Obama in Retreat Thanks to Elizabeth Warren-Led Opposition to Plan to Appoint Another Corporate Stooge as SEC Commissioner

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As readers may know, Obama’s plan to keep the already weak SEC in its role as a rubber stamp to Big Finance is going pear-shaped. Via some unexpected good fortune (Obama owing a favor to Rhode Island senator Jack Reed and Senate conventions that nominations of Senate staffers get approved) the SEC wound up with a new commissioner, Kara Stein, who actually knows a thing or two about banking and has been willing to declare war on a chairman from her own party, Mary Jo White. Stein has been more effective than someone in her spot would normally be by virtue of White being so badly conflicted as to be required to sit out many commission votes, and Stein allying regularly with fellow Democrat commissioner Luis Aguilar to block unduly Wall-Street-friendly measures.

But Obama appeared ready to restore status quo ante by virtue of having Aguilar’s term expire this year. That would allow him to install a more business-toadying replacement.

The Administration is changing course after having run into a buzz saw of opposition. Readers may recall we encouraged letter-writing as well as signing a Credo campaign to fire Mary Jo White. Although the SEC chairman can’t be ousted by the Administration, the well-warranted campaign against her was meant to tell the Administration that another Mary Jo White type commissioner was going to be hard to confirm.

From in Politico:

Elizabeth Warren and her liberal allies appear to be on the verge of another victory in their battle to stop the White House from choosing financial regulators with ties to Wall Street.

President Barack Obama was planning to nominate corporate attorney Keir Gumbs… But now that’s on hold at least until August after activist groups aligned with Warren raised an outcry over Gumbs’ work, including his advice to companies on how to dodge scrutiny from shareholder activists.

The White House will begin vetting additional candidates who don’t have corporate relationships to fill the seat being vacated by Democrat Luis Aguilar…

The nomination battle comes as Warren and activist groups have been turning up the heat on the SEC. The Massachusetts senator last month wrote a scathing public letter to Chair Mary Jo White, accusing her of being soft on financial enforcement. Two weeks later, activist groups launched a website — nomoremaryjos.com — and sent Obama a letter criticizing the revolving door between Wall Street and the SEC…

Activist groups such as Public Citizen have objected to Gumbs’ work representing the American Petroleum Institute before the SEC and his work involving corporate campaign-spending disclosure, a contentious issue for the SEC since the Supreme Court’s Citizens United decision in 2010.

Warren, other Democrats, and labor unions have been urging the SEC to require companies to reveal their political spending through nonprofits and political-action committees after Citizens United allowed independent groups to raise and spend unlimited campaign contributions…

Earlier this year, Gumbs and his colleagues at Covington wrote an article advising companies on how to deal with activist shareholders who are pressuring them to voluntarily reveal their political spending…

Progressives’ preferred candidate is said to be Jennifer Taub, a professor at Vermont Law School who has written critically of regulatory relief for Wall Street.

I’ve omitted handwringing about how hard it would be for the agency to do its work without a full complement of commissioners. Even though Aguilar’s term ended June 5, he can continue for the rest of this year if a replacement has not been confirmed.

Needless to say, the spectacle of Warren and her allies has led Politico to launch an attack in the form of another article that ran yesterday, Warren was similarly excoriated for being too uppity when she dared successfully oppose the White House’s nomination of Lazard’s Antonio Weiss to be assistant secretary of the Treasury, a position for which he had no relevant expertise.

The subhead to the story makes it clear who is upset with Warren:

The Massachusetts senator’s attack on Securities and Exchange Commission Chair Mary Jo White causes backlash on Wall Street.

That’s a feature, not a bug. And notice several things about the article: it depicts Warren as going solo, when she’s part of a group of progressive Democrats, as well as aligned activist groups. And the article fulminates about a letter Warren over a month ago wrote blasting Mary Jo White ; it’s only now that she has drawn blood that Politico deigns to reprimand her.

This bill of particulars would almost be funny if it wasn’t such an abject misrepresentation:

The backlash against Warren was the latest indication that populist firebrand’s efforts to push for tougher financial regulation may be losing some momentum. She failed to stop Obama’s push for trade promotion authority in the Senate last month, though she’s still trying to convince House Democrats to deny the president the votes he needs to pass the bill and thereby crush a major legacy item for him. She’s had trouble finding co-sponsors for a bill regulating auto-dealer loans. And Tuesday, liberal groups shut down their efforts to recruit her to run for president, finally acknowledging that she’s not going to get into the 2016 race.

The Senate was supposed to be smooth sailing for the Administration to get the TPA approved; in fact, that’s why the vote was scheduled there first, to give the impression of momentum and approval from Democrats before taking it to what was expected to be a fight in the House. The fact that the Administration got a stunning rebuke in the form of a vote against one of the key components in its Senate vote, that of the Trade Adjustment Assistance, was a huge, unexpected win for Senate Democrats like Warren. Similarly, Warren made it clear repeatedly that she was not running for President; even so, the unauthorized “draft Warren” initiative lasted longer than it should have.

