[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

CONSUMER FINANCIAL PROTECTION EFFORTS: ANSWERS NEEDED

=======================================================================

HEARING

before the

COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

JULY 14, 2011

__________

Serial No. 112-88

__________

Printed for the use of the Committee on Oversight and Government Reform

Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform

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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland,
JOHN L. MICA, Florida Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee PETER WELCH, Vermont
JOE WALSH, Illinois JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director

C O N T E N T S

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Page
Hearing held on July 14, 2011.................................... 1
Statement of:
Warren, Elizabeth, Assistant to the President and Special
Advisor to the Secretary of the Treasury, Consumer
Financial Protection Bureau................................ 36
Letters, statements, etc., submitted for the record by:
Connolly, Hon. Gerald E., a Representative in Congress from
the State of Virginia, prepared statement of............... 88
Cummings, Hon. Elijah E., a Representative in Congress from
the State of Maryland, prepared statement of............... 7
Issa, Chairman Darrell E., a Representative in Congress from
the State of California:
Followup questions and responses............................. 107
Prepared statement of........................................ 4
Tierney, Hon. John F., a Representative in Congress from the
State of Massachusetts:
Democratic staff report.................................. 12
Prepared statement of.................................... 30
Warren, Elizabeth, Assistant to the President and Special
Advisor to the Secretary of the Treasury, Consumer
Financial Protection Bureau, prepared statement of......... 38

CONSUMER FINANCIAL PROTECTION EFFORTS: ANSWERS NEEDED

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THURSDAY, JULY 14, 2011

House of Representatives,
Committee on Oversight and Government Reform,
Washington, DC.
The committee met, pursuant to notice, at 9:30 a.m., in
room 2154, Rayburn House Office Building, Hon. Darrell E. Issa
(chairman of the committee) presiding.
Present: Representatives Issa, Mica, Platts, McHenry,
Jordan, Chaffetz, Mack, Walberg, Lankford, Amash, Buerkle,
Gosar, Labrador, Meehan, DesJarlais, Walsh, Gowdy, Ross,
Guinta, Farenthold, Kelly, Cummings, Towns, Maloney, Norton,
Kucinich, Tierney, Clay, Lynch, Cooper, Connolly, Quigley,
Davis, Braley, Welch, Yarmuth, Murphy, and Speier.
Staff present: Thomas A. Alexander, senior counsel; Robert
Borden, general counsel; Lawrence J. Brady, staff director;
Katelyn E. Christ and Tegan Millspaw, research analysts;
Benjamin Stroud Cole, policy advisor and investigative analyst;
Drew Colliatie, staff assistant; John Cuaderes, deputy staff
director; Gwen D'Luzansky, assistant clerk; Adam P. Fromm,
director of Member services and committee operations; Linda
Good, chief clerk; Ryan M. Hambleton, professional staff
member; Frederick Hill, director of communications and senior
policy advisor; Christopher Hixon, deputy chief counsel,
oversight; Hudson T. Hollister and Christine Martin, counsels;
Justin LoFranco, deputy director of digital strategy; Mark D.
Marin, senior professional staff member; Laura L. Rush, deputy
chief clerk; Rebecca Watkins, press secretary; Peter Warren,
legislative policy director; Michael Whatley, professional
staff member; Beverly Britton Fraser and Davida Walsh, minority
counsels; Lisa Cody, minority investigator; Kevin Corbin,
minority staff assistant; Ashley Etienne, minority director of
communications; Jennifer Hoffman, minority press secretary;
Carla Hultberg, minority chief clerk; Lucinda Lessley, minority
policy director; Leah Perry, minority chief oversight counsel;
Jason Powell, minority senior counsel; Dave Rapallo, minority
staff director; Susanne Sachsman Grooms, minority chief
counsel; and Mark Stephenson, minority senior policy advisor/
legislative director.
Chairman Issa. Good morning. The hearing will come to
order.
We exist for two fundamental principles: First, Americans
have a right to know that the money Washington takes from them
is well-spent. And, second, Americans deserve an efficient,
effective government that works for them.
Our duty on the Oversight and Government Reform Committee
is to protect these rights. Our solemn responsibility is to
hold government accountable to taxpayers, because taxpayers
have a right to know what they get from their government. We
will work tirelessly in partnership with citizen watchdogs to
deliver the facts to the American people and bring genuine
reform to the Federal bureaucracy. This is our mission.
Today's hearing is an important one because the Consumer
Financial Protection Bureau is intended to bring protections to
the American people in and around financial products. We are
here not to micromanage every aspect of that. The Financial
Services Committee has a responsibility to look at the details
of that. What we are here to do is our oversight role as to
government organization: whether or not this agency is properly
designed and prepared; whether the funding stream is
appropriate and verifiable; whether it will be transparent;
whether or not, as it is being organized from a 2,000-page
document, whether the guidance has been sufficiently clear; and
whether or not the American people can feel comfortable that
what was envisioned in Dodd-Frank is, in fact, what they want.
We appreciate Professor Warren's willingness to clear her
schedule, testifying for the second time before this committee,
first time before the full committee. I know the American
people want to know more about an agency that you have
dedicated, in some ways your whole life, but certainly the last
year to building up. The American people do not understand all
the history that goes in to your preparation for this, and I
believe today is an opportunity for us all to get a better
understanding of that.
Additionally, the definition of consumer financial products
protection is one that people don't understand. Quite frankly,
it may apply to payday loans, but that wasn't the basis for
Dodd-Frank. Dodd-Frank was about making sure that we never
again have a meltdown because certain types of credit
instruments were unsafe, unsound, poorly documented, and
ultimately worth less than they were intended to.
But it is clear today that we will be dealing with an
agency that will be far larger. The budget for next year is
estimated to be larger than the two largest consumer protection
agencies presently in existence combined. That is a lot of
money.
Additionally, the authority of this agency is extremely
broad. Today, we also will ask some important questions that
this committee has been dedicated to, along with the Financial
Services Committee, for some time. The Federal Reserve is not
transparent. The Federal Reserve does resist any kind of
congressional oversight and considers it unreasonable
interference.
There have been limited--and I repeat, very limited
ability--to get transparency in some cases related to the
financial bailout from the Federal Reserve. It is likely that
without the specific and documented ability to have guaranteed
transparency and legitimate oversight, that this sub-agency,
independent as it might be, but fully funded and accountable to
the Federal Reserve, could well become an agency that, while
well-intended, is not well-understood or transparent to
Congress or to the American people.
These concerns and others will be voiced here today. We are
delighted to have a witness who, more than anyone, absolutely
understands the intention of her agency. Often, you have used
the term, ``cop on the beat.'' Oddly enough, we use it here,
too. Today, we will ask the questions that will include: Does
the cop on the beat have a district attorney overseeing the cop
on the beat? Is there, in fact, a defense counsel available to
check on the cop on the beat? Is there an independent judge of
the cop on the beat? Is there, in fact, a court of appeals?
And, by the way, if I am accused by the cop on the beat, can I
get an attorney paid for by the State?
These and other questions are important, because we are not
talking, in the case of your oversight, about only large,
international banks. We may be talking about a small
organization formed for the purpose of one financial instrument
potentially finding that product in disfavor with the large
banks, who complain that that product is in some way deceptive.
I have no problem with the idea that that will be looked in to
by your entity. I do have a question about whether or not that
small company will have their day in court and their ability
not to be in financial ruin if, in order to save their company,
they must disagree with your determination. That and many other
issues we will be concerned with.
Last, there is a concept of individual liberty. One of the
concerns that the chair has and I believe many members of the
committee have is, at what point do the American people have a
right to say, ``I want to be informed, I want to be protected
by being informed, but, quite frankly, I want something which
you may not want me to have?'' In America, unless it is
incredibly dangerous to others or may cause harm to society,
generally we let people have what they want, even if we don't
want them to have it. We could use many examples; I will simply
quit with adult beverages.
Under Dodd-Frank, the CFPB will have the power to regulate
all consumer financial products and to prohibit the ones it
deems unfair or abusive. Today, I hope we will be able to
understand what, under Dodd-Frank, is the scope created by that
language and others.
I appreciate, again, your being here.
And I yield to the ranking member for his opening
statement.
[The prepared statement of Chairman Darrell E. Issa
follows:]

[GRAPHIC] [TIFF OMITTED] T1969.001

Mr. Cummings. Thank you very much, Mr. Chairman.
And thank you, Professor Warren, for being here today.
And at today's hearing we have a fundamental difference of
opinion about what we believe is important and who we are here
to serve. The difference can be distilled into one simple
question: Whose side are we on?
On one hand, a homeowner who has been illegally evicted,
foreclosed on, and charged inflated fees. They include
thousands of U.S. military service members and their families
who lost their homes, were charged millions of dollars
illegally, and were subjected to other abuses in violation of
Federal law.
The chairman asked a question about someone having a day in
court and facing financial ruin. They did not necessarily have
their day in court, and they have faced financial ruin. Many of
these service members are deployed overseas. Their credit has
been impaired, and their security clearances have been
suspended. While they are fighting to defend our Nation abroad,
they are also fighting their banks back home.
Professor Warren is on the side of these service members,
these homeowners, and their families. Holly Petraeus, the wife
of General David Petraeus, is now working at the Bureau as the
head of the Office of Service Member Affairs to educate service
members and banks about their legal rights and obligations.
They have joined with our Nation's top uniformed lawyers, the
Judge Advocate General, to protect service members from the
predatory practices of these banks.
I, too, am on the side of service members and other
homeowners across the country who have been the victims of
these illegal--and I emphasize, illegal--actions. In my
opinion, none of our troops fighting overseas in Iraq or
Afghanistan or anywhere else should also have to fight illegal
actions by their banks back home just to keep a roof over the
heads of their loved ones. And, by the way, a number of these
illegal actions have already been admitted to by the banks.
Over the past 6 months, I have urged this committee to
conduct a thorough--thorough--bipartisan investigation of these
systemic abuses. Initially, we had positive signs. On February
11th, we formally adopted the committee's oversight plan, the
blueprint for our committee's investigative priorities. As part
of that plan, we voted unanimously to investigate, ``wrongful
foreclosures and other abuses by mortgage servicing
companies.'' We also held a bipartisan field hearing in
Baltimore, where we heard heart-wrenching testimony from a
disabled veteran who suffered abuses at the hands of a mortgage
servicing company, including an illegal eviction.
But since hearing that testimony, the committee has done
nothing. I asked the chairman to join me in sending document
requests to the top 10 mortgage servicers, but he declined. So
I sent them myself. I asked the chairman to invite JPMorgan to
testify about their illegal foreclosures against service
members, but he declined. When some mortgage servicers refused
to provide even a single responsive document, not a single
syllable, I asked the chairman to issue subpoenas, but he
declined.
Instead of conducting a bipartisan investigation to help
service members and other homeowners, this committee has now
trained its eyes and sights on Professor Warren, who is trying
to protect these very same families so that they may have, in
his words, their day in court so that they might not face
financial ruin.
Ironically, it appears that the majority's single biggest
criticism of Professor Warren is that she is somehow being too
hard on these mortgage banks. Professor Warren has now been
summoned to testify before the committee not once but twice,
and the committee has demanded that she produce a massive range
of documents, all while the mortgage banks are given a pass.
So let me end with my original question: Whose side are we
on? The side of service members risking their lives and their
safety and their health, and the side of other homeowners and
their families? Or on the side of the banks that are committing
violations against these folks? And these are violations that
they have admitted to.
I hope we can come together and work with a common purpose
to do what this committee has the opportunity to do best: to
help millions of American families improve their lives by
demanding accountability and compliance with the law.
I have often said to my constituents, we have one life to
live. This is no dress rehearsal. And guess what? This is that
life. I do believe that Professor Warren is doing her very best
to make sure that every American lives the very, very best life
that they can.
And, with that, Mr. Chairman, I yield back.
[The prepared statement of Hon. Elijah E. Cummings
follows:]

[GRAPHIC] [TIFF OMITTED] T1969.002

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Chairman Issa. The gentleman yields back.
We now recognize the chairman of the Subcommittee on TARP,
Financial Services and Bailouts of Public and Private Programs,
Mr. McHenry, for his opening statement.
And by previous agreement, any unused time you may yield on
our side, and they will do the same.
I recognize the gentleman.
Mr. McHenry. Thank you, Mr. Chairman.
As we sit here today, the economic health of the United
States remains fragile. Unemployment numbers continue to be
unacceptably high, while small businesses struggle to access
credit and families struggle to simply pay their bills. With
that in mind, this committee remains committed to examine the
economic tradeoffs of current and proposed regulations and to
define the limits of regulators in an effort to put this
country back on the path to growth and prosperity.
In the spirit of this process, the House Oversight
Committee again welcomes Professor Warren, who has led the
formation of the Consumer Financial Protection Bureau, set to
launch on July 21st. Although the CFPB is not directly subject
to congressional appropriations, I hope that our witness will
be forthcoming to Congress and the American public about its
processes, decisions, and budget today and for years to come.
It is not a secret that the activity and formation of the
CFPB has been controversial. Numerous questions regarding the
scope of the CFPB's activity in the mortgage settlement case
and the Bureau's regulatory limits remain unanswered. With the
CFPB's inauguration next week, it is imperative that Professor
Warren explain to this committee and to the American people the
specifics regarding activities of the Consumer Protection
Agency as of today and its broadly defined authority to
regulate access to credit.
We all agree that protections are needed. In fact, one of
the CFPB's first initiatives is nearly identical to the
Mortgage Disclosure Simplification Act that I introduced along
with Democratic Congressman Green of Texas. It was a bipartisan
piece of legislation. So that is a positive.
With that said, the majority of rules and regulations
coming from the CFPB will not be based on bipartisan ideas and
will never require a vote. That is a concern. It will be
conducted by a single regulator, single director, who will be
given authority to author the terms for access to credit for
the American consumers and small businesses. With meager
oversight, they will be left outside the window of
congressional appropriations.
To make matters worse, Professor Warren has continued to
evade questions about the types of financial products that the
CFPB would ban or restrict. Businesses and investors are
sitting on the sidelines due to regulatory and economic
uncertainty. There are many questions left unanswered: What
will the CFPB do? How will it proceed? And what are the costs
incurred by the American consumers through these regulations?
Because there will be costs. Professor Warren's evasive non-
answers only further contribute to this climate of tepid
investment and slow job growth. I fear that actions by the CFPB
that limit access to credit and increase its costs will only
further damage a struggling economy.
The only clear thing about the CFPB in its current form is
that it will have extraordinary reach and control over
individual consumer decisions, while having an unparalleled
lack of oversight and accountability by the American people. As
Professor Warren continues to work to stand up the CFPB by next
week, it is the Oversight Committee's obligation to continue to
ask the questions of the Bureau to be clear about its
regulatory limits and proposals to restrict access to credit.
I look forward to addressing these issues and many others
today with Ms. Warren. And I thank Ms. Warren for returning and
being here today and answering Members' questions.
And, with that, Mr. Chairman, I would yield the balance of
my time back to you.
Chairman Issa. Thank you.
And I won't use it for a further opening statement, but I
would like to answer the ranking member's inquiry.
As you know, we held a field hearing in Baltimore on the
mortgage crisis. And I hope that hearings held here are not
somehow weighted greater than those held in your own district
with your mayor and your Governor there for the same fact-
finding. The time of the committee is limited. We are trying to
do things which, in this case, Financial Services should be the
lead. If they are not, we certainly want to make sure that we
fill in any of the gap.
Originally I said we were not going to let this go. We are
not going to let this go. We are going to continue to look at
those abuses, whether there is a government nexus or whether we
believe this committee can make a difference. And I want to
reiterate, nothing has changed from February until now. And I
would hope the gentleman would realize that I am happy to
continue working on specific opportunities.
In the case of the mortgage industry, in your opening
statement, you did say ``illegal,'' ``admitted,'' etc. If we
already know something is illegal, if, in fact, it is already
known and prosecution or corrections are being made, then it is
appropriate for this committee to say, what more do we need to
do? And if the answer is nothing more there compared to other
areas where people are not admitting or not, in fact, known to
have done wrong, we are going to choose to go to those who are
still hiding behind a veil of ``We didn't do it. We are not
wrong.'' And I would hope that both of us would always put our
investigations first on those who are saying there is nothing
wrong or on government agencies.
And I, again, will join with the ranking member. At any
time, if we see a wrong that is not being righted that we can
help make right, I look forward to working with him.
I would recognize Mr. Tierney for his opening statement.
Mr. Tierney. Thank you, Mr. Chairman.
Professor Warren, let me welcome you and thank you for your
dedication to the interests of the American consumer. I think
you are doing an excellent job on that.
You know, the costs for lack of regulation certainly are
pretty clear to all of us, and it culminated in the recession
that we have been suffering through for some time. It is
amazing that some people in both branches of this legislature
seem to be flacking for Wall Street banks, attacking an entity
that has been set up to be the champion of the American
consumer and the taxpayer.
Some seem bent on sabotaging Dodd-Frank's consumer taxpayer
protections in order to cover for the Wall Street banks, who
most of America believe wrecked our economy, got a taxpayer
bailout, sometimes two, who built nothing of value for America
except for financial products that ended up bilking the
American public. And since then there has been too little
legal, moral, or financial reckoning by these wrongdoers. And,
frankly, the lack of accountability for this greed and misdeeds
is stunning on that.
So I want to add some comments and reiterate what the
ranking member talked about, in terms of foreclosure abuses
that hit service members particularly hard. And this is one
thing that this committee can continue to do because it is an
ongoing matter.
As the ranking member of the National Security
Subcommittee, I understand that readiness can certainly be
affected by troops who struggle to deal with issues back home,
whether that includes negative credit reports, security
clearances that are suspended, and, worst of all, losing their
homes due to the illegal actions by banks.
Mr. Chairman, I would like to enter in to the record a
report compiled by the Democratic staff entitled, ``Fighting on
the Home Front: The Growing Problem of Illegal Foreclosures
Against U.S. Servicemembers.''
Chairman Issa. I look forward to it.
Mr. Tierney. Thank you.
[The information referred to follows:]

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Mr. Tierney. The report describes in detail the systemic
nature of these problems.
Particularly troubling is that these abuses are already
illegal. Congress enacted the Servicemembers Civil Relief Act
to protect our men and women in uniform against foreclosures
without court orders and against inflated fees.
This report finds that when initial accounts of illegal
foreclosures began surfacing, the banks downplayed these
problems. But as thousands of affected service members were
identified, it became clear the problems were more widespread.
This year, three banks were forced to pay multimillion-dollar
settlements related to these abuses. The largest was JPMorgan.
At first, it announced it would pay $2 million, but it ended up
paying $56 million to settle claims by Active Duty military
personnel.
Justice Department officials also condemned the actions of
the Bank of America. This is what they said, ``The bank failed
to protect and respect the rights of our service members,
failed to comply with clearly mandated procedures, and
foreclosed against homeowners who are valiantly serving our
Nation.''
I want to thank Professor Warren and Holly Petraeus, who
have been working hard on this issue at the Bureau. Since these
illegal actions are so much more widespread, Mr. Chairman, than
originally thought, however, I believe a comprehensive
investigation by this committee is urgently needed.
And, with that, I yield to Mr. Quigley for the balance of
my time.
[The prepared statement of Hon. John F. Tierney follows:]

