EDITORIAL COMMENT: It’s a simple answer really. She is real and they are not. She wants us to have the truth, they want us to fight with each other over ideology while the truth sails away.
With Barofsky leaving the TARP watchdog, and the only meaningful prosecutions Warren is the only person left in the administration whose intent conforms with the job of a public servant protecting consumers from wholesale fraud by the banking industry. Now they are after her with a vengeance to extinguish the risk of action by the administration that puts away people who should be convicted felons, and the risk that restitution to the government, taxpayers, homeowners and investors will be seriously pursued.
Whereas Barofsky’s eye was on past transgressions and unraveling the mystery of the TARP money, Warren’s eye is more on the future to stop the banks from using business models that uses consumers as targets. We have a very unbalanced situation that seems likely to get worse unless Warren is successful.
The failure of Congress and thus the Justice department to include banking in the scope of industries where monopolies must be regulated and controlled has left the industry in charge of itself and controlling what little is left of government regulation. In any other situation the justice department would have a clear path to antitrust remedies. It’s like water, electric and phone service — if we are going to give companies monopolistic share of the marketplace and raise barriers to entry for competition, then they should be regulated like utilities or broken up into much smaller companies.
If water companies were allowed the freedom of the banks, we would be paying $100 per gallon. That is what we are doing in finance, but nobody wants to see it that way except a few people who are accused over being alarmist.
It strikes me as hypocritical for the anti-regulators to say that big government is unwieldy and can’t be managed properly and then allow the creation of a financial industry that in every real metric is bigger than government and even more unmanageable — and not possible to regulate. We’re getting the worst case scenario every way we turn. We’ve already tried deregulating the financial industry and except for top members of the industry itself, NOBODY IS BETTER OFF. Quite the contrary, debt, which is the life blood of the financial industry, is draining the life force out of economy.
Whenever it is that we push the reset button to clear title and stabilize commercial transactions, it better include a practical view of the financial industry. It should be serving the needs of the country and the marketplace. Instead we have them dictating what the economy and the country will get.
Elizabeth Warren has an uphill battle without much support from anywhere that counts. SO she needs YOUR support by writing to her and your congressman and state legislators about the inequalities in our economy that have stretched us past the breaking point. The goal is to have a healthy and productive society and a fair marketplace governed by democratic principles. The current status quo, for which the banks have dug in their heels to maintain, is anti-capitalism, anti-free market, and anti American.
Capitalism is an economic system that is midway between fascism (controlled by business) and socialism (everyone gets a share of the pie). The American dream is what drives capitalism — where we know there will be inequalities and excesses and we are willing to tolerate that because that is how opportunity and innovation flourish creating better circumstances for each generation of Americans. Using the unfounded fear of socialism, big business has taken us over the line to fascism in the marketplace and the society. we are a nation in which the government does not respond, much less fear, the reaction of the people because they are so easily manipulated by sound bites that scare them. Elizabeth Warren is practical and firm in her drive to return us to true capitalism, in which trickery is not protected by a system where predators run the government.
We need to return the favor and give her support every way we can.
The piñata sat alone at the witness table, facing the members of the House subcommittee on financial institutions and consumer credit.
The Wednesday morning hearing was titled “Oversight of the Consumer Financial Protection Bureau.” The only witness was the piñata, otherwise known as Elizabeth Warren, the Harvard law professor hired last year by President Obama to get the new bureau — the only new agency created by the Dodd-Frank financial reform law — up and running. She may or may not be nominated by the president to serve as its first director when it goes live in July, but in the here and now she’s clearly running the joint.
And thus the real purpose of the hearing: to allow the Republicans who now run the House to box Ms. Warren about the ears. The big banks loathe Ms. Warren, who has made a career out of pointing out all the ways they gouge financial consumers — and whose primary goal is to make such gouging more difficult. So, naturally, the Republicans loathe her too. That she might someday run this bureau terrifies the banks. So, naturally, it terrifies the Republicans.
The banks and their Congressional allies have another, more recent gripe. Rather than waiting until July to start helping financial consumers, Ms. Warren has been trying to help them now. Can you believe the nerve of that woman?
At the request of the states’ attorneys general, all 50 of whom have banded together to investigate the mortgage servicing industry in the wake of the foreclosure crisis, she has fed them ideas that have become part of a settlement proposal they are putting together. Recently, a 27-page outline of the settlement terms was given to banks — terms that included basic rules about how mortgage servicers must treat defaulting homeowners, as well as a requirement that banks look to modify mortgages before they begin foreclosure proceedings. The modifications would be paid for with $20 billion or so in penalties that would be levied on the big banks.
Naturally, the banks hate these ideas, too. So the Republican members of the subcommittee had another purpose as well: to use the hearing to serve as a rear-guard action against the proposed settlement.
“Under what statutory authority are you currently acting?” demanded Representative Patrick McHenry, a Republican from North Carolina, questioning the legitimacy of her role in setting up the consumer bureau. He also questioned whether the government had the right to impose a $20 billion penalty on the banks — and then use that money for (heaven forbid) mortgage modifications.
Spencer Bachus, Republican of Alabama, the new chairman of the Financial Services Committee, wanted to know how closely Ms. Warren had been consulting with the White House and Treasury Secretary Timothy Geithner about naming a director for the bureau — and whether she would accept a recess appointment “knowing the type of blowback from that.” (A recess appointment is a temporary appointment the president can make when the Senate is in recess, thus avoiding the need for Senate confirmation.)
Representative Steve Pearce, Republican of New Mexico, said that he fully expected the Consumer Financial Protection Bureau to be no better than “the S.E.C. and Mr. Madoff.” “Within two years,” he added, “your agency is going to be operating exactly the same, that it’s simply out there grinding wheels away.”
