If anyone thought that Senator Elizabeth Warren would ease up on her battle with the White House over Treasury Undersecretary for Domestic Finance nominee Antonio Weiss, they can put such thoughts to bed. In a speech today at the “Managing the Economy” conference in Washington organized by several financial reform coalitions, Warren made clear that her fight is about much more than one nominee at the Treasury Department. She crafted a direct challenge to three decades of bipartisan collusion between government and Wall Street, in a highly unusual manner for any politician, let alone one recently drafted into the Senate Democratic leadership. The Weiss affair has become secondary to this bigger competition for what principles will shape the Democratic Party, and what role Warren will play in it.
At a conference ostensibly about the role of the Federal Reserve in economic policy, Warren pivoted to her main concern—Wall Street’s outsized influence on our government. She highlighted the 1,447 former government officials who lobbied for the financial services sector during the Dodd-Frank debate, and how big banks like Goldman Sachs and JPMorgan Chase meet with top regulators several times a week.
But she really wanted to talk about Antonio Weiss, and set his nomination in the context of who really runs financial policy when Democrats get into power. Last month, the White House nominated Weiss, a mergers and acquisitions specialist at the investment bank Lazard, for the number 3 position at the Treasury Department, and Warren immediately came out against the nomination. At the heart of the disagreement is the easy manner in which financial sector executives float in and out of government, a practice known familiarly as the revolving door.
As Warren pointed out, three of the last four Treasury Secretaries under Bill Clinton and Barack Obama worked for Citigroup at some point, and the fourth, Tim Geithner, was offered the Citi CEO job. Under the current administration, ex-bankers staffed jobs at the Federal Reserve, National Economic Council, Office of Management and Budget, U.S. trade representative, and dozens of other top policymaking positions. She even cited my report in The New Republic about Wall Street securities lawyer Sharon Bowen’s ascension to a commissioner slot on the Commodity Futures Trading Commission, which has worked out exactly how you would expect, with the agency rolling back and delaying scores of derivatives regulations pushed through in Dodd-Frank.
Warren has come under criticism from elites in the financial press for her opposition to Weiss, and she answers those critics directly. First of all, she corrected the assumption that her concerns stem entirely from Weiss’ participation in the corporate inversion between Tim Hortons and Burger King. Actually, Warren leads with the fact that Weiss’ experience advising “companies buying and selling each other” displays no real qualifications for this particular job. The New York Times even had to issue a correction when Treasury oversold Weiss’ expertise to one of their reporters.
Here, Warren hits at a central conceit of both the financial press and government policymakers, that a Wall Street résumé automatically conveys expertise in all facets of the economy. Georgetown law professor Adam Levitin points out, none of the skills of advising international mergers and acquisitions relate to the actual job requirements of the Undersecretary for Domestic Finance: regulation of financial institutions, oversight and management of government debt, and the nation’s overall financial stability. MIT Professor Simon Johnson makes similar points. Assuming that anyone who’s ever worked with money can automatically fill a role regulating financial institutions “got us into the 2008 mess in the first place,” Levitin writes.
“We’d all scratch our heads if the president nominated a theoretical physicist to be Surgeon General just because she had a background in science,” Warren said today. “It’s no less puzzling to nominate an international mergers specialist to handle largely domestic issues at Treasury because he has a background in finance.”
Then there’s the $21 million “parting payment” Weiss will get from his former employer, Lazard, to take the government job. The AFL-CIO has focused on these payouts for Wall Street executives who rotate into government, wondering how it benefits the bank or its shareholders unless they expect a light touch of regulation in the future.
But Warren goes beyond just criticizing the Weiss decision. “Time after time in government, the Wall Street view prevails,” Warren said, largely because “conflicting views are crowded out.” As proof of this, she cited “the deregulation of the banking industry in the 1980s and 1990s,” carried out by Democratic and Republican Presidents, and Democratic and Republican Congresses. She condemned the “no-strings-attached bank bailouts in the aftermath of the financial crisis,” again a bipartisan concoction, and “the anemic efforts to help homeowners who had been systematically cheated by financial giants,” mostly a production of the Obama Treasury Department.
Warren even dared to bring up the demise of the Brown-Kaufman amendment to the Dodd-Frank reform. This would have set a cap on the size of financial institutions, but it failed amid mass opposition, not just from the financial sector but inside the government. “The hand-in-hand between Treasury officials and Wall Street executives on this was not subtle—a senior Treasury official publicly acknowledged it at the time,” Warren points out, referring to a long-forgotten admission in New York Magazine. The Treasury official in question boasted that Brown-Kaufman would have passed if Treasury supported it, “but we weren’t, so it didn’t.”
By the end of the speech, you’ve almost forgotten the name of Antonio Weiss, and are left wondering about the power center Warren is building in the Senate. The Weiss nomination offers a teachable moment, but it fits inside her framework of an economy rigged for elite interests. He was simply the unlucky ex-banker who walked through the revolving door at the wrong time.
In the wake of another midterm wipeout, the Democratic Party has been flailing around for some guiding principles, and Warren has seized on this moment to provide them. She has enough backing among the Democratic base and top donors to promote a different vision that the one offered by her fellow leaders in the party, one rooted in a populist critique over the design of the economy and how it works against ordinary Americans.
Since the Clinton years, Democratic technocrats have shared common cause with financiers, engaging in deregulation and bailouts with the conceit that what’s good for Goldman Sachs is good for America. Warren speaks for a different segment of the party, and may be well-positioned to take over its ideological heart. Whether that means she runs for president, or that she forces every party leader to uncomfortably take her side in this broader argument, hardly matters.
In her recent book, Warren recounts a conversation with Larry Summers, who offered her a choice of being an insider or an outsider. “Outsiders can say whatever they want,” Warren writes. “But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People—powerful people—listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.”
Warren isn’t taking Summers’ advice. This speech explicitly criticizes other insiders—indeed, the entire policymaking apparatus of the Democratic Party for two decades. She sees a moment to turn those insiders out of the temple of policymaking. And powerful people are listening to what she has to say.