[GRAPHIC] [TIFF OMITTED] T1969.021

[GRAPHIC] [TIFF OMITTED] T1969.022

Mr. Quigley. Thank you.
Thank you, Mr. Chairman and Professor Warren.
With due respect, I fear that this hearing is focused on
issues which distract from the obvious task at hand: helping
Professor Warren and others in our attempts to avoid another
economic catastrophe caused in large part by unregulated greed.
On one hand, we are trying to balance things here, or
balance a known entity, the greatest economic downturn since
the Depression caused by this lack of regulation; versus the
concerns about what an agency is going to do, whose full effect
doesn't go in to place until later this month.
So if we balance this, I think the American public
recognizes the real concern out there is what we have gone
through, what we are still experiencing because of those
problems, and how to face them, rather than some extraordinary
concerns about an agency which really hasn't done anything yet
to challenge those concerns that we have faced so far.
And, like any agency, the CFPB needs vigilant oversight
from Congress, but we should not obstruct the agency from
carrying out the intent of Dodd-Frank. As I said, millions of
Americans are still suffering the consequences of the housing
and financial crisis, which was caused by weak or nonexistent
regulation.
We all here have the beauty of hindsight about what took
place, but let's remember what Professor Elizabeth Warren said
in 2007: ``Nearly every product sold in America has passed
basic safety regulations well in advance of reaching store
shelves. But credit products, by comparison, are regulated by a
tattered patchwork of State and Federal laws that have failed
to adapt to changing markets.''
The CFPB was explicitly designed to address these
regulatory shortcomings. Just like the Consumer Product Safety
Commission protects consumers against exploding toasters, this
agency will protect consumers against faulty mortgages.
One key strength of the CFPB is to focus on the shadow
financial services sector, and that should be a focus today
instead of concerns about what we might do. These unregulated
lenders will, for the first time, be held to the same standards
as banks and credit unions. This should be our number-one
priority. And I thank Ms. Warren for her efforts so far and in
the future.
Chairman Issa. I thank the gentleman.
Mr. Cummings. Mr. Chairman.
Chairman Issa. Just a moment.
Members will have 7 days to submit opening statements and
extraneous material for the record.
For what purpose does the ranking member----
Mr. Cummings. Mr. Chairman, I have a motion.
Chairman Issa. The gentleman will state his motion.
Mr. Cummings. Mr. Chairman, since listening to your
statement a few moment ago, and since a key focus of today's
hearing is the abuses by mortgage servicers, I move, pursuant
to House Rule XI, clause 2(k)(6), that the committee authorize
subpoenas for documents from the five mortgage servicing
companies that have not been responsive.
By the way, Mr. Chairman, you said that there were some--
you were right--that there are some that have admitted
wrongdoing. The five that we are talking about have not
admitted wrongdoing. And I think that it would be appropriate,
based upon what we have done in other cases--just like you
said, we want to make certain things are priority those things
that we need to continue to look in to. I think this is an
appropriate situation for us to look in to.
Chairman Issa. I thank the gentleman.
At a hearing, only motions for subpoenas related to that
hearing can be considered in order for witnesses. However, we
will take the motion and work with the ranking member on a
business meeting where it could be in order.
Mr. Cummings. Well, we have consulted carefully with the
House Parliamentarian, and they tell us that, under Rule XI,
clause 2(k)(6), this motion is in order and must be recognized.
Chairman Issa. Under committee and House rules, we notice
business of the committee differently than hearings. Today we
have not noticed any business of the committee. So, although
Members would be advised that if a witness had not shown up a
subpoena could be in order to compel that witness, no other
business would be appropriate.
I will work with the ranking member to notice a business
meeting so that it would be. At the next business meeting,
including the markup of a post office, it would be ordinarily
in order for that.
Mr. Cummings. Very well.
Chairman Issa. I thank the gentleman.
Mr. Tierney. Mr. Chairman.
Chairman Issa. Yes?
Mr. Tierney. I would like to appeal the ruling of the
chair.
Chairman Issa. If the gentleman insists on his motion, we
will take a 5-minute recess.
Mr. Cummings. I insist.
Chairman Issa. We stand in recess.
[Recess.]
Chairman Issa. The hearing will come back to order.
Mr. Tierney, I have consulted with the House
Parliamentarian. And he informs me that, under ``Hearing
Procedures,'' which is throughout the ``800'' pages, at page
802 and beyond, of the House Rule XI, which you have
referenced, if you will look at ``Hearing Procedures,'' what it
says is--it goes through paragraph five of what is in order,
which is not included in what you have asked. And then
paragraph six says, ``Except as provided in paragraph 5, the
chair shall receive and the committee shall dispose of request
to subpoena additional witnesses.''
Do you have an additional witness?
Mr. Tierney. Yes, sir. If you look at the subpoenas, we are
moving the subpoena to custodians of the record for the five
banks to produce the list of documents.
Chairman Issa. And what would that have to do with today's
hearing? It is additional witnesses for the hearing that has
been noticed.
Mr. Tierney. Right. So the ranking member's motion here is
relevant and germane in the following way. The title of today's
hearing----
Chairman Issa. But no, no. Just before you----
Mr. Tierney. I will answer your question.
Chairman Issa. But let's get to the first question. It says
``witnesses.''
Mr. Tierney. Yes.
Chairman Issa. Your subpoena is for documents.
Mr. Tierney. Is for the custodian of the records to bring
the documents.
Chairman Issa. It is for documents.
Mr. Tierney. It is for the custodian of the records to
bring them in.
Chairman Issa. It is for documents, not witnesses.
Mr. Cummings. If the chairman would yield?
Mr. Tierney. I have been through this a few thousand times
in my life, all right? And I don't know about you. But the
subpoena is to the custodian of the records for the documents.
But the custodian is the one we are subpoenaing in here to
produce the documents.
Chairman Issa. So I want to understand your subpoena. So
what you want is for 10 bank executives to be here with
documents?
Mr. Tierney. I don't know if they are executives or not. I
want the custodian of the records.
Chairman Issa. So you don't want documents. You just want
the custodian.
Mr. Tierney. What part of the English language, sir, don't
you understand? We want the custodian of the records to bring
the documents here. That person will be the custodian of those
records and is the appropriate person to produce them as a
witness under oath in front of this committee. That is what the
subpoenas are for.
Chairman Issa. I appreciate that.
I have been additionally----
Mr. Cummings. Mr. Chairman.
Chairman Issa. Yeah, go ahead.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Chairman, since there is some question as to what our
motion is all about, Mr. Tierney is absolutely correct, we are
talking about the custodian of the records. And we are not
talking about 10 or 12 banks. We are talking about five banks.
And we are talking about the five banks where the minority
requested information and these banks did not provide us, Mr.
Chairman, with one syllable of information.
And the relevance is, Mr. Chairman, we have before us
Professor Elizabeth Warren. And her bureau, the bureau that she
is putting together and is working so hard on, part of their
task is to look at mortgage issues. And you said a little bit
earlier that, with regard to Financial Services, they are doing
the same thing. They have basically been tasked with looking at
things prospectively, Mr. Chairman. We are looking at them from
a historical standpoint.
And so, that is what it is all about.
Chairman Issa. And I appreciate the gentleman's comments.
Additionally, the Parliamentarian informed me that an
appeal of the ruling of the chair, although in order, is not
immediately votable under the rules. So we will continue this
hearing, and it is my intention before the end of the hearing
to hold a vote on your appeal of the ruling of the chair.
And, with that----
Mr. Cummings. Parliamentary inquiry? Parliamentary inquiry,
Mr. Chair.
Chairman Issa. I recognize the ranking member for----
Mr. Cummings. Thank you very much.
Just one quick question: At what time--based upon your
understanding of the parliamentary rules, is that where we have
an opportunity to debate our motion? Do you follow me? In order
words, you are talking about----
Chairman Issa. An appeal is not debatable.
Mr. Cummings. Okay. And so, basically, we will not have an
opportunity--it is my understanding----
Mr. Tierney. Point of order, Mr. Chairman.
That certainly is debatable. An appeal of the ruling of the
chair is debatable. And we get to discuss the germaneness of
that motion that was made by the ranking member. And I am happy
to do it now, if you like, or if you want to set it aside for
later, we could do it later. But it is debatable.
Chairman Issa. I have set it aside for later. The
parliamentary office of the House is available to all Members.
We will have plenty of time----
Mr. Tierney. We consulted them fully.
Chairman Issa. We will have plenty of time for you to check
on what they just told me.
And, with that----
Mr. Cummings. Mr. Chairman, just one quick question.
Chairman Issa. Yes, sir.
Mr. Cummings. Mr. Chairman, Rule V requires that if a vote
is postponed, as you are doing, you shall take reasonable steps
to notify Members as to when that vote will be held. Pursuant
to this rule, I ask that you provide all Members with at least
half-an-hour notice before holding a vote on the pending
motion.
Chairman Issa. It will not happen before 10:40.
Mr. Cummings. Very well.
Chairman Issa. At this point, Professor Warren, I
appreciate your being here.
Pursuant to committee rules, all witnesses will be sworn
before testifying. Please rise and raise your right hands.
Thank you.
[Witnesses sworn.]
Mr. Cummngs. Please have the record reflect that the
witness answered in the affirmative.
Professor Warren, we have a number of items which are
obviously pending. I want to and will allow you to go through
your full opening statement before we deal with this that is
unrelated to today.
So, the ordinary rule of the committee is 5 minutes. Your
opening statement is in the record in its totality. And what we
will do is not look at the clock very carefully. Obviously, if
you are summarizing or have additional items, we want to hear
them. Today is about hearing what you have to say, your vision
for this bureau.
And, with that, the gentlelady is recognized.

STATEMENT OF ELIZABETH WARREN, ASSISTANT TO THE PRESIDENT AND
SPECIAL ADVISOR TO THE SECRETARY OF THE TREASURY, CONSUMER
FINANCIAL PROTECTION BUREAU

Ms. Warren. Thank you, Chairman Issa, Ranking Member
Cummings, and members of the committee, for inviting me to
testify about the work of the Consumer Financial Protection
Bureau. We appreciate the committee's important oversight role
and welcome the opportunity to respond to your interest in how
the Bureau is being organized and operating.
Let me begin by assuring the committee that at the CFPB we
are working nonstop to build an effective organization, with
the goal of making consumer financial markets work better for
consumers and work better for financial services providers. We
want to make prices clear, and we want to make risks clear. And
we want consumers to be able to compare two or three credit
cards or two or three mortgages head-to-head.
We are opposed to complicated forms and fine print. We
believe they do not help consumers, and they do not work for
responsible lenders, who are happy to have their products
compared head-to-head in a competitive market.
Attend of the day, we think every consumer should have the
basic information they need to answer two basic questions: Can
I afford this? And is this the best deal I can get? That is how
markets are supposed to work, and that is where this new agency
is headed.
We have all seen the consequences of a regulatory system in
which no single regulator has the authority and the
comprehensive tools necessary to ensure that consumer financial
markets work for American families. For years, we have seen the
growth of fine print that hides important and complex terms,
fine print that makes it almost impossible for consumers to
know what they are really getting into before they sign on the
dotted line.
We have also witnessed an explosion of high-risk credit
consumer lending among largely unregulated companies, such as
payday and car title lenders. And we have seen the economy
driven to the brink of collapse by sub-prime lenders peddling
high-risk mortgages to people who couldn't possibly repay them.
As a country, we are all paying a high price for a broken
consumer credit system.
The CFPB will increase accountability in government. Under
the old system, seven different Federal agencies had bits and
pieces of consumer financial protection, but no one had the
authority and the comprehensive tools necessary to monitor
whether prices and risks were clear and to ensure that consumer
financial markets work for American families.
In the wake of the worst financial disaster since the Great
Depression, the Dodd-Frank Act reformed this flawed regulatory
structure by placing consumer financial protection
responsibility squarely on the CFPB so it can be directly
accountable, both to Congress and to the American people, for
getting the job done.
In my written testimony, I describe in detail our
achievements to date in standing up the new Consumer Financial
Bureau. We have made significant progress in our efforts to
combine two complicated mortgage disclosure documents into a
single short form. We are laying the groundwork to supervise
nonbank lenders, which will give better protection for all
families and help level the playing field between banks and
other kinds of lenders.
We are setting up of our Office of Servicemember Affairs,
under the very strong leadership of Holly Petraeus. We have put
the basic building blocks in place for a functioning agency,
hiring approximately 400 employees from diverse backgrounds. We
have people who are coming to us from financial services,
consumer advocacy, community banking, government service,
private legal practice, and regulatory compliance.
And we have kept stakeholders informed every step along the
way. I have talked directly with community bankers in all 50
States. I have spoken with literally dozens and dozens of
credit unions and credit union officials. I have also spoken
with big bank executives, with trade associations, with
government watchdog groups, and with consumer advocates across
the country.
I am pleased to report that our various initiatives on
improving mortgage forms, supervising nonbank credit
businesses, and setting up a strong military service office
have received widespread support from both individuals and
groups across this country.
In my written testimony, I also describe in detail the
steps Congress has taken to provide meaningful oversight over
the CFPB and to make sure that it remains accountable both to
Congress and to the American people. I appreciate the
opportunity to discuss that oversight today.
So, with that, Chairman Issa, Ranking Member Cummings,
members of the committee, thank you again for inviting me to
testify about the Consumer Financial Protection Bureau. As we
prepare this agency to begin its various responsibilities, we
appreciate the important oversight role of the committee, and
we thank you for your interest.
[The prepared statement of Ms. Warren follows:]

