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07.14.11

Elizabeth Warren’s Summer Grilling

Obama’s financial-reform expert is hauled up to Capitol Hill (again) to defend the new agency she helped create. Gary Rivlin gives the blow by blow.

Summer is the season of reruns, so anyone tuning in this morning to watch the latest appearance of Elizabeth Warren on Capitol Hill can be forgiven for thinking they’ve seen this show before.

There sat Warren alone at a witness table—the same as she had in March and then again in Maytrying to keep her cool as a battery of Republican congressmen peppered her with hostile questions about the new Consumer Financial Protection Bureau she is putting together. There was a repetitiveness to the dialogue as well. The charges the Republicans hammered on in March (basically that she’s overstepped the bounds of her authority) were the same ones they used as their excuse to haul her before Congress again in May.  And these same charges served as the leitmotif of today’s hearing before the House Committee on Oversight and Government Reform.

Today’s hearing must have left viewers scratching their collective heads, wondering what the whole show was really about.  Congressman Mike Quigley, a Democrat from Illinois, seemed to be stating only the obvious when he said, “With all due respect, I fear this hearing is focused on issues to distract from the obvious task at hand: helping Professor Warren and others in our attempt to avoid another economic catastrophe caused in large part by unregulated greed.”

The Consumer Financial Protection Bureau (CFPB), which goes live next week, was created by Dodd-Frank, the broad financial-reform package Barack Obama signed into law last July. It was Warren, a Harvard Law professor specializing in bankruptcy laws, who first gave the president the idea for this agency charged with protecting consumers from abusive and deceptive financial products, and it was Warren who Obama picked when seeking someone to turn her idea into reality. Warren is currently the agency’s temporary custodian, until President Obama nominates, and the Senate confirms, a director.

The House Financial Services Committee was the first to order Warren to Capitol Hill to answer questions about the agency she was creating.  In reality, that hearing, held by one of its subcommittees in March, added up to little more than a two-and-one-half-hour opportunity for Republicans to browbeat Warren and do the bidding of the banks and fringe lenders who have given generously to their campaigns. But at least in theory, Warren’s appearance made sense: House Financial Services is charged with overseeing financial reform, and it was House Financial Services that first introduced legislation establishing the CFPB (albeit when it was run by Democrats).

Things began to take a farcical turn when the House Committee on Oversight and Government Reform took over the inquisition. This is a committee charged with checking government abusebut here they were, poking into the actions of an agency that has no official authority yet. About the only pertinent question regarded the salaries Warren was paying those who the agency has already hired while ramping upa red herring, perhaps, but at least relevant to the committee. Warren appeared before a subcommittee of the full oversight committee, but she didn’t stay long enough to give every last Republican a chance to mug for the camera. So its chairman, Darrell Issa, a hard-charging Republican from California, used that as an excuse to summon her to face his entire committee this morning. Which is why Warren and the rest of us had to endure a rerun of the same, tired show, as Republicans hit her with any number of questions about actions that the CFPB may or may not take. Would the agency ban certain high-priced loan products? What new rules might it propagate?

“A lot of people are rushing to conclusions here,” said Jim Cooper, a Tennessee Democrat, toward the end of the nearly four-hour hearing.  Cooper then offered that, to his eyes, Warren was being “treated like a partisan punching bag before she’s had a chance to serve.”

The Democrats did their best to take advantage of a hearing that drew more than the usual share of media. They cast the spotlight on the foreclosures of homes owned by members of the military, despite the special protections Congress had granted active-duty personnel. Several of the country’s biggest banks, including JPMorgan Chase, have paid fines for their behavior, but Democrat after Democrat called on Issa to subpoena the rest of the big banks so they could pursue an investigation. That seemed equally out of bounds given the mandate of the committee, but the contrast was sharp. “The committee has trained its sights on Professor Warren,” said the committee’s ranking Democrat, Elijah Cummings of Maryland, meanwhile they were ignoring the kind of abuses that demanded they create a consumer financial protection agency in the first place. As Warren herself reminded the committee more than once, her agency is set to go live in just a week. But instead she was sitting there on Capitol Hill participating in the kabuki that passes for political debate in this country.

What Thursday’s hearing was really about was sour grapes: the Republicans lost last year’s fight over the Consumer Financial Protection Bureau.

What Thursday’s hearing was really about was sour grapes. The Republicans lost last year’s fight over the Consumer Financial Protection Bureau. To their chagrin, and to the chagrin of the banks and fringe players like the payday lenders and check cashers, Congress created a strong independent regulator with broad rule-making powers. Republican after Republican carped about the CFPB operating outside the bounds of congressional financial oversight, as if something nefarious was taking place. Of course, it wasn’t Warren but rather their colleaguesthe majority in the House and Senate who approved Dodd-Frankwho decided to fund the CFPB with a small portion of the fees that the Federal Reserve collects from the banks it regulates.

Warren, soft-spoken and polite, reminded the committee that every bank regulator, whether the FDIC or the Fed, is funded in a similar fashion. The idea is to insulate them from political influence, so they’re “not subject to lobbying by trillion-dollar enterprises,” she said.

But the hearing was never really about listening to Warren might have to say. (She’s actually rather more moderate than her critics make out.) It was about ... well, that’s the million-dollar question, isn’t it? Is it about the tens of millions of dollars the banks have donated to the political coffers of elected officials and the hundreds of millions they’ve spent on lobbyists? Or is the answer rooted in the powers the Republicans picked up last November when they regained control of the House: the ability to thwart and delay and hassle and distract?

To Lisa Donner, executive director of Americans for Financial Reform, a coalition of consumer advocates that came together during the debate over Dodd-Frank, it’s about both at once. “You make noise at the behest of interests opposed to this stuff,” Donner said. “That keeps the trade associations and interest groups happy. It allows them to say they’re working for their members. ‘I’m delivering, I’m performing.’ ’’

At the same time, it’s about the Republicans using their beachhead in the House to thwart the administration, Donner continued. “Elizabeth Warren and her team have a lot of work to do to get this thing together quickly,” she said. “And so the more they have to spend time worrying about what’s going on up on the Hill, the less time they have for agency building.” And, of course, the more the Republicans can delay things, the happier those writing them big campaign checks will be.