While lawyers are still working on the scope of its authority, the new agency is already hiring and initiating research and is already causing providers to change their behaviour. Focussed on clarity, it will be deeply reliant on outreach and collecting data about how consumer markets are working. Can Europeans learn from the US direction and ensure that funds are also allocated towards research and understanding what's happening in credit markets and the kinds of products that are sold? Can regulatory inquiry in the US and the EU take our coalition’s Principles of Responsible Credit into account?
Standing Up the Consumer Financial Protection Bureau
Posted by Elizabeth Warren on October 28, 2010 at 06:00 AM EDT, www.whitehouse.gov/blog/2010/10/28/standing-consumer-financial-protection-bureau
A few weeks ago, President Obama asked me to get to work starting the new Consumer Financial Protection Bureau. He was clear about his goal: Level the playing field for American families and fix the broken consumer credit market—and do it as quickly and effectively as possible.
Today, I’m in California to continue conversations with families, financial industry leaders, consumer advocates, and others about the challenges and opportunities of setting up the new agency. Over the past month, I have listened more than I have talked, and I have learned a great deal about the need for change and the places where change should come first.
While I am in California, a new layer in the conversations will begin. This morning, I will meet in Silicon Valley with technology industry leaders to solicit advice about building a state-of-the-art, 21st century agency that harnesses some new tools that exist in our hyper-connected and digital world. Tonight, I will deliver a speech at the University of California, Berkeley exploring key ways that information technology might be used to propel the consumer agency forward.
I think the tools that can be at the new agency's disposal will have at least three kinds of implications. First, information technology can help ensure that the new agency remains a steady and reliable voice for American families. The kinds of monitoring and transparency that technology make possible can help this agency ward off industry capture.
Second, technology can be used to help the agency become an effective, high-performance institution that is able to update information, spot trends, and deliver government services twenty-four hours a day, seven days a week. If we set it up right from the beginning, the agency can collect and analyze data faster and get on top of problems as they occur, not years later. Think about how much sooner attention could have turned to foreclosure documentation (robo-signers and fake notaries) if, back in 2007 and 2008, the consumer agency had been in place to gather information and to act before the problem became a national scandal.
And third, technology can be used to expand publicly available data so that more people can analyze information, spot problems, and craft solutions. When these data are made available – while also, of course, protecting consumer privacy, shielding personal information and protecting proprietary business information – a shared opportunity arises between the agency and people outside government to have a hand in shaping the consumer credit world.
I never forget the central mission of the new consumer agency: to level the playing field for American families in the marketplace for consumer financial products and services. The agency will have rule making authority and supervision powers, and it plans to use them. But I want to explore every tool that might repair the broken consumer credit market, and technology can play a key role in creating a more resilient agency and empowering consumers to engage in their own enforcement of market norms.
As with anything truly new, we will have to take some risks. But building this new agency gives us a chance to create a voice for families in Washington and to change the way Americans interact with government and their expectations of what government can do for them.
I look forward to more conversations.
Q&A with Elizabeth Warren: 'The changes are starting now'
The Harvard professor appointed to set up the Consumer Financial Protection Bureau says the new agency is already making a difference.
October 26, 2010|By Jim Puzzanghera, Los Angeles Times, http://articles.latimes.com/2010/oct/26/business/la-fi-elizabeth-warren-20101027
Reporting from Washington — On the fifth floor of an office building near the White House, consumer advocate Elizabeth Warren has begun shaping the centerpiece of the recently enacted Wall Street reform law — the Consumer Financial Protection Bureau.
Both Warren and the new agency are controversial.
Most Republicans and much of the financial industry opposed creation of the agency, which will have broad authority to write and enforce rules covering mortgages, credit cards and other consumer lending products.
Many of those same people also opposed making Warren the director of the powerful agency, calling her too much of an activist. President Obama decided to avoid a Senate confirmation battle and last month appointed Warren to dual Treasury Department and White House advisory positions to launch the agency, which begins operations next July.