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Chairman Issa. I thank the gentlelady.
With that, I will recognize myself for 5 minutes for a
first round of questioning.
As you know, I am not on Financial Services and never have
been, so I am going to try and just do some business of the
committee that I am particularly interested in.
Although both you and I use the term, you know, ``cop on
the beat,'' I received from Kim Wallace in your Legislative
Affairs Department, I received a rather interesting response to
our document request, which you had--or, actually, 1 second--
okay. And we are going to leave you with a copy of it. We are a
little--I think he works sort of for you through Treasury.
Ms. Warren. No, sir. I am sorry. He doesn't work for me.
Chairman Issa. Okay.
Ms. Warren. He works for the Secretary of the Treasury----
Chairman Issa. Okay, then----
Ms. Warren [continuing]. And is part of the Treasury. We
have a----
Chairman Issa. Okay. Well, the documents, though, that we
requested we requested from you.
And what we will do is we will give you a copy of this to
take back, because what--we don't mind that we need to work
through document requests. We have gotten about 300 pages from
what we asked for. The gentleman said that it was voluminous,
but we actually only received about 300 pages, most of it
public. But Justice said that some of the document we
requested--Department of Justice has concerns about responsive
records that may implicate the Department's equities. The
Department has advised us that disclosing some of these records
would adversely impact ongoing law enforcement efforts.
Now, just for you, Professor Warren, you are not in law
enforcement, you are not involved--you wouldn't be involved in
things which are criminal investigations at this time by your
agency, would you?
Ms. Warren. No, Congressman, Mr. Chairman, I am sorry, but
I am afraid that there may just be a little bit of confusion
here, and I want to make sure we don't get down the wrong path
here.
I believe there are requests for the Department of
Treasury. It is not to us----
Chairman Issa. Okay. Well, the problem is, you are not
stood up yet, so we put to it the agency that is custodian of
your records.
Let me go through a couple more. And, again, we are going
to have you take these with you, because, come July, the 21st--
--
Ms. Warren. It is a week from today?
Chairman Issa. A week from today, you are going to inherit
these things. During this intervening period, FOIA requests
have come in from Thomson West and from Judicial Watch. And
they have been, apparently, pretty inadequate, so inadequate
that Judicial Watch is appealing the CFPB's search for
production of records, stating that it was an abuse of
disclosure.
The problem is, they received, Professor, they received
these documents--actually, that is not--yeah, that is their
letter. And, Professor Warren, they received documents that
looked like this. And when you take over and have a FOIA
department, I guess, under your control, what I would like to
let you know is that, when someone redacts something so that
you don't know what was redacted, you don't even know what page
it is from, from what request, that is considered excess under
FOIA.
You have to find a way to make sure that, when you deliver
a paper with nothing on it, that you are able to tell those who
asked what that is responsive to. And, literally, in the case
of Judicial Watch, what they received were countless--they
received not as many pages as they should have, but they
received countless pages like this.
In the case of Judicial Watch, the State AGs have given
them the information that Justice, on your behalf, wouldn't
give them. So they have two pieces of paper. They have the one
that is responsive and they can see why they have a right to
it, and they have a black page.
So, a week from today, you are going to inherit an agency
where you are going to have a claim by a number of, you know,
transparency groups who are saying, ``Hey, we have the document
unredacted. You redacted it over at Treasury, so much so that
you violated the law.'' That is going to be one of the first
things on your table. And, like I say, I am going to give them
to you today.
My question to you is, will you please address them
immediately and report back to us on how you have resolved the
inconsistencies between what State AGs under their FOIA laws
thought they had to give and what Justice on your behalf didn't
give?
Ms. Warren. I----
Chairman Issa. Please.
Ms. Warren. Yes, Mr. Chairman, I have never seen this. But
I do want to say, Mr. Chairman, we will do our best here, but I
am not sure I can explain or would be in a position to speak
for the Justice Department.
Chairman Issa. Actually, what I am asking you to do is, you
are going to inherit those requests and those appeals.
Ms. Warren. Yes, sir.
Chairman Issa. You can resolve those appeals by having your
own FOIA people go back through the document request and fully
comply, or you will inherit the appeal. I am sure Justice is
not going to continue defending on your behalf their bad
decisions.
So what I would like to know is, will you look at them
immediately? Because these FOIA requests, I think, are going to
speak pretty loudly to whether or not the transparency that you
speak of, that we speak of, is actually occurring. And
sometimes the best example of transparency is, do you give all
you can give when FOIA requests come in asking for it, or do
you hide behind every possible redaction?
And FOIA officials have a considerable amount between what
the law absolutely requires they put out--which, in this case,
Judicial Watch, having unredacted forms, is saying Treasury
violated the law--and what is full and complete and transparent
and you could give out by saying, ``We are going to give all we
can.'' Your agency, not being a law enforcement agency, not
dealing with current criminal activities as a general rule,
hopefully will be able to give more, not less.
Please.
Ms. Warren. My only--I am afraid I am just a little lost in
the conversation because I am not sure what the FOIA request
was for and I had not seen----
Chairman Issa. For documents related to your activities
during the lead-up to the formation.
Ms. Warren. But I am not sure which documents you would be
talking about or what the subject matter is or whether it is
subject matter in which the Justice Department has indicated it
has some interest.
We have many activities, and I will say, sir, we have had a
lot of FOIA requests, and I believe we have answered FOIA
requests. We have had a--we have hired people who understand
FOIA. And it is my understanding we have been putting out a lot
of documents on FOIA, most of which the Justice Department has
no interest in one way or another because they do not involve
an ongoing law enforcement matter. And so----
Chairman Issa. Well, thank you. My----
Ms. Warren. I am sorry.
Chairman Issa. Please.
Ms. Warren. No, no. I am sorry.
Chairman Issa. I just want to be respectful of the time.
The ranking member is----
Mr. Cummings. Your name is not Geithner, is it?
Ms. Warren. No, sir.
Mr. Cummings. Well, the request that he is talking about,
the chairman is talking about, it is dated June 20, 2011, and
it is addressed to Timothy Geithner.
And I don't want the press to get confused and to get the--
there is an implication that you were trying to hold back
documents. You didn't try to hold back anything from this
committee, did you?
Ms. Warren. No, sir.
Mr. Cummings. Very well.
Professor Warren, you recently came to Baltimore for a town
hall meeting, where many of my constituents were able to learn
about the Bureau and share with you their issues. And we heard
from a veteran who was illegally foreclosed on and a retired
steelworker who was tricked by a phony debt-consolidation
company. These are real people who work hard, play by the
rules, and expect others to do the same. And, by the way, they
are the constituents of Chairman Issa and every single member
of this committee. They are the same kind of people that I
guess you have seen all over the country.
What struck me most about the town hall meeting, however,
was the overwhelming excitement. And I don't know if you know
it, but they literally had to turn people away. One local--
several of our local papers said that you were treated like a
rock star. I don't know about that, but they said it.
How often do you see our constituents, and how have you
been moving around to gather information? Can you tell us about
that very briefly? Because I have a number of questions I want
to ask you.
Ms. Warren. I can, Congressman Cummings. And I appreciate
just even the brief opportunity to do this.
One of the most exciting parts about setting up the new
Consumer Financial Bureau has been to be able to spend time
talking to Americans around the country. And these are
Americans of all political persuasions, Americans of all ages,
Americans of all races, who say, ``This is a real chance to see
government work for me. This is chance to have somebody on my
side. This is a chance to have a voice in a world in which it
is all run by big companies who want to drown me in fine print
and tricks and traps and surprises that always keep me down.''
I think we have a real chance with this agency, and it is a
chance not only to help markets work better but a chance really
to restore hope for many Americans who are starting over.
Mr. Cummings. Well, what I heard from folks is that they
said basically what you just said, they are just glad that they
have somebody looking out for them. They said, the banks are
doing okay; they are making record profits. But they want to do
okay. And, sadly, so many of them are drowning.
Now, let me ask you about the mortgage abuse issue. On
April 13, 2011, the Office of the Comptroller of the Currency,
the Federal Reserve, the Office of Thrift Supervision, and the
Federal Deposit Insurance Corporation issued a report finding
widespread problems at 14 mortgage servicing companies.
Let me read the major finding, ``The weaknesses at each
servicer, individually or collectively, resulted in unsafe and
unsound practices and violations and violations of Federal and
State law and requirements. The results elevated the agencies'
concern that widespread risk may be presented to consumers,
communities, various market participants, and the overall
mortgage market. The servicers included in this review
represent more than two-thirds of the servicing market. Thus,
the agencies consider problems cited within this report to have
widespread consequences for the national housing market and
borrowers.''
Professor Warren, these are massive and systemic
weaknesses. When the Bureau is up and running, what role will
it play in addressing them?
Ms. Warren. Well, I think the best way to understand it is
that we will be on the front line. And the question is, what
kind of mortgages get fed in to the system on the very front
end? Is it possible to use mortgages to surprise people, to
trick people, to drown them in terms that no one understands so
that consumers are neither able to ask the question, ``Can I
afford this, and is this the best deal I can get?''
Our job is to be there on the front end, and we are taking
enormous strides in that direction right now to make sure that,
in the first instance, mortgages are clear, people can tell
what they can afford, they can shop in a competitive
marketplace.
It is also our job to be there throughout the process,
including at the end, in mortgage servicing, if there are
problems, all the way through default and potentially
foreclosure, to make sure that the large financial institutions
that handle these transactions are complying with the law. That
will be our job, sir.
Mr. Cummings. Now, with respect to service members, the
report found cases in which foreclosures should not have been
proceeded, including against borrowers who were covered by the
Servicemembers Civil Relief Act. However, this review was based
on only a sampling of a relatively small number of files. To
address these widespread abuses, the agency has initiated
enforcement action against all 14 banks. They directed a
comprehensive review of all files of affected owners to
identify borrowers that have been financially harmed and
provide remediation.
Professor Warren, when will we know the full extent of this
problem, this year or next year? Do you know?
Ms. Warren. Congressman, I do not. I rely on Sheila Bair
and her most recent testimony, who pointed out, even with this,
we really do not yet know the full extent of the problem.
Mr. Cummings. And it is pretty bad, huh?
Ms. Warren. Yes, sir.
Mr. Cummings. Thank you very much.
Mr. McHenry [presiding]. The gentleman's time has expired.
I now recognize myself for 5 minutes.
Investor's Business Daily reported on July 8th that the
Justice Department has an investigation ongoing about biased
banks, about lending in minority communities. And I was
wondering, you know, you have been an advisor to Justice
before, under your testimony, regarding the mortgage issue, the
mortgage servicer issue. So I wanted to know if you are serving
as an advisor for this investigation.
Ms. Warren. The Secretary of the Treasury asked us to get
involved in the mortgage servicing issue----
Mr. McHenry. I am asking--you have already testified about
that. But I was wondering about this biased bank investigation
that has been reported in the New York Times and Investor's
Business Daily.
Ms. Warren. He has not asked us to be involved in that, I
don't believe.
Mr. McHenry. Okay. Thank you.
Now, in terms of--in my opinion, financial terms need to be
accurately and correctly disclosed to individuals, and
individuals can make their decisions based on whether or not
they would like to purchase the product. For instance, the one-
page mortgage disclosure issue you mentioned in your testimony
that you have mentioned before, that I mentioned in my opening
statement, I think that is positive.
Ms. Warren. Good.
Mr. McHenry. I think it gives individuals the terms that
they need. And it is very similar to legislation that I put
forward a couple years ago.
So, disclosure, I think, is an important piece in all of
this.
Ms. Warren. Uh-huh.
Mr. McHenry. Do you agree?
Ms. Warren. Yes, sir, I do.
Mr. McHenry. Okay. Now, in terms of what you see for the
CFPB, do you think your actions mainly pertain to enhancing
disclosures? Do you think that is going to be the core work of
the CFPB?
Ms. Warren. Well, I think the best way to understand it is
that there are multiple tools available in order to try to
promote a functioning market. And there is no doubt that no
market functions if people don't have meaningful and adequate
disclosure. But I never want to back away from the part that a
significant part of what we will do will be supervision and
enforcement. More than half of our resources will go to
supervision and enforcement over financial institutions to make
sure that there is a cop on the beat making sure everyone is
following the rules. And that includes both banks and nonbanks.
And if you will forgive me, I would also add to that, just
because I think of this in terms of the central areas where we
work, we also will have a significant responsibility on
consumer financial education. We are required by Dodd-Frank to
do that, and so, sir, will be doing that, as well.
Mr. McHenry. Okay. Now, do you think--in terms of financial
products now, do you see a financial product that is so complex
that disclosure wouldn't be a remedy?
Ms. Warren. It is a good and interesting question,
Congressman McHenry. I recall sitting in the House Financial
Services during long testimony and the question came up about
banning products. And I remember that Ed Yingling, the then-
president of the American Bankers Association, said, ``Yes,
there are certain products that should be banned.''
I am less certain if that is true. I am a big believer in
disclosure, meaningful disclosure. And I would at least like to
start with the concept of, let's get out there and try some
real disclosure, put some real power in to the hands of
consumers, and see if we can't get these markets working. I
believe in markets.
Mr. McHenry. Do you see a financial product out there today
that needs to be eliminated?
Ms. Warren. I don't know of one, sir.
Mr. McHenry. Okay.
Ms. Warren. But if you had a particular suggestion you
would like me to take a look at or others to take a look at----
Mr. McHenry. Well, I don't----
Ms. Warren. And there may be others.
Mr. McHenry [continuing]. I don't have a half-billion-
dollar budget, so I would leave it to you and the 400 people
working for you.
Ms. Warren. Oh, we----
Mr. McHenry. That is why I thought you would have some
ideas on this.
Now, in terms of enforcement mechanisms with the CFPB,
beyond disclosure, do you think those enforcement mechanisms
would prescribe terms going forward--meaning, setting interest
rates and fee structures?
Ms. Warren. Sir, I think what enforcement mechanisms are
about are making sure that the laws are properly enforced. And
it is done, as I understand it, both through supervision and
through direct enforcement--that is, if it can't be worked out
otherwise, suing banks if they don't follow the law or suing
nonbank institutions if they don't follow the law.
Mr. McHenry. But wouldn't part of the remedy be that they
change their practices going forward in a way that you
described? For instance, in the mortgage disclosure issue that
we are talking about, the mortgage settlement issue, that is a
significant piece of this, prescribing terms going forward?
Ms. Warren. Yes, sir. That would be new regulations that
would replace the older, complicated, more complex regulations
that required higher regulatory costs for the financial
institutions and probably produced a whole lot less value for
consumers.
And what we are going to do now and I think what we have is
something that is both cheaper for mortgage originators, for
banks, particularly for community banks and credit unions, to
issue and produces more value for consumers. And it is a form,
and they will be required to follow the form, just like under
current law, only it would be an easier and, we think, more
effective form.
Mr. McHenry. Ms. Maloney is recognized for 5 minutes.
The minority presented the list, and I am reading the list.
If the gentlelady wants to----
Mr. Towns. Thank you for considering me, but I think it is
based on arrival.
Mrs. Maloney. Thank you very much.
And welcome, Professor Warren.
Ms. Warren. Thank you.
Mrs. Maloney. I would like to ask you that, after we went
through the great recession and almost had the great
depression, in which $18 trillion in personal wealth in this
country was lost, would you say there was an overwhelming
consensus that reforms were needed to prevent another crisis
and that the CFPB and, I would say, the credit card bill of
rights, which I authored, were and are important protections
for consumers?
Ms. Warren. Yes, ma'am, I would.
Mrs. Maloney. And do you think that the CFPB, as already
carefully constructed, urgently needed, and should be free to
protect consumers as intended and go into effect on July 21st?
Ms. Warren. Yes, ma'am, I do.
Mrs. Maloney. Well, what has concerned me deeply, not only
in this committee but in the Financial Services Committee on
which I serve, is the number of questions against you, because
people have asked you for advice. Now, I thought freedom of
speech was in our Constitution and a fundamental right of our
country.
You have been described as a leading consumer specialist,
advisor. Is it unusual for--well, you are an advisor to the
President now, and to Secretary Geithner. But is it unusual for
other members of government, Congress Members, AGs, States,
city council members, other professors, other leaders and
captains of industry or managers in industry, is it unusual for
them to call you and ask you for advice?
Ms. Warren. Congresswoman, I have been giving advice for a
very long time. I hope it has been valuable, but I have always
been willing to answer the phone and always been willing to
talk to people.
Mrs. Maloney. And you don't have a vote on anything right
now. You are just basically putting in place an agency that the
President has asked you to put this agency in place. So you
basically don't have any power to force anyone to do anything.
Ms. Warren. Yes, ma'am, that is right.
Mrs. Maloney. But you can answer the phone, and you can
give advice. Well, I would say that is a basic American
fundamental principle and one that should be protected for
every person, and especially professors and academics that are
leading specialists in areas.
If you talk about oversight, if you talk about
transparency, the last thing we want to do is say people can't
give advice. Would you say that is a fair statement?
Ms. Warren. Well, I like to think that it is good to get
advice. I should state, Congresswoman, I believe in advice, and
I believe in it in both directions. We have been the
beneficiaries at the Consumer Financial Protection Bureau of a
great deal of advice from many, many people outside government
and many people inside government. And I am glad we have been
able to do that.
Mrs. Maloney. Okay. I would like unanimous consent to place
in the record an article that was in the American Banker,
entitled, ``A Leaderless CFPB Is Not a Blessing for America's
Bankers.''
Mr. McHenry. Without objection.
Mrs. Maloney. And it talks about, banks will likely pay a
price for a leaderless CFPB. And it talks about what the CFPB
on July--what they can do on July 21st, but what they can't do
if they don't have a confirmed leader.
Now, what they can do is write and enforce the rules that
are already in place from the FTC and HUD and other banking
agencies. But what is interesting to me is what they cannot do,
which I believe would be very beneficial to placing American
banking on a level playing field. And they cannot define which
nonbanks should be supervised by the agency. They cannot
examine or enforce laws against the nonbanks. And we know it
was the unregulated nonbank activities, with the sub-prime
mortgages and with the credit default swaps, of higher
leveraged derivatives, that led us to this crisis.
So not allowing the leader to come in and do this,
according to the American Banker, would be harmful to the
financial institutions of our country, particularly the
regulated banks.
Could you elaborate on that, Professor Warren?
Ms. Warren. Well, Congresswoman, I will just say that I
think when the consumer agency has its director and has its
powers ready to go, fully operational, will be a very good day.
Mrs. Maloney. I would like to also comment on the ranking
member's first statement. I have 3 seconds to go. I have----
Mr. McHenry. The gentlelady's time has expired.
Mrs. Maloney [continuing]. Four seconds. Oh, my time has
expired? Oh, my goodness.
Mr. McHenry. All right. Thank you.
Mrs. Maloney. I just want to say, 160 service members were
foreclosed on unfairly, according to the Department of Justice.
And I feel that his subpoena is rightly in order and should--on
the merits, we should look at this information on the abuse to
the American military service men and -women.
Mr. McHenry. The gentlelady's time has expired.
Mr. Chaffetz is recognized for 5 minutes.
Mr. Chaffetz. Thank you, Mr. Chairman.
The House Appropriations Committee was quoted in their
report as saying, ``disappointed that an agency dedicated to
transparency and accountability was not more forthcoming about
how it plans to spend the taxpayer money.'' It also went on in
there to say, ``In the absence of this fine print, the
committee cannot discern what the Consumer Financial Protection
Board plans to do, how it will do it, or how much it will
cost.''
Given that your agency is about to open up here in about a
week, how do the taxpayers, how do we see what you are going to
do and how you are going to do it?
Ms. Warren. Well, Congressman, we started 5 months before
the date that we are supposed to go live building a Web site,
trying to put as much information out there as possible----
Mr. Chaffetz. Okay. Now, on the Web site----
Ms. Warren [continuing]. About our operations----
Mr. Chaffetz. My time is so limited. My apologies. What I
want to get is very specific about the budget that you put
forward.
In this document, which is just seven pages, it has just 10
line items. The two biggest line items are full-time permanent
positions, followed by personnel benefits. That accounts for
about $225 million in expenses. The third item is contractual
services, which has a very specific number of $48,907,000.
Where is the detail about what you are going to do and how
you are going to do it? So how do we find the breakdown of that
number and how you are going to organize this agency? Because
you have obviously gotten some specificity in the numbers. We
are looking for the documents, the transparency in how you are
actually going to do that.
Ms. Warren. Congressman, let me try this at two levels, and
you tell me if this is helpful. And if it is not, I will try--
--
Mr. Chaffetz. Please.
Ms. Warren [continuing]. A different way.
The first level is to describe in a big sense where we will
be spending money in the Consumer Financial Protection Bureau.
And if you just think of it like a pie, half----
Mr. Chaffetz. No, I am worried about the fine print, the
details. The Appropriations Committee, this Oversight
Committee, we don't have the details of how you are actually
going to organize and put this forward.
Let me read, for instance--go ahead. Go ahead.
Ms. Warren. Also, Congressman, the--and I am afraid I am
blocking on the name, but every contract issued by the Consumer
Financial Protection Bureau is done, as you would know, through
the ordinary competitive process, when appropriate through
procurement, but is posted----
Mr. Chaffetz. But in advance of those contracts. For
instance, this is directly from the House Appropriations
Committee: ``Unlike other agencies, the Consumer Financial
Protection Board does not describe or explain the relationship
between its policy objectives and the budgetary resources,
performance measures or goals, significant proposals that
affect obligations in the 5- to 10-year period, and their
relationship to the current year and budget year, or the
budgetary effect of workload, strategic planning, capital
planning, or investment in information technology.''
How do we get the details of all of this information? You
obviously have a top-line number and that was based on
something. But you seem to be hiding the details of how you
came up with those numbers.
Ms. Warren. Congressman, no one is hiding anything. We
publish all contracts in--it is not called a Federal Register.
There is a special place these are published. But I just want
to say----
Mr. Chaffetz. I am not talking about the contract. You have
only--on your Web site, for a consumer--I am worried about the
person who is out, you know, in Albuquerque or in Provo, Utah.
How do they find out the makeup of all these numbers and the
details? As the Appropriations Committee suggested they can't
see that information, I doubt the public can see it either.
Ms. Warren. Then they may want to go to
www.usaspending.gov. It will list the type of contract, the
awardee, and the amount of the contract. They may also want
to----
Mr. Chaffetz. What about all these other items? For
instance--not just the contracts--performance measures and
goals, budgetary resources, what are these people going to be--
where do we find all that information? Because it is not on the
Web site, compared to other agencies.
Ms. Warren. Congressman, we are in the process, for
example, of developing our performance metrics. And we are not
