This is vitally important work. Here's the most obvious reason why: The late-stage mortgage boom of the mid-2000s, and the crisis it caused, was fueled by greed, ignorance, irresponsibility and fraud. After years of historic low interest rates, lenders and the Wall Street firms that funded them had largely run out of qualified people to whom they could lend money. But the banks and investment houses were too addicted to the easy money they made from mortgage fees to change course.
Lines were blurred, rules were broken and facilitators were rewarded for creating exotic and risky bundles of securitized loans—which were then off-loaded to uninitiated and unsuspecting investors. According to insider testimony, brokers at companies like Countrywide Financial, the largest subprime lender during the boom, tricked people into taking on loans they couldn't afford. And then the big boys went about enticing everyone from pension funds to Scandinavian fishing villages to buy those junky loans.
When the whole thing fell apart, the 99.25% were decimated (you don't really believe that the entire 1% escaped scot-free, do you?). People holding mortgages that never should have been written in the first place found the banks too overwhelmed with bad loans to help. Everyone else suffered, too, since the average value of all our homes has dropped by a third since the boom time peak.
[Read our coverage on the Consumer Financial Protection Bureau]
Guess who also lost out? Honest bankers and any other business that tried to stay free from the mess. Many financial institutions actually tried for years avoid the subprime market. But non-banks like Countrywide were making so much money that eventually virtually every major bank had to get into the business just to preserve market share.
The Consumer Financial Protection Bureau has the power to level the playing field for consumers and honest bankers, but only if and when it has a permanent director. It can educate, do research and enforce existing legislation, but when it comes to the important innovative work for which it was created, it is seriously hampered. Like an embryo permanently trapped in the womb of the Treasury Department, without a director, it has no power to prevent "unfair, abusive or deceptive practices," which, of course, is the core of its being. It can't even write new rules to enforce existing laws designed to protect consumers from mortgage fraud, payday loans charging 400% interest, and student loans that consumers can never escape, even if they declare bankruptcy.
Republican leaders would have you believe that they blocked this important work because they fear the CFPB has "unprecedented" power and is "unaccountable" to voters and Congress, in the words of Senator Richard Shelby. Who does the Honorable Gentleman from the Great State of Alabama think he's kidding? Nobody. The CFPB actually has less power than any other financial regulator. (The other seven can even veto any bureau decision.) This isn't a fight about accountability, transparency, or any such noble cause. It's a fight about who will win in our economy. It's a fight between consumers and honest businesspeople on one side, predators, charlatans and snake oil salesmen on the other.