Elizabeth Warren did not want a goodbye party. She told her aides there would be no grand send-off, no celebration of a mission accomplished.
The Consumer Financial Protection Bureau had been her idea from the start: a new arm of the government, uniquely empowered to police the kinds of loans and financial schemes that led to the Great Recession. Warren had detailed the idea in a journal article, then cajoled and pressured Congress to make it law. She was tasked by President Barack Obama in 2010 with setting up the bureau, and spent a year recruiting investigators and enforcers for an office they saw as an exhilarating cause.
But as spring turned to summer in 2011, Warren faced a wrenching separation. The White House had decided not to nominate her to lead the bureau permanently. So she gathered the staff for an “all hands” meeting and told them her work there was over.
“She told us that we were ready to sail the ship, that we did not need her there, and that we would be able to do it on our own,” said Patricia McCoy, a Boston College law professor who was a senior official at the bureau.
Warren was right. Under her successor, Richard A. Cordray, the bureau would recover $12 billion for consumers from financial institutions by 2017. It would become, to supporters, a prized example of the government taking on big banks after the 2008 financial crisis. To opponents — Republican lawmakers, business associations and a few conservative Democrats — it would become an example of “runaway government,” an agency to be curbed at the first opportunity.
To Warren, the bureau is something else as well: a formative lesson in how an idea — a plan — can become reality. For it was through creating a new financial regulator that Warren developed the approach to government that now guides her presidential campaign. And it was in losing the chance to lead her bureau that Warren came to see the value of asking voters, rather than a president, to give her power.
A review of Warren’s role in creating the consumer bureau, including interviews with more than 30 people involved in the process, revealed an approach to politics that joins imaginative policy ideas with a keen instinct for mass communication and a willingness to negotiate. On one hand, she marshaled support from progressive activists and helped build public demand for her idea; on the other, she haggled with members of Congress to earn their backing.
David Axelrod, who was Obama’s top political adviser during the battle to create the CFPB, called Warren’s role a “bona fide credential” for the presidency.
“There aren’t that many people who can say they had an idea, wrote about it and ended up bringing it to fruition, in terms of the creation of a whole new government agency with a very focused mission,” Axelrod said.
If some of Warren’s rivals — and more than a few Democratic voters — question whether her ideas are realistic, she and her supporters answer by pointing to the consumer bureau. At the New Hampshire Democratic Party’s convention this month, supporters of Warren broke out in chants of, “C-F-P-B! She fights for you, she fights for me!”
In a recent interview, Warren described the creation of the bureau as a “model” for how she would seek to deploy her plans as president. At a September rally in Washington Square Park in New York, Warren likened herself to Frances Perkins, the first secretary of labor — a woman, she said, “who worked the political system relentlessly from the inside, while a sustained movement applied pressure from the outside.”
But if the bureau has been an enduring victory for Warren, it culminated in a painful disappointment.
In the interview, Warren — an upbeat presence on the campaign trail — became somber when the conversation turned to her exit from the bureau. Asked about her insistence against having a farewell party, her eyes began to glisten.
“I couldn’t say goodbye to all those people I’d hired and all those people I’d brought in to fight,” Warren said, speaking slowly and quietly. “I’d made an implicit promise to lead the charge, and I would’ve stayed and led it if I could have. But I couldn’t. And I did not want to say goodbye to all of them.”
Warren’s band of advisers, lawyers, researchers and technicians devised a more discreet send-off. Elizabeth Vale, a former White House official who was among Warren’s close counselors, said an immense farewell card was made from a “big, big, big piece of cardboard,” stamped with the electric-green logo of the CFPB and signed by scores of staff members. Still, Warren, then 62, declined to receive it before a throng of colleagues.
“I remember two of us brought it to her,” Vale said, “and then I remember when she walked out, she just walked out quietly, by herself.”
