So Spencer Bachus and Shelley Moore Capito are really upset with Elizabeth Warren. In a letter from the two leaders on the House Financial Services Committee, they demand that Warren correct her testimony to the committee from March 16. See, when asked about the mortgage servicer settlement and CFPB’s role in it, Warren said that they merely provided advice and expertise to state and federal regulators working on the agreement. But aha! Bachus and Capito write:
Since you testified, new information has come to light indicating that the CFPB has actually been deeply involved in the negotiations. This information comes from a document bearing the CFPB’s name and entitled “Perspectives of Settlement Alternatives in Mortgage Servicing.” … according to the CFPB Settlement Presentation, the CFPB did more than provide advice; it recommended the goals and provided a detailed framework for the structure of the settlement.
Of course, advice typically means providing recommendations. These weren’t forced upon the AGs or federal regulators, but offered as alternatives. Hence, “Perspectives of Settlement Alternatives in Mortgage Servicing.” Adam Levitin has the full Fisking, it’s too early in the day and I’m too tired. Suffice to say that this is a nonsense letter, and Warren won’t be clarifying or correcting her testimony. Levitin closes with this:
But notice where this game is leading–this is the Republicans’ attempt to assemble a portfolio of arguments against Elizabeth Warren becoming the Director of the CFPB. As long as the CFPB remains without a Director, it cannot be an effective force in investigating foreclosure fraud and holding the banks to account, which means the AGs’ only settlement leverage is the threat of litigation, which will take years to play out, by which point there won’t be any distressed mortgages left to modify. Maybe the banks will pay a fine, but it will be a fraction of what they’d pay under the settlement. So the game here is for the banks to run the clock–negotiate in bad faith with the AGs and rely on their Congressional pals to keep the CFPB out of action. That’s a strategy that could save the banks’ billions. I’m sure they’ll find good uses for that money.
Now, I don’t totally agree with Levitin about a world without a global settlement, and I don’t totally disagree with Yves Smith about the prospects of Warren getting that CFPB position (I have a couple issues with her overall post). But I actually don’t think that’s the scenario right now. Levitin alludes to this, but the real problem is CFPB not having a Director at all. They lose key powers and cannot regulate non-bank financial institutions if no one is in place by July. And that’s what looks to be happening. It’s pretty clear that the White House is dragging its feet.
The push for Warren among the progressive community, if it does anything, actually might get someone nominated to the position. Someone that Warren would run out and endorse, to keep that left flank mollified. But without the pressure, I don’t think there will be a nominee, and the CFPB will just be permanently sidelined.
Warren, meanwhile, is someone who can speak to the Chamber of Commerce and be completely credible about the need for a set of principles for competitive markets. Of course, CoC members don’t want competitive markets; that’s not how they got to where they are today. They’re not capitalists, they’re rent-seekers.
So they’re going to fight Warren tooth and nail. And given the spirit at the White House, that fight will wind up ultimately keeping her out of that director position. It already did, in fact. But the banks and their allies in Congress need to worry just as much about head of enforcement Richard Cordray as they do anyone else. Unlike the other captured federal agencies, CFPB actually has the power to enforce the law, if a director actually gets in place. That’s what’s behind the Warren push, to me.