WHO is Elizabeth Warren and WHY is Wall Street TERRIFIED of her?

   Do you know who Elizabeth Warren is?  If you don’t, the banking giants in America certainly do.  In fact, the big banks are absolutely TERRIFIED of Elizabeth Warren.  Why is that?  Before that questioned is answered, some background information on Elizabeth Warren would be in order.

   Elizabeth Warren is a lawyer by trade.  She teaches law at the prestigious Harvard Law School where she teaches contract law, bankruptcy law and commercial law.  During the financial crisis of 2008-2009, Elizabeth Warren chaired the Congressional Oversight Panel that was created to investigate the bank bailouts.  Elizabeth Warren has had such a distinguished law career that it was rumored that she was on the short list to replace now retired Supreme Court Justice John Paul Stevens. 

   The Congressional Oversight Panel’s work led to the Dodd–Frank Wall Street Reform and Consumer Protection Act which instituted the strongest regulations against financial institutions since the Great Depression.  This law called for the oversight of any financial institution that makes consumer loans.  Lenders that make mortgage loans, auto loans, issue credit cards, “pay day loans” and lines of credit would be regulated by a government agency.  There was a new regulatory sheriff in town.  Such landmark and important legislation called for a watchdog agency and thus the Consumer Financial Protection Bureau was born and on September 17,2010, Professor Warren was named a special advisor to President Obama to oversee the development of CFPB.  While she chaired the Congressional Oversight Panel, one of the main culprits of the downward spiral of the U.S. economy was the mortgage industry.  It was clearly the 800 pound guerilla in the room and Elizabeth Warren recognized that and if there ever were an industry that needed regulating, it was the mortgage industry.  

   By now, you’ve heard of the horrific stories of millions of homeowners losing their homes to foreclosure and being displaced.  Even worse, there are millions of homeowners who have mortgages that are “under water”; the balance of their mortgage loan is significantly more than what the home is worth in the current market.  The Home Affordable Modification Program (HAMP) was developed in order to help families in this predicament save their homes.  Mortgage lenders were obligated to try and modify mortgage loans that would lower the annual interest rate to 2%, extend the loan term to 40 years and in some cases, backload any arrearages onto the principal balance of the loan and forgive any penalties and interest.   It was a noble concept.  As expected, lenders did not openly embrace the HAMP and in some cases, made tepid efforts to adhere to it.  Most lenders favored foreclosing on and evicting existing homeowners, re-selling the house at current market value and getting a new and financially stable borrower on their books for a 30 year commitment.  Lenders went to great lengths to pretend as if they made modification efforts only to foreclosure on unsuspecting homeowners.  In fact, in a story in The New York Times, “Shamed into Altering a Mortgage”, it is detailed how Bank of America had foreclosed on a 73 year old woman WITHOUT HER KNOWLEDGE.  Is there any question why the mortgage industry needs tighter regulation?

   Elizabeth Warren harshly criticized mortgage lenders when the unscrupulous methods of securing mortgage loans were discovered and called for even more regulation of mortgage lending.  She is also pushing for financial institutions to be penalized up to $20 BILLION.  Her criticism has not gone unnoticed.  According to another story in the New York Times (Mortgage Modification Overhaul Sought by States),  state attorneys general have submitted a list of demands to the five largest banks that will even further regulate mortgage foreclosure practices.  The demands will cause lenders to HIRE modification specialist and thoroughly train them on how to do their jobs.  (Imagine THAT: regulation that will actually create jobs!  Fancy that!)  This is in reaction to the latest discovery of lenders facilitating foreclosures without following the letter of the law.  This latest development is a direct result of the work of CFPB and Elizabeth Warren. 

   It should be clear by now why financial institutions are TERRIFIED of Elizabeth Warren.  She can’t be LOBBIED and BOUGHT.  Like Eliot Ness, she’s an “Untouchable”.  However, for all of her good work, Professor Warren is a special advisor to CFPB, not the Director.  To become Director, President Obama could either appoint her by executive order or she would have to be subjected to Senate confirmation where Democrats have a slim 6 seat advantage.  To avoid a filibuster her confirmation would need 60 votes in the Senate which could be tough.  Of course, the GOP would strenuously oppose her confirmation.  After all, why would financial institutions need to be regulated?  The slight-of-hand shenanigans of Wall Street only led to the biggest economic crash in the U.S. since the Great Depression.  The institutions are trustworthy and able to self-regulate themselves, right? (Wink, wink)  Why would a Wall Street insider with work habits similar to those of Bernard Madoff need regulating?  After all, Madoff only acted within the best interest of himself and his family as anyone in a capitalistic nation would, right?  As Director Charles Ferguson said when he accepted the Academy Award for “Inside Job”, his documentary on Wall Street run amok, “Three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail and that is wrong.”  That IS wrong.

   In the March 14, 2011 edition of Time Magazine, Joe Klein details why financial institutions and the GOP are TERRIFIED of Elizabeth Warren (Who’s Afraid of Reforming Wall Street?).  Elizabeth Warren is The Lone Ranger and the Wall Street financial institutions are Black Bart.  Black Bart and the GOP are TERRIFIED of her.

   For the life of me, I can’t imagine WHY?

Peace, peace in the Middle East!

Craig Riggins

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