Michael Hirsh explains precisely why progressives have become energized by the prospect of Elizabeth Warren fighting for consumer protection inside the regulatory apparatus. Hirsh sets up a dichotomy between the Rubinites (Larry Summers, Tim Geithner) on the one hand, who wanted better rules to govern Wall Street without fundamentally changing it; and the New Dealites (Paul Volcker, Warren) on the other, who wanted changes in structures designed to minimize risk and protect the average person. The Rubinites largely won out in FinReg, but with Warren at the Consumer Financial Protection Bureau, the New Dealites could have the last laugh:

Warren is most definitely not a Rubin acolyte. She’s more likely to be the sort of person who reveals to the public just how many administration speed dials Rubin occupies. Warren has long abhorred the sort of inside-the-box thinking that led a lot of smart people in Washington to conclude for more than two decades that Wall Street could be left to sort things out on its own.

And it’s real outside-the-box thinking that may be needed now. Because as “pay czar” Kenneth Feinberg’s recent report makes clear, little has changed in how Wall Street operates, and the big banks are even now finding their way through the new law’s many loopholes and continuing to award traders outrageous amounts of money for taking speculative risks […] it is undeniable that those who have been most aligned with the “progressive” side of the Wall Street reform issue and, often, most farsighted and outspoken about the dangers are still on the outside of the administration looking in. Among them: Brooksley Born, the former chairwoman of the Commodity Futures Trading Commission who famously warned of out-of-control derivatives trading in the ’90s; Nobel-winning economist Joseph Stiglitz; and Michael Greenberger, the former Born deputy who as an outside consultant helped to toughen transparency requirements for OTC derivatives in recent months. One leading “progressive” critic told me recently, “Our ruling intelligentsia in economics runs the spectrum from A to A-minus. These guys all talk to each other, and they all say the same thing.” Or as Stiglitz himself put it at one point: “America has had a revolving door. People go from Wall Street to Treasury and back to Wall Street. Even if there is no quid pro quo, that is not the issue. The issue is the mindset.”

I think mindset is the best way to describe this. I had the pleasure of spending time on a panel with Warren at Netroots Nation, as well as chat with her afterwards. And she does not share any of these qualities with respect to a mindset of what’s good for Goldman Sachs being good for America. She has firmly placed herself on the side of the middle class, not for sentimental reasons, but because that has traditionally been the path to prosperity and economic stability for all Americans, rich or poor. A bubble-and-bust economy, or one that props up banks who don’t want to admit their own insolvency, does no good for anyone. . . .

Obama came in promising to set up a “team of rivals” in his cabinet and his government. But on macroeconomic issues, that really hasn’t transpired. Geithner and Summers have the upper hand and basically present their narrow worldview. The problem is that just isn’t enough in these particular times, with mass unemployment and low growth. Their ideas have been good for the banks, which they saved, and corporations, which they allowed record profits. It’s even true that they averted a Depression. I have no problem believing that. But we’re at a new stage, and zombie banks, corporate profits and depressed workers makes for a terrible concoction of economic stagnancy.

Can Warren alone pull us out of that? Of course not. But she does have a different mindset, one that will at least give consumers a fair shake, and force the banks to compete on service and quality rather than how well they can rip off their customers. The rules exist in the FinReg law to end predatory lending (it’s a really good anti-mortgage fraud bill), and on the rest, the data gathering and research possibilities for the CFPB alone are enough to whip the banks in line. But only if the right leader forces that on them. And I think she understands that fraud – not cleverness, not ingenuity or innovation – sits at the heart of Wall Street, and rooting out that fraud is the only way to let the markets function again.

I think we ought to have someone in there who doesn’t spend most of their time devising ways for the big banks to stay alive, and who may look over at the regular person and decide that he or she needs a shot when going up against all that power and privilege. Warren embodies this different worldview, and will deliver on her promises. And that’s why she must be appointed.

