A Fighting Chance (58 page)

“mouthful of mush that doesn’t get the job done”:
Shahien Nasiripour, “Fight for the CFPA Is ‘a Dispute Between Families and Banks,’ Says Elizabeth Warren,”
Huffington Post
, March 3, 2010.

not the big banks, pick up the tab:
During negotiations between the House and Senate, the Congressional Budget Office came out with a report showing that the reform bill would cost $19 billion over time. (This estimate was for the cost of stepped-up bank regulation and did not include the cost of running the Consumer Financial Protection Bureau, which was separately funded as part of the Federal Reserve System, which is not taxpayer funded.) The financial reform bill that first passed the Senate ensured that the new costs of regulation would fall on the hedge funds and other large financial institutions that would pay a fee to fund the work. George Zornick, “Scott Brown’s Hypocrisy on Wall Street Reform,”
The Nation,
October 11, 2012. But in the final weeks of June, long after the funding provision had been agreed on by lawmakers and the Dodd-Frank bill was moving toward passage, Scott Brown demanded that the tax be eliminated. Donovan Slack, “Donations Poured In as Brown’s Role Grew,”
Boston Globe,
December 12, 2010. Instead of charging the biggest hedge funds and banks for the cost of the regulation, the vast majority of the funds would come from unused TARP funds, which were due to go back to the taxpayers. Daniel Indiviglio, “Financial Regulation Bill Passes Through Conference … Again,”
The Atlantic,
June 29, 2010. As Barney Frank and many others put it, Brown moved “twenty billion dollars off the backs of the banks and onto the taxpayers.” Zornick, “Scott Brown’s Hypocrisy on Wall Street Reform”; see also Max Fisher, “$19 Billion Bank Fee Nixed: Will It Save Financial Reform?,”
The Wire,
June 30, 2010.

5 | An Agency for the People

asking him to pick me:
The Progressive Change Campaign Committee (PCCC), under the leadership of Adam Green and Stephanie Taylor, organized a petition with the headline “Let Elizabeth Warren Police Wall Street” in 2010. At least thirteen senators signed on to the petition, and as of August 6, 2010, the petition had collected more than two hundred thousand signatures. Stephanie London, “Al Franken Leads Campaign to Whip Support for Elizabeth Warren,” CBS News, August 6, 2010.

because the banks would oppose me:
“Elizabeth Warren,” editorial,
New York Times
, July 24, 2010. The editorial characterized the banks’ objection to my appointment: “The banks don’t oppose Ms. Warren because she doesn’t get it. They oppose her because she does.”

“she’s what we need, yo”:
Los Angeles comedian Ryan Anthony Lumas was an employee at Best Buy when he wrote and performed in a Western-style rap video urging the president to appoint me to head up the new consumer agency. The video was sponsored by the Main Street Brigade, a group supported by Hans Zimmer and Bonnie Abaunza that was dedicated to fighting for American families and consumer protection reforms in Washington. In the video, Lumas raps about how the country has a strong consumer advocate and “sheriff of Wall Street” in Elizabeth Warren. Video available at:
http://mainstreetbrigade.org
. See also Joe Nocera
,
“Consumers Clamoring for a Leader,”
New York Times
, August 20, 2010.

“This is a power grab”:
See Ronald D. Orol and Greg Robb, “Warren Seen Gaining Key Consumer Protection Post,”
Market Watch
, July 28, 2010.

and that I would be hard to confirm:
Senator Dodd said in an interview with the
Courant:
“It isn’t just a question of being a consumer advocate. I want to see that she can manage something, too.” Kenneth R. Gosselin, “Dodd: Is Warren ‘Confirmable?,’”
Courant
, August 17, 2010. See also Shahien Nasiripour, “Chris Dodd, Top Democrat, Fights Against Elizabeth Warren,”
Huffington Post
, August 12, 2010.

