice has preferred to pursue insider trading cases, perhaps taking the view that these are easier to explain to juries.
But Elizabeth Warren cuts through the complexity and offers a message that -- outside of Washington -- plays well across the political spectrum.
Her message is simple: the consumer "market" for financial products does not operate like a proper market because leading firms (bigger banks and also nonbanks, like some payday lenders) have figured out how to make a great deal of money by confusing their customers.
Of course, there are many honest players -- mostly in credit unions and smaller banks. But when the playing field has been unfairly tilted towards cheating, honest bank executives struggle to stay in business (or to keep their jobs).
If someone attempted to sell boxed cereal in the same fashion that many financial products are now sold, that person would be drummed out of the cereal business. The norms of that sector (and many other nonfinancial sectors in the United States) would not stand for this degree of deception and malpractice.
Some parts of financial services have moved too far towards become unscrupulous and abusing customers. This is bad for the people who are mistreated, it's bad for the economy, and it's bad for all honest people in the financial sector.
Elizabeth Warren is offering to allow proper markets to work again within at least part of finance. She has convinced many community bankers that her intentions are sincere and that her principles-based approach can work.
It's time for the president to stand up to abusive financial practices facilitated by cynical and nontransparent subsidies.
If nominated, Elizabeth Warren's confirmation hearing would become a defining moment for thinking about finance in America.
And reform would win. All the missed opportunities, botched bailouts, and kowtowing to megabanks would fade into the background. Every attempt at change must face many setbacks - and financial reform has really struggled to have any impact.
But at the end of the day, if Elizabeth Warren wins, we all win.
This post was originally published at The Baseline Scenario.
Of course, there are many honest players -- mostly in credit unions and smaller banks. But when the playing field has been unfairly tilted towards cheating, honest bank executives struggle to stay in business (or to keep their jobs)."
Those two paragraphs point out a serious problem that needs to be addressed............. especially since those same issues apply equally to Congress itself.
"Sunlight is the best disinfectant" (Supreme Court Justice Louis Brandeis)
Transparency in all aspects of business and government would go a long ways in exposing.......... and remedying........... our nations ills.
What happened to the censors that made them let this get by?
Simon Johnson is one of the very most competent macro-economists alive. He should be paid handsomely for all his public service, yet he does it as a matter of conscience.
That is something all the God-talkers apparently know little, if anything, about.
They are too busy exemplifying the fire and brimstone and hatred that somehow they have no trouble equating with the God who is Love.
The Preamble to the Constitution places five burdens on the US Government. It has difficulty with the three that apply to the poor, the dispossed, and the whole nation: "insure domestic tranquility," "promote the general welfare," and "secure the blessings of liberty to ourselves and our posterity." Unfortunately, the most recent five presidents, including the current one, have forgotten the general welfare, because they have been blindly and religiously devoted to corporate welfare, and everybody else be damned, except rhetorically. No one even mentions domestic tranquility. Is there even a living elected official who can spell tranquility? Have any of them ever heard of it?
Don't even try with "securing the blessings of liberty" for anyone who isn't obscenely wealthy.
Liz Warren seems to be the closest thing we've got to a real truth teller US government.
http://buythecover.com
BTW: And I include Obama in my calculation.
Having a strong federal agency designed to protect consumers from predatory lenders isn't JUST about consumers, it's also about protecting the overall economy for everyone. When the public is protected from the big banks and predatory lenders, EVERYONE wins, except the deceptive lenders. More people have more income with which to stimulate the economy, jobs come back, businesses can grow, etc.
Dont let the fraudulent lenders kill the CPFB. Its either them or us.
No statement could be more true when speaking about financial reform and reform that would benefit 95% of the population of this nation. That's a hard number to ignore. I hope it is preached properly so the teabaggers and the poor and middle class repugs can see it will benefit them as well.
Which would of course be why Obama refuses to nominate her. She might upset his bribers...er...I mean donors.
Isn't this exactly backwards, according to conservatives?
Wasn't it the high school educated working man who elaborately defrauded these major banks and their Ivy educated MBAs into giving them loans they couldn't pay back?
And wasn't that all Jimmy Carter's fault?
and if we would've listened and followed jimmy, we wouldn't be so reliant on foreign oil but we all know the (R) Party just looooves middle-east oil. Remember the picture of Saddam shaking the first Bush's hand ? And who can forget the pictures of W walking hand in hand with the Saudi shiek.
The subprime loans are just a distraction from the real thievery that went on in 2008. A very small portion of the problems was actually caused by subprimes.