White House Bank Czar Elizabeth Warren has already drawn up a list of particulars for mortgage lenders to sign that would subject them to a host of new regulations and make them shave down the amount they are owed by debtors.
Fine, it’s a legitimate point of view, albeit one that may well extend the housing crisis by milking along those who can’t pay their mortgages – instead of moving them into foreclosure – and creating costs banks will pass on to their customers.
But what’s ugly here is that Obama de facto appointed Warren to a position that should require Senate approval, without getting Senate approval. And now she’s regulating away as if she was de jure in the position. She’s wielding power, accountable to exactly nobody as she battles the evil banking fat cats.
Technically she’s not in charge of the Consumer Financial Protection Bureau, created by the Dodd-Frank financial reform bill. She’s just a nice White House assistant supposedly helping with setting the thing up. But everyone knows she’s been running the CFPB since Obama brought her into the White House last September.
Subjecting her to Senate hearings would have forced a discussion of her background and Obama’s housing policies, and forced her to preview what she might do as head of the agency. And it would have taken time, and the president’s agenda is too important to wait.
So instead of running the agency directly, she uses Voodoo to do it from her office at the White House.
Now, under the guise of a “settlement” with banks over past “abuses,” Warren is trying to start regulating them. The Wall Street Journal opinion page picks up the action.
This brouhaha started last year when mortgage servicers—J.P. Morgan Chase, Wells Fargo and other banks—were accused of mishandling foreclosure documentation. The feds have been investigating, and it turns out that most of the infractions were technical while very few borrowers lost their homes without cause. But state Attorneys General and White House special assistant Elizabeth Warren have spotted a political opening to smack the banks one more time and dole out $20 billion to potential voters in 2012.
They’ve sent a proposed 27-page “settlement” to the banks that would, among other things, force mortgage servicers to submit to the bureau’s permanent regulatory oversight; impose vast new reporting and administrative burdens; mandate the reduction of borrowers’ mortgage principal amounts in certain circumstances; and force servicers to perform “duties to communities,” such as preventing urban blight. We warned during the Dodd-Frank debate that the new consumer bureau would become a political tool for credit allocation, and here we already are.
The legal language is so vague, and the potential liabilities so vast, that no CEO could in good conscience sign the agreement as it stands . . . Homeowners and bank shareholders will ultimately pay for the compliance burden and the $20 billion to reward delinquent borrowers, as servicers pass on the costs. Never mind that these banks didn’t originate many of those loans and typically don’t own them now.
Warren, as predicted by her opponents, has started acting without purview in a position meant to have congressional purview. Score another win for opaqueness in the “openness” administration.