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Warren’s star rose in D.C. battles

Oversight role won allies and enemies

Timothy Geithner (above right) never quite got the hang of it when it came to testifying in front of Elizabeth Warren, who chided the Treasury secretary for taking up too much time. (Susan Walsh/AP) Timothy Geithner (above right) never quite got the hang of it when it came to testifying in front of Elizabeth Warren, who chided the Treasury secretary for taking up too much time.
By Glen Johnson
Globe Staff / July 29, 2012
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WASHINGTON — Timothy Geithner knew he had to keep his opening statement short. The chairwoman, Elizabeth Warren, had interrupted the Treasury secretary repeatedly the first time he testified, chiding him for going on so long.

So, during Geithner’s second appearance before her congressional oversight panel, which was charged with monitoring his agency’s use of $700 billion in economic recovery funds, the secretary proudly noted that he had finished his opening in just six minutes.

Warren leaned into her microphone. “And 19 seconds,” she said.

For many who heard the exchange, this response — only partly tongue-in-cheek — captured the essence of Warren’s nearly three-year tenure in Washington.

Sharp-tongued, sharp-witted, exacting, unyielding, and fearless, the Harvard Law School professor quickly made an impression with the top echelon of political power. She earned a bold reputation that helped catapult her into the nation’s most high-profile Senate race this year, a campaign against Republican Scott Brown, but also laid the groundwork for some of her opponents’ most persistent attacks against her.

Warren’s verbal fencing matches with Geithner and other Washington heavies — the plainspoken watchdog taking on the power elite during the depths of the recession — soon became must-see TV. She emerged a media darling, with comic Jon Stewart proclaiming on-air that he “wanted to make out with her” after she made a guest appearance on his show in January 2010.

“What stood out to me was an unstinting sense of advocacy,” said David Axelrod, a top White House adviser when Warren was in Washington. “She really had a very strong identification with the struggles of everyday people.”

But the same unrelenting attitude, which often eschewed the clubby ways of Washington politics, also stirred a growing disenchantment in some quarters with Warren. She needled. She wouldn’t compromise. Republicans, already hostile to her anti-Wall Street rhetoric, chafed at what they considered her authoritarian leadership style.

When panel member Richard Neiman, a Democrat, surprisingly broke ranks to vote with the Republicans on a staffing matter, Warren telephoned him to complain. At the next meeting, the panel re-voted and Neiman reversed course.

The champion of transparency at the Treasury also initially sidestepped requests to release her panel’s meeting minutes and transcripts, fueling one of Brown’s campaign attacks against her. “I thought her leadership was lacking,” said Representative Kevin Brady, a Texas Republican who called for Warren’s resignation. “At the end, ultimately, I determined her focus was about her, not about the oversight.”

Increasingly, top officials within the Treasury Department, whose actions she had been assigned to oversee, believed that the longtime academic was too idealistic to clearly see the reality of the economic challenges they confronted. And in the end, even some of the same Democrats who are now publicly championing Warren’s candidacy inadvertently or deliberately bolstered some of the Republican criticisms of her.

“I know she will be a great representative for the people of Massachusetts,” former Senator Chris Dodd of Connecticut, now chairman and CEO of the Motion Picture Association of America, said in a statement to the Globe recently.

But in May 2011, during an interview with the influential Capitol Hill newspaper Politico, Dodd helped undercut Warren’s hopes of running a new federal consumer agency. He had worked with Warren as he and Representative Barney Frank coauthored the Dodd-Frank financial regulatory act, but he expressed concern that the consumer panel post created by the legislation might not be filled because of GOP opposition to her.

“It would be deeply unfortunate if the head of this agency is not filled because of ego, because of people who believe they are so important that their value exceeds the idea,” Dodd said, though the former senator denied it was a shot at her.

Warren says such criticisms were unavoidable, given her charge.

“It was my job to push for more accountability both for government and for the Wall Street banks,” she said during an interview.

