Who's Really Making Things Up? Elizabeth Warren v. Congress

May 27, 2011 — -- Who's making things up, really?

A House panel grilled Elizabeth Warren, the interim director of the new Consumer Financial Protection Bureau (CFPB), this week. Republicans on the committee want to strip the agency of its power before it even begins on July 21. The agency's purpose is to oversee rules regulating loans, credit cards and mortgages for consumers.

Rep. Patrick McHenry, R-N.C., the chairman of the subcommittee, accused Warren, a Harvard professor currently on leave from the university, of lying to Congress about her role in helping state officials negotiate a settlement with mortgage servicers that improperly foreclosed on homeowners. He even got into a dispute with Warren over when she could leave the hearing.

After Warren said her staff made an agreement with the committee's staff that she could leave at 2:15 p.m. to attend another meeting, McHenry said, "You're making this up, Ms. Warren. This is not the case."

The Committee on Oversight and Government Reform invited Warren and four other witnesses to a hearing, but the focus seemed to be on Warren. Some banking industry groups say the new bureau will have too much unchecked authority over banks, credit card companies and mortgage service providers.

That's despite a "David and Goliath" matchup, between a bureau with a $600 million budget limit and multi-billion dollar financial services industry, according to Rep. Elijah Cummings, D-Md., who extolled her to "keep the fire."

While Warren is regarded as a popular choice among consumer groups to become the bureau's first director, she has attracted the ire of many Republican Senators. Also, with reports that the Democratic Party is trying to recruit her to run for a Massachusetts senate seat against Sen. Scott Brown, R-Mass., she has become even more polarizing.

Rep. John Yarmuth, D-Ky., came to Warren's defense near the end of the one-hour grilling and apologized to Warren "for the rude and disrespectful behavior of the chair, the snarky comments about a senate race and the questioning of your veracity when there's documented evidence that you were being totally truthful."

Did the committee get the facts right? Did Warren? Here's a fact check of some disputed issues during the hearing:

1. Can the CFPB provide advice to other agencies beside the Treasury secretary and president?

McHenry questioned whether Warren had overstepped her authority in mortgage servicing settlement negotiations that focused on unlawful foreclosures. Warren was appointed a special advisor to the secretary of Treasury and assistant to President Obama last September after the Dodd-Frank Act established the new consumer bureau.

McHenry brought up her testimony before Congress on March 16, saying she had no authority to negotiate a settlement. He also asked whether she had advised Iowa Attorney General Tom Miller, who is involved in a suit against mortgage servicing companies.

Warren had said she helped at the request of the Treasury secretary, and the legislation authorizing the agency addresses such situations.

The Dodd-Frank Act requires that the CFPB oversee lending practices at all levels of government, including local and state. The Act created the Office of Fair Lending and Equal Opportunity under the CFPB which has the duty of "coordinating fair lending efforts of the Bureau with other Federal agencies and State regulators, as appropriate, to promote consistent, efficient, and effective enforcement of Federal fair lending laws."

2. Is the CFPB transparent with its operations?

The Republicans accused Warren of operating behind the scenes and trying to set up a "super class of administrative elites" to run the agency she helped create.

Warren said her schedule is open to the public. While her calendar is posted on its website, as of May 26, it was last updated with her schedule from April.

3. Is it unprecedented that CFPB staffers have salaries outside of the federal pay scale system?

Rep. Ann Marie Buerkle, R-N.Y., questioned Warren about the high salary ranges in the job postings on the CFPB's website. Buerkle said the starting salaries for the CFPB's analysts were 60 to 90 percent higher than the equivalent in the general pay schedule for the federal government.

"Given absolute fiscal constraints this nation faces…how do you justify that kind of a disparity between a government worker versus the folks who are going to be hired by your government agency?" she asked.

Warren answered that the CFPB's responsibilities had been scattered across the other financial regulatory agencies, and those agencies also were not on the federal pay scale system to better compete for talent with the private sector.

While it is true the Office of the Comptroller of the Currency (OCC), Federal Reserve, Office of Thrift Supervision, Federal Deposit Insurance Corp., and National Credit Union Administration do not use the federal pay scale system, the Federal Trade Commission (FTC) and Housing and Urban Development Department do use the federal system.

The FTC said most of their staff are under the "general schedule" system, with the exception of contract workers and other specialists. For example, the FTC commissioners are on a separate scale because they are political appointees.

4. Rep. Frank Guinta, R-N.H., claimed that it was unique for a financial regulatory agency to have a leader with a five-year term who is not subject to annual congressional appropriations.

Warren noted that the OCC's previous controller recently ended his five-year term in August 2010. There are other roles with longer term limits. The National Credit Union Administration has a six-year term limit for its three board members. While members of the House of Representatives serve two-year terms and Senators serve six-year terms, they can be re-elected.

"There is no banking regulator who is subject to the political process or to appropriations," Warren said.

This is true of a host of financial regulatory agencies including the FDIC, who take their budgets from the industries they regulate.