Journalism in the Public Interest

At a Time of Needed Financial Overhaul, a Leadership Vacuum

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After the worst crisis since the Great Depression, President Obama has unleashed an unusual force to regulate the financial system: a bunch of empty seats.

With Sheila C. Bair soon to leave her post at the Federal Deposit Insurance Corporation, the Obama administration will have five major bank regulatory positions either unfilled or staffed with acting directors.

The administration has inexplicably left open the vice chairman for banking supervision, a new position at the Federal Reserve created by the Dodd-Frank Act, despite having a candidate that many people think is an obvious choice: Daniel K. Tarullo. The new Consumer Financial Products Board chairman is unnamed. There are some lower-level positions that don't have candidates, including the head of the Treasury's Office of Financial Research and the Financial Stability Oversight Council insurance post.

Perhaps most important, the Office of the Comptroller of the Currency, is being headed by an acting comptroller, John Walsh, who took over the agency last August. Nine months have passed without a leader who might better reflect the Obama administration's views on banking regulation, a time lag made worse by the office's coddling of the banks even as they have acknowledged rampant abuse and negligence in the foreclosure process.

The vacancies come at a time that calls for stiffer regulatory examination. The financial regulatory system was remade under Dodd-Frank and requires strong leaders to put the changes into effect. Though the acting heads insist they feel empowered to make serious decisions, they have roughly the same authority as substitute high school teachers.

Supposedly, the Obama administration is getting close to naming people to head the comptroller's office and the F.D.I.C. But we've been hearing that for a while. In April, Barbara A. Rehm of American Banker wrote that the administration was working on a big package of nominations to send to the Hill all at once. A month later, we're still twiddling our thumbs in anticipation.

So what's going on?

In a vacuum of leadership, conspiracy theories arise. One is that Treasury Secretary Timothy F. Geithner is making a power grab and doesn't mind that these roles aren't filled. The idea is that he is asserting his influence over the Dodd-Frank rule-making process. A former adviser to Mr. Geithner dismissed that notion as ridiculous, and that's persuasive to me. It seems too Machiavellian by half.

If it's not Mr. Geithner, then who or what is responsible for the vacancies? Not surprisingly, people close to the administration blame Republicans. The nomination process has become hopelessly broken in Washington. Even low-level appointments are now deeply partisan affairs, the playthings of score-settling senators with memories like elephants and the social responsibility of hyenas (which probably insults hyenas).

The Obama administration put up Peter A. Diamond for a position on the Federal Reserve board. Winning a little something called the Nobel Prize hasn't helped him with confirmation, however. Sen. Richard Shelby, the powerful Alabama Republican and ranking member of the banking committee, is standing in his way. The senator also quashed the nomination of Joseph A. Smith Jr. to head the Federal Housing Finance Agency.

But much of the blame for this situation lies with the Obama administration. It's almost as if the president and his staff have thrown up their hands. The administration has had trouble finding good candidates who are willing to go through the vetting process and has shied away from fights. It also hasn't seeded the ground or supported the nominations it has made, people complain.

A Democratic Senate staff member confided worry to me about the fate of Mark Wetjen, whom the administration nominated last week as a candidate for a seat on the Commodity Futures Trading Commission. “They didn't shop it and they didn't get buy-in,” the staff member said. “The administration doesn't seem to be putting any sort of effort into it.”

Making these appointments will help answer a question: Where does Mr. Obama stand on financial regulation?

With the Geithner appointment, the president chose early on the path of continuity over muscular regulation. Immediately, the Treasury secretary became the personification of every Obama financial policy. Mr. Geithner remains the most politically costly appointment Mr. Obama has made, saddling him with all the Bush presidency's financial crisis decisions. After all, Mr. Geithner, as head of the Federal Reserve Bank of New York, was intimately involved in the emergency actions of September 2008. Republicans made great hay tying Democrats to the Wall Street bailouts in the 2010 midterm elections. Now, of course, Republicans are leading Democrats in Wall Street campaign donations.

With these positions unfilled, Mr. Obama is losing out on a political opportunity to draw a line between himself and his opposition.

But it's more important than that. Allowing these vacancies to linger drains leadership from the financial overhaul at the exact moment when it is needed most.

It is not axiomatic that the more bureaucrats there are the more likely a problem is solved.

