Financial ‘cop’ on the hot seat

WASHINGTON — It seems everybody is afraid of Elizabeth Warren, the Harvard law professor charged by President Obama with setting up the new Consumer Financial Protection Bureau.

The Wall Street Journal editorial page called her “President Warren” and a “czar” in command of an “empire.” Richard Shelby of Alabama, the top Republican on the Senate banking committee, thinks she’s orchestrating a “regulatory shakedown” of mortgage companies. And Spencer Bachus, chairman of the House Financial Services Committee, told Warren on Wednesday that she is “probably directing the most powerful agency that’s ever been created in Washington.”

That will come as news to the Pentagon.

But in the tradition of Chief Justice John Roberts, who described himself to lawmakers as a lowly “umpire,” Warren declared herself to be a mere sheriff’s deputy.

“If there had been a cop on the beat with the authority to hold mortgage servicers accountable a half-dozen years ago,” she announced, “the problems in mortgage servicing would have been exposed … long before they became a national scandal.”

Warren added: “We need a cop on the beat that American families can count on. It is critical that we get this right — a real cop on the beat.”

“You kept saying ‘cop on the beat, cop on the beat,'” complained Rep. Shelley Moore Capito, R-W.Va., who chaired the day’s hearing.

Warren could not dispute this. In reply, she said that banks must know “there will be a cop on the beat” and that her agency will need “enough money to put enough cops on the beat.” Before completing her testimony, Officer Warren made four more references to cops-on-beats — possibly putting her in violation of public-nuisance statutes.

But it was a useful metaphor: If she’s the cop, then banks are the robbers, and members of the Republican majority on the committee sounded like lawyers for the accused.

Echoing the talking points of their banker clients, the lawmakers complained that Warren’s new agency will be run by a director rather than a bipartisan board (never mind that the Office of the Comptroller of the Currency, another banking regulator, runs the same way), and that it is exempt from the congressional spending process (never mind that other regulators are treated the same).

Basically, the members of the panel didn’t want the new CFPB to have anything that would displease bankers.

Rep. Blaine Luetkemeyer, R-Mo., said the agency was “the last thing that our lenders need.” Rep. Robert Dold, R-Ill., ridiculed the “theoretical consumer protection” the agency would provide. Rep. Sean Duffy, R-Wis., complained that, in Warren’s agency, “consumer protection could trump safety and soundness.”

The obvious refutation of Duffy’s complaint was the mortgage bubble, in which lightly regulated banks ignored consumer protections — and the financial industry nearly collapsed. But instead of going there, Warren smiled pleasantly and nodded understandingly. She tried to establish herself as a regular gal (“the first house we ever bought was for $23,300”) and a patriot (“I went down to Lackland Air Force Base, where my brothers had taken basic training.”) She said she had been “schooled” by the lawmakers and given “good counsel.”

The flattery got her nowhere with committee Republicans. They were particularly annoyed that she is on the job without being formally nominated to run the CFPB, which opens for business in three months.

“You have no statutory authority to engage in these matters that you are engaging in,” Patrick McHenry of North Carolina informed her.

Bachus, who wants to abolish the CFPB director’s position before it is even occupied, dubbed her “the acting director of this to-be agency.”

“No, congressman, there is no acting director,” Warren replied.

Duffy disagreed. “If it walks like a duck and it quacks like a duck and it looks like a duck, it’s a duck,” he said, prefacing his duck test with the disclaimer: “I don’t want to beat a dead horse.”

The whinnying continued: “Ma’am, you’ve spent 30 seconds my time not answering my question. … You’re backtracking. … You’re demanding something from the people you will enforce things over that you’re not willing to give yourself, and that is, straightforward, clear, concise answers.”

The final questioner, Rep. Scott Garrett, R-N.J., skipped all but the last few minutes, arriving just in time to suggest that Warren was breaking the law. “What legal authority does a political appointee have in a situation like this?”

Officer Warren again flashed her proverbial badge. “Congressman,” she said, “I think we need cops on the beat to enforce the law.”

Dana Milbank is a Washington Post columnist. His e-mail address is danamilbank@washpost.com.