A Fighting Chance

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.