Perhaps he wants to make a recess appointment of Elizabeth Warren first before naming the lesser heads.  Without leadership, the regulators will press harder to avoid any blowups.  The net is that lending standards will remain tight for the foreseeable future and may get tighter.  Those the government is trying to protect simply won’t have access to money at any price.

The problem with government regulators is that they have their eyes on plush jobs at the corporations they are supposed to regulate. In addition, they often know much less about the industry that they are regulating, learning along the way; often “taught” by the very people they are supposed to oversee. The best “regulators” are the tort lawyers who enforce private property rights much better than a government agency could ever do. Not saying there isn’t a role for regulators, but we put far too much trust in them at our own peril.


May 18, 2011, 3:27 p.m.

The Fed and the regulators are the problem, not the solution. The Fed should be abolished in favor of free banking, and the regulatory agencies closed in favor of a free market in self-regulation.

No surprise to me.  Obama is way in over his head regarding financial matters and “leading” this country.  After all, Obama will make all the decisions. The “leaders” are just puppetheads.  Obama acts more like a dictator than a president. He disgusts me and even more disgusting is just how ignorant people are who continue to support this fraud posing as our president!  Obama has never let the facts and truth get in the way of HIS ambitions.  Never mind the country…


I ask, would you know financial leadership if you saw it?


This is an example for me of the great Obama puzzle. He spoke about changes that he would make as president. On the positive side some things have changed and credit is due.

In my opinion it appears as if he is in over his head. Wall Street is a prime example and perhaps will be the major failure of this administration.

So, who really runs our country?

Matthew Levison

May 18, 2011, 3:59 p.m.

What do you think would be worse, having empty seats or filling them with empty suits?

After more than a century of corporate funded PR and propaganda promoting the ‘free market’ religion, too many lost it in a swamp of ‘magical market thinking’. The Wall Street Journal needs to rename itself “The Daily Swindle” to more appropriately reflect the destructive criminal venality and gross misprision poisoning US business and society. Even with a reset, there is little hope when the elites ally in a common purpose to swindle us all of our birthright, to rob the stockholders, the taxpayers, the decent folks - to sell shit for profit, and to deny everything that doesn’t match exactly the agenda for the powerful.

It is going exactly as Obama wants it to go. Nowhere.

The criminal financial elitist rip-offs, who know not what is is to create something of actual value, are on autopilot and the ground is getting closer.

Marvin L Foushee

May 18, 2011, 4:29 p.m.

There are supposed to be seven members of the Federal Reserve Board of Governors, but their number is only five.  Maybe five is a lucky number for the caretaker Bush administration.

“The Fed should be abolished in favor of free banking, and the regulatory agencies closed in favor of a free market in self-regulation.”

The Fed was created because “self-regulation” led to the Great Depression.

Lack of regulation in the financial sector has almost always led to bank failings and financial collapses

Hi Nick:

I suggest you read “The Gods of Money” may view things differently.



From my time as a staffer on Capitol Hill, despite it being years ago for a Congressional Research Institute, I could see that smart people—really smart people—are often happy with jobs having lesser titles and scrutiny of highly-partisan politicians. 

So, having some seats at the top of agencies vacant does not, to me in my experience, mean that good work isn’t being done.  Now, having said that, I would dearly like to see Elizabeth Warren be seated as, in part, a way to send the message that smart people—working on behalf of a government and its people (both trying to get smarter)—will get things done. 

Honestly, this attitude of “what’s good for American big business is good for America” has just run amok. Period. The financial industry has made too much money either betting against—or trying to create indentured serfs of—the American consumer. Does the American public need to go on a low-fat, high-savings diet AND take courses in budgeting and credit management? Definitely! 

Meanwhile, plain spoken, patriots (such as Elizabeth Warren) should be vaunted—-not vengefully vetted into timidness about speaking up for—or serving—America’s people (as opposed to its loophole-loving corporations). American citizens ought not be considered the quarry of unscrupulous Machiavellianism among financial and other industrial executives—or their legislative accomplices.  God help us, I think even Ayn Rand would be shifting uncomfortably in her chair if she was alive to see what laissez-faire capitalism has wrought.

It appears as if bankers and Wall Street insiders are making the decisions, again!  One of the purposes of Dodd-Frank, as I understand it, was to bring allhe financial regulations to gether is one, well unjderstood package and end many, any loopholes that favored he bankers and said to heck with the public.  That hasn’t happened.  A considerable amount of the money that was leant to the banks is being used for the same old purposes that got us into this problem: Bonuses and pay raises and lobbying.  If what they are doing is illeagal, nothing is going to happen until someone goes to jail.  Period. End of sgtory!