Could you just wrap it up?

In the fall of 2008, the Bush administration was scrambling to respond to the worst economic collapse since the Great Depression. Weakness in the housing market had triggered a dive in the stock market, bankruptcy at Lehman Brothers, and demands to stave off the same fate at mega-insurer AIG, famously branded “too big to fail.”

In October 2008, Congress approved Treasury Secretary Henry Paulson’s request for $700 billion in funding for what became know as the Troubled Asset Relief Program, or TARP. Amid concerns about such an epic blank check, the House and Senate approved several layers of oversight.

One was a special inspector general, a position filled by Neil Barofsky, a New York attorney who released “Bailout,” a book about his experience, on Tuesday.

Another was the Congressional Oversight Panel, whose five members would be picked by congressional leaders.

Senate Majority Leader Harry Reid chose Warren, who had chops not just as a Harvard professor on bankruptcy law, but also as a leading voice on the plight of the middle-class, through “The Two-Income Trap” and “All Your Worth,” books she coauthored with daughter Amelia Warren Tyagi.

“I thought we needed somebody that was very serious, and not only serious, but had the capacity to understand very big issues, and she had that,” Reid told the Globe.

The panel members voted among themselves to pick their chairman, and the three Democrats backed Warren.

The law professor started the part-time job in early December 2008 and by Dec. 10 — working without offices and virtually no support staff — had produced a report running 37 pages and posing 10 questions to the Treasury Department. A month later, in her second report, Warren’s bluntness and zeal were evident as the panel assessed the response to the requests made in its inaugural report.

“While the letter provided responses to some of the panel’s questions and shed light on Treasury’s decision-making process, it did not provide complete answers to several of the questions and failed to address a number of the questions at all,” the report said.

The panel also began holding field hearings, the first on Dec. 16, 2008, in Clark County, Nev., which includes Las Vegas and has had a nation-leading mortgage foreclosure rate.

In language that now permeates her Senate campaign, Warren said: “Addressing the financial crisis can’t be just about Wall Street, or even just about Main Street, it has to be about the 30,000 homeowners in Clark County alone that have lost their homes this year and the families that are struggling all over the country.” Warren makes him ‘squirm’

The committee’s most visible moments were its Capitol Hill hearings, which Warren led. And none of those hearings attracted more attention than when Geithner testified, as he first did on April 21, 2009.

Warren’s voice was raspy from a cold, but she forged ahead, telling the secretary in her opening statement that his department should take actions that made sense, that he shouldn’t be afraid of facts, and that decisions creating short-term pain were fine. Geithner was diplomatic in response, thanking Warren and the other panelists for their “very thoughtful opening statements.”

Yet as he continued on about the “complicated questions” facing his department, Warren grew impatient.

“Mr. Secretary, could I ask you just to wrap up?” she said.

Geithner replied, “Yes, but this is very important for me to do, because you have asked me to lay out broad strategy.”

After a few more minutes, Geithner reacted to Warren’s continued impatience by flipping forward — pages at a time — through his prepared testimony.

Warren interrupted him again. “Mr. Secretary, I appreciate how many pages you are turning there,” she said. “But if we could wrap up, I know we want some questions, too.”

During Q&A, Warren complained that banks receiving TARP money had not been forced to make leadership changes, and were reimbursed for their losses dollar-for-dollar, while US automakers endured management changes and the companies had to accept what she termed “big haircuts” by getting reimbursed for just part of their losses.

Geithner insisted “they are different challenges. They require different solutions.”

Warren refused to yield, cutting the secretary off again.

“I am sorry. I just want to make sure I am following. You are saying that there have been changes in management at the financial institutions that received TARP funds?” she said.

Geithner would appear before the panel three more times, including the September 2009 hearing at which Warren suggested his 6 minute, 19 second opening statement was still too long.

“Elizabeth Warren makes Timmy Geithner Squirm,” was the headline atop one video of that hearing that went viral on YouTube.

