The unofficial czar of the new Consumer Financial Protection Bureau, Elizabeth Warren, told Congress last week that her organization is "the most constrained and the most accountable agency in government," and then repeated similar claims on CNBC Tuesday. If nothing else, you have to admire her nerve
That's nice. However, the fact of the matter is that the CFPB has no actual power in the form of actually doing anything other than setting forward more "rules" that will be broken without consequence.
There are already plenty of laws that constrain all the conduct that caused the bubble in housing and the subsequent collapse. It's illegal to sell loans to someone while knowing that the representations you made are not met by the borrowers. We have sworn testimony that 60% of the loans sold were in such a state in 2006, and 80% in 2007. We also have private suits that assert 90% fraud rates in this regard in some of these securities. Number of people and banks indicted for selling this paper while knowing it was trash? Zero. How long would a local gas station manage to sell fuel without being put out of business and the owner jailed if 80% of every gallon pumped was water? If 80% of the roofs put on by a contractor were defective? If 90% of the eggs in a store were rotten? If 80% of the tires sold by the local store would blow out on the highway? If 90% of the cars sold by a manufacturer would explode when hit from behind?
Ms. Warren was also disingenuous about the bureau's role in the ongoing mortgage settlement negotiations with banks, telling Congress the Justice Department and other agencies asked for the bureau's "advice." She added the bureau "will not be a party to any formal settlement," which is technically true because its powers don't vest until July. But that raises the question of the legality of its involvement in the negotiations now.
What's wrong with talking to people? Is there some special exemption in the First Amendment for people the Wall Street Journal doesn't like? The last time I checked it was supposed to apply to everyone.
Incidentally, don't take this as an endorsement of the so-called "settlement negotiations." There should be no settlement. What there should be is prosecutions for each and every felony that has taken place. Every single perjured document should result in a criminal charge. If there's a pattern of conduct established then Racketeering should be investigated, charged, and tried and if proved then treble damages and criminal sanction should be imposed.
We have plenty of laws already. The problem isn't that Elizabeth Warren is putting together the CFPB, it's that the entire concept of a CFPB is a joke and a fraud upon the public in the first instance. The more byzantine you can make a set of laws or regulations the more you can wave your arms and pretend to be doing something important while accomplishing nothing at the same time the Jester is stealing all the cookies right out from under your nose.
The banking industry has turned this sort of Washington DC hand-waving into an art form. We have seen money laundering, passing of funds to and from barred nations such as Iran while intentionally obscuring the source or destination of funds, crooked sewer contracts in Jefferson County Alabama and well over a trillion dollars in bogus mortgages made and peddled worldwide. Any of these, standing alone, should have been enough to shut all of these firms down.
The real scam is that we continue to fall for the false claims and people screaming and shouting about that which will do nothing to stem the scams and frauds, for the simple reason that we need no new laws to sanction the conduct that took place.
Without a prosecutor who will actually prosecute all we're doing is making noise to divert the public's attention while the thieves steal all the loot.
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