yet standing up as an agency, but as soon as we are stood up,
we are putting as much of this as possible----
Mr. Chaffetz. So are you saying by next week----
Ms. Warren [continuing]. On the Web site.
Mr. Chaffetz [continuing]. You are going to have this?
Ms. Warren. Let me say it this way, Congressman.
Mr. Chaffetz. You just said you would have it when you
stand up, and that is next week. So are you telling me that
this will be available next week?
Ms. Warren. Congressman, I don't want to overpromise,
because I am not sure how many things you have read. I am not
familiar with the document you are reading from.
Mr. Chaffetz. You are not familiar with the Appropriations
report?
Ms. Warren. Of course I try to stay up with the
Appropriations work. I am just trying--I am not sure what
particular paragraphs and lines----
Mr. Chaffetz. He is going to hand that to you right here.
It is the budget justification, which is dramatically different
than any other agency moving forward.
Ms. Warren. I am sorry, Congressman, is this----
Mr. Chaffetz. Your document.
Ms. Warren. This is our document?
Mr. Chaffetz. Yes.
Ms. Warren. I think you were reading from something else.
Mr. Chaffetz. Based on your giving that document to the
Appropriations Committee, the Appropriations Committee said,
``Unlike other agencies''--and it listed out all the other
things that they normally see, that we normally see as members
of the Oversight Committee. And all of that is absent.
Ms. Warren. Congressman, we----
Mrs. Maloney. Point of information? Mr. Chairman, could we
get a copy of this document to also look at it so we could
understand the questioning?
Mr. McHenry. Sure, sure.
Mrs. Maloney. Yeah.
Mr. McHenry. We will do that.
Ms. Warren. And could I also ask, is there a request
outstanding from the Appropriations Committee----
Mr. Chaffetz. That is my understanding, yes.
Ms. Warren [continuing]. For more information?
Mr. Chaffetz. Yes. And I think this committee is also
asking for that same sort of transparency.
Ms. Warren. Congressman, if that is the case, we would be
glad to come back, we would be glad to brief you, we would be
glad to work with you in order to find something that is
adequately transparent, both to Congress and to the American
people.
Mr. Chaffetz. I have to yield back.
Mr. McHenry. The gentleman's time----
Mr. Chaffetz. My time has expired. But I would hope that
that information would be on Web site for the public, as well.
Thank you.
Ms. Warren. Thank you, Congressman.
Mr. McHenry. Ms. Norton for 5 minutes.
Mr. Tierney for 5 minutes.
Mr. Tierney. Thanks, Mr. Chairman.
Mr. Chairman, this is stunning, I really have to say, this
whole display of being concerned about a consumer group that
somebody might actually be standing up to protect the consumer
and the taxpayer here, as opposed to flacking for the banks.
This is a not-too-transparent attempt here to sabotage the----
Mr. Chaffetz. Will the gentleman yield? Will the gentleman
yield for 15 seconds?
Mr. Tierney. No, I won't, sir. I won't. I only have 5
minutes, all right? And I probably won't get to go over, as you
did.
But the fact of the matter is, this is absolutely
incredible. We have no concern here about responding to
subpoenas to the banks asking them to show us documents related
to their foreclosing on service men and women acting in
Afghanistan or Iraq on behalf of the American people. But we
are----
Mr. Chaffetz. Will the gentleman yield?
Mr. Tierney [continuing]. Going around and around and
around here about----
Mr. Chaffetz. With the gentleman yield?
Mr. Tierney [continuing]. An agency that is in the process
of standing up.
Professor Warren, you know, I think the abysmal record of
these mortgage servicers is pretty well-chronicled. I have over
100 cases at any given time in my office alone. You know, they
lose documents, they are unresponsive, they give conflicting
guidance, they refuse to process payments, they have false
negative credit reporting. All of that is going on. And it is
terrible for the people generally, but it is even more terrible
when they do it with respect to our service members who are
deployed overseas.
And so I want to ask you about a particular case, the case
of Captain Kenneth Gonzales in the U.S. Army.
Would you put that up, please?
I think you may be familiar with this case, and I want to
ask you about it.
He was deployed to Iraq as a lieutenant from December 2009
to December 2010. His bank, Chase, told Captain Gonzales' wife
to submit their mortgage payments by using money orders, so she
did it. But Chase then failed to process the payments. Then
they submitted inaccurate and negative reports to the credit
bureaus, which then affected and badly impacted Captain
Gonzales' security clearance while he was still deployed.
The military JAG officer tried to help him, but she
described the uphill battle that she had when she wrote an
email to the American Bar Association. I would like to quote a
few. She said, ``To be honest, I have not been able to do
anything for this client. I am just talking to clerks at the
customer service section who refuse to talk to me without a
letter of authorization, which I have sent in four separate
times to four separate fax numbers. I am given a different one
every time and told processing takes 48 to 72 hours. I have
left voice messages with two supervisors, and no one calls me
back. Basically, I just need to talk with a human being that
will listen to the facts of this case and who will understand
the need to make it right.''
Professor Warren, if this JAG officer can't get any
reaction, you know, from a mortgage servicer, how do we expect
that our members in the service who are overseas in Iraq and
Afghanistan are going to get some response?
Ms. Warren. I think you have put your finger on the
problem, Congressman. These systems are not designed to be
responsive.
Mr. Tierney. Well, you know, Chase had clear errors and
clear abusive practices. They then tried to charge Captain
Gonzales fees--fees--when they finally admitted they were wrong
on the whole process and tried to help him unwind all the
damage that had been done to him.
So how often are mortgage servicers initiating these types
of unlawful foreclosures and fee collections or whatever and
then charging them more fees at the back end, how often does
that go on?
Ms. Warren. Congressman, we do not know. There have not
been full investigations of this, and there is no public
information on this.
Mr. Tierney. Well, as I said at the outset, you know, this
is far from unique, the situation. I think everybody on both
sides of this dais have had these kinds of complaints coming in
from their constituents; some, no doubt, from people that are
in the service. And that is why it is critical that we get the
documents the ranking member has subpoenaed and asked this
committee to subpoena and that we go through and we thoroughly
investigate all these illegalities and these abuses.
No service member--no service member--should spend his or
her personal time while they are in Iraq or Afghanistan trying
to unwind customer service mistakes from a bank that just isn't
doing the job they should do, nor should their family be
evicted from their home being foreclosed upon.
Thank you. I yield back. Or I will yield to Ms. Maloney, if
she likes.
Mrs. Maloney. There have been a number of settlements--I
want to applaud the gentleman's work on this, but there were a
number of settlements with Countrywide, particularly with
service members, where they were fined, I believe, well over
$20 million for foreclosing and throwing the service members'
families out on the street while they were serving in Iraq.
I have read those documents, and I ask permission to put
them in the record to support the fine work of Mr. Tierney and
also to say that we can talk about substance, process,
appropriations, but we are the investigative committee. And I
believe that we should follow, with a subpoena or with
voluntary actions, the leadership the ranking member has put
forward to look at the bottom of this.
Recently, Holly Petraeus, who is heading up a very special
division for the military, testified in the Senate and also--on
the very extreme problems.
I yield back. Thank you.
Mr. McHenry. Ms. Buerkle is recognized for 5 minutes.
Ms. Buerkle. Thank you, Mr. Chair.
And thank you, Ms. Warren, being here today.
We had the opportunity to question you in a subcommittee
hearing, where we called attention to the salaries of many that
will be working in your new department, and the concern that
those salaries were anywhere from 10 to 40 percent higher than
Federal salaries, and that the salaries you set for your
employees are not subject to and not consistent with the
Federal salaries and that you have the autonomy to set your own
salaries, and the concern that, in this economy, that may be a
little more liberty than we would like with the American
taxpayers' dollars.
But I just want to talk about a couple of issues here.
First of all, we heard about the service men and women and the
particular issue with Chase Bank. That issue was already
declared illegal.
So I am trying to understand--we all agree in this body--
and this is a bipartisan issue--that our men and women should
be protected and no home should be foreclosed on when they are
overseas serving this Nation. But this action by Chase was
already deemed illegal. We heard that Countrywide has already
had a settlement.
How do we justify this $500 million department if that is
the gist of what we are taking about here?
Ms. Warren. Well, Congresswoman, I would put it this way:
We know about specific abuses that have come to light. They
were brought to light by the press, not by government
investigation. And we know of three specific mortgage servicers
who have publicly admitted to wrongdoing and engaged in a
voluntary settlement----
Ms. Buerkle. Excuse me. And, again, we have such a short
period of time.
Ms. Warren. I am sorry.
Ms. Buerkle. But, again, that wasn't your department--you
are not up and running yet----
Ms. Warren. No, ma'am.
Ms. Buerkle [continuing]. That shed light on those abuses
to the military.
Ms. Warren. That is right.
Ms. Buerkle. Okay.
Ms. Warren. But the question I thought you asked is how the
consumer agency may be helpful. We are there to be an ongoing
monitor. We have only talked with three mortgage servicers here
so far.
Let me put it this way: We set up our Office of
Servicemember Affairs back in January. It was one of the first
groups we organized. Shortly after that, press reports came out
about illegal foreclosures against service members. Just to
give you an idea of what we do, Holly Petraeus wrote a letter
immediately to 25 servicers asking them to review their
practices. And we have heard back from about half of those
servicers and engaged in some discussion----
Ms. Buerkle. Thank you. I don't wish to cut you off, but I
know in Veterans' Affairs we have handled this issue up front,
close, and so----
Ms. Warren. Yes, ma'am.
Ms. Buerkle. I do want to talk to you about a couple of
issues. Number one, this past week, the jobs numbers came out,
and they were horrific. As you know, only 18,000 jobs were
added in June.
My concern is what you are going to do will continue to
hurt job growth in this country. So I would like to know from
you specifically, do you intend to raise compliance costs or
raise the cost of credit for consumers?
Ms. Warren. Congresswoman, I should say we are trying to
make prices clear, risks clear, and we are trying to make it
easy for families to compare products. I don't think that that
is going to cost people jobs. I think it likely makes them a
little more secure.
In the case specifically of compliance costs, our first
initiative is the one that Congressman McHenry also talked
about. Congress and the regulatory agencies have been working
for 15 years to try----
Ms. Buerkle. Well, excuse me. Again, our time--I watch my
time clicking away.
Do you intend to raise compliance costs on companies, which
will further add to the unemployment and the difficulties that
our companies and small-businesses owners are facing in this
economy?
Ms. Warren. Congresswoman, I am sorry. I was----
Ms. Buerkle. That is a ``yes'' or a ``no.''
Ms. Warren. It is a ``no.'' We already have our first
example of what we are doing lowers compliance costs. That is
why it has been embraced by the American Bankers Association,
by the Independent Community Bankers Association, by the
Consumer Bankers Association, by the credit unions. It has been
embraced by bankers and mortgage originators across the country
because it will reduce their----
Ms. Buerkle. So that is a ``no.'' You don't intend to raise
compliance costs for companies----
Ms. Warren. No, ma'am. We are trying to lower costs for
them.
Ms. Buerkle. Never, ever?
Ms. Warren. Well, right now what we are trying to do--we
have lined up what we are trying to do, and we hope it is the
prototype for all of our work. We are working closely with
community banks; we are working closely with credit unions----
Ms. Buerkle. Thank you.
One last question. You talked in your testimony about--and
it concerns me--that you have this conception that the mortgage
and the credit consumer world is fraught with tricks and
traps--I think that was your word.
If that is the case and you are sitting here saying that
this world is fraught with all of these issues--and this goes
back to the chairman's question--what is it that you intend to
ban? What is it that you intend to change? If you are saying
this world is filled with tricks and traps, what is it that you
intend to change and to----
Ms. Warren. Congresswoman, I don't think banning is the
right way. This is what we were talking about. It is make the
prices clear, make the risks clear, mow down the fine print so
it is possible for consumers to compare one product to two or
three others.
Ms. Buerkle. But then why do you need the power and a $500
million budget? That is my concern.
Mr. McHenry. The gentlelady's time has expired.
Ms. Buerkle. That is my concern.
I yield back. Thank you, Mr. Chairman.
Mr. McHenry. The witness may answer.
Ms. Warren. I am sorry?
Mr. McHenry. The witness may answer the question.
Ms. Warren. Oh, I just didn't hear you. Thank you.
Congresswoman, we need a budget because these are very
large and powerful financial institutions who hire armies of
lawyers to design financial products that can't be read by
ordinary American families. We need some pushback. We are the
voice on behalf of the customer, the American family.
Mr. McHenry. Ms. Norton is recognized for 5 minutes.
Ms. Norton. Thank you, Mr. Chairman.
I do want to welcome Professor Warren, and to indicate that
I have asked staff to look, and they informed me that the
salaries are in line with all banking regulatory agencies.
I want to go back to this report and to the bicameral forum
and to some of what was said at that forum, because this
committee should be trying to find out whether what we found
from law enforcement amounts to a systematic problem that needs
further investigation.
Holly Petraeus, the head of the Office of Servicemember
Affairs, appeared at this bicameral forum. And she was asked
whether the cases of the kind she had heard were isolated or
more typical, and let me read you what she said. She recalled a
National Guard wife saying to me that every time her husband
was activated--and he had been activated three times--she had
to go through an extended fight with her bank to get the
interest rate reduction. And it was the same sort of thing:
send the paperwork; oh, we don't have the record on that; send
it again; send it again; send it again.
Have you heard similar accounts?
Ms. Warren. Yes, ma'am, I have.
Ms. Norton. I want to ask you about what you think the CFPB
could do, because we know it is not charged with enforcing the
service act. So I think it is fair to ask, what would be the
role of the CFPB in uncovering and doing something about these
kinds of abuses and ensuring that what our service members are
encountering does not happen again and again with bank after
bank?
Ms. Warren. Thank you. If I can, I will give a two-part
answer.
The first part is that, last week, the Consumer Financial
Protection Bureau, led by Holly Petraeus, signed an
understanding with the Judge Advocates General of all of the
services, and it was for how we can cooperate and, between the
two of us, use our resources more effectively to protect
service members. We had already been well into the process of
working with the Department of Defense, and this was just a
more formal acknowledgment of that process and, I think,
building a strong relationship going forward.
But I also want to say a second thing about it within the
consumer agency, and that is what it means to have a strong
leader like Holly Petraeus, what it means to make an Office of
Servicemember Affairs front and central in this organization.
And that is, we have started reaching out. Holly Petraeus and I
went together to a joint base in San Antonio. We have been to
other places; she has been on her own. She has opened up a Web
site. We have hired more people----
Ms. Norton. Well, Professor Warren, this is just the kind
of thing we had hoped you would be doing.
I would like to ask you, though, about the kinds of
complaints that you expect to receive first when you come on
line on July 21st. Have you anticipated what kind of complaints
are likely to come to the forefront? Do you expect these
servicemember complaints to be among them?
Ms. Warren. We have reason to believe, because we have
already been reaching out to service members and service-member
families and, actually, are already in active communication
with many families and with many of those who serve service-
member families--we anticipate that this will be a significant
part, over time, of our workload at the Consumer Financial
Protection Bureau.
Ms. Norton. Thank you, Mr. Chairman.
Ms. Warren. Yes, ma'am.
Mr. Tierney. Mr. Chairman, a point of order? Is there any
recent update on the disposition of the subpoena motion that
was going to be addressed at 10:40?
Mr. McHenry. Well, the chair announced that it would not
happen before 10:40. There is no update.
The gentleman----
Mr. Tierney. So midnight might be a good time, is that the
idea? Or could we have a little closer approximation? Some
Members have other business to attend to, as well. And in
fairness to the Members on both sides, it would be nice to have
some idea of roughly when you think that might occur.
Mr. McHenry. The chair will give a 30-minute notice, which
was the ranking member's request. And the chair has--will now
announce that you will have a 30-minute heads-up before the
vote happens.
With that, Dr. DesJarlais is recognized for 5 minutes.
Mr. DesJarlais. Thank you, Mr. Chairman.
And, Professor Warren, thank you for being here today.
I have a pretty simple question. I represent Tennessee and
also sit on the Agriculture Committee. And I was just curious
to know your take on an issue central to ensuring credit for
Tennesseeans and farmers in general.
Title X in the Dodd-Frank Act, of the act which creates
your agency, the CFPB, states that the Farm Credit
Administration will retain all of its enforcement authorities
over persons regulated by the Farm Credit Administration and
that the CFPB will have no authority to exercise any
enforcement powers under the Dodd-Frank Act with respect to
persons regulated by the FCA.
So is it your interpretation that the CFPB has any
enforcement authority over institutions regulated by the FCA?
Ms. Warren. Dr. DesJarlais, this is evidently a question
that is what lawyers are all about. The language you have read,
as I have been briefed on this, I think you used the word
``persons,'' and then there is a question about whether that
covers institutions, covered entities, which are different from
persons in this. And so, as I understand it, the lawyers are
out just trying to work this through to make sure there aren't
any gaps and there aren't any overlaps. That is my
understanding at this point, sir.
Mr. DesJarlais. Okay. I am not sure that I fully understood
your answer. So is it your interpretation that the CFPB has any
enforcement authority over institutions regulated by the FCA?
Ms. Warren. So, Congressman, I am just going to have to
back up. The statutory language you used referred to persons,
and your question referred to institutions. And what the
lawyers are trying to figure out, from multiple authorities
here, how is it that we get appropriate coverage, which is what
we all want, and to carry out Congress' will.
So all I am saying, sir, is I think there is a little bit
of a statutory interpretation question, and we are just trying
to work through it in a reasonable way. We just want to make
sure we carry out the intent of Congress.
Mr. DesJarlais. Okay. So what do I tell my farmers?
Ms. Warren. Well, you tell your farmers that, because of
the language in this particular part of the statute, the
lawyers are working on it right now.
Mr. DesJarlais. Well, I don't know if that would be very
comforting to them.
Ms. Warren. I certainly understand that, sir.
Mr. DesJarlais. I do have a second question.
Ms. Warren. Sure.
Mr. DesJarlais. As you know, nearly half of small
businesses use personal credit cards when they are first
founded. Can you commit that none of CFPB's regulations will
remove financing possibilities for these businesses?
Ms. Warren. Oh, Congressman, you hit on a very important
question. As you rightly know, it is consumer credit that we do
at the Consumer Financial Protection Bureau. And, as you also
know because I have said it probably every chance I get, that
we are about trying to make prices clear and risks clear and
trying to mow down fine print so people can make real
comparisons.
I have actually had small-business groups reach out to me,
and small-business individuals, who would like to know that
they are going to have coverage and that they will have the
same kind of protection about clarity in pricing and clarity in
risks and not face fine print if they are using a credit card
to try to start a small business. And I think this is going to
be a real challenge, because we have a constrained authority at
the Consumer Financial Protection Bureau, sir.
Mr. DesJarlais. Okay. So it is going to be a struggle, you
are saying, to determine whether credit is being used for
personal use or business use?
Ms. Warren. Well, what I am saying is, the way Dodd-Frank
was established, it is clear that we can help beat down the
fine print in the case of consumer credit cards, but in the
case of business credit cards, our authority is limited.
Mr. DesJarlais. Okay. Would there be a situation where
there is a credit card that has a 20 percent interest rate and
you step in and say, ``No, you can't have that?''
Ms. Warren. No. Congressman, the statute is quite clear
that we are not in the business of establishing usury laws.
Congress spoke unambiguously. I know there are some parts of
the statute that ambiguous, but I think that part is pretty
unambiguous, sir, pretty clear.
Mr. DesJarlais. Okay. So small businesses can breathe
comfortably that they are going to have access to credit?
Ms. Warren. I want to say it this way: Small businesses are
struggling, I understand that. And access to credit is about a
whole lot of issues. But in terms of what we are doing here at
the Consumer Financial Protection Bureau, we are hoping we are
going to make things a little better for all those good people
out there who are trying to start businesses and that it will
be good for them if they know prices, if they know risk, if
there is not so much fine print in their contracts.
Mr. DesJarlais. Thank you, Professor Warren.
My time has expired. I yield back.
Ms. Warren. Thank you, sir.
Chairman Issa [presiding]. I thank the gentleman.
We now recognize the gentleman from Missouri, Mr. Clay, for
5 minutes.
Mr. Clay. Thank you, Mr. Chairman.
And thank you, Professor Warren, for being here.
And before I go into the questions, let me state that this
is one of the most incredible committee hearings that I have
ever attended in this committee, because the two sides are so
far apart.
I just can't help but give you two examples of abuses that
cry for an agency like this bureau. One is the area that I
represent in north St. Louis County, where homeowners, middle-
class, African-American homeowners, were steered into high-
cost, predatory loans. And if you look at a map of the
foreclosures in my community, it is evident that they were
steered and that these predators took advantage of them.
In the second example--and let me say, you know, to my
colleague, patriotism also means standing up for the men and
women who wear our uniform, who bravely--who bravely defend
this country. And if you don't think this is an abuse, then I
have a bridge to sell you.
You know, illegal foreclosures against U.S. service members
is a growing problem. Multiple mortgage servicing companies
have conceded that they violated the Servicemembers Civil
Relief Act. They illegally foreclosed on service members and
charged fees in excess of the maximum amounts allowed under the
law.
And we have only begun to understand the scope of these
problems. In April, four Federal agencies that regulate
mortgage servicers issued a report finding critical weaknesses.
They initiated enforcement actions against 14 banks, and they
directed a comprehensive review to identify borrowers who have
been financially harmed and to provide remediation.
And it is good that these agencies are on the job, but this
highlights just one of the many reasons why we need the
Consumer Financial Protection Bureau: to protect consumers from
unfair, deceptive, and abusive financial practices. And if
people here don't understand that, then I don't know what we
can do about that.
But it is good that the agencies work to enforce the law
after the fact. But consumers, and especially Active Duty
service members, shouldn't have to go through an illegal
foreclosure in the first place. Think about it: A service
member stationed overseas, fighting for their country, risking
their life, while back here their family is losing their home--
illegally. That is devastating, and no one should have to
endure that.
Professor Warren, I understand that you organized an Office
of Servicemember Affairs with CFPB. Can you please explain the
role of the CFPB in protecting the rights of service members
and their families?
Ms. Warren. Yes, sir.
When we set up the Consumer Financial Protection Bureau,
one of the first pieces that we tried to put in place and make
active was the Office of Servicemember Affairs. I first met
with Holly Petraeus--I believe it was October, although my
calendar is public, so it would be possible to find that. And
she had come to see me about what she thought were terrible
abuses that were going on with military families. And she said
to me, ``You now have this new consumer agency, and you can do
something about this.''
I must say, for a small woman, she is very forceful. And I
listened to her and took lots of notes. And she had lots of
very specific instances of what she was concerned about and
very specific recommendations for what we could do.
So about a week went by, and I invited her to come back.
And we talked a second time, and she had even more ideas. And
that is when I realized we had found our leader for the Office
of Servicemember Affairs. And I made her an offer, and she came
to work for us.
And that is really how I want to describe this. This office
started with someone who fully, on-the-ground understands what
is happening to military families. She, herself, comes from a
military family, from generations of military service people,
and she has seen it firsthand. She often describes that she has