“I tried to make it a more democratic process,” Warren told the Globe. “This wasn’t about the battle of the nerves; it was about letting people in on what was at stake, and what kinds of decisions were being made in their name.”

After Geithner had another rough outing in December 2010, he decided to cut back on his schedule of appearances before the panel.

“It won’t be the same without you,” Warren pleaded to Geithner during a subsequent phone call, according to a former Treasury aide who was briefed on the conversation.

“I know,” the secretary replied with a chuckle.

Geithner would not return for another seven months, until June 2010. By then, Warren was about finished with the panel herself after 24 reports and 21 public hearings. Under attack from the GOP

At the same time the panel was conducting its business, Congress was writing legislation designed to prevent a future financial mess, a massive bill that came to be known as the Dodd-Frank Act.

Warren had long advocated for a federal agency that looked after the consumer, an idea she put forth in a 2007 Democracy Journal article. President Obama, a fan of her work, was insistent that just such an agency be included in the final bill. And, while still leading the oversight panel, Warren worked on the side with Frank — her fellow Massachusetts Democrat — to draft politically palatable language about the proposed agency.

Obama signed Dodd-Frank into law and, on Sept. 17, 2010, appeared with Warren in the Rose Garden to announce that he had asked her to join his administration to start what would be known as the Consumer Financial Protection Bureau.

“Elizabeth understands what I strongly believe: that a strong, growing economy begins with a strong and thriving middle class,” Obama said. “And that means every American has to get a fair shake in their financial dealings.”

Warren negotiated the title “special assistant to the president” and was also named “special adviser to the secretary of the Treasury.” As a full-time employee, she secured herself a sizable office in the department.

It was one floor below Geithner’s.

Adding a layer of palace intrigue were reports that the secretary had lobbied hard to keep Warren out of the job, given his experience with her at the Congressional Oversight Panel, an assertion that Geithner publicly denied.

Nonetheless, Senator Bernie Sanders, a Vermont independent who caucuses with the Democrats, felt it was necessary to write to the president on her behalf, while others collected over 200,000 signatures on a petition backing her appointment. Liberals from and Dr. Phil, on whose TV show she used to appear, also rallied behind her, increasing pressure on the White House.

Republicans fought just as hard on the other side to block her from the five-year term spelled out in the Dodd-Frank Act. As a party, the GOP objected not just to a new government agency, but also one that — at Warren’s insistence — was funded directly by the Federal Reserve rather than being subject to congressional appropriation.

That, in their view, stripped the agency of accountability; Warren countered that bank regulatory agencies established in the Civil War era had similar funding mechanisms.

“There was a recognition even a 100 years ago that banks can be large and powerful and wield political influence, and so the regulators who are charged with monitoring those banks were given independent funding sources,” she said in the interview.

In the end, the president found middle ground: He appointed Warren as his special adviser so she could launch the bureau, but he deferred a final decision about whether she would permanently head it.

As she continued her work, creating and staffing the agency, Republican opposition grew.

In March 2011, Warren testified before a subcommittee of House Financial Services Committee. Republicans wanted to dilute the bureau’s power before it went into full operation in July 2011, and one idea was to transfer decision-making authority from its lone director to a bipartisan committee.

Two months later, as Warren made a return appearance before the committee, members attacked her.

Representative Patrick McHenry, a Republican from North Carolina, accused her of misleading the panel during her March testimony when she denied accusations that the bureau had inserted itself into negotiations between other government authorities and mortgage servicing companies.

Then, after an hour in which he and several other Republicans tried to pin down Warren with a series of yes or no questions, McHenry sought a recess so members could attend votes on the House floor.

Warren, chafing at having exceeded what she felt was a commitment to testify for just an hour, said, “Congressman, you are causing problems. We had an agreement.”

McHenry replied, “You’re making this up,” a suggestion of lying that The New York Times said triggered gasps from the audience. “This is not the case.”

