Friday’s action by President Obama to appoint Elizabeth Warren as his assistant in the White House and as an advisor to Treasury Secretary Timothy Geithner was extraordinary for several reasons, not the least of which was the 180 degrees reversal from positions by congressional leadership and the President since Wall Street reform became a legislative hot-button issue fifteen months ago.
When the President launched his push for financial re-regulation, he made creation of a new agency, charged with protecting consumers from harmful financial products and services, the cornerstone of his legislative initiative. Paramount to the future success of this new agency, according to President Obama, was its absolute independence from political influence.
Generally, agencies operate under the President’s supervision and major policy direction is determined through a dialogue between each agency and the White House Office of Management and Budget which sets agencies’ budgets. President Obama and Chairmen of the House and Senate Banking Committees insisted that the new Consumer Financial Protection Bureau should be independent from any political interference from the White House or other agencies. They accomplished this through provisions in the law that exempt the new bureau from having to check with the White House before making policy decisions, guaranteed funding through the Federal Reserve, and through the appointment of a Director for a 5-year term (as opposed to most Senate-confirmed appointees who leave office in conjunction with the President who appointed them).
Anyone who listened to the strong pronouncements by the President about why the consumer agency should be independent must have been surprised on Friday when he announced that his pick to staff up the Consumer Financial Protection Bureau would not be independent at all. Instead, Elizabeth Warren will report to both President Obama and Secretary Geithner.
Looking at President Obama’s decision, it is easy to see that appointing an advisor is easier than submitting a controversial nominee to the Senate for approval. However, the attempt to avoid a political battle may backfire by putting Elizabeth Warren in a role subject to the very political interference the agency was supposed to avoid.
It is unclear how the President’s appointment will work out. However, his about-face on the importance of an independent voice for consumers suggests that President Obama has twisted a familiar old adage into, “do as I do, not as I say.”
Tom Sullivan is an attorney with the law firm of Nelson Mullins Riley & Scarborough where he runs the Small Business Coalition for Regulatory Relief.