to unbelievably high monthly payments:
For background on the rise of complicated mortgage products, including the rise of interest-only, adjustable-rate, or “teaser-rate” mortgages, see note,
“
prepayment penalties
.”
According to a CoreLogic study, one-third of the adjustable-rate mortgages taken out between 2004 and 2006 had initial “teaser” rates below 4 percent. On average, payments for these loans doubled after the initial teaser period lapsed. Veena Trehen, “The Mortgage Market: What Happened?,” NPR, April 26, 2007.

rather than powers under this “title”:
Section 1066 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: “The Secretary is authorized to perform the functions of the Bureau under this subtitle until the director of the Bureau is confirmed by the Senate in accordance with section 1011.” Choice of the word “subtitle” over “title” had powerful implications. According to Treasury’s lawyers, the statute as enacted meant that a wide range of regulatory and supervisory activities could not be initiated before a director was in place. See, e.g., letter dated January 10, 2011, jointly from the Inspectors General of the Department of the Treasury and the Federal Reserve Bank to Chairman Spencer Bachus and Chairman Judy Biggert at pages 6–7.
http://www.treasury.gov/about/organizational-structure/ig/Documents/OIG-CA%2011004%20Committee%20of%20Financial%20Serivces%20Response%20CFPB.pdf
.

this crash was the direct consequence of years of deliberate deregulation:
In testimony before the Financial Crisis Inquiry Commission on January 13, 2010, Jamie Dimon commented on the strength of JPMorgan and the actions it took in the run-up to and aftermath of the financial crisis. See
http://fcic-static.law.stanford.edu/cdn_media/fcic-testimony/2010-0113-Dimon.pdf
. Dimon recounted: “My daughter called me from school one day and said, ‘Dad, what’s a financial crisis?’ And, without trying to be funny, I said, ‘This type of thing happens every five to seven years.’ And she said, ‘Why is everyone so surprised?’” Second, Dimon conceded that the banks did not adequately account for scenarios in which housing prices went down. I took issue with Dimon’s first comment, which—in contrast to his second comment—painted the financial crisis as inevitable and removed responsibility from those who engaged in reckless and shortsighted activity on Wall Street and the regulators who should put an end to it. I noted that effective financial regulation following the Great Depression had ended “150 years of boom-and-bust cycles and gave us 50 years with virtually no financial meltdowns.” The boom-and-bust cycle began when these Depression-era laws were dismantled. I encouraged bank CEOs to “acknowledge how Americans’ trust has been lost and take the first steps to earn it back” by working with financial regulators and embracing meaningful consumer protection. For coverage of Dimon’s comment, see Sewall Chan, “Voices That Dominate Wall Street Take a Meeker Tone on Capitol Hill,”
New York Times
, January 13, 2010. For my op-ed, see Elizabeth Warren, “Wall Street’s Race to the Bottom,”
Wall Street Journal
, February 8, 2010.

spent more than $2 billion in political contributions:
According to calculations from data provided by the Center for Responsive Politics, the Finance/Insurance/Real Estate sector contributed more than $2 billion to federal campaigns from 2000 to 2010. This figure includes contributions from individuals and PACs and “soft money” contributions reported to the Federal Elections Commission. The total reached a new all-time high of $665 million during the 2012 election cycle.
http://www.opensecrets.org/industries/totals.php?ind=F
.

knew where they stood on each detail of banking regulation:
According to the Center for Responsive Politics, the Financial Services Roundtable has spent more than $70 million on lobbying since 1998.
http://www.opensecrets.org/orgs/summary.php?id=D000021984&cycle=A
.