You can see Politico undercut its thesis in the very next paragraph:

Still, some Democrats worry that Warren in her sharp attack on White, the most prominent female regulator in Washington, is now pushing the party even farther to the left in ways that could complicate the election prospects for likely nominee Hillary Clinton as well as the party’s congressional candidates. Warren’s outsized political presence is already putting pressure on Clinton to declare where stands on issues including free trade deals — which the public broadly supports — and busting up the nation’s largest banks.

If Warren is losing steam, how can she possibly be “pushing the party even further to the left” (which charitably depicts it as left-leaning to being with), much the less have an impact on the 2016 campaign as a non-candidate? The mere fact that Hillary is having to calibrate her messaging in light of what Warren is up to (no mean feat given how deep the Clintons’ Wall Street ties are) is proof in and of itself that Warren continues to punch above her weight.

Please call your senators (numbers ). Tell them you are glad to see that Obama is getting the message by pulling back his plan to nominate Covington & Burling corporate crony Keir Gumbs and that you hope he will chose someone who is a knowledgeable as well as a strong advocate of tough regulation like Jennifer Taub. Please call and Warren’s office to thank her if you have time. And thanks to all of you for your past efforts on this front!

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27 comments

  1. John Smith

    “and busting up the nation’s largest banks.”

    Smaller banks ostensibly cannot safely create as many deposits as larger banks because those liabilities are more likely to end up with competing banks and thus cause a reserve drain to those banks. However, interbank lending allows banks to borrow back those reserves (or others) from competing banks at the cost of having to share the interest with them. So given a big enough interest rate spread between what a bank can lend at and what it can borrow at, breaking up big banks might not have the desired effect?

    Now imagine a more radical situation where we have a Postal Savings Service that does no lending (and thus no lending to banks) and that government deposit insurance has been abolished. Now the banks can still create deposits but now they run the very real risk, even if they are very large, that many of those liabilities will end up with those who are unwilling to leave them with an uninsured (by the monetary sovereign) bank but rather will move them (actually the reserves backing them, dollar for dollar) to the risk-free Postal Savings Service.

    And that’s why we don’t have a Postal Savings Service – it would make runs on the banks as convenient as writing a check rather than having to deal with large amounts of physical cash and the “mattress” or safety deposit boxes.

    But why shouldn’t removing fiat (reserves) from the banking system be convenient? Why must the population be involuntary depositors to a system they might loath and that is inimical* to their interests?

    *“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” The Rothschild brothers of London writing to associates in New York, 1863.

    1. Steven Greenberg

      Where do you get this claptrap? Does it come from youe own feverish brain, or do you get it straight from the Paul family?

      1. John Smith

        What specifically do you object to? I’m ready to be corrected if you can do so.

        1. tegnost

          somewhat confusing comment, but not a ridiculous idea, postal savings bank would be great, and I think you’re saying basically that then all large banks would simply be investment banks and people could take them or leave them as they wish, rather than be forced to use them not unlike, say, a utility…and the quote at the end is nicely revealing…

        2. Ben Johannson

          Smaller banks ostensibly cannot safely create as many deposits as larger banks

          That’s a good thing.

          . . .because those liabilities are more likely to end up with competing banks and thus cause a reserve drain to those banks.

          Liabilities and assets move together. It isn’t problematic and transferring reserves through the payments system isn’t a reserve drain.

          However, interbank lending allows banks to borrow back those reserves (or others) from competing banks at the cost of having to share the interest with them.

          Banks can borrow excess reserves. If reserves are transferred to offset a deposit they aren’t in excess.

          So given a big enough interest rate spread between what a bank can lend at and what it can borrow at, breaking up big banks might not have the desired effect?

          There is no evidence large banks make equivalent loans at a consistently lower rate.

          Now imagine a more radical situation where we have a Postal Savings Service that does no lending (and thus no lending to banks) and that government deposit insurance has been abolished.

          Why would we want to?

          Now the banks can still create deposits but now they run the very real risk, even if they are very large, that many of those liabilities will end up with those who are unwilling to leave them with an uninsured (by the monetary sovereign) bank but rather will move them (actually the reserves backing them, dollar for dollar) to the risk-free Postal Savings Service.

          Absolutely nothing changes. It would be no different than if the deposits had found their way to a chartered bank.

          And that’s why we don’t have a Postal Savings Service – it would make runs on the banks as convenient as writing a check rather than having to deal with large amounts of physical cash and the “mattress” or safety deposit boxes.

          No. Ending deposit insurance increases the likelihood of bank runs in a financial crisis which is why it makes no sense for you to advocate it. That people are making deposits in a savings bank is immaterial.