I’m going to skip reading a book by a guy who thinks oil is continually made by the earth without biomatter and that Peak Oil is a political invention.  Oh, he also believes the planet is cooling, not warming.

I do have some books for you, though.

“Lords of Finance”

“13 Bankers”

and Krugman’s “The Return of Depression Era Economics”


Thanks for taking the time to suggest further reading. to reciprocate, I suggest you (and anyone looking for perspective on why the United States has such a difficult time accomplishing any real reform)

1) Taking the Risk out of Democracy - Alex Carey
2) The Corporation that Changed the World - Nick Robins account of the East India Company
3) Paradise Built in Hell - Rebecca Solnit

I would stay away from the financial books - that way madness lies, but Jesse Eisenger and ProPublica are doing good reporting on the slagheap crater that is the financial industry. The book that I found most useful for dispelling the current FUD (fear uncertainty and doubt) was Joshua Holland’s “The Fifteen Biggest Lies about the Economy”

So, I’ll read yours if you read these.

Larry Crawford

May 18, 2011, 6:28 p.m.

Hey Nick :-)

Yes, look past adiabatic oil…

I suggested “Gods” as of the books I have read and the numerous blogs, this one is a well referenced historical to present perspective on investment banking and its influence on geopolitics…I am “afraid” I am not a friend of the FED…

I have read 13 Bankers, Aftershock, Meltdown and read several blogs, Mybudget360, Ampedstatus, Too Much…listen much to Bill Black: ...very good video…

Have a few other books on the shelf but not enough time (After thr Fall, Great American Stickup, It Takes a Pillage, etc :-)

I’ll buy The Fifteen…it looks a bit left of my staunchly middle of the road, non-partisan quirks but then it is good to read widely.

Thank you for the suggestions and challenge!

Larry Crawford

I have been sending letters to everyone in Congress and the Administration asking the same question for years. Why did the Administration not immediately restaff once in office when they had the power to do so? Not hiring to fill vacancies is a huge mistake they may never recover from. Look at all the empty seats in the Justice Department.

“Even low-level appointments are now deeply partisan affairs, the playthings of score-settling senators with memories like elephants and the social responsibility of hyenas (which probably insults hyenas).”

You pretty much answered you own question as to why this happens.

We all forget that Obama is too busy making wars, to be concerned about financial regulation.  America does not need more regulators, what it needs is less wars and less wasteful government.


You asked in your post, “So, who really runs our country?”

I presume this was a rhetorical question… but just in case it wasn’t here is a telltale clue:

From the Huffington Post, Jan 11, 2011:

“President Barack Obama’s next chief of staff holds more than $7.6 million worth of stock in JPMorgan Chase, according to a regulatory filing.

William M. Daley, vice chairman at JPMorgan Chase, holds 175,678 shares in the $2.1 trillion behemoth, the nation’s second-largest bank by assets. Daley headed the firm’s Corporate Responsibility division, which included oversight of the firm’s lobbyists and relations with government officials.”

It seems he sold his shares in Chase, but I wonder where his allegiance lies, and unhappily, the allegiances of the once promising President who brought Mr. Daley, the head of lobbying efforts at Chase, aboard.

You say, “Allowing these vacancies to linger drains leadership from the financial overhaul at the exact moment when it is needed most.”


This after you’ve noted, “Even low-level appointments are now deeply partisan affairs . .  .” and that Senator Shelby (R) has “quashed” one important nomination and is blocking another.

A little logic and incoherence, please.

(And don’t cite the single Democratic staffer you quoted. I was a newspaperman for many years, and I know how the conformation-quote game is played.)

Anyone who thinks the earth is not cooling is incorrect.With each day the crust and core cool. I mean please, this is no longer up for debate. And the earth is still not flat. That is common knowledge. The new backpedaling and more correct term is global climate “shift”. Notice they have dropped “warming” and for good reason. History proves we have been in periods of glacial growth and retreat. It is only this time that weather patterns are being used as a political and finacial tool.
Debate is great, but it often helps to include some facts, if a worth while answer is what you are seeking.

Obama has not made appointments because it is not glamorous. All this dictator craves is the spotlight. We jumped from the frying pan into the fire with this guy. NO change more BULL and another WAR to boot. The US public has been enslaved,packaged and sold to the highest bidder once again. This admistration is as bad as the last.

