Mortgages should be regulated at least as strictly as toasters, says Elizabeth Warren in an anecdote that should by now sound familiar: “It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house. But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street—and the mortgage won’t even carry a disclosure of that fact to the homeowner.”
Warren, the woman behind the Consumer Financial Protection Bureau, has been repeating this anecdote over and over again in interviews on television and for print since at least the summer of 2007 when she laid out the arguments for her consumer protection agency in the journal Democracy. The tidy comparison packs a punch and Warren has a gift for this kind of thing—telling persuasive parables—says a BloombergBusinessweek cover story on Warren this week called “She's With the Government, and Here to Help.” The CFPB, one of the pillars of Dodd-Frank reform, has a mandate to eliminate “unfair, deceptive or abusive” lending practices and to dictate the terms of every consumer lending product on the market. The agency will examine firms for compliance, write rules and enforce the rules, too.
One of the biggest points the article makes is that even if she doesn’t get to run the agency, she has already won the battle she set out to fight. Republicans have made it pretty clear they will block her nomination to run the CFPB if that ever comes to pass—and made it impossible for Obama to make a recess appointment. They have also vowed to block any and all candidates nominated to lead the agency unless Obama agrees to overhaul its governing structure—they want a bipartisan committee to run it instead of a single individual. But the CFPB already carries her stamp due to the behind-the-scenes role she has been playing to get it up and running. The agency will totally reshape the way Americans borrow, regardless of who presides over it.
Over the past many months, Warren has been busy hiring a staff of hundreds, including several high-profile and talented industry executives and academics at the top. The chief operating officer is Catherine West, previous president of Capital One; head of research is Sendhil Mullainathan, a behavioral economist and Harvard professor; head of Resarch, Markets and Regulation is Raj Date, a former banker at Capital One and Deutsche Bank.
“Few cabinet secretaries can claim to have left as indelible a mark on the departments they lead as Elizabeth Warren has already left on the one she doesn’t,” writes Drake Bennett, who authored the BloombergBusinessweek piece.
Apparently, Warren, or at least the staff she has chosen to run the CFPB, would like to remake not just the landscape of consumer finance, but also to “reinvent what a government agency can be,” Bennett writes.
It's a great article and a good read, no matter how you feel about Warren. Check it out.