An Idea About Exploding Toasters
It all began with Warren’s decision to write an article in the winter of 2007. She had endured one unhappy brush with Washington, testifying against a bill to tighten the bankruptcy code in a way she feared would burden low-income debtors. The proposal became law in 2005, with Joe Biden, then a senator, as its leading Democratic supporter.
Back at Harvard, where she was teaching law, Warren began considering a new idea: a proposal for a government regulator to address the issue on which Congress had spurned her advice — the problem of consumer credit and the often-deceptive financial products being offered to ordinary people.
She outlined the concept to Kenneth Baer, then 34, a former Clinton administration aide who with several like-minded Democrats had founded a publication, Democracy, to stir an ambitious policy debate among liberals. He was skeptical at first of Warren’s regulatory proposal, wondering if forming a new government agency represented an “old Democratic way of thinking.”
But Baer and his colleagues were hungry for big ideas to fill what they saw as an intellectual void in the Democratic Party, and he encouraged her to make the case for a new regulator.
In a February email to Baer, Warren agreed to write it. As she tells it now, she was bursting for the chance.
“The idea was ripe,” she said. “I was ready.”
A draft of the piece followed in late March. Warren urged her collaborators to “edit aggressively,” an instruction that proved unnecessary. A copy of her first version reviewed by a reporter shows its now-famous opening was scarcely changed.
“In the U.S. today it is not possible to buy a toaster that has a 1-in-5 chance of bursting into flames and burning down a customer’s house,” Warren wrote in her draft. “But it is possible to refinance an existing home with a mortgage that has the same 1-in-5 chance of putting the family out on the street — without ever disclosing that fact to the homeowner.”
When Democracy published Warren’s article in the summer of 2007, Baer and his colleagues promoted it — and its author — vigorously, booking Warren on CNN and winning coverage for her idea in national newspapers. And they promoted it to presidential campaigns, too. A breakthrough came in June when Heather McGhee, a policy adviser to Sen. John Edwards, emailed Warren to say her candidate was about to endorse a new regulator for financial products.
By early 2008, Warren and her sometime editors were musing over email that the proposal could really become law. When Warren noted praise for her idea in Newsweek, Andrei Cherny, a co-founder of Democracy, wrote back, “Next stop: law of the land!”
“I’m working on it!” Warren replied, signing off with her initials, EW, in lowercase.
It had been decades since either political party had tried seriously to impose tougher financial regulations. Even sympathetic Democrats, like Rep. Barney Frank of Massachusetts, questioned the feasibility. McGhee, who stayed in touch with Warren after the Edwards campaign ended, said she saw the professor straining to discern what to do and whom to turn to in Washington.
“She really was trying to figure out how to have all the right conversations,” McGhee said. “And then the financial crisis happened.”
A Two-Sided Game
The Congressional Oversight Panel, a body set up to scrutinize Washington’s bailout of the financial system, did not mention toasters in its “special report” on financial regulation.
But the document, issued days after Obama’s inauguration in 2009, was unmistakable in its suggestion. The report recommended creating a financial regulator that could gather up the fragmented enforcement tools of the federal government and seek to avert another financial crisis.
It was a natural suggestion for the oversight body, since Warren was its chairwoman.
Harry Reid, the Senate majority leader at the time, had named her to the post at the end of 2008, in the throes of a global financial catastrophe that sent unemployment soaring and threw millions of homeowners into foreclosure. From this perch, Warren began a campaign for her bureau.
It was no longer a lonely effort. Frank, a powerful committee chairman, was now an ally. So was an emerging coalition of progressive groups, labor unions and consumer advocates, known as Americans for Financial Reform. Warren sought out its leader, Heather Booth, for insight into political organizing.
“She knew many of the players on the policy side,” Booth said. “What she hadn’t been experienced with were the politics.”
Warren also built alliances inside government, finding friends in people like Axelrod and Valerie Jarrett, one of Obama’s closest advisers. Axelrod saw the bureau as a political necessity, the one part of financial reform ordinary voters might understand.