even lived parts of this.
She was there from the beginning to build an Office of
Servicemember Affairs that said, ``We at this agency will be
responsible for identifying what is going wrong, for dealing
with service members' families who get caught in traps, and for
helping change, putting a cop on the beat, to make sure that
these who are dealing with military service members are
following the law.'' That is our job.
Mr. Clay. Thank you so much.
Chairman Issa. The chair now recognizes the gentleman from
South Carolina, Mr. Gowdy, for 5 minutes.
Mr. Gowdy. Thank you, Mr. Chairman.
``Free of legislative micromanaging, the Financial Product
Safety Commission could develop nuanced regulatory responses.
Some terms might banned altogether, while others might be
permitted only with clearer disclosure.''
So you don't support legislative micromanaging? What about
legislative macromanaging?
Ms. Warren. I am sorry, Congressman. I don't----
Mr. Gowdy. It is a quote from an article you wrote, ``free
of legislative micromanaging.'' So my question to you is, what
is legislative micromanaging? Because, to me, it is a euphemism
for ``oversight.''
Ms. Warren. I am sorry, Congressman. I may have written it,
but I am not sure what the context is. Was it an article?
Mr. Gowdy. The context is it is in the Democracy Journal--
--
Ms. Warren. All right.
Mr. Gowdy [continuing]. And it is the first public notion
that we have of an agency similar to the one that you are going
to head in a week. And you wrote an article about----
Ms. Warren. Yes?
Mr. Gowdy. And you said, ``Free of legislative
micromanaging, the Financial Product Safety Commission could
develop nuanced regulatory responses. Some terms might be
banned''--my question to you is, to some of us ``legislative
micromanaging'' is a euphemism for ``oversight.''
Ms. Warren. Actually, I think this goes to the point that
Congressman McHenry raised. And that was the question, you may
recall, we are trying to figure out how to combine the TILA and
RESPA forms--complicated, hard to read, high regulatory
compliance costs for the bank, or at least higher, very little
value for the consumers. For more than 15 years, the various
regulatory agencies have been negotiating to try to bring those
together. And, as Congressman McHenry said, there have been
multiple attempts from Congress trying to do it. The problem--
--
Mr. Gowdy. Ms. Warren, my question is actually more general
than that. My question is, what is the role for congressional
oversight? You don't like legislative micromanaging; you wrote
that.
Ms. Warren. No.
Mr. Gowdy. Some of us think that that is oversight. So do
you concede that Congress has the authority and should have the
authority to, for instance, hypothetically, set the budget for
your agency? Is that legislative micromanaging, or is that
oversight?
Ms. Warren. Congressman, I was trying to respond to your
question, and what I was trying to point out is that it was an
example of how difficult it is for Congress to get an
appropriate nuanced response to a specific problem. And, in
this case, it was combining two forms.
But what we have been able to do as a consumer agency,
because agencies operate differently, is that we have had banks
in, community banks, credit unions; we have been able to put
out multiple iterations of the forms. We have been able to
adjust, we have been able to consult with groups in ways that
is not possible in the legislative process.
Mr. Gowdy. Well----
Chairman Issa. Would the gentleman yield for a moment?
Mr. Gowdy. Yes.
Chairman Issa. I think Mr. Gowdy is very happy, you doing
what you are doing. I think what he is really asking is, does
Congress have a right to look over your shoulder? And did that
statement indicate that you think that Congress not--looking
over your shoulder, second-guessing your funding or, in fact,
your actions? That is, I think, the question, and I haven't
heard an answer.
Ms. Warren. I am sorry, Congressman. Let me give as
straightforward an answer as I could.
My direct testimony this morning is, of course we need to
be responsible to the Congress. The Congress should look over
our shoulder 24 hours a day, 7 days a week. And I was trying to
explain, once I understood where the passage came from, I was
just trying to explain what I thought that passage meant. But--
--
Mr. Gowdy. Well, may the record reflect that your article
did not go in to the detail that your answer this morning went
in to on that nuanced point. And so I will ask a less nuanced
question.
Ms. Warren. Yes, sir?
Mr. Gowdy. What about congressional involvement in your
budget? Is that micromanaging, or is that oversight?
Ms. Warren. Congressman, I think it is neither. I think
that is a big policy and political decision. As you know, sir,
not one banking regulator in the history of the United States
has ever had its funding through the political process.
Mr. Gowdy. So you agree that Congress should not be
responsible for setting the budget for your agency?
Ms. Warren. I believe that Congress should treat all of the
banking regulators alike and not say that the one that tries to
watch out for consumers is going to be put through the
political process and subject to lobbying by trillion-dollar
financial institutions.
Mr. Gowdy. You did mention oversight in your opening
statement. And the distinguished gentleman from Maryland, for
whom I have great regard, used the term ``illegal'' seven
times. It has been used an additional five times since Mr.
Cummings used it.
Criminal and civil engagement with companies is also
another form of oversight. If these practices are illegal, then
why isn't Eric Holder sitting here with you explaining what he
has done? Why do we need your agency if they are already
illegal?
Ms. Warren. Well, Congressman, I think there is a real
question about whether there has been adequate investigation in
to what financial----
Mr. Gowdy. What have you done with respect to Attorney
General Holder and the 90-plus U.S. attorneys, most of whom
have been appointed by this administration, what have you done
to cajole them to do their jobs? Because I have heard the word
``illegal,'' and that has a very specific meaning to me. If it
is illegal, what have you done to cajole the prosecutors to do
something about it?
Ms. Warren. Congressman, that is what we did when we got
involved in mortgage settlement and were so sharply criticized
for having advised the Department of Justice and our sister
agencies as they are trying to work through holding responsible
the parties that violated the law.
Mr. Gowdy. You were criticized for referring people for
criminal prosecution?
Ms. Warren. Congressman, we were criticized for trying to
help----
Mr. Gowdy. By whom?
Ms. Warren. Congressman----
Mr. Gowdy. Not me.
Ms. Warren. Congressman McHenry, Congressman----
Mr. Gowdy. Well, I am going to let Congressman McHenry
speak for himself. But as a former prosecutor, when I hear the
term ``illegal,'' which I have heard 12 times this morning, I
want to know why there aren't criminal prosecutions, why we
need an agency and the Department of Justice can't do it.
Chairman Issa. The gentleman's time has expired.
The gentleman from Tennessee, Mr. Cooper.
Mr. Cooper. Thank you, Mr. Chairman.
I don't have a question for the witness. I do have a
comment, primarily aimed at the junior members of the committee
on both sides of the aisle.
I think all of us realize that this Congress is viewed as
dysfunctional. And I would submit that this committee is also
viewed as dysfunctional. And this alleged hearing is one of the
reasons why. It too easily degenerates into a partisan food
fight, and it doesn't have to be this way. In fact, just a few
years ago in Congress, it was not this way.
So I would urge the junior members of the committee to
resist the partisan talking points that enable people on both
sides of the aisle to walk in here, read a question, make a
partisan hit, look like we are smart, and then leave. That is
not good governance regardless of which party is in charge.
I didn't vote for Dodd-Frank. It had many good features; it
had some less good features. But I do not want to be part of a
committee, at least at the subcommittee level, that treated Ms.
Warren with more rudeness and disrespect than I have ever seen
a committee witness treated. That is not the American way.
Now, some of us come here and we get so used to the food
fight that we want it to continue. And you will probably score
brownie points if you make your partisan hit. You might even
get on a better committee. Well, congratulations. You will not
have solved a problem.
I would suggest to the chairman and the ranking member that
oftentimes a seminar format is much more instructive, is much
more educational than the sort of partisan charade we seem to
continue to engage in with hearings like this.
I would urge Members to read Ms. Warren's--one of her
books. I have only read the ``The Two-Income Trap.'' It is
outstanding. Your constituents back home should read this book.
Your bankers back home should read this book. Then there would
be a lot less hatred and a lot less discord and a lot less
anger. Because this lady is trying to do the right thing.
And we all recognize that consumers oftentimes get the
short end of the stick. I have tried to refinance my home
mortgage several times to take advance of today's record-low
interest rates, and the paperwork is a blizzard. I went to a
very good law school, and it is almost impossible for lawyers
to understand this stuff.
Ms. Warren has pointed out that the existing regulatory
agencies have taken over a decade to try to simplify a couple
of the forms, and they have failed. What has this committee
done to simply some of the forms? Nothing. So isn't it time for
a new approach? Isn't it time for fresh thinking to give the
consumers a break?
And let us also acknowledge that Congress is sometimes
captured by vested interests. Sometimes that happens. And we
need to resist that.
So I would urge the members of the committee, particularly
the junior members who are not so entrenched in bad habits, to
consider new and fresher approaches to solve some of these
problems so that we can protect consumers and also give
legitimate industries a fair shake, because all bankers aren't
bad people.
But I am afraid that we are falling into a rut here that is
going to be the detriment not only of this committee and this
Congress but of the Nation. It doesn't have to be this way. We
can be civil to each other. We can be informed. We can resist
the partisan talking points. But I am not seeing that sort of
behavior, at least so far.
So let's try to do better, and let's try to be civil to
witnesses like Ms. Warren. Let's try to focus on the substance,
because I have actually heard very little substance here today.
And there are better ways to solve our problems, and I hope
that this committee will be part of those.
So I thank the chairman. I see that my time is about
expired.
Chairman Issa. Would the gentleman yield?
Mr. Cooper. I would be delighted.
Chairman Issa. We have worked together for a long time, and
I join with you in wanting this hearing and any talking points
in front of any Member, junior or senior, to be about our
oversight.
I do agree with you on the simplification. Patrick McHenry
offered a bill like that a number of years ago and continues to
support it.
I hope that all of us understand that our jurisdiction here
is limited. We are here to discuss whether Dodd-Frank got it
right for the organization, whether Professor Warren is now
finding things which are poorly defined within the statute that
she is working and her 400 employees are working to try to
resolve, whether some committee, probably Financial Services
primarily, needs to revisit to give her guidelines, additional
authority, and so on.
If we do our job right--and the gentleman is absolutely
right--we will, in fact, be talking about an organization that
Professor Warren may head as the first head, she may not, but
she is certainly the most knowledgeable witness. And I have
said, this hearing will be about civil behavior for Professor
Warren and about a dialog about the agency that she has put a
year of her life in to standing up.
So I join with the gentleman in full agreement.
Mr. Cooper. Well, Mr. Chairman, a civil discussion would be
a marked improvement over the subcommittee's behavior.
You are right that the Financial Services Committee does
have substantive jurisdiction, but here we have had two
hearings with Ms. Warren before her agency is even stood up. A
lot of people are rushing to conclusions here. And sometimes
that is the only exercise they get.
It is unfortunate that this----
Chairman Issa. It is one of the things we really do well
here, isn't it, is make conclusions?
Mr. Cooper [continuing]. Nice lady has been treated as a
partisan punching bag before she has even had a chance to
really serve. So let's give all American citizens the benefit
of the doubt.
Thank you, Mr. Chairman.
Chairman Issa. Thank you.
We now go to the gentleman from Pennsylvania, Mr. Kelly,
for 5 minutes.
Mr. Kelly. Thank you, Mr. Chairman, and Ms. Warren, thanks
for being here today.
In my previous life, I was in the automobile business, and
I know how critical it is----
Ms. Warren. Sorry, sir?
Mr. Kelly. I said, in my previous life, I was in the
automobile business, and the availability of credit is so
critical and I know that. And I have looked at your background.
You really have an impressive background and you--by so many
people and so many things.
The availability of credit is one of those things, and I
know that automobile loans come up quite often, and sometimes
they are regarded as predatory lending. Tell me, how would your
agency work toward that end, because we already are governed by
the FTC. So is there going to be some overlap there, and how is
that going to work, and how are we going to be able to sift
through that?
Ms. Warren. Just to make sure I am being responsive, and
you help me if I am not in the right place.
On automobile loans in particular, you do know that dealer-
initiated automobile loans, that automobile dealers are not
within the jurisdiction of the consumer agency, that Congress
made that distinction in Dodd-Frank. And so the place where we
are focused--and I just want to be clear about this--it is
really about saying, consumers just need to know--they need to
know what the price is. They need to kind of know generally
what the risk is, the difference between, say, a fixed rate
mortgage and a variable rate mortgage. And they need there to
be less fine print so they really have a shot at comparing
straight-up three mortgages, three credit card agreements,
three checking accounts. They can actually look at those.
That is really the thrust of what we want to do. My own
view of that is that that actually makes credit, if anything,
more available to consumers. Consumers can trust that when they
sign on the bottom line, I get it, I know what is happening
here.
Mr. Kelly. And that is true, and I think that oftentimes
when we are dealing with retail customers, and they go to a
lender, and we try to guide them through that process, and it
can be very difficult, and I think there is lot of good advice,
and over the years, you have given a lot of good advice to
people. And one of the things we caution people about is, you
know, the amount of money that you are borrowing, the length of
time that you are going to have it, and the percentage that you
are going to pay on it, and these are all critical aspects of
it. I think we both agree on that.
And so I guess what I am coming to you for, and I want to
hear from you, because this is critical--this is critical. I am
looking at, the American taxpayer is actually a cosigner to
loans that are being asked for right now by a body that governs
these folks, like to buy them, who governs them, borrows money
on their behalf, and they actually sign up as the cosigner, the
coborrower.
And I guess I'm a little bit intrigued. The emphasis is on
credit availability, how much money you can borrow, and
rightfully so, the banks actually put a limit on what you can
borrow, a ceiling as it were. And we're looking now at
increasing the debt ceiling again, and I find that kind of
amusing that we use the word ``ceiling'' because, in my world,
a ceiling means that's something that's actually established
and you can't go beyond. And all the lending institutions I've
ever gone to, they put a ceiling on what you can borrow and
what you can't go beyond.
And so now we're involved in this measure, and we're going
to tell these cosigners who are responsible for making all the
payments on these loans, that don't worry about that ceiling,
this doesn't really matter; we're going to continue the raise
it because we've been so reckless and so irresponsible, and you
know what, you put us here and you put us in the position to
actually borrow money for you that you're cosigning us.
So as your past history and the way you have advised
people, and I know, right now, the consumers are the most
important part of what we're talking about. We want to protect
these people because I noticed in your testimony, you did say,
an economy being driven to the brink of collapse, and we use
terms about companies that are predatory companies and what
we're doing to the economy.
I think that maybe we should be expanding your role to
taking a look at what this body is doing to not only the future
of our children and grandchildren but also the present, and I
would like to--you have a big experience in this--this amount
of money that we pay is interest, that's kind of artificially
low right now, if we think this debt limit now or this deficit
is great now, wait until we get the real interest rates out
there. Then people, instead of holding their heads, they're
really going to be holding their stomachs because they will be
sick. So I know you only have a couple of seconds left, but how
would you advise these consumers on buying the product that
they're being asked right now to buy into and cosign for?
Ms. Warren. Well, Congressman, I think the one distinction
I would make is I am very familiar with creditors putting
limits on how much you can spend in the future. That's a--
that's a world I live in, but I do want to say people expect
you to meet your obligations that you have already incurred and
they expect you to meet those a 100 cents on the dollar.
Mr. Kelly. That's why in the automobile industry, you
actually have a beacon score that tracks your past history and
watches actually what your revenues are. That's a big part of
what you're allowed to borrow. So I think that's maybe part of
the equation we're looking beyond. Thank you, though, for your
time.
Chairman Issa. Thank you. The gentleman's time has expired.
The gentleman from Kentucky, Mr. Yarmuth.
Mr. Yarmuth. Thank you, Mr. Chairman.
Professor Warren, it's great to see you here again, and I
had the opportunity during the subcommittee hearing some weeks
ago to ask many of the questions I would ask. So I'm not going
to repeat them.
One of the things that I was curious about is in the
Republican budget that passed the House, the so-called Ryan
plan for Medicare was part of that, and under that plan, for
those people under 55-years old, Medicare would no longer
exist. Instead, citizens who then reached 65 would be given
some kind of payment in some form to go out and shop for
insurance in the private insurance market. Would you envision
that that might be a role at some point for CFPB, that
insurance contracts would be subjected to the same scrutiny in
terms of clarity and transparency that other financial
documents would be?
Ms. Warren. Congressman, I would say I think there are some
very real concerns about the difficulty that consumers have
reading insurance contracts and that it raises some of the very
same issues we'll be dealing with in the Consumer Financial
Protection Bureau over other kinds of contracts that are
unreadable.
But right now, Congress has put a very clear curb in place.
We have a lane we are supposed to swim in--I think I just
explained that--about consumer credit, consumer credit
products, the issuing of consumer credit, credit reporting, and
we are not to stray into insurance. And we are not to stray
into investment products, and right now, sir, that's exactly
what we'll be doing.
Mr. Yarmuth. Certainly I would think, though, that whatever
progress you've made in making sure that financial documents
were understandable and transparent might serve as a good model
for other areas of the economy.
Ms. Warren. I certainly hope that's the case, and I also
want to say, it's a little piece of the consumer agency, since
we're here doing oversight, and you give me a chance to talk
about the agency and the things it's going to do.
We have a research division in our agency. In fact, it's
called research markets and rule writing. We've combined it all
together, and we are building a robust research team; I mean,
smart and very diversified in terms of approaches to how to
think about research. And a significant part of what we will
do, we will look at what it takes to take complicated ideas and
get them into something that really works on the ground day in
and day out for American families. That research will be
available to everyone, and I hope it will be useful in places
beyond its implications in consumer credit.
Mr. Yarmuth. I'm sure it will be. In the remainder of my
time, I had the privilege the other day of sitting in on a
forum that Senator Rockefeller conducted with Holly Petraeus
and a couple of the servicemen who had been subject to these
incredibly unscrupulous practices.
And one of them was Chief Warrant Officer Charles Pickett,
and he was an Apache helicopter pilot serving in the Army
National Guard, was flying missions in Operation Iraqi Freedom.
And while he was on duty, Bank of America attempted to
foreclose on his home, or actually, they ended up trying to
foreclose four times. One of those times, his daughter came
home from school and found the eviction notice, foreclosure
notice, I'm sorry, posted on the door. And so he is here trying
to--also, he was current on his mortgage, which was--I guess
adds insult to injury, and here he is flying missions in Iraq,
trying to spend his spare time on the phone with banks trying
to clear this up, was unable to do so.
Finally, he hired a lawyer who was familiar with the
Servicemen's Civil Relief Act, and that lawyer took seven--I
think seven different times trying to find somebody, four
different people before he could finally stop this foreclosure
procedure, which was totally unjustified.
So in terms of what we had been discussing earlier and the
incredibly good, positive effort that Holly Petraeus is making
from the CFPB and trying to deal with this, I certainly think
it would be appropriate if this committee would use its
subpoena power and its oversight responsibilities to make sure
that we have all the information possible to make sure that
people like Chief Warrant Officer Pickett are not abused in
this way in the future.
Do you have any comment on that? I have 20 seconds left.
Ms. Warren. I would just say in that very short period of
time, you know, I think it's easy to put out of sight what the
real implications are of these financial misdeeds on military
readiness. The number one reason for losing a security
clearance in the United States now is a problem over credit.
Servicemembers who are deployed abroad have talked to us
multiple times about what it means to try to fight a war on two
fronts, one in a foreign location and one back at home, to take
care of their families. This is wrong.
Chairman Issa. I thank the gentleman.
The gentleman from New Hampshire, Mr. Guinta.
Mr. Guinta. Thank you, Mr. Chairman.
Thank you very much, Professor Warren, for being here
today.
I was listening to the questions and the testimony, and
part of the responsibility we have in this committee relative
to this particular hearing is stated in the paperwork that we
all received today, and I just want to read from the conclusion
what it says so we're all clear about what we should be doing:
During this hearing, the committee will examine what oversight
mechanisms are in place to ensure that this new government
bureaucracy properly carries out its mission to protect
consumers. The committee will also examine the potential uses
and consequences of the CFPB's powers.
And in keeping with a responsible line of questioning, I
think we all have an obligation to ensure that the country
trusts what this new entity is going to do and that there's
transparency with this new entity and this new agency, and that
we are charged with that responsibility.
In the last time we met back in March, I had wanted to talk
to you a little bit about the--excuse me, on May 24--I wanted
to you talk to you a little bit about the structure and what I
think is somewhat unprecedented. You had stated that there's no
banking regulator who is subject to the political process or to
the appropriations. All banking regulators are funded
independently, and indeed, all of the other banking regulators,
not the consumer agency, but all of the other banking
regulators are able to set their own funding levels.
I don't disagree with your comment in regards to the Fed,
the FDIC, the OCC, but I do think that there are distinctions
and differences between those entities and this one. So could
you clarify for me if you think that there's any difference in
terms of oversight relative to the appropriations process?
Ms. Warren. I'm sorry, Congressman, I just don't know what
you're driving at. I don't mean to be unhelpful. I just don't
know what you're driving at.
Mr. Guinta. Okay. Well, let me read your comment again. On
May 24th, in the hearing that we had, you had stated that there
is no banking regulator who is subject to the political process
or to appropriations. And I was making the point that there is
a distinction between this agency and others relative to power
and authority. Can you comment on that and whether you think
you are treated as every other banking regulator or if there
are differences between you and other agencies?
Ms. Warren. Well, I hope this is responsive, but please if
it's not, stop me. In terms of funding, yes, we are different.
We have capped funding. Other banking regulators, for example,
the OCC, determines funding levels and assesses financial
institutions for them. The FDIC follows a similar structure.
The Fed, of course, gets its money in yet a different way.
So, as I said in my statement, there are--there are limits
on our funding. If we want funding above the cap provided in
the statute, we must come back to Congress and ask Congress for
an additional appropriation. That's what's provided in Dodd-
Frank, and we would be permitted to do that, but it means we
have to come back into the appropriations process, and as I
understand it, the other bank regulators do not go into the
appropriations process in order to get their funding.
Mr. Guinta. Would it be fair to say that the CFPB is
different in the sense that, with respect to the director
position, it is subject to removal only for cause and is,
therefore, exempted from Presidential control?
Ms. Warren. I would have to go back and look at the statute
again, Congressman.
Mr. Guinta. My concern is this: It appears as though there
is some unintended power or powers that are vested in this
particular position, and that's what I would like to clarify,
because the concern I would have, as an individual--I'm not
talking about you personally--just the individual who would
oversee this agency would appear to have greater powers and
authority simply by the fact that it is treated differently