Representative Scott Garrett, Republican of New Jersey, zeroed in on the proposed settlement. Where in the statute did she have the authority to consort with the attorneys general? he demanded to know. “Are you making recommendations to government regulators about the dollar amount?” he badgered. “Is that part of your role, to make recommendations about dollar amounts?”
On and on it went, until the hearing sputtered to a close, two and a half hours after the browbeating had begun.
•
To listen to the House Republicans, you’d think the financial crisis of 2008 was like that infamous season of the long-running soap opera “Dallas,” the one that turned out to be a season-long dream. Subprime mortgages? Too-big-to-fail banks? Unregulated derivatives? No problem! With the exception of their bête noire, Fannie Mae and Freddie Mac, the Republicans act as if nothing needs to be done to prevent another crisis. Indeed, they act as if the crisis never happened.
The home page on the House Financial Services Committee’s Web site has been turned into a screed against Dodd-Frank. Clearly, the committee is going to spend this session trying to minimize the effect of the legislation, starving agencies of the funds needed to enact the regulations mandated by the new law, for instance. In fact, that effort has already begun.
It’s not just the House Republicans either. Already the Office of the Comptroller of the Currency has reverted to form, becoming once again a captive of the banks it is supposed to regulate. (It has strenuously opposed the efforts of the A.G.’s to penalize the banks and reform the mortgage modification process, for instance.) The banks themselves act as if they have a God-given right to the profit they made precrisis, and owe the country nothing for the trouble they’ve put us all through. The Justice Department has essentially given up trying to make anyone accountable for the crisis.
Thank goodness, then, for the attorneys general — and for Ms. Warren. On Main Street, where the attorneys general operate, it is pretty obvious that problems persist. During the subprime boom, many states tried to stop the worst lending abuses, only to be blocked by federal banking regulators. Now that the country is dealing with the aftermath of those abuses — the rising tide of defaults and foreclosures — it is the attorneys general who are, once again, put in the position of trying to stamp out abuses, this time of the foreclosure process itself.
Their leverage comes from the fact that the banks and their servicing divisions have, in the words of the University of Minnesota law professor Prentiss Cox, “routinely violated basic legal process” by, for instance, not transferring the note after the sale of a home. But in addition to assessing a financial penalty on the banks, the A.G.’s are trying to use the threat of litigation to force the banks to finally deal with defaulting homeowners more fairly and humanely. That is the essence of the settlement proposal that has been floating around. That — and a big push to finally come up with a modification plan that works.
When I spoke to Tom Miller, the Iowa attorney general — and the leader in this 50-state effort — he said that one reason he had asked Ms. Warren for advice was that she had already hired people with genuine expertise that he wanted to take advantage of. But that’s not the only reason. If the banks were to agree to settle the case on the A.G.’s terms, the Consumer Financial Protection Bureau would be the agency charged with enforcing the terms. So it makes sense to include its current leadership as they work through ideas for a settlement. Besides, the A.G.’s don’t really trust anybody else in the federal government to be on the side of financial consumers. Given their previous experience, why would they? Ms. Warren is the one person in Washington they feel is on the same side they’re on.
The notion that Ms. Warren lacks statutory authority to talk to the attorneys general is an objection so silly it is hard to take seriously. Consulting with the only government officials around who are actually trying to do something for financial consumers is precisely what she ought to be doing. Given that her agency could wind up enforcing the terms, it’s practically a necessity.
As for the idea the Republicans have been spreading talk that the attorneys general are overstepping their bounds by trying to force reform — and a big penalty — on the mortgage servicers, that’s pretty silly, too. As Adam Levitin, a Georgetown law professor, has pointed out on his blog recently, settlements are private agreements between two parties. The banks can accept what the A.G.’s are proposing. Or they negotiate different terms. Or they can reject them outright, and go to court to fight over the proper remedy. It’s really not any different from the multistate tobacco settlement of some years ago, which imposed some minor reforms on the tobacco industry along with a giant financial penalty. Congress had nothing to do with it.
I wish I could say with certainty that the ideas put forth by the attorneys general will finally help ease the foreclosure crisis. I hope they do. Mr. Levitin thought there was a decent likelihood of success; Mr. Cox, a former assistant attorney general himself, was also hopeful — though more skeptical. “So much of it rides on how well it is enforced,” he said.
Which is also why Ms. Warren is the most logical person to be the agency’s initial director: if the settlement does come to pass, no one will understand its terms better, or have a better feel for how to enforce them. Let’s face it: there isn’t anybody in Washington more fearless about standing up to the big banks. No wonder they don’t like her.
As I listened to her on Wednesday, I was struck anew at how clearly she articulates the need for the new bureau. “If there had been a cop on the beat to hold mortgage servicers accountable a half dozen years ago,” she said at one point, “the problems in mortgage servicing would have been found early and fixed while they were still small, long before they became a national scandal.”
Senate Republicans have vowed to block her appointment if President Obama nominates her. Yet even if her nomination goes down in flames, Senate confirmation hearings would be clarifying. Americans would get to hear Ms. Warren explain why the Consumer Financial Protection Bureau has the potential to help Americans. And they would get to hear Republicans explain why the status quo — including the everyday horror of the foreclosure mess — is just fine.
It has been much noted in recent months that President Obama seems unwilling to start a fight with Republicans. Maybe that’s why he has shied away from nominating Ms. Warren to a job for which she is so clearly suited. But if protecting financial consumers — and helping the millions of Americans struggling to hold onto their homes — isn’t worth fighting for, then what is?
NEW! 
