WASHINGTON In a move that will surprise no one, Sen. Elizabeth Warren pulls no punches calling out bankers and Washington insiders in her just-released memoir.
The book, A Fighting Chance, hit bookstores on Tuesday. It details the Massachusetts lawmaker's dramatic rise from humble Oklahoma roots to bookish Harvard law professor to liberal juggernaut, highlighting her work crafting and then spearheading the Consumer Financial Protection Bureau along the way.
Below are seven takeaways for the financial services industry, including key insights into the political wrangling involved in getting the CFPB off the ground and becoming one of the most powerful women in Washington.
Selling Barney on the CFPB
Tucked away among the many up-close-and-personal anecdotes Warren shares with readers is a revealing account of how she sold Rep. Barney Frank, D-Mass., the then-chairman of the House Financial Services Committee, on making her nascent idea for a consumer financial protection agency a top priority during negotiations over the Dodd-Frank legislation.
She describes a key encounter in April 2009 in Frank's kitchen in Newton, Mass., in his apartment complex of "modest, two-story brick buildings."
Frank was initially focused on getting the more complicated bank regulations out of the way first, according to Warren's telling.
"Financial reform was already too complicated, and he was worried the consumer agency might have to wait. In the fight for any financial reform, we would be up against an army of lobbyists, and he thought it might make more sense to take them on one issue at a time. If we tried to push through everything at once, we could lose it all," the book says. "So he would start with the bank regulations that obviously needed fixing, focusing on the rules covering derivatives, capital reserve requirements, and so forth."
But Warren persisted, noting that she was concerned about dropping the consumer agency for the same reason.
"I was sure the lobbyists would fight tooth and nail against the new agency, and I worried that if the rest of the reform package made it through first, no one would feel any great urgency about continuing to battle the lobbyists. We had to make this agency a priority. I figured this was our moment: now or never," she writes.
To sway the irascible, long-time lawmaker (while "wedged up against Barney Frank's refrigerator"), Warren ultimately opted for storytelling. She relayed insights from her family following the Great Depression: "I don't think my grandparents knew anyone who owned stocks or other investments. For them, the Depression had nothing to do with Wall Street and the stock market crash. It was about local bank failures and families losing their savings and their farms."
"My grandmother had never been very political, and she sure didn't follow high finance," Warren said. "But decades later, she was still repeating her line that she knew two things about Franklin Roosevelt: He made it safe to put money in banks and she always paused here and smiled he did a lot of other good things."
Warren says Frank was sold on the spot after the two-minute pitch, which centered on a strategy of doing something "simple" that "people can see," and, more importantly, understand.
"Yes, derivatives and credit default swaps were huge problems. He was totally right about that," she writes. "But for a lot of people, those were just words that fly by in news reports. On the other hand, a mortgage broker who lies about the terms of a mortgage he sells to a homeowner that's something everyone understands. Hidden fees on a credit card bill that's a problem millions of people had been living with for a long time. Fine print and confusing legalese everyone had signed loans that were loaded with it."
Bid for a recess appointment
After the creation of the CFPB by the Dodd-Frank reform law, Warren was tasked to help put the agency together.
It's well known that Republicans strongly opposed a potential Warren nomination to head the CFPB permanently, and that consumer advocates and others called on President Obama to use his recess appointment powers to name her to the position. But what hasn't been discussed is that Warren herself floated the idea to the White House, though it was quickly vetoed.
"According to the president's team, the Republicans in the Senate were still adamantly opposed to me. Worse, the Republicans would never even let the issue come to a vote, so there was no way I could get confirmed. So I tried a different tack: If I can't get confirmed, would the president consider appointing me during a congressional recess?" Warren writes. "The tenure of a recess appointment is limited by law, but it could give me up to two years in the job of director while we established the agency's course."
The Obama administration declined, because "the president wanted a director to be confirmed through the proper channels," Warren writes.