Ultimately 44 Republican senators declared they would filibuster any confirmation vote for Warren to lead the bureau, unless the Obama administration agreed to structural changes in its oversight and funding.

“I was genuinely shocked that in the wake of a staggering financial crisis, brought on by the rampant tricks in the mortgage industry, that the Republicans would move to cut the legs out from underneath the consumer agency,” Warren told the Globe.

In July 2011, Warren again stood next to the president in the Rose Garden as he nominated her top lieutenant — former Ohio Attorney General Richard Cordray — to be the first head of the Consumer Financial Protection Bureau.

Warren had decided instead to return to Massachusetts, to take her grandchildren on a vacation to Legoland, and then to launch a Senate candidacy. Her departure note to the bureau staff sounded like a Kennedyesque campaign anthem.

“I leave this agency, but not this fight,” wrote Warren. “The issues we deal with — a middle class that has been squeezed and business models built on tricks and traps — are deeply personal to me, and they always will be.”

As he prepared to walk through a set of ornate doors and onto the US Senate floor last month, Senator John Cornyn was asked for his opinion of Warren.

The cowboy boot-wearing Texan is a member of the Senate Banking Committee, and chairman of the political committee charged with electing Brown and other Republicans to the Senate.

“Well, I would say she certainly had strong zeal for her point of view, but, obviously, I didn’t agree with a lot of the policies,” Cornyn told the Globe.

After branding it the “anti-democratic Consumer Financial Protection Bureau,” Cornyn said he was irked by its ability to run without a congressional appropriation. “It, literally, denied Congress an attempt to do the kind of oversight that we typically, under the Constitution, would do,” he said.

Frank said such criticisms highlight that Warren wasn’t an obstacle to her bureau, but was the victim of the philosophical and partisan battle that rages today on Capitol Hill.

“There are no specific criticisms of what Elizabeth has done, none that she appointed inappropriate people, none that her agency overstretched her bounds,” the congressman said.

Warren defended her tenure and denied she exercised ironfisted control over the oversight panel’s official documents, Warren said she followed federal law and the examples set by similar panels like the 9/11 Commission.

“And now, so far as I know, everything is public or can be made public,” she said.

Axelrod, the top Obama aide, said Republican opposition to making Warren the permanent head of the financial protection bureau put the president in a predicament from the outset: Nominate her for the permanent assignment and trigger another partisan battle on the Senate floor, or put her into the post temporarily through a so-called recess appointment while Congress was on vacation.

The latter option would have allowed Warren to head the bureau, but only until the current session of Congress expires. Then she would have been out of a job.

“Once the agency was set up, you know, both she and the president felt, ‘Better move on to other things,’” said Axelrod.

The former Treasury aides and some of those who worked with Warren on Capitol Hill say there was a sense in both the White House and the halls of Congress that Warren’s best course was to seek a seat of her own in the very Senate whose GOP minority vowed to block her nomination.

Frank, who shares billing with Dodd on the financial regulation act, disputed the complaint of some critics that Warren’s efforts were undercut by an outsized ego.

The congressman remembers bracing himself for a conversation with Warren when he planned to tell her something she wanted in Dodd-Frank couldn’t be included. To Frank’s surprise, he found Warren accepted his explanation without argument. “That was when I fell in political love with her,” the congressman told the Globe. “I didn’t have to explain reality to her. She was flexible, she was thoughtful.”

Frank, though, said he wishes the president had taken a hard line in the face of the Republican opposition to Warren’s permanent appointment to the consumer bureau.

“I told President Obama at a Democratic issues conference to appoint her,” the congressman said. “Either she gets confirmed, or she gets filibustered and becomes a martyr and wins the Senate election.”

Frank said the president replied, “Oh, do you think she wants to run for the Senate?”

The congressman said he replied, “Oh, yeah, I think she does.” Frank added: “I think Scott Brown wishes he had appointed her now.”

Glen Johnson can be reached at Follow him on Twitter @globeglen.

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