          But why shouldn’t removing fiat (reserves) from the banking system be convenient? Why must the population be involuntary depositors to a system they might loath and that is inimical* to their interests?

      2. hunkerdown

        You seem to be trying to draw the discussion away from incentives and power, and portraying yourself as loyal to convention, presumably because convention. Why do you believe those are valuable activities? Are you arguing that capitalism is not inimical to most people’s interests? C’mon. Engage, rather than trying to show off how American you are as if that weren’t something to laugh at.

    2. different clue

      You are somehow reminding me of a long-gone old-regular named F. Beard. All that is missing is the bible thumpery. I hope that doesn’t show up.

  2. Praedor

    Nice but irrelevant if Obama gets TISA passed. In that event, the SEC may as well fold up shop and go home. Perhaps Obama sees this as merely a minor bump in the road before he hands “regulating” Wall Street and Big Finance over to…Wall Street and Big Finance.

  3. Eric Patton

    Nice but irrelevant if Obama gets TISA passed. In that event, the SEC may as well fold up shop and go home. Perhaps Obama sees this as merely a minor bump in the road before he hands “regulating” Wall Street and Big Finance over to…Wall Street and Big Finance.

    Untrue. This is real.

  4. NotTimothyGeithner

    Is there a list of the other Senators who stood with Warren? They should be thanked.

  5. steelhead23

    Warren’s outsized political presence is already putting pressure on Clinton to declare where stands on issues including free trade deals — which the public broadly supports — …

    Bull***t! The spectrum of folks against TPP range from libertarians to socialists. The citizenry are “broadly” divided on the issue of free trade and just as broadly don’t know what an ISDS tribunal is. Saying something is thus and so does not make it true. Warren is making it tough on Hillary?! Hell, it is the wave of populist momentum our little battler created that Bernie is surfing right now. She sure as heck changed the conversation. Tough on Hillary? Bless her little heart.

    Of course our SEC needs folks well-versed in the machinations of Wall Street. But not those who mapped out how to evade SEC rules for the titans. Just say no to Keir Gumbs and his ilk. Letters coming.

  6. willf

    The mere fact that Hillary is having to calibrate her messaging in light of what Warren is up to (no mean feat given how deep the Clintons’ Wall Street ties are) is proof in and of itself that Warren continues to punch above her weight.

    This would be a good thing to have happen, but unfortunately there is no proof that Clinton is changing her message in any way.

    There are lots of people saying that she is being pulled to the left, but there very little evidence that this is so. Although I am happy to be proven wrong on this point, if someone can show an example of Hillary actually moving to the left, rather than someone simply asserting that she has moved left.

  7. JustAnObserver

    How long will it be before we see these two depressingly predictable MSM events:

    o A hit piece on Kara Stein in the NYT full of unpleasant insinuations that she was once nasty to her cats.

    o A Dealbook hagiography of Keir Gumbs. Always stressing, of course, that he’s completely cat friendly.

  8. backwardsevolution

    As soon as I saw the word “Covington,” my antenna perked up. That’s where Eric Holder came from.

    “After failing to criminally prosecute any of the financial firms responsible for the market collapse in 2008, former Attorney General Eric Holder is returning to Covington & Burling, a corporate law firm known for serving Wall Street clients.

    The move completes one of the more troubling trips through the revolving door for a cabinet secretary. Holder worked at Covington from 2001 right up to being sworn in as attorney general in Feburary 2009. And Covington literally kept an office empty for him, awaiting his return.”

    And it’s also where Lanny Breuer (Assistant Attorney General under Eric Holder) worked from 1989 to 1997, who then joined the White House Counsel’s Office in 1997 and defended the President during his impeachment proceedings, and who in 2009 was selected by Obama to head the Criminal Division of the Department of Justice. He left office in March of 2013 after Frontline’s piece on the lack of prosecutions of bankers, during which program Lanny Breuer stressed that he couldn’t go after bankers because of “the economic effect of bringing a case against a systemically important institution.” He’s since returned to Covington & Burling.

    After Lanny came (Acting) Assistant Attorney General Mythili Raman [March 2013 to March 2014].

    “Mythili Raman, the DOJ’s former Acting Assistant Attorney General for the Criminal Division, has joined 800-lawyer Covington & Burling as a partner, the firm said Tuesday.

    She’ll practice in the firm’s D.C. office with the litigation and white collar groups.

    Raman left the DOJ in late March.

    Her predecessor at the Criminal Division, Lanny Breuer, also joined Covington & Burling after he left the DOJ in March 2013. He serves as the firm’s vice chair.”

    I don’t know who came after her, but there’s three (Holder, Breuer, Raman), all with ties to Covington & Burling. One big revolving door!

  9. backwardsevolution

    “President Barack Obama was planning to nominate corporate attorney Keir Gumbs.”

