Tim Geithner might be Endia Eason’s new best friend. If he lived in Cleveland, she’d probably bake him a pie.
“My pies are the best pies in town – they’ve been saying that for years,” Eason says. “I make apple, sweet potato, peach and cherry.”
So why would a 91-year-old woman in southeast Cleveland want to bake a pie for the U.S. treasury secretary?
Because lately, Geithner has been publicly nudging Senate Republicans who have hamstrung a new consumer protection agency – created to protect homeowners like Eason, and to stop what happened to her from happening to other people.
Eason nearly lost her home because a mortgage broker talked her into a $50,000 loan.
The Consumer Financial Protection Bureau is the cornerstone of the sweeping Wall Street reform law known in shorthand as Dodd-Frank. It opened its doors in July. But it’s been operating with one hand tied behind its back. Senate Republicans have vowed not to confirm a director for the agency. They say the law puts too much power in the hands of a single director. And they say the agency is not accountable enough to Congress.
Without a director, the agency can’t regulate many financial services companies that aren’t banks: payday lenders, mortgage brokers, and consumer finance companies, for instance. Some of those companies were blamed for some of the worst abuses in the recent housing crisis.
“Now I know there are people in the Senate who have concerns about the scope of authority of this agency,” Geithner told reporters last week. “But I would ask: Who are they protecting? What are they protecting? Whose interest are they protecting? It’s not consumers.”
Steve Bartlett heads a group that represents major financial institutions. Speaking at a conference of the Consumer Federation of America, Bartlett cast the Senate Republicans’ opposition this way:
“The Constitution says the president shall sit with the advice and the consent of the Senate. What seems to be missing is the advice part. So there is an impasse at this point.”
Mark Seifert, who heads a housing counseling group in Cleveland, said the Senate gave plenty of advice – before it passed Dodd-Frank. He said the consumer agency Dodd-Frank created has a simple premise: keeping people from getting ripped off.
“It really comes down to – would you put your own grandmother in this loan program?”
Seifert says without a director, the Consumer Financial Protection Bureau is like a car mechanic without tools.
“The mechanic says, 'Well, anything you need fixing that takes a screwdriver, I can do. But if it requires a ratchet, sorry, there’s not much I can do.' That’s what Congress has done with the CFPB. They don’t have a ratchet.”
Without a director, the CFPB can’t rein in mortgage brokers like the one who approached Endia Eason and her husband, a retired postal worker, in 2001.
The broker knocked on their door and told them he knew the city had cited them because their front steps needed repairing. Seifert says the broker told the Easons they’d go to jail unless they took out a loan.
He talked the Easons into borrowing $8,000 to repair their steps, and their garage and their roof too. And he convinced them to open a line of credit – backed up by the deed on their home. And he promised to help them get the repairs done.
He was so friendly, Endia Eason made him dinner.
The Easons showed up to sign for an $8,000 loan. They didn’t know about all the hidden fees the broker had packed in, Seifert says.
“By the time they knew it, they were hit – where their house is worth $50,000 and their loan is near $50,000,” Seifert says.
The Easons signed the contract, because the broker said it was too late to back out. And they believed him.
When they fell behind on the payments, the lender started the foreclosure process.
Seifert’s housing group persuaded an executive from the mortgage lender to meet the Easons and tour the neighborhood. The company decided to write off part of the loan, and back off foreclosing on the Easons.
The mortgage broker, on the other hand, got $4,000 from the deal – and walked away. He hadn’t broken any consumer protection laws. Seifert says it’s this kind of situation that the CFPB needs a ratchet to fix.