Warren had been widely viewed as the top pick to head the Consumer Financial Protection Bureau but was vigorously opposed by Republican House members — many of whom have promised to hold up a vote for any director of the new agency — as well as by the financial services industry. A move from consumer advocacy into politics is an unconventional, though not unprecedented, career switch. But Warren probably feels like she’s already steeped in the rancor and partisanship of Washington, so she might as well make it official.
Ironically, given that Warren clearly would have preferred to run the agency she created, the banks and their allies in Congress may live to regret that they stood in her way.
As head of the CFPB, Warren would have had oversight over not only banks, but credit bureaus, mortgage companies, payday lenders and a host of other providers of sometimes-predatory financial products to consumers. Unlike existing agencies like the FTC, which has to wait for consumer complaints to trickle in before it can launch an investigation, the CFPB is designed to proactively investigate companies or practices and work on rules designed to keep citizens from being taken advantage of by companies offering usurious loans, deliberately misleading contracts and the like. That’s a lot of power — too much power, according to GOP lawmakers — but in the end, Warren could wind up wielding a much bigger stick as a senator than she ever could have as an agency director.
Of course, this is speculative: Warren still has to win both the Massachusetts primary and the general election in November. But her tussle in Washington is likely to help rather than hurt her in those venues. The national exposure of the episode will help when it comes to fund-raising, and she’s developed a reputation as a determined advocate willing to face political ugliness in the pursuit of her goals, an image she’s already capitalizing on in her campaign.
If she does win the seat, it would be a political blow to her critics. When Scott Brown was unexpectedly elected to fill the seat left vacant by the death of Ted Kennedy in 2010 (the seat Warren will be running for), the upset became a political rallying point. GOP leaders framed the results as a proxy for voter rejection of Democrats in general and President Obama in particular. A victory by Warren would send the opposite message.
But banks face a more direct threat from a potential Senator Warren. A victory at the polls would amount to an end run around House Republicans’ blockade of her CFPB appointment. From the Senate, she’d have an easier time rallying public support for pro-consumer laws that banks will undoubtedly hate, and would be able to form alliances, trade favors, and build coalitions with like-minded lawmakers to address financial reform.
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If Warren sticks it out for a couple of terms, she would likely wind up in an influential committee leadership role. Consider Michigan Democrat Carl Levin, the longest-serving junior senator in Washington, as a hypothetical example of Warren’s Congressional trajectory. Levin’s early career skewed toward advocacy; he was assistant attorney general and general counsel of the Michigan Civil Rights Commission before moving into politics as a councilman for the city of Detroit. A senator since 1978, in 2009 Levin headed up the subcommittee that slapped subpoenas on Goldman Sachs and other banks over allegations of fraud in their sales of mortgage securities. The group’s investigation generated a 650-page report that it forwarded to the Justice Department earlier this year.
Whether Warren would want or need to wait 40 years to launch a sweeping investigation into the industry whose lobby has so vigorously opposed her is an open question, but it’s certainly one big financial institutions don’t want to entertain. Right now, the CFPB’s full regulatory authority is hamstrung by a divided Congress, a state of limbo with no end in sight. Depending on the outcome of next year’s elections, the agency could be scuttled outright or have the scope of its authority limited. Warren at the head of a CFPB hemmed in by bank-friendly (and bank-funded) lawmakers could do far less damage than a Warren ensconced in the Senate for the next six years or more.