    Keir Gumbs was at the Securities and Exchange Commission from 1999 to 2005. After that he joined Covington & Burling. Now it appears the SEC is calling him again; the door is sucking him back in.

    And the successor to Eric Holder as Attorney General of the United States, Loretta Lynch, surprisingly did not hail from Covington & Burling, but reading about her, I did see that: “From 2003 to 2005, she was a member of the board of the Federal Reserve Bank of New York.”

    Oh, yeah, she’s going to be going after banks, isn’t she? No, she’ll do her stint, and then no doubt the doors of Covington & Burling will be waiting for her. Is Covington & Burling an unknown arm of the U.S. government?

  10. backwardsevolution

    And here’s a good article from International Business Times regarding their revolving door concerns re Keir Gumbs.

    “…Mary Jo White, whose husband works for the law firm Cravath, Swaine & Moore, had to recuse herself from at least four dozen enforcement actions due to potential conflicts of interest with her former clients or those of her husband. […]

    Some worry that SEC ethics rules could pose similar barriers for Gumbs. “If he has to recuse himself with former clients, it could make him less effective as a leader,” says Michael Smallberg, an investigator with the Project on Government Oversight, a public interest organization founded in 1981.”

    It’s a good article laying out which way Mr. Gumbs blows.

  11. OttoGrotewohl

    I mean, really, another Elizabeth Warren puff piece?

    Why anyone would find themselves all ga-ga about Liz simply because she’s doing what one ought to expect her to do boggles the mind. Yet when she dumps all over progressive expectations as she did last Summer by justifying Israel’s savagery against Gazan children, she’s readily given a pass by the oh-so morally upright readership here at Cfdtrade. Give me an “H”.

  12. backwardsevolution

    Otto – you’ve got a point. If she justified Israel’s actions, that is wrong. You could also say she is helping to raise tuition costs:

    “Elizabeth Warren, a tenured celebrity professor who jumped into politics, and Barack Obama, an untenured law school instructor, who made it big in politics, know exactly why student loan debt is so high and why their measures do nothing to address its real causes.

    Harvard Law paid Warren $350,000 to teach a single course. When Scott Brown brought it up during a debate about student loans, she protested. “I want to talk about the issues. Senator Brown wants to launch attacks.”

    You are right, we must be careful who we put on a pedestal, but I think in the above article she happens to be correct. There is something terribly wrong at the SEC, and maybe she can help fix that.

  13. Pepsi

    Politico is such a sorry excuse for a political publication. Casting things as if Elizabeth Warren is personally opposed, as a person, to the person called Obama, rather than being against horrible policies that Obama represents.

    Pointless horserace faux journalism needs to be dumped overboard.

    1. backwardsevolution

      Pepsi – when someone is trying to shove horrible policies down peoples’ throats, I don’t see any reason not to be personally opposed to the person. Obama came from nowhere, was fine with being bought (otherwise the elite would not have chosen him), and he’s doing what the elite wanted him to do. He’s a puppet for dollars, a narcissist who could really care less about his country. He’s precisely the type of person you want to personally oppose. And I’m not singling him out; the rest have been disasters as well. They are all owned by corporate America. Everybody keeps getting fooled because they just keep changing the wording. This time is was “hope and change”. Yeah, right.

  14. William C Wesley

    Am I the only one who takes issue with the term “free trade”? Since when did giant corporate monopolies infiltrating and subsuming the role of governance represent “free trade”? When they buy off legislators and use the laws they instal to avoid fair competition and legislate rivals out of existence do we call that free trade? Is free trade then represented by the likes of a modern day Al Capon? How about FAIR trade then instead of “free” trade? “Free trade” has come to mean giving free reign to pirates so that they might raid free trade lanes with impunity. In effect “free trade” means a license to steal and extort trade, in effect it means the right to oppress trade, it means “enslaved trade”

    1. backwardsevolution

      William C Wesley – I take issue with the term “free trade” too, and I agree with what you’ve said.

      1. Minor Heretic

        “Free” (anything economic) is an oxymoron. Trade, market, enterprise, are all bound by rules. No rules means no trust, and no trust means no transaction.

        Just dealing with dictionary definitions, when we speak of “free trade” we mean trade across national boundaries. Of course, a national boundary is by definition a restriction on trade. It is part of the meaning of national sovereignty that a nation state can control commerce across its borders. “Free trade” is just code for “loss of sovereignty.”

        While the spittle spray is fresh and moist on my interlocutors, let me add that a market is made of rules and its entire purpose is to restrain the actions of participants. “Free market” is the economic equivalent of “married bachelor.”

        It is testament to the power of repetitive and effective propaganda that millions of people hear these terms without guffawing.

  15. different clue

    Perhaps we could call it a ” gangsters’ paradise free-for-all market” and come closer to capturing the reality?

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