Wall Street banks reaping profits and paying bonuses while the rest of the country struggles shows “we still have a problem” with economic disparity, said Elizabeth Warren, the Obama administration adviser responsible for setting up the Consumer Financial Protection Bureau.
“This just staggers me; I mean, I just don’t have words to describe what this means,” she said in an interview for Bloomberg Television’s “Conversations With Judy Woodruff” that will be broadcast this weekend. “For me, what an economic recovery is about is about what happens to American families. It’s what happens in the real economy. It’s whether or not families are building up wealth in their homes or whether or not their homes are dragging them over an economic cliff.”
“It isn’t meaningful to talk about profits and a growing economy until American families are stabilized,” she said.
Warren, a Harvard University law professor, was appointed in September as an adviser to President Barack Obama and U.S. Treasury Secretary Timothy F. Geithner to help set up the consumer bureau created by the Dodd-Frank financial-regulation overhaul enacted in July. The bureau, which will have power to impose rules on mortgages, credit cards and layaway plans, was proposed by Obama after lawmakers said existing regulators failed to protect borrowers against lending practices blamed for fueling the credit crisis.
Warren, 61, said financial companies could benefit from new mortgage regulations that would allow them to abandon the lengthy disclosure forms now required under two housing finance laws.
The Truth in Lending Act and the Real Estate Settlement Procedures Act require mortgage companies to give extensive information to borrowers, but do little for either consumers or lenders, she said.
“What if we dump both of those forms and in its place we have a one-page mortgage shopping sheet that gives the consumer the key information that the consumer needs?” she said. “They overlap by about 80 percent in terms of content, but because they use different terms, they have to be calculated in different ways, so they’re costly for the banks to fill out.”
On credit cards, Warren said her team is “getting creative, new ideas” about how to formulate credit-card disclosure rules that will clarify costs and enable borrowers to do comparison shopping, A simple label for credit cards, similar to Food and Drug Administration-mandated nutritional information, is one possible model for credit cards, she said. “We’re getting good ideas from all sorts of places,” Warren said. “I like the food labeling idea as at least one to take a look at and we’re getting more.”
Republican lawmakers who opposed creation of the consumer bureau and Warren’s appointment to help organize it have said they will increase scrutiny and attempt to implement congressional control over the agency’s funding, which Dodd-Frank stipulated would come from the Federal Reserve.
“We’re trying to build an agency here, and we’re trying to do it on behalf of the American people,” Warren said. “We didn’t get this agency because there was $100 million of lobbying money in favor of it. In fact, the lobbying money, the big dollars, were against this agency.”
“We got this agency because the American people want it, and they want a voice in Washington,” she said. “And that’s what I’m here to do.”