At times, Warren’s appeals were strikingly personal: Over dinner in Cambridge, Massachusetts, Warren told Jarrett much of the life story that is now familiar to voters who follow her campaign, a tale of deep economic adversity for her family in Oklahoma. “It put in context why this policy was so important to her,” Jarrett said.
Obama embraced the proposal, putting a consumer bureau in his blueprint for financial reform in the spring of 2009 and talking on late-night television about exploding toasters.
Warren was elated but uneasy. The financial industry was mobilizing, warning that a new regulator would damage the economic recovery. And Warren was concerned about two of Obama’s lieutenants: Treasury Secretary Timothy Geithner and Lawrence H. Summers, who helmed the National Economic Council. She had profound philosophical disagreements with both men, who believed that her savage criticism of the bank bailouts revealed a misunderstanding of the role of Wall Street in the fragile economic recovery.
“Tim and Larry were not fans of this agency,” Warren said. “I heard more than once from Senate and House staffers that they had proposed scrapping it in return for some other concession that they cared more about.”
Of Obama, she said: “I never worried about the president. I was worried about his advisers.”
Obama remained forcefully supportive, and senior officials at the Treasury Department helped negotiate the shape of the bureau at every stage.
In the House, Warren blessed deals struck by Frank, including one exempting banks with less than $10 billion in assets from certain new regulatory requirements. The concession was intended to win over an influential trade group, the Independent Community Bankers of America, and its chief lobbyist, Cam Fine. The arrangement dismayed the left — until Warren endorsed it.
“She was very realistic,” Frank said. “She was deeply engaged in talking to members and she did acquire her own sense of what was politically doable.”
Warren had less influence in the Senate, where Democrats held the majority but their ability to break a filibuster hinged on centrist legislators. So Warren turned her attention beyond the chamber, rallying activists and talking to the media. In her most provocative move, she told HuffPost that the Senate must either create a “strong consumer agency” or have “no agency at all and plenty of blood and teeth left on the floor.”
“That,” Warren said recently, “is the outsider’s game.”
The Senate ultimately approved a bureau that was stronger in some ways than Warren’s 2007 proposal. Instead of a Financial Products Safety Commission, led by committee, it would be the Consumer Financial Protection Bureau, headed by a single director. And it would draw funding from the Federal Reserve, putting its budget beyond reach of adversaries in Congress.
Warren attended the July 2010 ceremony where Obama signed the Dodd-Frank bill into law, and with it a consumer bureau that he asked her to help set up. He designated her an aide to himself and to Geithner, with a mandate to build the regulator she had devised on paper in 2007.
There was no promise she would become the permanent director.
If Warren had won a landmark policy victory, it came at the cost of making enemies in Congress and the administration. While Geithner would criticize business groups for opposing the consumer bureau in a 2014 book, he also cast Warren as an implacable critic of the bank rescue, more focused on “made-for-YouTube” grandstanding than on crafting practical ideas. He and Summers described her in White House meetings as unreasonably hostile to financial institutions, and as simply unreasonable.
“You cannot play the role she was playing without making people mad at you,” said former Rep. Brad Miller, a North Carolina Democrat involved in drafting Dodd-Frank. He said of the Obama economic team, “Those were folks who were used to getting their own way and not having to deal with critics at all.”
Geithner, now president of the private equity firm Warburg Pincus, declined through a spokeswoman to be interviewed. Summers, who has criticized some of Warren’s 2020 campaign proposals, did not respond to interview requests.
But Warren at times unnerved others in the administration. In a 2015 memoir, Axelrod wrote that Obama grew frustrated in 2010 with Warren’s assertive efforts to position herself to become director — a possibility he feared would enrage banks and doom the Dodd-Frank bill.
“Tell her to keep her mouth shut,” Obama said, according to Axelrod’s book. “She may well be the choice, but we can’t surface that now.”