than other banking regulators or agencies.
Ms. Warren. I see. I think I understand the question. Yes,
there are differences. The consumer agency is the only agency
that is subject to a veto by other agencies. There is no other
agency subject to that kind of oversight. There's no other
agency--banking agency, at least as far as I know agency
anywhere, whose rules or regulations can be thrown out by a
vote of other agencies. So, yes, there is a difference. The
consumer agency operates under a unique constraint that is not
there for others.
Mr. Guinta. Okay. Thank you. I see my time has expired.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Illinois, Mr. Quigley.
And Mr. Quigley, I apologize, I did not see you on the last
round. So I'm taking you late.
Mr. Quigley. No problem. Thank you, Mr. Chairman.
Good morning, Ms. Warren.
Ms. Warren. Good morning.
Mr. Quigley. Mr. Chairman, as to Mr. Cooper's comments, I
think it's appropriate occasionally to catch ourselves at these
hearings and ask ourselves if we're maintaining the proper
decorum and respect.
I'm reminded as a veteran of about 200 criminal trials that
cross-examination can be contentious, but there's a respect due
to the court, as there is a respect due here and our witnesses.
And now, it is incumbent upon our witnesses to answer questions
succinctly and forthrightly, and when they're not doing that,
it's fair for the member to push them along.
I would respectfully suggest that both sides have on
occasion pushed the envelope on that and appeared to be
disrespectful to the process and to our witnesses. So I think
Mr. Cooper's point is well taken and if we could all move in
that direction, it would be a better body overall.
Ms. Warren, salaries of your employees have been discussed,
and I recognize they don't necessarily come straight from the
taxpayers, but they're still important. The concern I have is
really toward the other end, and that is, your ability to
attract qualified employees because you are really looking for
folks who have the same knowledge set of people you're
regulating.
I understand that in 2009, the average salary, even for the
back office folks at hedge funds, is about $300,000. Just the
sheer volume of workers on the banking side and the salaries,
my concern isn't so much how much your folks are making; it's
your ability to track qualified workers and keep them to get
the experience they need to do the work you're supposed to do.
Is this a challenge that you see as a real problem at this
point?
Ms. Warren. Yes, Congressman, it is a serious challenge.
You know, I just want to be sure that we're clear on the
record since this question came up earlier. We don't set our
own salaries. They're set by Federal statute, and we have
exactly the same salary base as the Fed, as the OCC, as the
other banking regulators. We're just--we're in a system. That's
what Dodd-Frank requires, and we're following the law in terms
of the salaries we set.
But there is a serious problem right now in the regulation
of financial services, and that is--I want to put it this way:
We have been genuinely blessed at the Consumer Financial
Protection Bureau with people who have come to this agency who
are incredibly smart and who have the opportunity to make lots
more money somewhere else, but they truly hear the call of
public service. They see an opportunity to make a real
difference in a marketplace that they know, sometimes from
firsthand experience, is badly broken.
I worry how long we will be able to keep those people when
the siren song of money from elsewhere continues to play. But
it is where we are, and I say today, as much I worry about this
as a long-term problem, I'm proud of every single person who
has come to work for the Consumer Financial Protection Bureau.
Mr. Quigley. How much of this is the institutional memory,
given the complexities of the new world of finance and learning
how systems operate? By the time people are experienced enough
to really do this competitively, they're really worth a lot
more because of their experience with you.
Ms. Warren. That is a very fair point, Congressman. We're
doing a lot of training. I want to put it this way, we invest
in our people. We spend a lot of time with them on education in
a formal sense. We spend a lot of time in education in an
informal sense; that is working across groups, running lots and
lots of--we call it lunch and learns--around different topics.
We think that every time we make an employee of the Consumer
Financial Protection Bureau smarter, it's good for the bureau
and ultimately inures to the benefit of the American people.
But I recognize, it also makes them a lot more attractive to
people with more money.
Mr. Quigley. Again, for the record, I have no problem with
someone who's smart enough to go out in the financial world and
make a good living, but given that this is a new, complex
world, I'm concerned that there isn't a balance here of equal
experience and knowledge and understanding so that the American
public isn't cheated. But I appreciate what your workers do and
what you do. Thank you.
I yield back.
Ms. Warren. Thank you, sir.
Chairman Issa. We now recognize the gentleman from Florida,
Mr. Ross, for 5 minutes.
Mr. Ross. Thank you, Mr. Chairman.
Let me preface my comments, Professor, on first of all
acknowledging that in your position, where a lot of it is
administrative, you also have the responsibility to testify
before Congress, and I'm very grateful to you for doing this. I
know that it is not always the most enjoyable part of your day,
but I also understand that it's necessary, and I do realize
that while we may not always be philosophically aligned, I'm
grateful for your continued participation today.
And to that end, I would like to ask you some questions,
specifically with regard to what I think is one of the most
important powers of the Dodd-Frank Act, and that's found in
Section 1031, which gives the CFPB the authority to ban any
product, any consumer financial product, service, or practice
that it deems unfair, deceptive, or abusive. Would you agree?
Ms. Warren. Yes, sir.
Mr. Ross. And to that end, back in May, May 24th, when we
had the hearing here, Mr. Gowdy asked you a question as to how
you would distinguish between abusive practice and nonabusive
practices of these financial institutions. And the reason for
that, of course, is because now that it has been in effect for
a year, we're looking to make sure that consumers as well as
companies know what to look for when they're going to be deemed
to either be an abusive or nonabusive product or service to the
market.
And now that we've had a year, I want to ask you again,
because I believe your response in May was that we will go
through the process of interpreting the language that Congress
has given us. And I don't think that was quite where we want to
be, what we need to know. So I want to ask you again
specifically, can you name any product, service, or
transaction, not already illegal, that is unfair, deceptive, or
abusive within the meaning of the Dodd-Frank Act?
Ms. Warren. Congressman, can I just start by saying we have
not been in effect for a year?
Mr. Ross. You've got 1 week to go.
Ms. Warren. We've only been--we will be in effect next
Thursday.
Mr. Ross. Yes, ma'am, that's pretty darn close. I'll give
you 51 weeks, you've been in effect.
Ms. Warren. No, we have not been in effect.
Mr. Ross. But you have had an opportunity for 51 weeks to
interpret and understand the Dodd-Frank Act, and getting back
to my question, please answer this: Do you know of any product
that is not already illegal that is unfair, deceptive, or
abusive within the meaning of the act?
Ms. Warren. Congressman, I can recall no product----
Mr. Ross. Have you had any discussion with your team as to
any such products, or how you would go about identifying such
products?
Ms. Warren. I have not had a discussion with my team about
a particular product, no, sir.
Mr. Ross. Don't you think that's probably one of the most
important things, though? I mean, that's the power to ban, to
ban, to stop the marketing of a certain product. Don't you
think, though, that that would be something that you and your
team should be addressing as you go into your first year next
year?
Ms. Warren. Congressman, I appreciate the advice, but
actually, no. I think that what we should be doing is
concentrating on the places where we can best make changes in
the marketplace, and that's, for example, in our TILA RESPA
form.
Mr. Ross. So would it be okay then if we just revoke the
power?
Ms. Warren. Congressman----
Mr. Ross. Believe me, I'm being very respectful, ma'am. I'm
from the South.
Ms. Warren. Well, I think the point is that we are starting
our work in the places that, for example, Congressman McHenry
suggested was an important place to start, and that is where we
can reduce----
Mr. Ross. You have the power through the Dodd-Frank Act to
ban any such products, and you're telling me now that you've
not even given them any consideration. Would it be safe to say
then that there are no such products that you are aware of that
are either unfair, deceptive, or abusive within the meaning of
the act?
Ms. Warren. Congressman, what I'm trying to describe is
that we have priorities, and our first priority in terms of
rulemaking is around the TILA RESPA forms. We are trying to
reduce regulatory burdens at the same time that we're trying to
increase the understanding for consumers so they can make good
product choices.
Mr. Ross. Professor, with respect to my time and yours, I
will yield the rest of my time to Mr. Gowdy so that you may
adequately answer his questions.
Ms. Warren. Thank you, sir.
Mr. Gowdy. Payday lenders have a bad reputation for taking
advantage of people. No one should expect to be treated well by
them. Do you know who said that?
Ms. Warren. Probably me.
Mr. Gowdy. So that would be one group that should be
banned?
Ms. Warren. Congressman, there's a lot of space between
banning a product and making a product clearer to consumers.
Mr. Gowdy. But not including capping the interest rate; you
don't have the power to do that.
Ms. Warren. The statute is unambiguous.
Mr. Gowdy. So you do not think payday lending should be
banned?
Ms. Warren. The statute is unambiguous that we have no
authority to engage in usury caps.
Mr. Gowdy. That wasn't my question. My question was, do you
think payday lending should be banned?
Ms. Warren. Congressman, payday lending is one of the areas
that will be under our jurisdiction.
Mr. Gowdy. Do you think it should be banned, Professor
Warren? You just said no one should expect to be treated well
by them. You also said, subprime lending, payday loans, and a
host of predatory high-interest loan products that target
minority neighborhoods should be called by their true names,
legally sanctioned corporate plans to steal from minorities.
That sounds like a wonderful thing to ban. Should they be
banned?
Ms. Warren. Or to make better. We have a whole agency, and
we have a whole process to work on this. We have a lot of
different tools available at the Consumer Financial Protection
Bureau. One of the advantages we have is that it is possible to
work on multiple fronts at once.
Mr. Gowdy. So with respect to----
Mr. Connolly. Mr. Chairman, I call for regular order.
Chairman Issa. Excuse me, Mr. Gowdy, I apologize, but Mr.
Ross' time has expired, which is why I was already gaveling.
We now go to the gentlelady from California, Ms. Speier.
Ms. Speier. Thank you, Mr. Chairman.
And thank you, Professor Warren.
I was at that hearing on May 24th and was shocked by the
way you were treated. A number of us members wrote to the
subcommittee chairman and asked him to apologize to you, and I
was curious whether or not he has extended an apology to you.
Ms. Warren. No, ma'am.
Ms. Speier. Well, on behalf of the members that found that
conduct absolutely beyond the pale in terms of professional
conduct for Members of Congress, please accept my apology for
that behavior.
We have spent a great deal of time today on a number of
issues that are probably premature because you are yet not
operational, but this committee just recently had a hearing on
the Department of Education's regulations that they are going
to impose on for-profit schools, universities, and colleges
that, you know, provide not only an education but also do have
financing through the Federal Government, through Pell grants
and the like.
One of these for-profit colleges, Kaplan University's
training manual entitled, ``military e-learning modules,''
tells recruiters how to utilize fear, uncertainty, and doubt in
the sales process with regard to competitors' offerings and
teaches them how to overcome objections that potential students
may raise to signing an enrollment agreement. The document
states this technique was originally created within the
computer hardware industry and uses these emotions to attempt
to influence perception or a belief. The technique is
especially effective when prospects introduce the need to
examine other online schools.
Now, this is particularly targeted, again, at our military.
That, coupled with the fact that not only are we talking about
a few incidents of military members, typically abroad, who have
been foreclosed on, we're talking about JPMorgan, who has
foreclosed on 4,000 active duty members of the military, has
made $2 million in refunds, and has paid a $56 million fine;
Wells Fargo that has admitted to 55,000.
Now, back in January, I joined--asked a number of
colleagues to join in a letter to Mr. Bernanke and also to John
Walsh, the Acting Comptroller of the Currency, asking them to
audit these very banks. I have not yet heard from any of them,
and yet, to my surprise and delight, you've already undertaken
to do this within the Consumer Financial Protection Bureau.
So my question to you is, will you also look at this issue
as it relates to military servicemembers?
Ms. Warren. Yes, ma'am, we will. Starting next week, on
Thursday, July 21st, we will receive transferred authorities
from the other agencies that have been responsible before for
the consumer financial protection laws. It will come to the new
consumer agency, and we will be in the largest financial
institutions engaging in on-the-ground supervision of whether
or not they are following the law as regards different consumer
financial products.
Remember, I want to be clear about our approach. We are not
safety and soundness supervisors. We are there to examine
consumer products and examine to see whether or not the
financial institutions have put appropriate procedures in place
to assure that they are following the law and that they are, in
fact, carrying out those procedures and are in compliance with
the law. That would be our job. We will be there. We will be
cops on the beat to do that starting next week.
Ms. Speier. Now, as I understand it, not only can these
financial institutions not foreclose on military
servicemembers, but they cannot charge more than a 6 percent
interest rate. Will you be looking at that issue as well?
Ms. Warren. Congresswoman, I should make a caveat here. It
is the Department of Defense and not the Consumer Financial
Protection Bureau that is specifically responsible for the
enforcement of the Servicemembers Civil Relief Act, and so what
we are--our statutory part will be around truth in lending and
other parts of the statute for consumer financial protection,
but we will be working closely over a long period of time with
the Department of Defense to gather appropriate information
through different channels and to be able to work with them in
a way that makes us understand the problems better and makes
sure there is more diverse enforcement of current laws.
Ms. Speier. Thank you. My time has expired.
Chairman Issa. I thank the gentlelady.
We now recognize the gentleman from Oklahoma, Mr. Lankford,
for 5 minutes.
Mr. Lankford. Ms. Warren, honored for you to be able to be
here. You are a fellow Oklahoman from the Fifth District of
Oklahoma, and so let me say welcome to you for being here as
well.
Ms. Warren. Thank you.
Mr. Lankford. Let me ask a couple of questions off of you
on just some of the structure as it's coming up. You've
mentioned several times that the authority is coming over July
21st to the agency from the other agencies, Comptroller of the
Currency, FDIC, wherever it may be, for some of these. Do you
happen to know or have you heard if, as that authority is
transferring over from that agency, that agency has been
downsizing as you are ramping up? I know that's not your agency
that you're dealing with, but have you heard that they're
downsizing to accommodate for the transfer of authority?
Ms. Warren. Yes, sir, we have. Indeed, there's been--if you
will permit me, there's been a lot of trying to coordinate with
these agencies. We've done some recruiting from these agencies.
You know, there are some good on-the-ground people who
currently work at the Fed.
Mr. Lankford. There are some people that are--those
agencies are downsizing as you are ramping up?
Ms. Warren. Yes, sir.
Mr. Lankford. Okay. Let me follow through on a couple of
things. You had great emphasis on the unregulated businesses.
Payday lenders you mentioned that a couple of times as well. Do
you see a difference between engaging with a payday lender and
a community bank, specifically? I know the big banks get tagged
all the time on things. I'm just talking about community banks
today when I'm talking about banking. Do you see a difference
between payday lenders and community banks as far as regulating
them?
Ms. Warren. Yes, sir, I do.
Mr. Lankford. Will there be a difference in the way the two
are handled, in the way that your agency will interact with
payday lenders or community banks?
Ms. Warren. Yes, sir, there will be.
Mr. Lankford. Dodd-Frank has about a hundred rules this
year that will be added to community banks. Between now and
December 31st, they have a hundred rules to be able to
implement on that. Do you anticipate another series of rules on
top of those coming down on community banks from the new
Consumer Financial Protection Bureau?
Ms. Warren. I just want to say, on the hundred, it's not a
hundred for the consumer agency.
Mr. Lankford. That's what I'm saying. They're already
getting hundred from Dodd-Frank, not from you. That's what I'm
trying to say. If they're getting a hundred already, they're
coming down from Dodd-Frank. When y'all stand up, will there be
more that will be coming through?
Ms. Warren. The one that we have teed up right now is this
TILA RESPA combination, trying to reduce the paperwork around
mortgage origination, something--and I will say to you, sir,
because I think it might be relevant. When we first started
this process, the idea for us to put that first came from the
community banks. And I asked them at many points along the
line, I know there have been other changes--I know it costs
every time forms are changed--is this something you want us to
go forward with? And they have said yes.
We also have as one of our very early rulemaking
obligations will be around payday lenders, but of course, I
should say, not payday lenders--other nonbank lenders, other
than payday, because payday is automatically covered, the large
participants, but of course, that's not going to affect the
community banks other than how it affects their competitive
environment.
Mr. Lankford. The concern is, is that right now, they have
a lot of rules that they're trying to put into place, and you
know well community banking. That is not some large bank with a
New York headquarters. This is 12 people in a small town in
Oklahoma that they're trying to go implement a hundred rules
and figure out how to do it, and it's very overwhelming.
So while the rules come down and say that's not a big rule.
It's not the size of each rule; it's the stack of all the rules
that are coming down on them.
What I'm asking of you is, in the days ahead, will you
please make sure that's coordinated, that there's not just
saying, oh, we just added 20 new rules to them, at the same
time, OCC added 20 and FDIC added a hundred, and then suddenly,
they're getting overwhelmed in a small community bank. If you'd
make sure those things are coordinated, that would be very
helpful to them to able to continue to have the free flow of
credit going on.
Let me ask you as well on the way you will interact with
the banks also. You made a statement that one of my community
bankers notified me on, in forms of business, that there may be
an exam every 2 years on the banks from the--from your bureau.
Do you anticipate also engaging as a bank examiner role, not
for safety and soundness, but for consumer protection, there
will also be an audit of each bank from your agency?
Ms. Warren. I'm sorry, sir, that's for the 111 largest
financial institutions, not for the community banks.
Mr. Lankford. So community banks should not be concerned on
that?
Ms. Warren. We are not the supervisor for the community
banks.
Mr. Lankford. But as far as engaging and doing auditing and
stepping in and being another person that's on the ground for
them, will not be?
Ms. Warren. As explained to me, they've run out of chairs
for that kind of----
Mr. Lankford. They actually have. They have just about
every week they have another auditor that's sitting there, so
they might as well leave an office set aside for the Federal
Government because there's going to be somebody there the next
time.
Do you have a concern with the authority that's been given
to the specific director to kind of determine products and
services that are unfair, that the next director has that same
authority to come undo what you do on that?
Ms. Warren. I think you may overstate the power of the
director. There's a whole process in place for this, that
starts with research, that starts with community outreach, that
goes into analysis of markets, that has cost and benefit.
There's a big process in an agency before we get to a place
where any rule, whatever it's on, can be issued.
I started to say earlier, just to get an idea about how
this agency functions, half of our entire budget and our FTE
will be about supervision and enforcement, supervision of the
largest financial institutions and supervision of the nonbank
financial institutions, and straightforward enforcing the law.
About a quarter will be around consumer education, which we
haven't talked about much today, and consumer complaint.
And the last quarter has to cover everything else. Writing
rules is just one piece of how we can help make this market
work better for American families. I've given you our first
priority. That's where we intend to go, and we want to do that
in conjunction with community banks all around the country.
Mr. Lankford. Thank you.
Chairman Issa. The gentleman's time has expired. Thank you.
I want to announce that when we've completed with Professor
Warren we'll take a recess of between 10 and 15 minutes. I
estimate that that will occur within about 20 minutes based on
the number of members here, and I don't think I can accurately
give everyone a half an hour notice, but my intention is to, in
fact, allow us to work through Professor Warren's completion,
dismiss our witness, and we'll take a recess of not more than
15 minutes and then reconvene for the vote related to the
earlier motion.
So I hope everyone's comfortable with that. If people feel
they need a half hour notice, they have it, but depending upon
people coming back, they may choose to then ask questions so
they actually could make it longer, but I want to make sure
that--you have been very kind with your time and answers;
hopefully, we've been kind back--that we get through it and
allow you to get on with your day and we'll get on with our
procedures.
So, with that, I recognize the gentleman from Virginia for
5 minutes, Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman.
And welcome, Professor Warren. It's good to see you again.
And let me ask you a question. The agency you are
representing here today, the Consumer Financial Protection
Bureau, was created how?
Ms. Warren. By Congress.
Mr. Connolly. No, but I mean in a piece of legislation?
Ms. Warren. Yes, the Dodd-Frank Act, sorry, sir.
Mr. Connolly. And was that act passed with overwhelming
bipartisan support?
Ms. Warren. No, sir, it passed, and I believe there were--
there was some bipartisan support, but I don't think it was
overwhelming.
Mr. Connolly. How is--tell us about the governance of the
Consumer Financial Protection Bureau.
Ms. Warren. Well, it's set up to have oversight in terms of
its money. Its budget is set up outside the political process,
like other banking regulators, so that it receives a capped
amount of money from the Fed.
Mr. Connolly. But actually, I am asking more about the
actual governance. For example, are you appointed by the
President?
Ms. Warren. Oh, I apologize. I currently am the Special
Advisor to the Secretary of the Treasury for standing up the
consumer agency. There will be a nominee from the President of
the United States, and there will be advice and consent,
presumably, from the Senate on that nominee.
Mr. Connolly. Are there other members of the board who are
also appointed and subject to confirmation?
Ms. Warren. That's the only Senate confirmable or, I should
say, Presidential appointment in the Consumer Financial
Protection Bureau.
Mr. Connolly. And on a bipartisan basis in the other body,
has there been indication that they're willing and receptive to
the idea of such an appointment and they're ready to act on it?
Ms. Warren. I have seen a letter that says 44 Senators will
block any nominee to head up the Consumer Financial Protection
Bureau unless the bureau is substantially changed.
Mr. Connolly. From the Dodd-Frank legislation?
Ms. Warren. Yes, sir.
Mr. Connolly. Which passed into law but not with much of a
bipartisan vote, as you indicated?
Ms. Warren. Yes, sir.
Mr. Connolly. Mr. Chairman, I just want to say, I listened
carefully with rapt attention to our colleague, my friend from
Tennessee, admonishing this committee, especially the junior
members of this committee, for lack of civility and for
partisanship.
With all respect, the tone of partisanship and civility is
not set by the junior members of this committee; it's set by
the senior members of this committee. They're the ones, at the
end of the day, who make the rules, enforce the rules, and
engage in certain practices or not.
And frankly, while I also regret how you were treated
before the subcommittee of this committee, Professor Warren, I
think the issue of civility toward you begs the question
because what we're really up against is a relentless attack on
the creation of your bureau, of the legislation that created
that bureau, even to the point of blocking any nominee.
Every single Republican in the Senate signed that letter
you referenced saying they will move to block any nominee of
the President's; so if we can't win legislatively, we're going
to use other mechanisms to make sure that your mandate is not
enforced and that you can't really do your job.
And so while I wish the problem were just one of civility,
it goes far deeper than that. It is, in fact, a political
attempt to prevent the protection of consumers the legislation
foresaw and tried to create a framework for. I deeply regret
that because I think you could provide enormous visionary
leadership in protecting the consumers of America, and I deeply
regret that one party decided to make that a partisan issue
rather than try to come together and find a common ground.
With that, I yield back.
Mr. Cummings. Would the gentleman yield?
Mr. Connolly. Yes, I will happily yield to the ranking
member.
[The prepared statement of Hon. Gerald E. Connolly
follows:]

