Elizabeth Warren has been selected by Democratic leadership to join the Senate Banking Committee next year, according to a Democratic source with knowledge of the situation.
The caucus still has to approve the committee makeup for the next Congress but that step is only expected to be a formality with regard to Warren.
Upon taking a seat on the panel, the Democratic Senator-elect from Massachusetts would immediately become one of the panel’s harshest critics of the financial industry, having campaigned as a populist champion who would crack down on big banks.
Warren was the architect of the Consumer Financial Protection Bureau, a key liberal priority in Wall Street reform but a major sticking point for Republicans and the banking industry. Warren appeared in line to be the bureau’s first director, but her path to the position was blocked by Republican Senate opposition.
After Warren won a Senate seat by defeating Massachusetts Republican incumbent Scott Brown, rumors circled that the banking industry was lobbying Democratic leadership to keep Warren off the panel, but industry officials dismissed that as spin and speculation.
“The committee perch gives her a microphone, but she has a microphone anyway,” one industry official said. “Nobody I’ve heard of is taking any steps to use whatever little capital they have with Senate leadership to keep her off — nobody I’ve heard of.”
Still, liberal groups took no chances she would be denied the spot, with the Daily Kos urging its readers to sign a petition to put Warren on the committee.
While Warren’s rhetoric on the campaign trail scorched Wall Street, she had a much more cordial relationship with the banking industry while she was setting up the consumer bureau for the Obama administration between July 2010 and August 2011.
Wall Street, industry watchdogs and Warren’s fellow lawmakers will all be watching to see whether Warren’s Senate approach will match that of the candidate who who accused Wall Street CEOs of strutting around Capitol Hill with “no shame” or the administration official who soberly emphasized the goal of regulation should simply be to ensure that mortgage and credit card products are easy for consumers to understand.
"I don't know what we'll see. It's always difficult to know with new members," said one former Senate aide. "The politics of running for office and the politics of crafting legislation are not always the same."
The former aide said that Warren's history suggested she would moderate her approach — if not her policy views — upon joining the Senate, noting that she had launched a "well-documented charm offensive" to shore up her relations with members of the financial industry when launching CFPB.
One industry source said Warren has been busy making phone calls to the financial services industry trade associations since her campaign victory in November.
But groups that threw their weight behind Warren’s Senate campaign will be asking her to take a hard line against the banking industry and Republicans on some committee issues.
Consumer advocates said they expected Warren to champion their top priority for next session on the Banking Committee: defending the CFPB. Republicans have balked at the CFPB’s structure, arguing the bureau should be dependent on Congress for its funding, an arrangement that would allow Congress more influence over its activities.
Tom Feltner of the Consumer Federation of America said he expected Republicans to try to again attempt to strip the bureau of its independent funding, and said he thought Warren’s seat on the panel would be an important part of the bureau’s defense.
“Elizabeth Warren had a very important hand in both the creation of the CFPB and standing it up in its early stages,” Feltner said. “In 2013 we’ll be looking to hang on to what we’ve achieved, and she stands to be very influential in that.”
Some in the banking world are worried that Warren’s position, coupled with her national fame and loyal liberal fan base, will lend her a high-profile perch with which to vilify their industry — but they remained skeptical of her ability to use her star power to re-write the law on financial regulation.
“Obviously she’ll have to do some things politically to get some headlines,” one banking executive who asked to speak anonymously said. “But I think those things will be about optics. They will be a way to please her base, but will be more political than substantive and most likely will not go anywhere.”
Scott Talbott, the senior vice president for government affairs at the Financial Services Roundtable — a Washington-based group that represents large financial institutions and is led by former Minnesota Gov. Tim Pawlenty — said of Warren getting a seat on the Banking Committee: “I think the fear of her is overblown.”
“I’m not worried about working with her,” he said. “I’ve worked with her and her staff for a long time. So it’s a comfortable relationship and there’s a lot of things where we actually agree upon. And where we don’t agree, she keeps an open door.”
The industry hopes to have an open line of communication with the Massachusetts Democrat in the coming years as the long process of implementing the Dodd-Frank regulatory reform law continues to unfold, said James Ballentine, the executive vice president of congressional relations and political affairs at the American Bankers Association.
“But I also don’t want to paint Sen.-elect Warren in the Dodd-Frank box as most will,” Ballentine said. “She is a senator, we have several issues concerning the banking industry outside of Dodd-Frank, and we want to make sure that we can speak with her on those things educate her, educate her staff see if we can work together.”
He added, “I hope that folks will not prejudge her based on previous remarks and likewise, I hope the senator doesn’t prejudge the banking industry based on things that she has seen or read about the industry.”
Next year there will be two open Democratic spots on the Banking Committee due to the retirements of Sens. Herb Kohl and Daniel Akaka. Sen. Joe Manchin (D-W.Va.) is Senate leadership’s pick to get the other open spot, according to a source familiar with the decision.
The decision to put Warren and Manchin on the banking panel was first reported by The Huffington Post.