The CFPB and Congress’ Need for an Adult Conversation

The Republicans, now in control of our House of Representatives, love to talk about having adult conversations about things, and so I can’t for the life of me figure out why, when it comes to consumer protection, certain members of the GOP insist on speaking to us all like we’re either too young or stupid to understand just how badly the American people have been hammered—both by the financial services industry and our elected and appointed representatives who clearly abdicated their responsibility to keep tabs on them. This absolute disconnect from the American consumer was on display last Wednesday when Elizabeth Warren testified before the House Financial Services Committee.

Warren, a special advisor to the president in charge of setting up the new Consumer Financial Protection Bureau, possesses unparalleled bona fides when it comes advocating on behalf of average Americans who have been worked over by big banks and lenders (read this Newsweek article for some of the particulars). Yet many of the House Republicans on the committee questioned her almost as though she was the one responsible for destroying the economy.  As though they, the deregulators, are the real consumer protectors. As opposed to the person who’s actually been protecting consumers for the last couple decades.

To quote Will Ferrell: I feel like I’m taking crazy pills.

The hearing, in fact, featured a succession of Republicans questioning the legitimacy of the CFPB and, by extension, Warren.  Rep. Blaine Luetkemeyer (R-Mo.), opined that the CFPB is “the last thing that our lenders need.” Actually, sir, it’s the last thing they want, but it’s exactly what they need. And do you know who else needs it? The people in your district. It’s worth noting that prior to his election in 2008 the good Congressman was a bank vice president, and a loan officer.  I have no doubt that the gentleman from Missouri sincerely cares about the people in his district, but I can’t quite stomach a former banker objecting to the CFPB because it’s bad for banks. Frankly, it’s the laissez-faire philosophy he and his colleagues espouse that promoted the environment of financial illiteracy, predatory financial products and services, yield-hogging, Bernie Madoff and Allen Stanford–to name a few–that almost took us all under.

[Article: Are the Deregulators Trying to Destroy the Economy?]

In addition to Rep. Luetkemeyer’s concern over the CPFB’s effects on banks, Committee Chair Shelley Moore Capito (R – WV) said that she felt the creation of the CFPB represented a new bureaucracy with “little congressional oversight.” Actually, Congress is the bureaucracy and other than that one brief shining moment when it enacted Dodd-Frank and the CARD Act, it doesn’t have a particularly great record of late on consumer protection.  While I understand the concern about oversight, consumer protection­—a sacred mission in my life—is too important to get stuck in the political quagmire.

Later, Rep. Robert Dold, (R-Ill.) characterized the CFPB as offering “theoretical consumer protection.” Seriously? For some, “consumer protection” is a punchline. For Warren it has been a guiding principle.  She has been screaming from the rooftops for years about the injuries and indignities visited upon American consumers by the financial institutions that both Democrats and Republicans were supposed to be monitoring. But precious few of you listened to her. And now you have the chutzpah to suggest that her brand of consumer protection is theoretical, implying that yours is real? Where were you these past several years when the financial services industry was shaking down the American consumer?

An Adult Conversation »

Image: CFPB video

An Adult Conversation

Republicans are pulling out all the stops in the hopes that they’ll kill the CFPB before it really gets going, raising issues about CFPB employees consulting with state attorneys general who are trying to eliminate fraud from the mortgage servicing business; about how the CFPB is funded. It all seems quite petty. The law establishing the CFPB was drafted to shield it from Congressional tampering and as advertised, Republican Members of the House are trying to tamper with it—limiting its funding and working to undermine the woman who fought for it and is working hard to turn the concept into a reality.

Ultimately, there wasn’t a particular theme to the questioning—rather it was more like a series of snipes. It seemed to me that they were trying to take her down by any means necessary. Actually, now that I think about it, there was a theme: political suicide. The sniping from rank and file Republicans on the Financial Services Committee may be political theater, but they ought to consider the real world ramifications of taking this approach.

As Rep. Barney Frank (D-MA), the former Chairman of the House Financial Services Committee, pointed out on Monday’s Morning Joe, “This is not just the left and the right. The Republican Party is united against healthcare and united against the environment. They’re not united against financial reform. The Tea Party people didn’t send people to Washington to defend derivatives. I think the fight over Elizabeth Warren would be worth having and I’m not sure how all the Republican senators would vote.”

[Article: The GOP’s Plans for Financial Reform]

I agree with him. I think this is an issue that crosses party lines and that, broadly speaking, the American people see through the rhetoric. They want someone out there watching their backs, who’s smart enough and tough enough to take on the financial services industry when they step out of line. Now who do you think is better suited for that job: Congress or Elizabeth Warren?

I frankly don’t understand why Republicans don’t support Elizabeth Warren. And please don’t give me the Tea Party mantra about how the world would be perfect if only government would get out of our lives.  Instead of trying to find a way to work with her to protect consumers—and last time I checked, these politicians “represent” and, in fact, are consumers—they want to demonize her and strangle the newly created CFPB.

I am not an unreasonable guy.  I don’t disagree with Rep. Capito’s recently stated objection to Warren’s overuse of the phrase “cop on the beat,” which is a pretty considerable admission coming from a guy who loves a good catch phrase. However, it does accurately describe what we have lacked heretofore and so sorely need today.

Here are some of the most important things Elizabeth Warren wants to do. Can any reasonable person oppose them?

• Prohibiting mortgage brokers from making greater commissions by steering borrowers to more complex financial roach motels of hi-bred adjustable financial instruments.
• Raising the bar for America’s financial literacy.
• Mandating shorter, more easily understandable mortgage and credit card contracts.

Isn’t an educated, financially hip, less risky borrower who tells the truth about his or her ability to pay and actually does pay better for our financial system? Isn’t it time for the “Gotcha” conduct of financial relationships to be replaced by civility, transparency and fairness? In a world where supermarkets are mandated to unit price a can of peas, how it is possible that banks have yet to offer a unit price for a credit card?

[Related Article: Holly Petraeus, Military Family Watchdog Slated for Consumer Protection Agency Post]

We have a golden opportunity to finally do something right for the American consumer by not only saying that we are making institutions more accountable to us but actually making them more accountable to us. Isn’t that the battle cry of the Tea Party?

Let’s all try to have an adult moment here. The financial system needed something far more structured and lasting than Congress simply consigning banks and credit card companies to a few minutes in the regulatory time-out chair. Elizabeth Warren and her team at the CFPB are doing the job that American consumers want and need them to do. Perhaps instead of sniping from the cheap seats, Congressional critics might give them some slack and allow a work in progress to progress.