Michael Hirsh explains precisely why progressives have become energized by the prospect of Elizabeth Warren fighting for consumer protection inside the regulatory apparatus. Hirsh sets up a dichotomy between the Rubinites (Larry Summers, Tim Geithner) on the one hand, who wanted better rules to govern Wall Street without fundamentally changing it; and the New Dealites (Paul Volcker, Warren) on the other, who wanted changes in structures designed to minimize risk and protect the average person. The Rubinites largely won out in FinReg, but with Warren at the Consumer Financial Protection Bureau, the New Dealites could have the last laugh:

Warren is most definitely not a Rubin acolyte. She’s more likely to be the sort of person who reveals to the public just how many administration speed dials Rubin occupies. Warren has long abhorred the sort of inside-the-box thinking that led a lot of smart people in Washington to conclude for more than two decades that Wall Street could be left to sort things out on its own.

And it’s real outside-the-box thinking that may be needed now. Because as “pay czar” Kenneth Feinberg’s recent report makes clear, little has changed in how Wall Street operates, and the big banks are even now finding their way through the new law’s many loopholes and continuing to award traders outrageous amounts of money for taking speculative risks […] it is undeniable that those who have been most aligned with the “progressive” side of the Wall Street reform issue and, often, most farsighted and outspoken about the dangers are still on the outside of the administration looking in. Among them: Brooksley Born, the former chairwoman of the Commodity Futures Trading Commission who famously warned of out-of-control derivatives trading in the ’90s; Nobel-winning economist Joseph Stiglitz; and Michael Greenberger, the former Born deputy who as an outside consultant helped to toughen transparency requirements for OTC derivatives in recent months. One leading “progressive” critic told me recently, “Our ruling intelligentsia in economics runs the spectrum from A to A-minus. These guys all talk to each other, and they all say the same thing.” Or as Stiglitz himself put it at one point: “America has had a revolving door. People go from Wall Street to Treasury and back to Wall Street. Even if there is no quid pro quo, that is not the issue. The issue is the mindset.”

I think mindset is the best way to describe this. I had the pleasure of spending time on a panel with Warren at Netroots Nation, as well as chat with her afterwards. And she does not share any of these qualities with respect to a mindset of what’s good for Goldman Sachs being good for America. She has firmly placed herself on the side of the middle class, not for sentimental reasons, but because that has traditionally been the path to prosperity and economic stability for all Americans, rich or poor. A bubble-and-bust economy, or one that props up banks who don’t want to admit their own insolvency, does no good for anyone.

Obama came in promising to set up a “team of rivals” in his cabinet and his government. But on macroeconomic issues, that really hasn’t transpired. Geithner and Summers have the upper hand and basically present their narrow worldview. The problem is that just isn’t enough in these particular times, with mass unemployment and low growth. Their ideas have been good for the banks, which they saved, and corporations, which they allowed record profits. It’s even true that they averted a Depression. I have no problem believing that. But we’re at a new stage, and zombie banks, corporate profits and depressed workers makes for a terrible concoction of economic stagnancy.

Can Warren alone pull us out of that? Of course not. But she does have a different mindset, one that will at least give consumers a fair shake, and force the banks to compete on service and quality rather than how well they can rip off their customers. The rules exist in the FinReg law to end predatory lending (it’s a really good anti-mortgage fraud bill), and on the rest, the data gathering and research possibilities for the CFPB alone are enough to whip the banks in line. But only if the right leader forces that on them. And I think she understands that fraud – not cleverness, not ingenuity or innovation – sits at the heart of Wall Street, and rooting out that fraud is the only way to let the markets function again.

I think we ought to have someone in there who doesn’t spend most of their time devising ways for the big banks to stay alive, and who may look over at the regular person and decide that he or she needs a shot when going up against all that power and privilege. Warren embodies this different worldview, and will deliver on her promises. And that’s why she must be appointed.

UPDATE: The National Organization for Women has acknowledged the elephant in the room, wondering if sexism is playing a role in the lack of support for Warren.

David Dayen

David Dayen