Today’s Globe ran a front page story about how Elizabeth Warren’s determination to speak truth to power earned her the ire of not only the GOP, but some high-ranking democrats as well (“Warren’s Star Rose in D.C. Battles”.) This got my wife and I thinking not only about the institutionalized resistance in Washington to oversight and regulation of the financial sector of the economy, but also about the role women have played in Washington as policy makers, watchdogs and whistleblowers and how their efforts have been thwarted by oppositional power brokers who are exclusively male to the man. Since the 1990’s, when financial “modernization” took hold with the repeal of Glass-Steagall, the passage of the Gramm-Leach-Bliley Act deregulating the banks and allowing banking institutions to become “too big to fail,” a patronizing pattern of denial and dismissiveness has emerged in an effort to silence the Cassandras of the on-going financial crisis:
Brooksley Born - Chairwoman of the Commodity Futures Trading Commission (CFTC) from 1996 to 1999. Born issued a prescient warning about the lack of transparency inherent in trading swap derivatives and wanted to expand the regulations of the Federal Reserve, the Options Clearing Corporation (OCC) and the National Association of Insurance Commissioners (NAIC) for curtailment and oversight of such trades. Her recommendations were met with a buzz saw attack by FED chair Alan Greenspan, Treasury Secretaries Robert Rubin and Lawrence Summers. Greenspan, in particular argued that there wasn’t a need for a law against fraud because if a floor broker was committing fraud, the customer would figure it out and stop doing business with him, prompting the WSJ to proclaim, “ the nation’s top financial regulators wish Brooksley Born would just shut up.” Under heavy pressure from the financial lobby, legislation prohibiting regulation of derivatives by Born’s agency was passed by the Congress. Born resigned in 1999.
Sheila Bair- Acting Chair of the CFTC from 1991 to 1995, Chairwoman of the Federal Deposit Insurance Corporation (FDIC) from 2006 to 2011 current chair of the Systemic Risk Council, a volunteer effort formed by the Chartered Financial Analyst Institute and the Pew Charitable Trust to monitor and comment on regulation. Bair has been a strong advocate of breaking up the big banks. Bair warned of the impending sub-prime mortgage crisis. Bair organized a meeting to persuade financial institutions to reduce monthly payments, but bank investors were not convinced. As FDIC chair she saved the FDIC fund some $40 billion by assessing banks the cost of insuring deposits rather than liquidating banks or taxpayer borrowing. Bair came under fire in 2008 for the FDIC’s lack of statutory authority pre Dodd-Frank and said, “We were told by the New York Fed that problems would occur in the global markets if Citi were to fail. We didn’t have our own information to verify this statement, so I didn’t want to dispute that with them.” Dodd-Frank Act, enacted in 2010, expressly prohibits bank bailouts by extending the FDIC’s resolution authority to close the largest financial firms and make their shareholders and creditors bear the losses without creating a systemic disruption. Dodd-Frank also gives the FDIC new authority to directly access information from large bank holding companies which are not in sound condition.
Elizabeth Warren-Chairwoman of the Congressional Oversight Panel to oversee the Troubled Assets Relief Program, Assistant to President Obama and Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau (CFPB) and currently the Democratic candidate for the U S Senate from Massachusetts. Warren has met repeated resistance from Treasury Secretary Tim Geithner because TARP did not require any management changes at the world’s biggest banks while being reimbursed by taxpayers’ dollar- for-dollar for the banks losses. She was forced out of the running to oversee the CFPB by unrelenting attacks from the GOP and lack of support by leading democrats for her efforts.
Banking interests on Wall Street and in Washington continue to trump party politics, democratic rule and common sense policy in much the same way that Neo-Conservative ideology triumphed in American foreign policy in the last decade. These women challenged this “fifth column” of financial patricians on behalf of the American people and were met with a level of resistance that, arguably, would not have been directed at them if they were men. Was it assumed by some in power in Washington that, by appointing women to these positions, they, and their agencies, could be marginalized and then steamrolled into doing the bidding of Big Finance or is this just so much conspiracy theory? In any event, such an assumption, if true, was a bad one because Geithner, Rubin, Summers, Greenspan, and others, in their “irrational exuberance”, assented to the bad practices, hubris and greed of crony capitalism that continues to subvert the economic recovery. We need Elizabeth Warren, and people like her, in Washington representing our common interest.