Wednesday, June 29, 2011

A Statement on the Recess Appointment of Elizabeth Warren

Click here for my notes on this speech.

Hello, and good morning.

One year ago I signed into law the Wall Street Reform and Consumer Protection Act- an historic piece of legislation designed to change the reckless financial practices that led to the banking crisis of 2008. In the months leading up to the passage of the bill, there was a terrific debate in this country about what kind of oversight the government should have over financial service companies. Specifically, whether or not a new agency should be created to protect consumers from predatory lending, and to help inform them of the services being sold to them. In the end, Congress decided to pass the law with this new Consumer Finance Protection Bureau included, and charged me with appointing its director. Today, with the Congress in recess, I have used the authority granted to me by the Constitution to appoint Elizabeth Warren to that post for one year. I am extremely confident in her abilities, and know that she will work diligently on behalf of the American people.


Elizabeth has served as my advisor for many months, helping oversee the creation of this agency. Before that, she was appointed by Congress to serve as chair of the Congressional Oversight Panel to help supervise the Treasury Department’s use of the Troubled Asset Relief Program, and to report back how effective their efforts were. I believe that her repeated testimony to Congress during the time she chaired this panel proves she is a fair, unbiased leader, who treats her duties and the trust of the American people with the utmost respect. She has advocated for years for the creation of a consumer protection agency as a counterweight to the huge influence banking industry lobbyists hold in Washington. Having been involved with this bureau from inception to creation, she is, I believe, unquestionably the most qualified candidate to serve as its head, and can be trusted to make the best use of all the powers granted to her under the new law.

In the midst of the financial crisis, and still now in its wake, people looked for answers. How could this have happened? Who’s to blame? The trigger for the collapse came from a rise in the mortgage default rate, so it’s natural to look in the direction of homeowners when trying to place fault. Why did that take those loans they couldn’t afford? There’s a long history in this country of blaming working families for their problems, and celebrating the wealthy as masters of their own destiny, but each of us is the product of a system, and these generalizations never fully encompass the truth. During the previous decade, bankers received huge incentives to make  as many loans as possible. As these incentives grew, the bankers began to change the system of home borrowing. Soon enough, instead of regular 30-year fixed rate loans, adjustable mortgages were pushed. They came up with special introductory teaser rates that were designed to make the loans seem more affordable than they were. These cryptically worded teaser rates by themselves are evidence that dealers were trying to mask the reality of what they were pushing. Then, when even these deceptively cheap mortgages couldn’t be made fast enough to satisfy Wall Street’s demand, lenders began to offer what they called “no-doc loans”. You could walk into a bank, and be told that it wasn’t necessary to show any pay stubs, tax returns, or documentation of any kind to be approved for a loan. It was the system that had changed, and had become corrupted, not the character of the American people. Millions of families all around the country didn’t simultaneously wake up in 2005 and decide to lie on their mortgage applications. It’s what they were told to do, explicitly or not, by the actions of the bankers they trusted.

The entire monetary system is built on trust. Trust that the banking system has enough fail-safes that our deposits will be there for us to withdraw; trust that pieces of paper will be accepted as money. To question this is to question almost everything our western civilization has been built on, so it shouldn’t be surprising that when people are told something by a bank officer that they accept it as fact, just as they might if it were a police officer or a judge. When these bankers take advantage of peoples trust to make someone believe they can afford a loan, or that the falsification of documents is acceptable, they are committing a crime that places the very basis of our society in jeopardy. That’s why it is so important to create a regulatory body whose sole purpose is to protect consumers, and ensure that the actions of their creditors are as transparent as possible.

The term limit for directors of this agency is five years. The lawmakers who passed the Consumer Protection Act thought that term length was necessary to free the director from political pressure, and ensure the agency’s stability from year to year. However, only a Senate confirmation can grant this full term, and a select minority in that body has decided to block any discussion of an appointment. They don’t provide arguments against Ms. Warren’s competence or fairness. They simply are unhappy with the outcome of the legislative process, and are using the technicalities of the Senate rules as an opportunity to cripple this new protection agency. But this law wasn’t secretively passed in the dead of night, and there were no underhanded tactics to deny representatives votes. A bill was proposed, and we went through the process we all learned about in school. More than half a year was spent debating the merits of the various proposals, and the Consumer Finance Protection Bureau was at the forefront of the discussion.

In the end though, the peoples representatives decided that the lack of adequate consumer protection and regulation was a main cause of the crisis, and that it is vital to the nation’s long-term stability that these reforms be made. It is the great need for this agency, combined with the minority’s signaled unwillingness to participate in the process, that led me to decide that this appointment cannot wait indefinitely. It’s too important that there be a director on day one, and that Elizabeth Warren is able to get to work making the credit system fairer for every American. I wish her luck, and know that she will fight to make a real difference for American families. Thank you.

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