Another excellent Jesse E. piece, with unblinking clarity and calm, astute judgment.
Keep going, Jesse. We need you on the case.

Has anybody asked Obama or any of his staff for a more thorough explanation?  I would welcome some frank discussion from the man himself.

Rudy (BA, Phil)

May 19, 2011, 9:17 a.m.

What really gets to me is that there are UNFILLED POSITIONS at a time when a lot of Americans are jobless.  I, for one, have been unemployed for close to a year.  I will regulate whatever/whomever needs to be regulated, just hire me.


What would happen if all the people who are current on their “subprime loans” (not really loans), and all the people in default of what they still believe to be loans, (but are really just debt collectors with no standing to foreclose because they have no legal proof of a creditor)—-what would happen if EVERYBODY suddenly knew of the sham, and stopped paying the “bogus bill” every month—as a protest to the pervasive fraud…and had absolute PROOF that the “pretender lender” had no standing to foreclose?

I think that might wake “them” up a little…

check out:  livingliesdotwordpressdotcom (won’t let me link here…)



tell everyone!

May 19, 2011, 1:59 p.m.


EDITOR’S ANALYSIS: “Don’t get intimidated. This is actually very simple. The Federal Reserve window and other “facilities” were made available to the tune of $7 TRILLION dollars (half of the debt ceiling in its current form) in order to ease the liquidity problem. The belief was that by saving these institutions credit would start flowing. Quite the opposite resulted, as Banks consolidated their gains from the biggest economic scam in world history.
As the suit says, Wall Street firms went to the Fed window and gave them assets in exchange for money. The problem is that the assets were “impaired” (i.e., fraudulent). They were worthless pieces of paper that were never reviewed by anyone until now. The pools were never filled with assets because no paperwork was ever generated on the actual loans. The paperwork that WAS generated was fake describing a transaction that never took place. And then they even failed to transfer the fake paperwork because each time you use fake paperwork in a new transaction it is another crime or civil violation subjecting you to all kinds of liability.
THE POOLS WERE EMPTY. SO ANY BOND ISSUED BY THE POOL WAS WORTHLESS. THAT IS WHAT WAS USED TO CHEAT THE AMERICAN TAXPAYER AND THE SCAM IS CONTINUING WITH FORECLOSURES ON FAKE PAPERWORK OF A FICTITIOUS TRANSACTION. Where people are confused is that a loan DID get funded, but the loan described in the closing papers did NOT occur. FOLLOW THE MONEY TRAIL. NOT THE DOCUMENT TRAIL. If you follow the money, you win, if you follow the paper, they might win.”

@Shay—the crust and core of the Earth are cooling? That’s your contribution to climate science? Hilarious. You know what? Every day the sun is cooling too!

Christine Wheeler

May 22, 2011, 12:31 p.m.

So I get a letter from Bank of America who I had a checking account with since 2005 that says in order to continue giving you outstanding service we need to start taking $12 out of your account monthly.  I promptly went in to the bank a few days ago and closed my account, took the little bit I still had in there and stuff it under my mattress.  Why all this taking from the little person. I have a home based business and sometimes after paying all my bills all that’s left is close to $12, why would I want them to take it once a month. It’s because the rich want there to only be two classes, the homeless and the rich.  After all we wouldn’t want the people in the higher tax brackets to not be able to afford their new yacht or their private island vacation, or house in the Manhattans now would we. If I had more money after helping my girls with their college expenses and basic day to day expenses I would give a lot of my money to charities I feel deserve it.

Obama, master of the bait n’ switch con, CIA asset ( check out Wayne Madsen), and poseur extraordinaire, has but one interest: himself as president in the pantheon of immortal Americans. He will never confront the financial oligarchs, not even in his midnight fantasies, except perhaps on his knees in that immortal supplicant position with which he is very familiar. Mr. Obama cannot distinguish between public interest and self interest and the continuity with Bush is firmly established.


May 31, 2011, 6:51 a.m.

even in his midnight fantasies, except perhaps on his knees in that immortal supplicant position

Jesse Eisinger

About The Trade

In this column, co-published with New York Times' DealBook, I monitor the financial markets to hold companies, executives and government officials accountable for their actions. Tips? Praise? Contact me at .(JavaScript must be enabled to view this email address)