‘That Was Her Job’
In the spring of 2011, Fine, the lobbyist for community banks, got a call from Jarrett. If the White House selected Warren to lead the consumer bureau, she asked, would he fight for her confirmation?
Fine said he would.
A few days later, Warren told Fine over lunch in downtown Washington that the White House had decided against nominating her.
“I said: ‘That’s just not right. Do you want me to start a campaign? Do you want me to demand a meeting over at the White House?’” said Fine, whose offers Warren declined. “She put on a brave face.”
For Warren, this setback came at the end of a whirlwind year setting up the bureau. Since Dodd-Frank became law, Warren had traveled widely and hired aggressively. Eager to show her organization was at work, she demanded swift, visible actions, like the creation of a complaint hotline with a public catalog of Americans’ grievances against banks and other lenders.
Her recruitment efforts had established the bureau as a political force, as well as a legal one. The staff swelled, and weekly meetings shifted from a modest conference room to an elevator-studded lobby. In a pair of public-relations coups, Warren asked Holly Petraeus, a Better Business Bureau official married to a renowned general, to lead the Office of Servicemember Affairs, and enlisted Cordray, the outgoing attorney general of Ohio, to lead her enforcement division.
“As she put it to me: It’s a chance to do on a nationwide basis what you’re doing in Ohio, with more tools, more authority to pursue the banks,” Cordray said, recalling Warren’s pitch.
It was a chance, in other words, to wield great power.
But Warren would soon learn that hers was borrowed power — power delegated by the president, and for only a year. By the spring of 2011, the opposition to Warren becoming permanent director was unbending. Republican senators said they would never confirm her; so did Sen. Ben Nelson of Nebraska, a conservative Democrat.
Nelson, who is supporting Biden in the Democratic primary, said in an interview that he worried about empowering someone he saw as a champion of “runaway government.”
“I was very concerned about somebody who had been such a strong advocate for a government bureau that had virtually no control,” Nelson said.
Reid said Republican opposition sealed Warren’s fate.
“The Republicans stopped her from getting that job,” he said. “That was her job.”
Among some of Warren’s allies, frustration lingers about what happened in 2011. They blame not just Republicans but also her rivals in the Obama administration and a harsh strain of sexism directed at her by political opponents and the media.
“Men never get this adjective, ‘strident.’ That bothers me, because I don’t think she is,” Petraeus said. “Yes, she’s passionate. She doesn’t hesitate to call somebody out, especially on the Hill, if they’re trying to serve up a bunch of double-dealing nonsense.”
Sheila Bair, a Warren ally who was then at the head of the Federal Deposit Insurance Corporation, said she had been angry to learn the White House was leaning against nominating Warren. Her detractors in the administration, Bair said, had been “whispering behind the scenes that she couldn’t get confirmed.”
“Even if that is true, fight it out,” Bair said.
In the end, Obama concluded Cordray stood a better chance of clearing the Senate. Republicans would stonewall his nomination until 2013.
It was Jarrett who called to inform Warren. She also suggested an alternative path forward: running for Senate.
“She was not overly enthusiastic in our first call, because she never saw herself as a politician,” Jarrett said, “and I said I thought that’s the reason she’d be perfect for the job.”
Others in the administration, including Geithner’s aides, saw the Senate race as a way to get Warren out of the executive branch. Miller, the former congressman, said he emailed Warren to warn that her critics might be trying to lure her “into a race that she could not win.”
But in September 2011, Warren entered the race against Sen. Scott P. Brown of Massachusetts, starting down a path that has led with improbable speed to a presidential campaign.
Her candidacy today resembles a vastly enlarged version of the movement that gave rise to the consumer bureau. In a campaign framed as a crusade of ideas, Warren has vowed to restructure the economy as president using the same methods that helped make her imagined agency a real structure of concrete and glass.
It is not lost on Warren that, had she become the director, it is unlikely she would be a leading presidential candidate now.
“I would have stayed,” she said, “and done it forever.”
This article originally appeared in The New York Times.
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