At FDL News, David Dayen covers an article on Elizabeth Warren in which she argues, correctly, that if the new Consumer Financial Protection Bureau had been up and running years ago, much of the banking/mortgage fraud could/would have been prevented.
That’s fine as far as it goes. But there’s something missing from the polite Ms. Warren’s telling.
I’d very much like to believe that if a relatively new and still energetic Consumer Financial Protection agency had been around a few years back, and if it had been led by a relentless consumer champion like Liz Warren, it would have flagged and likely limited much of the massive fraud committed by banks, mortgage lenders, servicers and securities bundlers, provided . . .
. . . provided it wasn’t interfered with by more powerful regulators whose job it was to stop fraudulent banking and lending practices instead of interfere with legitimate investigations by those with authority, including state regulators.
It is a pernicious myth, perpetuated by those in charge at the time (many still here), that the federal government was powerless to stop the financial crisis and all the fraud and looting that attended it. There was plenty of authority, but the people in charge chose to look the other way.
Just as bad, these complicit federal regulators aggressively stopped efforts by states to investigate and halt the fraudulent practices. In early hearings of the Financial Crisis Inquiry Commission, they interviewed numerous witnesses, including States’ Attorneys General and securities regulators from Texas, Illinois and other states who were empowered to investigate and stop fraud and began their own investigations. Several state officials and experts testified that their efforts were repeatedly stymied by federal bank regulators who, although willing to do nothing themselves to stop the rampant crime wave, insisted that states were preempted from even conducting their own investigations.
It is simply not true that there was no government defense against the massive fraud perpetrated by banks, mortgage originators and lenders, loan servicers, foreclosure mill law firms, and Wall Street securities/trusts marketers. All the authority the feds and states needed existed then to stop the reckless crime wave that eventually tanked the financial sector and has since victimized millions.
Federal regulators at the Federal Reserve, Treasury and OCC were complicit throughout. They chose not to do their jobs, and they’re just as guilty as the looters that still populate the nation’s financial sectors from top to bottom.
Yes, bring on the CFPB and put Liz in charge. We need its energy and new blood. But we also need to clear out the incumbent crooks who will do everything they can to tie her hands.
And don’t forget, that complicity permeates much of Congress and the entire Republican Party, whose representatives on the Financial Crisis Inquiry Commission recently issued their own minority report that ignores all of this history. And they’re insisting the Commission’s final report ban any references to “Wall Street,” “shadow banking,” “interconnection,” “deregulation” and other terms that might reveal an entire political ideology’s complicity in the largest, most egregious looting ever perpetrated.