How Long Will the AP and the Establishment Press Downplay Consumer Czar Liz Warren’s Financial System Shakedown?
You begin to get an idea of how poorly served the news-consuming public is by the Associated Press when you compare its “reporting” on Obama czar Elizabeth Warren’s appearance tomorrow before the House Financial Services Committee to an information-packed editorial — yes, an editorial — in the Wall Street Journal this morning.
You can read all of the over 750 words in the unbylined AP report without learning that Ms. Warren and various state attorneys general are attempting to shake down the banking system for $20 billion. You would think from the wire service’s selective content that it’s only Republicans who have opposed and continue to oppose the broad, unchecked authority her brainchild, the Consumer Financial Protection Bureau, will have over U.S. banking policy and practices. It ain’t so.
New consumer agency under fire from GOP, banks
Four months before formally opening its doors, the new federal watchdog for policing mortgages, credit cards and other financial products is under attack from Republicans and banks.
Elizabeth Warren, the Harvard law professor who championed the Consumer Financial Protection Bureau and is now in charge of setting it up, faces the hostile fire directly on Wednesday. Republicans running the House Financial Services Committee will press her to answer their concerns – shared by banks and other business interests – that the agency and its director will have unfettered power over financial products used by millions of people and might abuse it.
… Echoing criticism from their business allies, GOP lawmakers want the new agency’s budget placed under Congress’ control so lawmakers could threaten its financing if its actions displease them. Its money now comes from the self-financing Federal Reserve, which Congress plays no role in financing.
… Democrats and their allies say they purposely gave the bureau clout and independence. Its creation was a marquee achievement of last year’s financial markets overhaul law, which Obama and Democrats in Congress enacted last summer over GOP opposition.
… Republicans and business allies also complain the new financial overhaul law is too vague and open to interpretation regarding the power it gives the bureau to protect consumers against “unfair, deceptive, or abusive acts and practices.”
These provisions make the bureau “perhaps the single most powerful agency ever created by an act of Congress,” House Financial Services Committee Chairman Spencer Bachus, R-Ala., said last week.
… Warren herself has come under attack from Republicans who say that she has overreached. They have especially bridled at reports that she has been an advisor to federal agencies and state attorneys general trying to force big U.S. banks to change the way they modify mortgages and handle foreclosures.
Last week, Sen. Richard Shelby of Alabama, top Republican on the Senate Banking Committee, called the legal effort “nothing less than a regulatory shakedown” by the bureau and other federal agencies.
… (Treasury Secretary Tim) Geithner wrote back Tuesday, saying the bureau would not formally participate in any settlement with mortgage servicers but would advise agencies on how to design mortgage servicing standards.
“Marquee achievement”? No bias there, eh? (/sarc)
What is this “settlement,” anyway? You’d never know from reading the entire AP item.
Over at the Journal, its editorialists aren’t worried about whether Warren might abuse her power; they believe that she, using the Rahm Emanuel “never let a crisis go to waste” approach, is already doing so. They appear to have a very strong case (bolds are mine):
The new federal Consumer Financial Protection Bureau … is trying to extend its reach by extorting billions of dollars from private mortgage servicers, regulating their business by fiat, and stalling a U.S. housing market recovery.
This brouhaha started last year when mortgage servicers—J.P. Morgan Chase, Wells Fargo and other banks—were accused of mishandling foreclosure documentation. The feds have been investigating, and it turns out that most of the infractions were technical while very few borrowers lost their homes without cause. But state Attorneys General and White House special assistant Elizabeth Warren have spotted a political opening to smack the banks one more time and dole out $20 billion to potential voters in 2012.
They’ve sent a proposed 27-page “settlement” to the banks that would, among other things, force mortgage servicers to submit to the bureau’s permanent regulatory oversight; impose vast new reporting and administrative burdens; mandate the reduction of borrowers’ mortgage principal amounts in certain circumstances; and force servicers to perform “duties to communities,” such as preventing urban blight. We warned during the Dodd-Frank debate that the new consumer bureau would become a political tool for credit allocation, and here we already are.
The legal language is so vague, and the potential liabilities so vast, that no CEO could in good conscience sign the agreement as it stands. The settlement includes, for instance, “unfair and deceptive business practice” clauses that would expose servicers to lawsuits for any “material” violation of the agreement, whatever “material” means. Homeowners and bank shareholders will ultimately pay for the compliance burden and the $20 billion to reward delinquent borrowers, as servicers pass on the costs. Never mind that these banks didn’t originate many of those loans and typically don’t own them now.
(The) real policy goal is to impose by fiat a measure that was roundly rejected in 2009, when a Democratic Congress defeated a “cramdown” measure that would have allowed bankruptcy judges to force servicers to do principal write-downs.
I would suggest that the AP is keeping the scope of the situation out of its reports (a March 9 report by Alan Fram also makes no mention of the potential amount involved) to keep it from becoming widely known. That’s not the job of a wire service with journalistic integrity, but it appears to be the mission of the state-compliant Associated Press.
Cross-posted at NewsBusters.org.