A Fighting Chance

Others might have lost their homes eventually, but they lost the chance to have more time—guaranteed by their local laws—to look for a new place and to settle in their families. For some homeowners, all their possessions were unceremoniously—and illegally—dumped on the sidewalk. What’s the right compensation for that? The big banks had systematically and deliberately broken the law, and so many families across the country had paid the price. To know how much injury mortgage companies had caused, the agencies would have to do a very significant investigation.

There was another way to calculate the damages too. It would have been possible to determine how much money the banks had saved with every corner they had cut and every paper they had failed to file. In other words, how much did the mortgage servicers profit from breaking the law? Once that was known, the banks could have been forced to pay a multiple on that amount. By way of comparison, in a fraud prosecution, the fraudster is often required to pay three times the amount that was taken by deception, in order to deter future fraud.

It made no sense for regulators to push for a quick settlement, but that’s what several of them did.

demanded an “independent investigation”: For Senator Shelby’s statement, see http://www.shelby.senate.gov/public/index.cfm/newsreleases?ID=0447c3e6-5864-452e-ab43-2b9ec7afa684.

favored a number closer to $30 billion: Abigail Field, “Sizing Up a Sweeping Mortgage Settlement,” CNNMoney, May 20, 2011.

“led by Elizabeth Warren”: Senator Shelby accused regulators of using “strong-arm tactics” to “politicize” the mortgage foreclosure settlement process, with “serious due process” implications. Shelby called on the Senate Banking Committee to inquire into the substance and process surrounding the proposed settlement, and he urged the Obama administration to refrain from entering into any agreement before Congress had a chance to weigh in on the details. See http://www.shelby.senate.gov/public/index.cfm?p=NewsReleases&ContentRecord_id=ac820c24-1e3c-4114-a601-c8a33e2a30bc&ContentType_id=ae7a6475-a01f-4da5-aa94-0a98973de620&Group_id=876a24c9-639d-499e-8f4d-ad2b6c7cf218.

provided a detailed account of our work: See http://financialservices.house.gov/media/pdf/031611warren.pdf.

served a five-year term (not true: several others do, too): For example, the chairman of the Federal Deposit Insurance Corporation serves a five-year term. The Comptroller of the Currency (OCC) also serves a five-year term. Federal Reserve Bank presidents serve a five-year term. The Director of the recently defunct Office of Thrift Supervision had also served a five-year term.

as if I had enacted the law instead of Congress itself: Michael McAuliff, “Elizabeth Warren Called Liar at CFPB Hearing by Republicans Who Botched Facts on Agency,” Huffington Post, May 24, 2011.

described it when she ran the video later that day: See http://www.today.com/id/43170318/ns/msnbc-rachel_maddow_show/#.UnixCxbkhFI.

overrun with tens of thousands of angry messages: David Waldman, “Blowback for Patrick McHenry’s Nastiness to Elizabeth Warren,” Daily Kos, May 25, 2011.

The secretary never wavered: Secretary Geithner testified before Congress on March 15, 2011: “… the Consumer Financial Protection Bureau, does not currently have authority to administer penalties and will, therefore, not be a party to any formal settlement with mortgage servicers. Under that same law, though, the CFPB will obtain significant authority to set standards for the mortgage servicing industry on July 21, 2011, the date when the consumer finance protections of other agencies transfer to the Bureau. For this reason—and this is very important—for this reason, the CFPB has been invited to, and I personally invited Elizabeth Warren to advise the other agencies that are part of this process on how to design appropriate servicing standards for the mortgage servicing industry.” See http://www.gpo.gov/fdsys/pkg/CHRG-112shrg67144/html/CHRG-112shrg67144.htm.

The agency must be substantially weakened: On May 5, 2011, forty-four Republican senators sent a letter to President Obama asserting that they would not confirm anyone to head the Consumer Financial Protection Bureau absent structural changes to the agency. In particular, the senators wanted to change the management, funding, and rule-making apparatus of the CFPB, citing “accountability” and “democratic values” concerns. See http://www.shelby.senate.gov/public/index.cfm/newsreleases?ContentRecord_id=893bc8b0-2e73-4555-8441-d51e0ccd1d17. These proposed reforms would have severely weakened the CFPB. For example, see Jim Puzzanghera, “Senate Republicans Vow to Block Any Appointee to Head Consumer Protection Bureau,” Los Angeles Times, May 6, 2011. All of the Republicans then in the Senate signed the letter except Senators Lisa Murkowski, Scott Brown, and John Ensign. Brian Beutler, “Republicans Make Power Play to Gut Consumer Financial Protection Bureau,” TPM, May 6, 2011.