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Are Treasury's Knives Coming Out Against Elizabeth Warren?

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After several weeks of officially pleasant interactions, signs are emerging that the Treasury Department's knives may be coming out against Elizabeth Warren. In recent weeks, Treasury officials have leaked details about Warren to Politico as part of what appears to be an effort to paint her as some kind of prima donna. These relatively silly stories raise troubling questions, however, about what Treasury officials may be leaking with fewer fingerprints and greater ramifications.

The Politico pieces have been petty, but there's no doubt they both came from Treasury. On Oct. 12, Politico ran a piece featuring this anonymous nugget (among others):

Some at Treasury grumble that Warren, in her early memos, spent much time detailing what press she was going to do... rather than the nuts and bolts of setting up an agency.

Then yesterday, in Politico's Morning Money column:

NEW PAINT JOB -- We also hear that while Warren is out west, her Treasury office is getting a makeover (Warren will have digs both at Treasury and the CFPB's L Street headquarters). That's something of a rarity for Treasury officials, who usually leave their offices as-is. There is much internal debate as to exactly what color it is that is going up on Warren's walls. One person called it "Arizona sunset," another "terra cotta."

Both of these represent the kind of meaningless, issue-free, pseudo-news that serves as Politico's bread-and-butter. The actual complaints themselves, of course, are preposterous. Warren is painting her office and making media appearances -- exactly the sort of things you'd expect the head of a new federal agency to be doing during her first weeks on the job. But look at the frame Treasury is putting on the stories. In both, Warren is portrayed as an ego-centric fluff-monger, not a serious policymaker. Look at fancy Elizabeth Warren painting her office! Our humble boss Timothy Geithner would never do such a thing!

Just days before an election, it's somewhat astonishing that Treasury officials would be working the media to smear Warren instead of, say, talking about the economy. And it's certainly counterproductive for Treasury to be creating these distractions for the new, can't-be-independent-soon-enough agency as it sets out to re-regulate Wall Street.

This sort of bad judgment is surprising even in light of the burdens Treasury's failures have created for the White House over the past two years. But this silly back-biting wouldn't be that troubling on its own. A few childish press people going rogue, maybe, or perhaps petty payback for some perceived bureaucratic slight. But last night's HuffPost Hill newsletter subtly connects the leaks to a brutally dishonest article that appeared in the New York Times this week:

TREASURY GUNNING FOR ELIZABETH WARREN? -- Shahien Nasiripour sends us word: "This morning, Politico's Ben White reported that Elizabeth Warren's 'Treasury office is getting a makeover... something of a rarity for Treasury officials.'... The latest leak by Treasury officials against Warren has reform advocates worried. 'There's no doubt they're trying to undermine her,' one source says. Observers of the new agency also have been scratching their heads about who may have been behind a controversial New York Times story on Wednesday about Elizabeth Warren aide Raj Date, who worked closely with consumer advocates and was hailed for his efforts during the financial reform debate. Date attracted strong defense on the blogosphere in the aftermath of a story reformers consider to be an unfair hit piece.

If in fact Treasury officials played any sort of role behind the Times story, it's hard to state just how disgusting such behavior would be. The article in question is an outrageous smear targeting Raj Date, one of the most committed and effective consumer advocates in the United States. No reporter who had even tangentially covered the Wall Street reform bill would have written it, and the fact that the Times' editors allowed it to be printed is a grave embarrassment. Few people I've spoken to say they'd be surprised if it was planted by somebody pursuing an agenda against Warren and the CFPB.

As I explained on Wednesday, the Times story is a pack of innuendo and distortion that tries to portray Date's years of work on behalf of consumers as a bank lobby plot to enrich subprime lenders. The article absolutely shocked consumer advocates and members of Americans for Financial Reform who worked closely with Date to rein in Wall Street (disclosure: I have been a member of AFR's steering committee since August), and there has been considerable pushback to the story's mischaracterizations this week from reform advocates.

I had assumed the Times piece was planted by a bank lobbyist looking to hamstring the young agency -- until I saw Thursday's Morning Money, and realized that Treasury people weren't just griping with reporters on background -- they were actively leaking attacks, however childish.

Treasury officials would be making a serious error if they think they can scapegoat Warren in an effort to deflect criticism from the Department's own very real failings. As Chair of the Congressional Oversight Panel for the Troubled Asset Relief Program, Warren has been highlighting major problems with the Treasury's foreclosure relief plan for literally years. But Geithner and Treasury have steadfastly refused to change the program, as millions of avoidable foreclosures have rained down on the economy.

The result, ultimately, has been bad for the bigwig bankers and too-big-to-fail behemoths that Geithner has boasted about subsidizing stabilizing. Last week, while Treasury continued to deny that the ever-escalating foreclosure fraud outbreak is a serious problem, investors started placing bets that Bank of America's stock will sink below $3.00 a share.

So Wall Street reform advocates are concerned, and you can bet they'll be watching Treasury very closely over the coming months, because their willingness to work with Warren will indicate a tremendous amount about Treasury's commitment to financial reform of any variety.

When President Barack Obama named Warren to her current post, he did so in an unusual manner. The new head of the CFPB would require 60 votes for Senate confirmation, and it appeared that a confirmation process would be both long and difficult. So instead of formally nominating Warren as CFPB Director, Obama named her a special adviser to both the president and Treasury. Since the Treasury has temporary authority over the CFPB, Warren's new post allows her to set-up the agency without going through a confirmation battle.

Reform advocates were divided by the maneuver. It was either a clever piece of strategy -- allowing Warren to build up her political appeal for confirmation by demonstrating her effectiveness -- or it was an effort to scuttle her away into a powerless role. In either case, reformers promised to keep an eye on any efforts at Treasury to undermine her work.

If Treasury is indeed behind the Date hit-piece, there could be no real question about Geithner's machinations. Trash-talking Warren, her top advisers and the CFPB itself would be an unmistakable effort to compromise the entire enterprise. If it worked, Geithner could deny Warren the formal nomination as CFPB director, Warren would go the way of Brooksley Born, and less consumer-friendly officials could quietly crush the young agency.

That would be a shame, since a strong CFPB headed by Warren is the signature accomplishment of the Wall Street reform bill Obama signed this summer. Whatever its other shortcomings, the legislation created the opportunity to level the playing field between bigwig bankers and ordinary citizens and strengthen the financial security of American households.

That's a big if, of course. But reformers will be watching Treasury very closely from here on out.