Elizabeth Warren Questioned by Consumer Financial Protection Bureau: How She Blew It
The brain behind the new Consumer Financial Protection Bureau faces another round of congressional hostility.
When Elizabeth Warren last appeared before the House Committee on Oversight and Government Reform, she said she could stick around for only an hour due to a scheduling conflict. This time, the Republicans won’t let that happen again. “I expect you to remain before the committee until all members of the committee have had all their questions answered,” Rep. Darrell Issa , the California Republican who chairs the committee, wrote to Warren. His tone called to mind nothing so much as a teacher reprimanding an unruly student.
On Thursday, Warren must once again endure the charade of answering questions about the actions of a new Consumer Financial Protection Bureau that has no official authority until it goes live next week—and over which she is serving as temporary custodian until President Obama nominates, and the Senate confirms, a director.
Yet Warren has only herself to blame—not only for Issa’s tone, but also for this latest demand that she appear before his committee to undergo another round of grilling. The truth is, Warren blew it the last time she was on Capitol Hill. She was cordial on that sweltering Tuesday in late May when she arrived at a small hearing room on the second floor of the Rayburn Building. With equanimity, she answered the prosecutorial questions of Patrick McHenry, the North Carolina Republican chairing the oversight hearing (“Yes or no, Ms. Warren?”)—just as she answered similarly aggressive questions from other Republicans.
Her mistake came when McHenry called for a recess so that members of the committee could make it to a vote on the House floor. At least a couple of members had not gotten their turn at Warren, so McHenry asked her to stay. Claiming that she had made it clear to his staff that she had a full schedule on tap for the rest of the afternoon, Warren declined. To her credit, at the end of every month she posts her calendar at the Consumer Financial Protection Bureau website. But in this case it revealed that she had a few meetings with colleagues inside the Treasury Department and then a 45-minute interview with a Vanity Fair writer.
“I’ve asked questions of a litany of administration officials from Democratic and Republican administrations,” McHenry is quoted as saying in the current issue of Bloomberg Business Week, “and I’ve never seen an action by any witness like I saw that day.” McHenry should have emerged as the victor on that occasion. He and his colleagues had been trying to cast this new creation as a superagency beyond the normal checks and balances of government—and paint Warren, a Harvard Law professor, as one of those pointy-headed elites who think they know what’s best for everyone else. And here Warren was playing right into their hands. McHenry might have kept his cool and said something like “I can’t force you to stay if you don’t think it’s worth an extra few minutes of your time to answer our questions.” Sitting in the chairman’s seat, he might have noted that she seemed contemptuous of Congress. Instead he dubbed her a liar, Warren gasped, the video of his tough-guy exchange went viral, and the blogosphere cast McHenry as a bully. In sports, the expression is "snatching defeat from the jaws of victory."
The first time Warren was summoned to Capitol Hill to talk about the consumer-protection agency was in March, when she appeared before a subcommittee of House Financial Services. The big controversy at that hearing was also the big controversy at the McHenry hearing—and it will no doubt be the big grievance Republicans raise at Thursday’s hearing. It boils down to the settlement agreement the country’s 50 state attorneys general worked out with the banks after their mortgage-servicing subsidiaries were caught taking shortcuts and generally acting too hastily when foreclosing on homeowners. Warren shared some ideas with the AGs while they were working out those agreements--which makes sense, given that consumer protection is her expertise and there’s no rule against a federal official giving advice to a state official who seeks it. But the Republicans who oppose her see this as proof her agency has run amok. Spencer Bachus, the Alabama Republican who now chairs the Financial Services Committee, described Warren’s brainchild as “the most powerful agency ever created.”
Congressman Barney Frank remembers the first time he and his colleagues on the Financial Services Committee debated the idea of a new agency to serve as a kind of product-safety commission for mortgages, credit cards, and other financial products. This was in the fall of 2009, when the Democrats still ran the House and he still served as chair of that powerful committee. Warren hadn’t yet attained national status as a consumer champion, but she was outspoken in her criticisms of the more predatory side of the banking industry.
Republican colleagues on Frank’s committee were hardly keen on this idea of a new regulatory body that monitored the behavior of the banks, debt collectors, and the country’s fringe lenders, but they seemed more intent on ensuring that if such an agency were created, Warren would not be in charge. Scott Garrett, a Republican from New Jersey, even introduced an amendment dictating that the head of this new consumer agency needed to have worked at least one year as a bank employee or a bank regulator. Frank dubbed it “the Elizabeth Warren amendment” because, he told me, “it was written precisely so Elizabeth would not qualify.” Frank recently witnessed more mischief when the House Republicans floated a bill that would have taken away Warren’s salary as the agency’s temporary custodian.
“Who’s Watching the Watchmen,” McHenry dubbed his May hearing. Yet one might ask the same of this four-term congressman, who represents a rural patch of North Carolina. Only a modest portion of McHenry’s campaign contributions come courtesy of anyone who actually lives in his congressional district. His main constituency, at least if his campaign-disclosure forms serve as an accurate stand-in, are the financial institutions and fringe lenders seeking to defang the consumer-protection bureau. The American Bankers Association, Bank of America, and a check-cashing chain based in Florida are among the entities writing McHenry checks for $10,000 or more over the past two years. Goldman Sachs, Morgan Stanley, and JPMorgan Chase have also been big McHenry contributors. Earlier this year he traveled to the Westin Diplomat Resort & Spa in Hollywood, Florida, to speak at the annual convention of the payday lenders, who make high-interest loans against a person’s next paycheck. In the first three months of 2011, the payday lenders gave McHenry more than $27,000 toward his next election—and it’s fringe players like the check cashers, pawnbrokers, and payday lenders who stand to lose the most in the face of a strong consumer-protection agency.
Maybe in the end McHenry was simply too eager to please his contributors. Warren scares the bejeebers out of the banks and the fringe lenders, and perhaps he was too willing to take up their cause. Their anger was his. If only Warren had decided to stay and suffer through interrogations from another couple of Republicans, she wouldn’t have to be going through it again so soon. This time she’ll be facing the entire House Committee on Oversight and Government Reform rather than the smaller subcommittee McHenry runs. That means facing a committee of 40, including 27 Republicans. They’ll no doubt ask more or less the same questions and hit on the same talking points: The consumer-protection agency is too powerful, its people aren’t answerable to anyone but themselves. Presumably this time she’ll grin and bear it as she imagines what else she might be doing.