White House Struggles to Fill Key Regulatory Positions
The White House is struggling to fill key financial posts in the administration as a combination of Senate opposition and candidates’ reluctance to join up leaves critical positions empty.
Regulatory reforms passed by Congress last year created two positions, heading the new Consumer Financial Protection Bureau and the new Office of Financial Research, but both these and existing jobs remain unfilled.
Robert Shiller, the Yale economist and co-founder of the widely watched Case-Shiller Home Price index, has been approached to run the OFR but ruled himself out, according to people familiar with the search. Mr Shiller?declined?to?comment.
Other academics with an interest in the field, including Andrew Lo of the Massachusetts Institute of Technology, have taken themselves out of the running. The administration has also spoken to John Geanakoplos, also of Yale, and finance executives.
Those approached have given different reasons for declining to pursue the job. Some are put off by the six-year commitment; some by Washington turf wars. One said it was a difficult job because “it seems to need some kind of intellectual who thinks about bubbles”, and “it seemed to take a tough-guy-like attorney” to enforce new data-gathering powers on the banks.
The CFPB, meanwhile, is being set up by Elizabeth Warren, a Harvard professor whom banks and Republicans portray as having a radical pro-consumer agenda, which will add greatly to the industry’s costs.
She is in the unusual position of managing the search for the first chairman – a job that she is widely assumed to want for herself. But in spite of sustained efforts to placate the industry, aides from both parties say it is a stretch to see her confirmed by the Senate as first chairman of the bureau, a hurdle the position requires.
Leading Senate Republicans such as Richard Shelby, the senior Republican on the Senate banking committee, wield a great deal of power over the positions. Mr Shelby has effectively vetoed the nomination to the Federal Housing Finance Administration of Joseph Smith, the North Carolina banking commissioner, and opposed the appointment of Peter Diamond, a Nobel prize-winning economist, to the board of the Fed.
But the administration has not even nominated people to fill other roles, and officials and aides say the run-up to the 2012 presidential elections – where Republicans will be even more reluctant to do the White House’s bidding – makes life even harder.
Of the existing agencies, the most powerful position to come up is the chairman of the Federal Deposit Insurance Corporation, which Sheila Bair, who leaves the top job in June, has built into a regulatory powerhouse, partly by refusing to bow to the views of Tim Geithner, Treasury secretary, and Ben Bernanke, Federal Reserve chairman.
Other officials are therefore delighted to see the back of Ms Bair, but the White House has not lined up a replacement, just as officials have not managed to fill the top job at the FHFA, vacant for more than two years, and the Office of Comptroller of the Currency, empty since last summer.
Out of the 15 members of a new Financial Stability Oversight Council, meant to monitor the system to avoid future crises, a third will be manned by acting officials, or will have empty chairs, when Ms Bair departs.
Republicans suggest the bruising experience of working with independent-minded chairmen such as Ms Bair means the administration is in no rush to fill the positions. “The one guy who sees no advantage to filling these positions is Geithner,” said one senior Republican aide.
Meanwhile, there has been a quiet exodus at the Treasury of finance professionals who helped the administration fight the financial crisis and drew up regulatory and housing finance reforms.
Jim Millstein, a former Lazard banker, Matthew Kabaker, a former Blackstone executive, and Lew Alexander, a former Citigroup economist who was setting up the OFR, have all left in the last few weeks.
With the passing of the financial crisis, the call of duty that brought many to Washington has waned, leaving several top officials heading for the exit.
One official said: “The crisis is passed, the vetting process is a nightmare and it’s hard to get people into these jobs.” But, the person added, the White House had “failed in a systematic way” to fill the positions. The White House did not reply to a request for comment.