Another Bureaucrat Overreach

Elizabeth Warren, an unconfirmed bureaucrat heading up the new Consumer Financial Protection Bureau, or CFPB, has proclaimed that financial institutions should not be forced to build their business models around any unfair, deceptive or abusive practices. This you can see right on their website at consumerfinance.gov.

My question is why then is she  trying to extort from these same companies and regulate their businesses despite having no discernible experience even running a financial institution?

Last year Wells Fargo, Chase, Citi, HSBC and a host of others were accused of using robo signers when creating foreclosure documentation.  While thousands of foreclosures were affected, few people lost their homes without cause.  The issue was a technical one, and the banking departments regulating these companies have suggested they clean up the mess, which they are, and pay a small fine. Most of the homeowners had not paid their mortgages in months or even years.  Not to be deterred, Warren has decided to try to hit the banks with $ 20 billion to “settle” the investigations, and force these banks to submit to her permanent oversight.

Here are some highlights of her 27 page “proposal” to the banks.

1. Mortgage servicers must submit to her permanent regulatory oversight with new reporting and administration burdens;
2. Force the banks to reduce borrowers’ mortgage principal in some cases;
3. Force servicers to perform “duties to communities” such as preventing urban blight.

The CFPB was created by the Obama administration to run without any congressional oversight.  In fact, some of her “proposals” were deemed unacceptable and dangerous in previous Congresses by those we elected from both sides of the aisle.  She has never had to be confirmed by Congress yet she is using her position to tell banks how and to whom to lend money.  I have had a long career in consumer banking and I saw first hand how Government interference in the housing market forced banks to lend to unqualified and very risky borrowers under the Community Reinvestment Act and other regulations.  Fannie and Freddie were told to buy these mortgages to continue the vicious cycle.  These policies are a direct cause of the housing bubble as cheap money flowed to unqualified people, driving up home prices to unsustainable levels. A collapse was inevitable.  We are living with the results of it now. 

It’s important that the housing market be cleaned up using market forces.  Suspending foreclosures, forcing the reduction in principal balances, and other egregious practices will further dampen the market, delay and prevent its eventual recovery.  Warren needs to be vetted by Congress as to her qualifications, and if necessary she needs to be removed from her office, and the CFPB shut down. It’s a political machine not a true protection agency in my opinion.