[GRAPHIC] [TIFF OMITTED] T1969.035

Mr. Cummings. Thank you very much. I just wanted to add on
to what the gentleman just said, and I want to associate myself
with his words.
Ms. Warren, there's absolutely no doubt that you bring to
this agency something that is so very, very important, and that
is passion, and I say to my children, I say to them, if you can
take what you believe to be your purpose in life and then match
it up with a job, then you are truly blessed. And you bring
that passion, competence, and integrity and we really do
appreciate you. Just in case I don't have a chance to say that
again on the record, I want to make that very, very clear.
Mr. McHenry. Gentleman's time has expired.
Dr. Gosar is recognized for 5 minutes.
Mr. Gosar. Hi, Ms. Warren.
I'm one of the junior members, too, and I'm from the
private sector. I'm a dentist, so some of this makes a lot of
sense to me, but I also come with a different set of eyesights,
too. Is that when you're at the dance, it always takes two
parties to dance, and that there's problems not just from the
private sector in wrongdoing but also from government. And
that's why I come with a different eyesight. I'm also from
Arizona, so just to give you some perspective.
So the way I look at things and the way I've seen things is
that legislation, when it comes into new existence, isn't
always perfect, and so what we're straining here with, and me
as one of them, is was that legislation crafted right, did it
have the proper checks and balances, and I think, I hope and I
extend that's what the tenor is there is that question. And
when you don't get an answer to a question, it just creates
more questions. I hope you understand. Okay.
So, with that being said, I heard you talk to Mr. Gowdy
that no product should be banned, okay. I thought I heard that
you didn't say any product should be banned.
Ms. Warren. No, Congressman, I hope what I said is that
I've been in hearings before. The President of the American
Bankers Association has been asked, are there products that
should be banned. He said, yes. I've said I think the way we
should go is I think we should start with much clearer
disclosure. I don't think it's appropriate to take any tool off
the table. It depends on what happens.
Mr. Gosar. I love where you're going with this.
Ms. Warren. Good.
Mr. Gosar. What I'd like to do is see us kind of work in,
this is a new agency; it's got some breadth of powers. So, with
that being said, I mean so would you endorse repealing the
specific power of Dodd-Frank to that degree, that you could not
ban any specific item.
Ms. Warren. No, Congressman.
Mr. Gosar. You wouldn't?
Ms. Warren. No.
Mr. Gosar. And you say that power, that law is perfect?
Ms. Warren. Congressman, repeal the--giving the agency the
powers that Dodd-Frank has given it, you know I think what we
ought to do is we ought to get out there and get started on
behalf of the American people.
Mr. Gosar. But I'm a businessman, too, and the last job
numbers I saw are just plummeting, and part of that is, is the
uncertainty we're creating in here, and to have one individual
truly heading an agency, dictating that there won't be a
product, creates some uncertainty into the markets. So you can
understand why me as a businessman don't like that, right?
Ms. Warren. Actually, I do have a little problem with why
you wouldn't like that because when we're starting and we've
made clear our initial regulatory actions, with the help of the
consumer--with the community banks is that we're actually going
to change the law in a way that reduces the regulatory burden
for these community banks and at the same time increases the
ability of customers to read and understand a mortgage. You've
seen that----
Mr. Gosar. Well, I love where you're going here. I'm sorry,
again, I'm going to interrupt. I'm not being rude, but I've got
so little time here. Okay. I also told you I'm from Arizona,
and Ms. Buerkle talked to you and you gave her some answers
that you had a lot of outreach, a lot of support from a lot of
different perspectives, big banks, community banks. Can you
tell me specifically which banks those are, the community
banks?
Ms. Warren. Sure, Roger Beverage at the Oklahoma Bankers
Association. I met with Roger and probably 25 bankers on the
very first day I was in office. They were here visiting from
Oklahoma.
Mr. Gosar. You have letters of support from all of those?
Ms. Warren. Well, Roger's their leader. I don't know how
every single one of them feels.
Mr. Gosar. Let me ask you a question. I know we talked
about the housing market. Could you agree that Arizona is one
of the epicenters for a problem with mortgages and home crisis,
would you say?
Ms. Warren. There's some terrible problems in mortgage
foreclosures in Arizona.
Mr. Gosar. Give me some examples of some groups that you've
reached out into Arizona because it seems to me if we've got a
problem of the magnitude like this, that you'd reach out and
have some support in Arizona. Could you tell me specifically
and throw a couple of community banks in if you could?
Ms. Warren. Congressman, I've talked with community bankers
in all 50 States, including community bankers in Arizona, but
I'm afraid I'm not good enough to remember the names of
everyone.
Mr. Gosar. I'd love to know who they are, and why I ask is
that we've had to have outreach--I'm from one of the poorest
districts in the country. I have a lots of Native Americans,
have a lot of veterans, have a lot of senior citizens, a lot of
folks that--this agency is really easy in my district because
there are no choices. You cannot refinance your house. Right
now, most of the people are living not paying their mortgages,
and the banks aren't even putting it on their list because they
can't take it as another hit.
And I'm not finding, from my standpoint in District One,
any banks that have been contacted in my district from you, and
I'd love to know who they are so that we would find out and get
a list from you if we could. Thank you.
Mr. McHenry [presiding]. The former chairman, Mr. Towns, is
recognized for 5 minutes.
Mr. Towns. Thank you very much.
Let me begin by saying that I've heard some of my
colleagues' concern about the salary of the workers. Let me say
to you that I applaud you for really paying wages that you can
keep people, to be able to do the kind of job that needs to be
done.
I think that if we look back and if we're honest that I
think some of our problems have been is because we did not pay
people that had oversight responsibility the way we should have
paid them, and that led to some of the problems. I do believe
that. I've not done any research on it, but I do think that
that's an issue, but at least you have the insight and
understanding to pay people so you will be able to hold on to
them to be able to do the job that needs to be done to bring
about the confidence that needs to happen in order for us to be
able to move forward from this point on. So I want to go on
record saying I salute you, you know, for doing that.
And of course, I was in Afghanistan not too long ago, and I
had an opportunity to talk to many of the soldiers and their
real concern was about the fact that they were having
difficulty maintaining their homes, and they gave me stories
like, for instance, they were stationed in one place,
transferred them out and then, of course, they had a house
there, and now they're moving again, and what can we do? How
could you be a helpful to us? So that was the outcry that was
coming from many, many of the soldiers as we talked and walked
in Afghanistan, and to me, I think that we have an obligation
and responsibility to do something about it.
What suggestions do you have?
Ms. Warren. Well, Congressman, I will start by saying
you're really showing how we are all paying a price for a
broken consumer credit system, that letting things get as far
out of control as they got in 2005, 2006, 2007, 2008, and now
we pay. At a minimum, what we can work on at the Consumer
Financial Protection Bureau is giving servicemembers and
veterans a place to come, a place that we can at least get a
better understanding of what's wrong, to work with the
Department of Defense to make sure that the Servicemembers
Relief Act is fully and fairly enforced, that other tools that
are available to us, like truth in lending, are also fully and
fairly enforced and to make this issue a national priority for
America.
You know, we've done a lot to heal other segments in the
economy, but we have not focused on the impact on our
servicemembers of a broken credit market, and we must do
better.
Mr. Towns. I really appreciate you focusing on it, and let
me again thank you, of course, Professor Warren, and Mrs.
Petraeus for your effort to bring accountability to the banks
that unlawfully foreclosed on servicemembers, especially during
the course of deployment. I want to do that.
And on July 6, 2011, Mrs. Petraeus announced that the
Consumer Financial Protection Bureau and the Judge Advocate
General of the U.S. Army, Marine Corps, Navy, Air Force and
Coast Guard agreed to a number of steps to provide stronger
protections for servicemembers and their families; is that
right?
Ms. Warren. Yes, sir.
Mr. Towns. One important aspect of this has to be
education, but another aspect has to be enforcement. When Mrs.
Petraeus appeared at the forum on Tuesday, she emphasized this.
Here is what she said. Let me go repeat, ``You could have the
laws in place, but if the people on the other end of the phone
are not aware of them or are not applying them properly, then
it is not going to work.'' What is your reaction?
Ms. Warren. I think that is absolutely certain,
Congressman. She speaks truth on this. You know, one of the
things I want to say about the consumer bureau and I'll just
say it again quickly, half of all of our money, our employees,
eventually will be in supervision and enforcement, not in
trying to change rules but in making sure that the law is
enforced. A quarter of our people will be in financial
education and consumer complaint, dealing right on the ground
with families, and the remaining quarter will be about
research, will be about rule writing, will be about the other
things it takes to keep an agency functioning. We believe in
enforcement at the consumer agency, yes, sir.
Mr. Towns. Let me say this before I yield back, Mr.
Chairman. You know, I'm excited about this agency, and of
course, you are launching on my birthday.
Ms. Warren. I'm delighted to hear that. Happy birthday,
sir.
Mr. McHenry. The subcommittee chair on government
management, Mr. Platts, is recognized for 5 minutes.
Mr. Platts. Thank you, Mr. Chairman, appreciate you and
Chairman Issa holding this hearing.
Ms. Warren, appreciate your being here and your patience as
all of us have an opportunity to interact with you and your
past and current service to our fellow citizens.
I don't want to be repetitive, and so I'll try not to be,
and I also plan to try to focus specifically in areas that deal
with the subcommittee I chair, which is Government
Organization, Efficiency, and Financial Management, and I
chaired it 4 years past with Mr. Towns, who was ranking member,
and I was chair. Then he was chair, and I was ranking member.
And so I'm going to get into some structure of the bureau and
in the area of financial management.
In reading through your testimony, I know you're standing
up a new bureau, a lot of hard decisions, and part of your
testimony is the commitment to accountability and transparency
and seeking comments and critiques, whether this falls under
the area of comment or critique, it's meant to be helpful. And
that is, in your testimony, you talk about how you're hiring.
You talk about general counsel, information technology,
procurement, human resources. An area that's not mentioned
specifically, there is financial management and a chief
financial officer, and I guess if you could give me an update,
first. I know that you had a request for, you know, resumes in
essence for a CFO. I think it closed maybe in late June. Where
do we stand on getting a CFO in place, given how I see the
importance of that position?
Ms. Warren. Right. And I'm glad you asked about this
because this is very important, and in the startup phase, we've
also had to lean on Treasury to make sure that we were
following every letter of the law and the spirit of the law and
doing this appropriately. Would you permit me the tiniest
little diversion? You stop me obviously at any second.
I actually want to start with COO because in the way I
understand this, this becomes even more important. What we did
for the chief operating officer at the bureau, who is the
person who is responsible for the----
Mr. Platts. The director----
Ms. Warren. We hired someone who has been the head of a
very large financial institution. She has been responsible for
a budget, has been the person who has had to sign off on a
budget, and I may get my numbers wrong, I believe it's over a
billion dollars. She has been responsible for the management of
tens of thousands of people. We hired her. She had not had
government experience. What she had had was private sector
experience and private sector experience in keeping up with
every nickel and making sure it was well spent.
We have an acting chief financial officer who has really
been terrific and who has worked, not only to make sure we have
the appropriate internal procedures but with Treasury and their
existing officers and I should say has worked with the
Inspector General for Treasury and the Inspector General with
the Fed so that we were getting external review of how we were
setting our procedures up.
Mr. Platts. Your mentioning COO was kind of in line with
what I wanted to follow up in. Glad to hear the quality of the
person in that position, and hopefully someone of equal caliber
will be in the CFO permanent position. The one concern I guess
is, one, on the alignment, emphasizing that direct access in a
major corporation, any CFO has to be directly tied to the CEO,
you know, to the director of the whole bureau. Is delineating
within the organization, great you have a good COO, but
structurally make it clear that that CFO is directly, you know,
reporting, you know, to the director because of the importance
of financial management. We're talking hundreds of millions of
tax dollars or fees and dollars ultimately that your bureau is
going to be handling.
Ms. Warren. The organization chart, as it is set up right
now, is that the CFO reports directly to the COO, who in turn
reports directly to the director so----
Mr. Platts. I would encourage and when we sit--it is
because you are a new organization, when we set up the
Department of Homeland Security Under Secretary of Management,
we had a dual report where there was a CFO reporting there, we
also had it set up going directly so that it sent a message to
the whole agency that CFO has direct access to the director,
you know, does go to the COO, but we want to make sure it's
sending a message, and it does relate to the issue that I
know--I don't want to be a part of the budget justification
issues.
Another way you send a priority is how much is being
allocated to the CFO's operation and internal control, and here
at the base level, you know, at the ground level, setting up
really strong internal controls so that when you get into the
audits by GAO, you know, your financial reports, you're not
playing catch up because you didn't have good systems in place.
I talk about internal controls over and over and over. So some
suggestions in that area of financial management, I hope you'll
take to heart as you move forward.
Thank you, Mr. Chairman. I yield back.
Ms. Warren. And I just want to--could I say, thank you very
much, Congressman.
Mr. Platts. Yep.
Ms. Warren. Thank you.
Mr. McHenry. Mr. Davis of Illinois for 5 minutes.
Mr. Davis. Thank you very much, Mr. Chairman.
And thank you, Professor Warren, for your service to the
country, for your patience, and for being here with us this
morning.
When you appeared the last time--and let me just say that I
believe that consumer protection, consumer education, is one of
the most valuable functions that our government can perform for
its citizenry. And when you appeared before us the last time,
on May 24th, the title of hearing was, ``Who's Watching the
Watchmen?'' But I think a better question is, who is watching
the banks? We certainly aren't. I wonder if the committee as a
whole is ever going to watch the entities that have admitted
that they need watching.
This committee has now summoned you twice to appear before
us. We have sent a massive document request seeking all manner
of emails, reports, and other items. At the same time, we have
not brought the mortgage servicers in even one time to answer
for their conduct. We have asked JPMorgan, that they be invited
to testify, but the chairman did not agree to that request. Nor
has the committee made a single document request to a mortgage
servicer the entire year.
I want to ask you to weigh in on this, but it seems pretty
obvious that our priorities are somewhat backward.
Here is what I will ask you about. On July the 11th,
Newsweek published an article entitled, ``The Billion-Dollar
Bank Heist.'' It notes that the same financial institutions are
spending vast amounts of time and money to impede the Dodd-
Frank Act and the Consumer Bureau from becoming fully
operational and effective.
As a matter of fact, I will read from that article. It
states that, ``JPMorgan Chase is on track to spend $7 million
this year on lobbying. Wells Fargo, which spent $5 million last
year, spent $1.9 million on lobbying in just the first quarter
of this year. None of that includes the millions in campaign
contributions the banks and trade associations have poured into
the coffers of those Members of Congress who sit on the
relevant committees responsible for financial reform,
especially those willing to take on Dodd-Frank,'' end of the
article.
Professor Warren, these are the same two institutions that
publicly admitted to wrongdoing in State and Federal mortgage
servicer investigations, is that not correct?
Ms. Warren. Yes, sir.
Mr. Davis. As I understand it, JPMorgan admitted to
overcharging thousands of Active Duty military personnel
millions of dollars in fees and interest charges, in violation
of the Servicemembers Civil Relief Act. Is that correct?
Ms. Warren. Yes, sir.
Mr. Davis. And Wells Fargo admitted to flaws in 55,000
foreclosure proceedings.
And I guess my question is, do you think this kind of
action and activity has anything to do with what has been their
opposition to your agency becoming fully operational and
carrying out its duties and functions?
Ms. Warren. Congressman, it was a hard fight to get this
agency passed into law, but I thought, once it had passed and
it had become the law, that this kind of fighting would be
over, at least for a while, and we would have a chance to get
on with protecting families. Obviously, I did not fully
understand the politics of the situation.
Mr. Davis. Well, let me just thank you again for your
service, because I believe that this agency is designed to
function in the public interest and that you have demonstrated
throughout your career that you are a public-interest-oriented
individual, and that is exactly what you will do. I thank you
very much and appreciate your service.
Thank you, Mr. Chairman. And I yield back the balance of my
time.
Ms. Warren. Thank you, sir.
Chairman Issa [presiding]. I thank the gentleman.
Professor, you have been very kind with your time. Would
you like a short break before we do the last few or----
Ms. Warren. If we have a few more to go, could I just be
excused for about 3 minutes?
Chairman Issa. Absolutely. We will take a 5-minute recess.
Ms. Warren. Thank you.
[Recess.]
Chairman Issa. The hearing will come back to order.
Professor Warren, we are down to just the last few. The
ranking member and I have agreed that we will conclude by
approximately 1 o'clock. You will be dismissed, and then we
will talk about other matters. And I want to thank--that may be
a very short, quick ``thank you, goodbye,'' so I want to thank
you in advance for your participation.
I have tried to let the clock run so that you get full
answers. Hopefully I have never cut you off. This has been the
kind of hearing, at least as to your participation, that we
strive for, and we appreciate your being here.
And, with that, we recognize the gentleman from Florida,
Mr. Mack, for his round of questioning.
Mr. Mack. Thank you, Mr. Chairman.
And I also want to thank you for being here and, your
testimony, not once, not twice, but a third time. And so I
appreciate that very much.
And I want to move in to another area a little bit, and
maybe you can help me understand a few things. And just to be
clear, I oppose the legislation. I don't support the
legislation. If my comments appear to some to be political in
nature, it is because I don't trust what it is that we are
doing. So, just wanted to put that on the table at the outset.
Let me ask you--start with this. Are you still actively
campaigning for your preferred settlement?
Ms. Warren. Congressman, you mean in the mortgage servicer,
where the mortgage servicers----
Mr. Mack. Yes.
Ms. Warren. This is an effort that is led by the Department
of Justice----
Mr. Mack. No, but--all right. But are you still actively
campaigning for your preferred settlement?
Ms. Warren. Am I still--no, Congressman, but I am not--I
just want to be careful about the premise here. I am not sure
what kind of campaign I have ever had, but----
Mr. Mack. Well, haven't you been--I mean, isn't there a
preferred settlement option that you think is right, and
haven't you been out kind of campaigning around the country for
that?
Ms. Warren. Around the country?
Mr. Mack. Yeah, the country.
Ms. Warren. On a settlement for mortgage servicers? No,
sir, I don't think so.
Mr. Mack. Okay, so you haven't been campaigning for a
preferred settlement? Have you or haven't you?
Ms. Warren. Congressman, I don't think I understand what
you mean.
Mr. Mack. Okay. Have you been engaged in trying to convince
people that your point of view is right in a settlement?
Ms. Warren. Congressman, I am always engaged in trying to
persuade people that my point of view is right.
Mr. Mack. Okay. But have you been doing that with attorney
generals around the country or private industries, banks?
Ms. Warren. I don't think I have had a conversation with
anybody in private industry about mortgage settlement for
months. And I----
Mr. Mack. But you have stated that----
Ms. Warren. I don't think.
Mr. Mack [continuing]. These are in negotiations with the
private parties, are entirely directed by the Department of
Justice, by the States' attorney generals, and by other Federal
agencies.
Ms. Warren. Congressman, I think, if I am following the
same thing you are reading, the negotiations over settling the
wrongdoing----
Mr. Mack. All right. Let me--wait, I am sorry, because my
time is going to go by, and I want to get to some specific
things.
So you have been saying that you are only giving advice.
Does that advice mean to seek out meetings with States,
attorney generals in different States?
Ms. Warren. If it is helpful, I have been glad to talk with
attorneys general, sir.
Mr. Mack. Does that mean you give advice to private parties
to the settlement?
Ms. Warren. To private parties?
Mr. Mack. All right, maybe this will----
Ms. Warren. No, sir.
Mr. Mack [continuing]. Help you. I would like to put an
email document up on the screen, if we could.
Number one, please?
This is a copy of an email from Iowa's assistant attorney
general to someone with CFPB on February 24, 2011, where he
states that, ``It is my understanding that you,'' Ms. Warren,
``would like to make a loan mod presentation to the executive
committee,'' which is referring to the National Association of
Attorneys General. ``We would like to do this.''
Did your presentation give advice on the mortgage
settlement?
Ms. Warren. Congressman, I think you might want to look at
the email that preceded this. Because, as I recall, there is an
email that precedes this that----
Mr. Mack. Did you give advice on your preferred settlement?
Ms. Warren. Congressman----
Mr. Mack. All right.
Ms. Warren [continuing]. I gave advice----
Mr. Mack. Let's go to the----
Chairman Issa. You know, I would ask unanimous consent that
the gentleman have 2 more minutes. In return, please, Ms.
Warren, go ahead and finish your answer. I want it to be the
time necessary to get a full answer and the additional followup
questions. Additional 2 minutes.
Ms. Warren. I will try to be as right to the point.
The first point is, I think this email says that I was
trying--I was soliciting to make a loan presentation. And since
you had started your question there, I simply wanted to say, I
think if you look at the earlier emails, there may have been
some misunderstanding. I was asked by the attorney general of
Illinois, I think it was, to make this presentation. It was
their idea.
The second question about did I talk with the attorneys
general and give them advice, yes, I certainly did. Yes, sir.
Mr. Mack. That you gave advice on your preferred
settlement?
Ms. Warren. Sir, I said things I thought were right, yes.
Mr. Mack. Okay. But haven't you been saying that you
haven't been participating in these things? Hasn't your quote
been that you have been giving advice to the Secretary of
Treasury and other Federal agencies? But you have been avoiding
answering this pretty simple question. I mean, the question we
want to know is, are you out there trying to--part of the
negotiations on this settlement?
Ms. Warren. Congressman, on April 4th, I said, ``We have
provided advice to Federal and State officials regarding a
potential servicing settlement. In doing so, we have been an
active participant in interagency discussions, sharing our
analysis and recommendations in support of a resolution that
would hold accountable any servicers who violated the law.''
It also says in this letter, ``The consumer agency is not
conducting settlement negotiations with mortgage servicers.''
Mr. Mack. Okay. Have you talked to private--have you talked
to any private servicers, private industry, about the
settlement?
Ms. Warren. We have not engaged in negotiations with any
private--with any of those who are alleged to have violated the
law.
Mr. Mack. Okay. Let me ask you this.
If we can put up Document 4?
Here is an email from the chief executive officer at Wells
Fargo to you on February 25, 2011, with the subject,
``Mortgage.'' And he wrote to you, ``Would you be interested in
