Why Warren Isn't Ready to be the New Consumer Watchdog

If Obama wants to improve things for consumers he can start by dropping plans to nominate Elizabeth Warren to head the new consumer protection agency.

If President Obama wants to improve things for American financial consumers and realize the promises of the financial reform bill, he should drop the rumored nomination of Harvard Professor Elizabeth Warren to head the newly created Consumer Financial Protection Bureau and pick a proven professional manager in her stead.  It isn’t a matter of politics: Warren’s work is on the Left but hardly out of the mainstream and, her relative unpopularity on Wall Street isn’t necessarily a strike against her. (Industries shouldn’t be regulated by their best friends.) But, Sen. Richard Shelby’s (R-AL) comments about Warren—that she has “no significant managerial experience”—should raise some pretty grave concerns.

Some background on Warren:  Although some versions of the financial reform bill created a super-powerful freestanding Consumer Financial Protection Bureau, the entity that emerged will come into existence as the Treasury Secretary consolidates existing powers and authorities over credit cards, mortgages and other financial products.  If Warren or some other activist wants to use the CFBP to ban all payday lending, reinstate usury laws nationally, or make it impossible for poorer people to get credit cards—all goals various segments of the Left have embraced—they’ll find themselves out of luck. Even if these things were good ideas (they’re not), the Bureau probably can’t do them.  Over-zealous consumer protectors like Carter administration Federal Trade Commission Head Michael Pertschuk have found their own powers severely circumscribed.

The real task ahead for the bureau will involve meshing staffs from dozens of different agencies to administer existing laws in a better more predictable fashion.  This unglamorous but necessary work could yield some real dividends. A single agency might well be able to cut back the phone-book sized package of papers necessary to close on a mortgage, reduce the 20-page fine print credit card agreement to a few easy-to-read pages, and crack down on the financial scams that proliferate on the internet.  This isn’t exciting or glamorous stuff.  Mostly, it will require a sure managerial hand and the ability to build a task-focused organizational culture at the new bureau.   And nothing in Elizabeth Warren’s resume indicates she has that set of skills.