“create an opportunity for good businesses to thrive”:
In addition to discussing how effective financial regulation can benefit banks that want to offer transparent products, I emphasized the following points in my speech to the Financial Services Roundtable on September 29, 2010: (1) my commitment to helping build a consumer credit structure that “works for families, works for the financial services industry, and works for the American economy”; (2) my belief in
genuine
free markets, in which “the best products at the best prices win” because consumers and lenders have access to a level and transparent playing field; and (3) my support for a new regulatory approach that cuts through the thicket of fine print contracts and “thou shall not” rules by using simple principles to measure success, such as the principle of “fair treatment” embodied in the following question: “Can customers understand the product, figure out the costs and risks, and compare products in the marketplace?” This principles-based approach, I argued, would empower consumers while easing the regulatory burden on lenders. My speech is available at
http://www.scribd.com/doc/38439729/Elizabeth-Warren-s-Speech-to-the-FinancialServices-Roundtable
.

KNIVES COMING OUT AGAINST ELIZABETH WARREN?:
Zach Carter, “Are Treasury’s Knives Coming Out Against Elizabeth Warren?,” AlterNet, October 29, 2010.

in a couple of days he nearly doubled his money:
In his book
Throw Them All Out
, Peter Schweizer found that from July to November 2008, “[Congressman] Bachus engineered no less than forty options trades, betting that the market, a sector of the market, or an individual company would go up or down at critical times” and reported $50,000 in capital gains during this period. Peter Schweizer,
Throw Them All Out
(2011), 25. He accused Bachus of exploiting his role as a policymaker by relying on insider information about the state of the financial market when trading (25–32). As just one example, Schweizer pointed to a September 2008 incident in which Bachus traded short options—effectively betting against the market—the day after a closed-door meeting with then Treasury secretary Paulson and then Federal Reserve Bank chairman Bernanke, with the result that he almost doubled his money (Bachus bought the options for $7,846 and sold them for over $13,000) (28–29). Schweizer notes: “Congressman Bachus was not the only one actively trading stocks while setting policy during the financial crisis. But he was particularly aggressive with options; others merely cashed out of positions that were just about to worsen,” and he implicated ten other lawmakers (33–34). CBS broke the story in a
60 Minutes
special, and several other media outlets reported it thereafter. See “Congress Trading on Stock Information?”
60 Minutes,
June 11, 2012. The reaction to the reports in the public and in Congress was quick and negative. For his part, Bachus denied allegations of insider trading, noting “you would have to be living under a rock not to know by September 18, 2008 that the economy was in bad shape.” See Tim Mak, “Spencer Bachus Letter to ‘Insider Trading’ Publisher,”
Politico
, November 16, 2011. Of course, his comment ignored the fact that for every trade in which the congressman profited, there was someone who didn’t get confidential briefings and lost money. The Office of Congressional Ethics ultimately cleared Bachus of insider trading on April 30, 2012. See Scott Higham, “Congress Ethics Office Clears Bachus of Insider Trading,”
Washington Post
, April 30, 2012. While Members of Congress were exempt from most insider trading laws at that time, Congress subsequently made the rules more stringent.

which banks had the fewest complaints:
Since the CFPB began amassing and posting information about consumer complaints in 2011, some groups have in fact started analyzing the data, shedding important light on how financial institutions treat their customers. For example, the US PIRG Education Fund found “… thousands of consumers with errors on their credit reports are getting relief through the Consumer Financial Protection Bureau (CFPB). The report also found that credit reporting agencies vary widely in how they respond to consumer complaints…” “Big Credit Bureaus, Big Mistakes,” US PIRG Education Fund, November 19, 2013.

In another study, PIRG analyzed CFPB complaint data about banks: “The CFPB’s searchable complaint database is the newest of a set of federal government consumer complaint databases that help consumers make better economic and safety choices by reviewing others’ experiences and searching for problems or product recalls. The transparency also helps firms improve their products and services. In short, transparency improves the way markets work.” “Big Banks, Big Complaints,” Florida PIRG Education Fund, September 17, 2013.

In a separate study, the National Community Reinvestment Coalition (NCRC) found racial disparities in terms of both the source of complaints and banks’ response to complaints, raising questions about the inequality of financial services and fair lending practices. Danielle Douglas
,
“Consumer Group Finds Racial Disparity in Bank Complaints,”
Washington Post
, October 8, 2013.