discussing what the press is reporting on speculated terms and
conditions to settle the mortgage servicing issues?''
You replied later that day, ``I apologize for not getting
back to you earlier,'' and then you gave him your cell phone
number to call over the weekend.
What did you and the CEO of Wells Fargo discuss about
mortgage servicing issues?
Ms. Warren. I started that conversation by saying that ``I
am not able to negotiate or discuss the settlement negotiations
with you in any way, shape, or form. I am sorry''----
Mr. Mack. And was that the end of conversation?
Ms. Warren. ``I am sorry, but I am not able to do that.''
Mr. Mack. And that was the end of the conversation?
Ms. Warren. Yes, sir, it was.
Mr. Mack. And then the last document, if we can put up
Document 5----
Chairman Issa. If the gentleman would make this his last
question.
Mr. Mack. This is my last question.
Document 5, in an email to--I believe it is Mr. Date, the
associate director of CFPB, to the executive vice president of
JPMorgan Chase on February 24, 2011, with the subject, ``Monday
agenda.'' And he wrote, ``Given persistent rumors and
headlines, I do not want this meeting to be construed as
relating to any potential settlement discussions or regulatory
enforcement actions. And I think that the meeting really has to
be off the record.''
Why was Mr. Date so worried about the meeting being
construed as relating to any potential settlement?
Ms. Warren. Well, he wanted to make clear, as we have with
all of the mortgage servicers whom we have spoken with them,
that we are not engaged in any kind of settlement negotiations.
As Mr. Date explained in his testimony and I am glad to
explain, we have been receiving information and requests from
people throughout the industry. We are standing up an agency,
and we are trying to understand how this industry works. But we
have been completely unambiguous in telling participants, ``We
are not part of the settlement negotiations.''
Mr. Mack. So you still stand by the fact that you are not
actively campaigning for your preferred settlement?
Ms. Warren. Congressman----
Mr. Mack. It is a ``yes'' or ``no.'' Yes, you are, or no,
you are not.
Ms. Warren. I just don't know what you mean by the word
``campaigning.'' If it means I think my ideas are good and I
would rather have people follow my----
Mr. Mack. And are you actively campaigning with the
participants?
Ms. Warren. I am not--we are not talking to the
participants about mortgage servicing.
Mr. Mack. Is there a potential----
Mr. Miller. Mr. Chairman, regular order.
Mr. Mack. Is there a resolution----
Chairman Issa. Wait. No. The gentleman, I apologize, but
your time really has expired.
Mr. Mack. Thank you.
Chairman Issa. With that, we go to the gentleman from Ohio,
Mr. Kucinich.
Mr. Kucinich. Thank you for being here, and thank you for
your service to the country.
Ms. Warren. Thank you.
Mr. Kucinich. I would like to go back to the way that you
see your responsibilities. What do you believe is the major
purpose of your job today in terms of protecting consumers?
Ms. Warren. The purpose of the consumer protection agency,
as I see it, is to give consumers a fighting chance in the
credit marketplace, to get enough basic information that they
can make their decisions about what products they want to use.
Mr. Kucinich. And is it your belief that, prior to the
creation of this agency, that consumers really didn't have a
fighting chance?
Ms. Warren. Congressman, I just think there is a lot of
evidence that they have not had a fighting chance in the credit
markets over the last decade and, in some cases, longer.
Mr. Kucinich. Would the proliferation in the past of no-
document and low-document loans come within that observation?
Ms. Warren. In my view, yes, sir.
Mr. Kucinich. What is the area that you intend to focus on
with respect to banking today? What are some of the most
important consumer services you would like to perform, A? And
B, what do you say to the public about, if they have a
complaint, how do they get it to you?
Ms. Warren. Yes, thank you, sir.
The first one is really about enforcement of current laws.
One part of the agency that I am enormously excited about is
that we will have bank supervision officers who will be in the
banks, the 111 largest financial institutions in the country,
very big financial institutions, checking to see if they are
complying with current laws.
This isn't about expanding the law. This is about taking
the 19 Federal statutes that are out there, that are
currently--7 different agencies, bits and pieces scattered
around--it is to bring it to one place. We will have people who
will be in those banks, looking at their books, looking at
their records, determining whether or not----
Mr. Kucinich. So you are functioning both proactively by
looking at the records but you are also functioning by
reference, people referring complaints to you?
Ms. Warren. Yes, sir.
Mr. Kucinich. And when you are in the banks looking at
their records, what are their statutory obligations with
respect to their compliance with you? And are you finding any
resistance?
Ms. Warren. Congressman, we are not there yet. We will go
for the first time--next Thursday is the first day that we will
be statutorily authorized to show up at the banks. Now, I don't
want to overpromise; we can't go to every bank on the first
day. But we are putting in place our plan for how to get out
there----
Mr. Kucinich. So walk me through that. Do you knock on the
door of the bank president? Do you call ahead of time? Do you
send them a letter? What do you do?
Ms. Warren. We send a letter. First, we have to do a lot of
internal work, partly because we have to do a serious risk
assessment.
Mr. Kucinich. Right. How many letters do you think you will
be sending out?
Ms. Warren. At the beginning, I anticipate we will probably
be sending--I am worried that Steve Antonakes, my head of bank
supervision, may fuss at me when I get back, but I am
anticipating it would be in the range of about 20 letters.
Mr. Kucinich. And would they go to banks based on their
annual revenue? Or how would you determine who you send it to?
Ms. Warren. Bank supervision actually takes in to account a
lot of factors about how much risk you think any individual
bank poses and how to assess those risks. As you know, the
risks could sometimes be that it affects a lot of people but
only few dollars; it could be that it affects only a few people
but really big dollars. Some banks have----
Mr. Kucinich. When you start--that you sent out the
letters, it is essentially a private process?
Ms. Warren. Yes, sir.
Mr. Kucinich. So that no one gets smeared because they get
a letter, but they are warned that they are expected to
cooperate.
Ms. Warren. Yes, sir.
Mr. Kucinich. So then, how many people arrive at a bank,
let's say?
Ms. Warren. Well, it depends. These are--as you know, we
are dealing with the largest financial----
Mr. Kucinich. Right.
Ms. Warren [continuing]. Institutions. But a team could be
anyplace from 4 or 5 people maybe up to 20, 30. It depends on
the kind of product we are trying to supervise at any given
moment.
Mr. Kucinich. One last question.
Ms. Warren. Yes, sir.
Mr. Kucinich. As you get the agency up and running, is
there a number or--and maybe you already said this--an address
that people can communicate to, an email or a Web address they
can contact to file a complaint?
Ms. Warren. So let me say two things very quickly on that.
We have a Web site that is up and running right now,
www.consumerfinance.gov. Anyone----
Mr. Kucinich. Www.consumerfinance.gov.
Ms. Warren. Right. One word, consumerfinance.gov. Not very
catchy, but--people can email us now.
We will have a formal complaint process in place starting
on July 21st starting with credit cards. We are going to do
this by product. We are trying something very innovative here.
We will roll out the first one on July 21st, and the others
will follow, product by product.
Mr. Kucinich. Thank you very much, Ms. Warren.
Ms. Warren. Thank you.
Mr. Kucinich. Thank you, Mr. Chairman.
Chairman Issa. I thank the gentleman.
The gentleman from Michigan, Mr. Walberg, is recognized for
5 minutes. And you are estimated to be the last one.
Mr. Walberg. Well, better last than not at all, right?
Thank you, Mr. Chairman.
And thank you for your endurance, Professor.
In a press release, it has been noted that the CFPB has
determined that it will consider supervising such things as
debt collection, consumer reporting, consumer credit and
related activities, money transmitting, check cashing and
related services. Is this list now complete?
Ms. Warren. So, Congressman, I appreciate your asking about
this. As you recall, the way Dodd-Frank was set up is that in
the nonbank financial institution space we will automatically
be required to supervise three types of institutions, no matter
their size: private student lending, payday lending, and
mortgages.
For the rest of consumer financial services that are not
handled by banks, we are required as an agency to supervise the
largest--I think it is called ``large''--the large
institutions. We are required, again by Dodd-Frank, to set up a
rule to determine what that is and what areas it goes in to.
What we have started doing is--we are not in the formal
rulemaking process yet. We are bringing in people----
Mr. Walberg. When will that be?
Ms. Warren. The formal rulemaking process?
Mr. Walberg. Yes.
Ms. Warren. I am sorry. First, we have to get better
information before we are ready to do a formal rule. So we have
started the process by bringing in industry participants,
community banks, credit unions, large financial institutions,
trade associations, consumer groups----
Mr. Walberg. Any specific criteria that you use in
determining these, other than largeness?
Ms. Warren. Well, this is the interesting question, given
the open texture of Dodd-Frank on this point. We have actually
been talking with all of the stakeholders about what is the
right approach here, and we have gotten some very creative
ideas. We are trying to work with them, we are trying to work
with industry to find the right way to do this out of the box.
Mr. Walberg. Well, the statement of the openness of Dodd-
Frank doesn't give me a lot of comfort about the--not simply
the consumer protection, but the protection of liberty----
Ms. Warren. Fair enough, sir, but I----
Mr. Walberg [continuing]. Choice, individual freedom, and
self-determination as well. So I guess that is why I asked the
criteria. But you indicated that it is fairly broad.
Ms. Warren. I want to say that, as best I can, we have
gotten enormous support from the industry, from consumer
groups, from banking groups for the process we are using to try
to embrace everyone's participation in this and to give them
all an opportunity to help us hammer out a rule that works best
for everyone. That is what we are working on right now, sir.
Mr. Walberg. I appreciate that.
Let me continue that. How will the Bureau undertake the
analysis required under Dodd-Frank, such as the impact that a
rule or regulation will have on consumers? And what legal
protection may already be in place for consumers before the
Bureau can promulgate a rule or regulation?
Ms. Warren. Well, I think the best way to say this is we
are building a strong research function. We have--it is our
view that it is our responsibility to study and understand how
markets are working, what consumers actually face, what
community banks actually face in terms of their regulatory
hurdles, how markets operate.
We will be a data-driven agency. I think we proved that
starting back in February, before we were even formally
launched, when we started a process to do an analysis of the
CARD Act that had passed Congress. And we brought in
stakeholders from across the industry, we developed data, we
asked for their data so that we could evaluate----
Mr. Walberg. Let me ask just in the remaining 43 seconds I
have, how much weight--on another area--how much weight will be
given to the fact that many products and services that the
Bureau could potentially regulate are already well-regulated by
the States, bringing the States into the whole equation here?
Ms. Warren. It is certainly a part of our consideration how
much regulation already exists. And if there are no problems,
then there are no----
Mr. Walberg. How much weight does that play, though, in
making that determination?
Ms. Warren. Well, it is--big. I mean, it is important, it
is heavy, it is very relevant, how much regulation, how
effective the regulation is, how well-enforced the regulation
is, how consistent the regulation is throughout the country.
Those are enormously important to us as we go forward.
And I should say, in our early meetings with the industry,
with consumer groups, this is exactly an issue that has been
raised. And there were some differences of opinion between, for
example, the community banks and the non-regulated financial
services industry about how much effective regulation was
occurring at this point.
Mr. Walberg. I appreciate that. I know my time has ended. I
would just encourage you to put heavy weight on the States,
being that the original intention was not for the Federal but
for the States to have that type of control.
Ms. Warren. I understand----
Mr. Walberg. Thank you.
Ms. Warren [continuing]. And I appreciate that.
Chairman Issa. I thank the gentleman.
Professor Warren, as I predicted, additional Members have
returned from their other committee assignments. Could you be
kind enough to give us up to another 15 minutes?
Ms. Warren. Of course, Congressman. I have cleared my
schedule, and I am here for as long as you need me.
Chairman Issa. It has still been a long day for you.
What I would like to dispense with during this intervening
period is an announcement that the ranking member and chair
have agreed to a series of joint letters related to,
specifically--and this is germane to the area you will be
involved in a week from now--related to the members of the
military and some of the loan activities.
We are going to inquire in different ways to all 10
entities, financial entities, some of which are banks, some of
whom have given responses, some of whom haven't. Additionally,
we are going to make a request to the Veterans' Affairs
Committee, who apparently has done a quite a bit of discovery,
which is why we thought much of this was already done--bring
that together, and then see where we go from there.
I now recognize the gentleman from Maryland.
Mr. Cummings. Mr. Chairman, I want to thank you for your
cooperation. We are just merely trying to make sure we zero in
on this problem. And I know you share my concerns and all of
our concerns. And so I really appreciate this.
And, with that, I will--I guess we are--I withdraw my
motion.
Chairman Issa. I thank the gentleman.
And, Professor Warren, this is an area that the committee,
although it doesn't have exclusive jurisdiction, does want to
make sure that this historical event is never to be repeated
when it comes to our military overseas.
With that, I recognize Mr. Braley for his round of
questioning.
Mr. Braley. Professor Warren, I heard you calling my name
when you raised concerns about financial products that cannot
be read by average customers. And the reason I say that is
because, on October 13th of last year, President Obama signed
into law my Plain Writing Act that I fought 4 years to get
through both the House and the Senate. And that means that on
October 13th of this year, every Federal agency is going to be
required to use plain language in covered documents, using
writing practices that are clear, concise, well-organized, and
written for the intended audience.
And this is something that has broad, bipartisan support
but is part of what is endemically wrong with the way we write
regulations and the way that financial products are written.
And I would give you strong incentive to take a look at plain
language and plain writing standards as a way of looking at how
consumers can be protected in a much more powerful way and hope
that that is something that you would consider.
Ms. Warren. Congressman, could I just add, I have already
looked, and I am a huge advocate of the notion, not only that
financial services companies ought to be required to write in
plain language, but that the government itself should be, as
well.
And I want to say, it is an uphill battle. It is hard to
push--even within our agency. We have well-intentioned folks,
but we have all learned a different way of thinking about
regulations, of reading regulations, of writing them.
I have talked to community banks around the country who
say, ``I want to comply with the law. I can't read it. And I
can't afford to hire an army of lawyers to come in and read it
for me and then tell me what I am supposed to do.''
I can tell you, the direction we want to go is exactly
where you are on this. I can also tell you, it is a battle to
get there. It is hard. But it is something I am very committed
to. I am committed to it on behalf of the American people, on
behalf of community banks and credit unions and others who
really suffer under the notion of, you are legally obligated to
do something and you can't figure out what it is.
Mr. Braley. As the ranking member of the Veterans' Affairs
Economic Opportunity Subcommittee, I have participated in
hearings dealing with this underlying problem of these loan
complications to our service men and women, and I attended the
forum that we have been talking about here today.
But I have a concern, and my concern is, we hear a lot
about ``too big to fail,'' but as it comes to providing some
level of responsibility for these lenders, I fear we have
gotten too big to punish. Because when you look at the
magnitude of this problem and you look at the existing
sanctions to punish it, it is obvious that it is not achieving
its desired effect.
And I want to give you an example. I went back to Dubuque,
Iowa, about 2 months ago for a welcome-home ceremony for a
young Marine who lost both of his legs above the knee. And
thousands of people turned out that day to line the route from
the airport in Dubuque to his home. And we passed by many
community banks and credit unions that had signs out front
welcoming him home.
And this gets down to the problem of who holds the paper in
our increasingly complex mortgage industry. Because I guarantee
you, if one of those local banks that we passed had engaged in
the types of practices we talk about at these hearings, they
would have been run out of town by the people lining that
parade route.
And I am concerned because the American people are not as
outraged about this practice as you and I are and members of
this committee are. And it is an insult to the people who put
their lives on the line every day that we allow this to
continue while these institutions continue to profit.
And I will yield back.
Mr. McHenry [presiding]. Mr. Farenthold of Texas is
recognized for 5 minutes.
Mr. Farenthold. Thank you very much.
I would like to yield my time back to you, Mr. McHenry.
Mr. McHenry. Thank you. I thank my colleague for yielding.
Ms. Warren, you have previously written, ``Big corporate
interests, led by the consumer finance industry, are devouring
families and spitting out the bones.''
Ms. Warren. Yes, sir, I sure have.
Mr. McHenry. Now, previously, this committee had a number
of questions about whether or not you would ban products. Now,
has your opinion changed in this time? Because it seems like
what your rhetoric was previously was that there are products
that should be banned.
Ms. Warren. No, Congressman. Let me see if I can say this
more clearly.
There are a lot of tools available to make markets work
better for American families. It does not require--banning is
not the only tool. In fact, it is probably not nearly the most
effective tool.
I think the best place to start in changing a world in
which big corporate interests chew up American families and
spit out the bones is to make prices clear, to make risks
clear, to mow down fine print so people can make head-to-head
comparisons, looking at three or four credit cards, three or
four mortgages.
I believe in the power of individual Americans to be able
to make good decisions, and I believe in the power of markets,
but they don't work if people don't have good information.
Mr. McHenry. Well, okay. And, actually, I think you sound
very similar to what I have said in Financial Services over and
over and over again. And so I like what you just said.
Is it your intention that the CFPB would not ban products?
Or can you say--can you make some statement about intention?
Because we have a lot of folks in the consumer finance industry
and those that are accessing those products that have that
concern about your bureau. And so, if you can make some
statement to that, I think that would be a positive in terms of
certainty, that that is not an intention you have.
Ms. Warren. We have made all of our priorities clear, and
we have no present intention to ban a product. But we are still
learning about what is out there. And the world keeps changing
and new things keep developing out there. It is a tool in the
toolbox, and that is where it should stay.
Mr. McHenry. Okay. So you still think that the ability to
ban a product should be--it should continue for the CFPB, that
that rule should--that power should still reside with the CFPB?
Ms. Warren. I think that Congress was smart when they put a
lot of tools in the toolbox. And I think, with the help of
industry, with the help of consumer groups, with the help of
good research, we are using those tools--or we are prepared to
use those tools in very effective ways.
Mr. McHenry. So the shorter way to say that is, yes, that
you think that that power should continue to reside----
Ms. Warren. I am sorry, sir. Yes.
Mr. McHenry. Okay. Thank you. Thank you for your testimony.
With that, Mr. Farenthold, I would yield my time back to
you. And I think Mr. Guinta has----
Mr. Farenthold. I will yield the remainder of my time to
Mr. Guinta.
Mr. Guinta. Thank you very much.
Thank you, Mr. Chairman.
I want to follow up on two specific items, number one an
item that Ms. Buerkle had been focusing on. I just want to make
sure we were clear.
She had talked about possible concerns about raising
compliance costs. And I think you had said that your goal is it
to reduce compliance costs. Can you just affirm that the stated
goal and the expectation is it to reduce costs for credit to
consumers?
Ms. Warren. Our first item that we are working on out of
the box is to reduce the costs for the credit issuers, yes,
sir.
Mr. Guinta. Okay. So if in the next year they come to
Congress and say, ``Look, that hasn't happened, the cost is
going up,'' you would like to hear from us.
Ms. Warren. Congressman, I suspect we will hear from them
even before you do.
Mr. Guinta. And then, second, you talked about greater
disclosure rather than--and this is an important point--greater
disclosure rather than banning, I think you said earlier in
your testimony today.
Ms. Warren. Yes, sir.
Mr. Guinta. You just said you believe in the power of
markets, we need good information. I, too, share that belief
with you and with the chair. But you also said banning should
be a tool in the toolbox. Can you give me an idea of when you
plan to take that tool out of the toolbox?
Ms. Warren. Congressman, we don't have any present plans. I
don't--I can't identify a specific product. But remember, this
is an agency we are building over a very long arc. And it is an
agency that is built in the aftermath of a consumer credit
industry that went wild. We could sit here--they invented new
products, new approaches, new ways to surprise people, to sell
people products that the issuer knew was going to explode, and
never make that clear to the customer.
Whether or not there will be a day when a creditor will
figure out, I can make a fast buck with something that is so
lousy that the answer is it should actually be banned, that day
could come.
Mr. Guinta. Okay. I thank you.
And I see the time has expired.
Chairman Issa [presiding]. Professor Warren, we are going
to wrap this up. And if it is okay, I would like the ranking
member and I to have a few minutes with you afterwards.
Additionally, I would ask at this time, would you be
willing for those who kindly said they will submit their
questions for the record, would you be kind enough to answer
them for the record?
Ms. Warren. Of course, Mr. Chairman. We would be delighted.
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Chairman Issa. With that, I recognize the ranking member.
Mr. Cummings. Thank you very much, Mr. Chairman. I will be
very brief.
Professor Warren, I want to simply thank you. My mother
used to say, ``Thank you for all that you are, but also thank
you for all that you are not.''
When you were in Baltimore, you told a story about how you
came up and that it wasn't easy and that you have never
forgotten your own struggles. And, in part, you were very
fortunate to get a good education and to end up at Harvard. And
I just want to thank you for never forgetting what you have
been through, so that you might use it as a passport to help
other people.
I have met a lot of people in my life with a lot of
passion. One of them was the President of Colombia, South
America, Uribe--so much passion. And your passion is just
phenomenal.
But I also thank you for doing something else; I thank you
for synchronizing your conscience with your conduct. And so, I
don't know, you know, what your future may bring, but if it
were to end today, the fact is that you have already had a
tremendous impact on families and generations yet unborn.
And I just want you, when you walk out of here, to know
that there are a whole lot of people who really, really
appreciate you and what you stand for. And they are inspired by
you. And that is why, you know, in Baltimore people were--
literally, we had to turn people away. Because they just wanted
somebody--somebody--to stand up for them. That is all they
wanted. And you have taken on that role. I know it has not
always been easy. I know there have been some difficult
moments, but we thank you.
And I am so glad that we were able to have this hearing,
because, like the chairman said, this is the kind of hearing
that, you know, we should have, where you actually get a chance
to answer the questions, to lay out your goals, where you are,
what you are trying to do.
But anyway, as I said before, we thank you.
Chairman Issa. With that, the hearing stands adjourned.
[Whereupon, at 1:16 p.m., the committee was adjourned.]