Elizabeth Warren and Timothy Geithner

Timothy Geithner with President Obama aboard Air Force One

Very important news coming out of Washington D.C. in recent days.  First, with the imminent departure of Timothy Geithner as head of the U.S. Treasury department in 2013, a unique opportunity for President Barack Obama has presented, where he has the chance to nominate, for the first time in a long time, a Treasury Secretary that is NOT a Wall Street puppet. Second, with the election of consumer protection expert Elizabeth Warren to the U.S. Senate (D., MA), the United States Senate has a unique opportunity to genuinely  utlize an individual with expertise when it comes to consumer protection and capital markets regulation.  Senator Warren has just been named as a member of the Senate Banking Committee.

As per Geithner's resignation, Professor Tim Canova has just published a compelling article with American Prospect entitled "Not Another Wall Street Puppet," where he calls upon President Obama to abandon the strategy of Treasury leadership direct from Wall Street, and instead adopt a strategy of nominating a Treasury Secretary that places the needs of Main Street, and middle class Americans, ahead of the needs and desires of Wall Street Banks.  According to Canova:  "In his first post-election press conference, President Barack Obama said voters had awarded him only one mandate: to help middle class families and those striving to reach the middle class. In line with fulfilling this charge, the administration’s top priority would be creating manufacturing jobs and rebuilding the nation’s schools and infrastructure. An early bellwether of the president’s commitment to this will be his selection of a replacement for Timothy Geithner, who is expected to step down as Treasury secretary early next year. The nomination presents an opportunity for a White House course correction, finally putting Main Street ahead of Wall Street. . . .

Most of the names mentioned as potential new Treasury secretaries are people with Wall Street backgrounds like BlackRock CEO Larry Fink, or deficit hawks from within the administration such as White House Budget Director Jacob Lew. After three decades of a Wall Street Treasury, that’s the last thing the country needs or voters want. What’s now needed is a secretary who can answer Obama’s convention-speech call for “bold, persistent experimentation”—language recycled from President Franklin Delano Roosevelt, whose administration was genuinely bold, experimental, and largely successful in confronting another protracted economic crisis."

Canova not only points out the failed strategy of Wall Street insiders as Treasury policymaker, but he suggests the names of individuals that would very likely fight first for American citizens and a robust middle class, rather than fighting first for the survival and profitability of Wall Street banks.  Canova suggests the following:  "First, Obama should consider nominating the first female Treasury secretary. Brooksley Born, chairperson of the Commodity Futures Trading Commission in the ’90s, sounded the alarm about the growing risks in the unregulated financial-derivatives market. Unfortunately, her warnings were beaten down by Alan Greenspan, Larry Summers, and Robert Rubin—Geithner’s old mentors. Sheila Bair, a Republican who, unlike the present Federal Reserve Chairman Ben Bernanke, would have swept out the failing bankers and broken up some big banks when Wall Street was on government life support. Sarah Bloom Raskin, a very effective former Maryland state banking commissioner and now the most progressive governor on the Federal Reserve Board, well understands the importance of repairing the debt overhang in the housing and consumer sectors by helping the middle class."

As per Elizabeth Warren, despite intense pressure from Wall Street lobbyists, Senate Majority Leader Harry Reid has placed Senator Warren on the Senate Banking Committee.  From the L.A. Times:  "Talk about karma.  After lobbying ferociously to prevent Elizabeth Warren from running the new Consumer Financial Protection Bureau, the banking industry now must contend with her sitting on the Senate Banking Committee.  Rumors have circulated for weeks the Massachusetts senator-elect would be tapped for the gig overseeing the industry she so completely cheesed off with accusations of fraud and unfair play."

Wall Street bankers and lobbyists spent millions to keep Senator Warren from joining the U.S. Senate, backing her opponent, incumbent Scott Brown, more than 9 to 1 in campaign contributions.  "Warren has been a harsh critic of Wall Street practices, and the securities and investment industry spent $3 million in an unsuccessful effort to boost her Republican opponent Scott Brown in the Massachusetts Senate race, according to the Center for Responsive Politics.  The financial/ insurance/ real estate sector spent another $6 million to boost Brown. Those sectors combined spent less than $1 million on Warren's behalf."