Warren, 61, a Harvard Law School professor, sat down with The Times this week to discuss her priorities and the financial issues facing consumers. The edited transcript:
When do you think consumers will start seeing the impact of this agency?
Now. The fact that the agency is now in place means that a number of credit providers are starting to reexamine their business models for long-term sustainability in a world with a cop on the beat. So I think the changes are starting now.
Can you point to any specific changes?
Look at the credit card offerings online and note how many are trying to advance the notion of clarity, simplicity and the absence of tricks or traps. That's a direct response to the impetus that created the consumer agency.
Is disclosure your priority?
No, it's clarity. Disclosure has come to be a dirty word. Disclosure has become like shrubbery, a dense thicket of words that are a good place to hide tricks and traps. Clarity is about emphasizing the key pieces of information that someone needs to know: price, risk, easy comparison of other products.
Many in the financial industry strongly opposed creation of this agency. Should they be afraid of this agency?
It depends on their current business model. If they make money from tricks and traps, they will have a problem. But if they want to provide services to the customer that are valuable in a straight-up, apples-to-apples comparison, they will do great with the new agency.
One concern is whether you think people are capable of making the right financial decision or do some products need to be banned.
I have great faith in the capacity of people to make good financial decisions — when they have good information. No one makes great decisions — consumers or businesses — if the relevant information is hidden from view. This agency is designed around the premise that with good information, consumers can make good decisions for themselves, their families and ultimately for the economy.
What's your priority in getting this agency running?
It's to build into the bones of this agency service to American families. This agency must always belong to the American people, not to the industry it regulates. That happens in every piece of the building process, from developing an organization chart that draws deeply on data about how consumer markets are working through outreach to the many constituencies that are profoundly affected by consumer credit. It's an A-to-Z attitude that this agency should drive toward … making credit products easy to understand and easy to compare.
You're not the director of the agency. Are you still interested in that position?
Right now, my plate is so full in trying to get this agency started that I'm not focused on that question.
Do you believe you have the authority to take actions until a director is in place, including writing rules?
The lawyers are still working on the scope of the authority. For now, we have plenty of power to do what needs to be done to get started. We're setting up the agency, hiring, initiating research. There is so much that needs to be done, and it needs to be done now.
Had this agency existed 10 years ago, would we have the foreclosure problems that we have now?
No. If this agency had been in place a decade ago, the subprime mortgages that were sold to families across the country and that ultimately cost so many of them their homes would never have been marketed. Without those subprime mortgages fed into the system, the housing bubble would not have inflated with such speed, and an asset securitization market would not have … grown to such gargantuan proportions, built on a fundamentally unstable base.
We might still have had a housing bubble, but it would have been modest and most families would have survived without significant disruption. Too-big-to-fail would not have entered the lexicon, at least not through home mortgages.
What are the best ways to try to prevent a recurrence?
It starts with research, understanding what's happening in credit markets and the kinds of products that are sold to American families and insisting on some basic principles. If a customer can't tell the price or the risk easily and can't make an apples-to-apples comparison among products, then something is wrong. That's where regulatory inquiry should start.
Do you support a nationwide foreclosure moratorium?
Right now my money is on the attorneys general [who have launched a joint investigation in all 50 states]. Foreclosure rules differ from state to state, and they are in the best position to determine who has and who has not followed the law.
Do you think some consumers might be surprised that you are not advocating a broader pause on foreclosures while bank paperwork problems are being worked out?
This agency will not veer from its support of American families, whether it's in the foreclosure crisis or elsewhere. But no one would want this agency … to act before it had collected all of the necessary data and thought through the options. The attorneys general are moving fast, and at this moment, I think that's the right response …with emphasis on "at this moment."
Are you concerned about what Republicans might do should they take majority control of the House or the Senate?
This agency has enemies, political and economic. That won't change what I do. I'll keep working every single minute to build a strong, independent agency to represent American families.