The financial reform bill will create a new consumer protection agency, and TARP watchdog, and Harvard professor Elizabeth Warren has widely been seen as one of the frontrunners.But last week the Huffington Post reported that Tim Geithner opposes the nomination of Warren to the position.
This is an important issue, because the strength of the agency will likely be dictated by who’s at the helm. It’ll be like the EPA, a force for environmentalism under Democrats, while very much less so under Republican Presidents.
The presumption is that Tim Geithner just doesn’t want a bank gadfly in the position, but author John R. Talbott thinks that his opposition is much more profound. Writing at HuffPo he argues that the banks have never moved the majority of their bad assets, and that their only way to the end of the tunnel is to extend, pretend and, importantly, earn their way through.
And how will they earn their way through? By soaking consumers through fees.
And that, of course, is what Warren is eager to oppose.
Warren’s appointment wouldn’t just be a setback, it would devastate Geithner’s entire plan on how to deal with trillions of bad assets the banks still won’t recognise as losers. That is why I think she is going to face enormous resistance, even inside of the administration. The next one to oppose Warren after Geithner will be Larry Summers for this very reason. Then they will see if they can get Bernanke and finally Obama on board. The pitch to Obama and Bernanke will not be personal, it will be the same phony argument that Paulson and Bernanke used to justify TARP to congress, they will say that if Warren is appointed the entire world of banking and finance as we know it will come to an end.
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