The Consumer Financial Protection Bureau: Like a mechanic with no tools?
U.S. Treasury Secretary Timothy Geithner is pushing the Senate to confirm a director to run the Consumer Financial Protection Bureau.
December 4th, 2011
09:06 AM ET

The Consumer Financial Protection Bureau: Like a mechanic with no tools?

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?

CNN's Libby Lewis reports on how Geithner helped the "best" pie baker in Cleveland

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.

Obama renews push for consumer bureau chief

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.

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Filed under: Economy
soundoff (99 Responses)
  1. Pearl

    @ Fanny: standing up to applaud you. 🙂 well said

    December 4, 2011 at 7:15 pm | Report abuse |
  2. Santa Fean

    Big banks are corrupt, meaning unsafe and unsound. Financial statements that are a joke, massive liabilities with unsecured mortgage securitizations, investor lawsuits, etc. Do you need proof? How many lawsuits is your bank involved in?

    December 4, 2011 at 7:17 pm | Report abuse |
  3. Bennycat

    Another example of a complex issue being reduced to confusing simplicity. There's a little more to this than greedy, careless people wanting more house than they can afford.

    The old scenario: I borrow from my bank to buy a house. My banker gives me money, and I'm obliged to pay him back. He has a vested interest in making reasonably sure I can afford to pay him.

    The 21st century Wall Street Fancy Dance scenario: I'm a mortgage underwriter. I'll take any mortgages I can get, no matter how shaky, because I'm not going to wait for my money, I'm going to bundle them and sell shares in the bundle. That's how I make my money. I don't give a flip if the mortgagees can pay back the money they owe. I don't give a flip what happens to the shareholders. That's their problem. Of course, since 2008, that's now everybody's problem.

    December 4, 2011 at 7:21 pm | Report abuse |
  4. Patriot

    “The single most important thing we want to achieve is for President Obama to be a one-term president.” ~Mitch McConnell, Senate Minority Leader, (R-Ky.), October 2010

    McCain just said on CNN that if the economy is doing good it will help the democrats in the next election.

    The GOP strategy of thwarting any attempt by Obama and the rest of congress(including independents) to improve economic conditions has harmed the USA.

    I'm NOT a democrat or Obama supporter. CONSERVATIVE economists know what your supposed to do during a recession is to spend on infrastructure. For two reasons, one it's cheaper to do the repairs now when workers and materials like concrete are at a low price, and two it puts people back to work stimulation the economy. We had a SURPLUS when bush took office because of the GROWTH during the Clinton years.

    Good old Ronald Reagan did the EXACT SAME THING! GOP governors used the recession to ATTACK the middle class and poor. From now on GOP you lost my vote, your obviously not good for the USA.

    TRAITORS.

    December 4, 2011 at 7:26 pm | Report abuse |
  5. Fanny Farquair

    @Pearl: thank you. I would take a bow, but I'd be afraid I wouldn't be able to straighten up again!

    December 4, 2011 at 7:29 pm | Report abuse |
  6. Pearl

    @ Fanny, You seem like a reasonable straight shooter and you took the words right out my mouth.
    Now straighten up! LOL 🙂

    December 4, 2011 at 7:31 pm | Report abuse |
  7. Pearl

    Hmmm, makes me wonder if good old Ronnie was ever a Democrat ?

    December 4, 2011 at 7:33 pm | Report abuse |
  8. Voltairine

    Sweet potato pie right over here Ms. Eason, please ma' me please : ) mmmmmmmmm

    December 4, 2011 at 7:34 pm | Report abuse |
  9. Voltairine

    You can't have a real consumer protection agency in this country. Are you stoned? O.o That would seriously interfere with big business F-ing EVERYBODY at every conceivable opportunity and that's just unAmerican.

    December 4, 2011 at 7:36 pm | Report abuse |
  10. Ken

    I equate Geithner to the shady mortgage broker. The Republicans keep saying "Look this agency has to much power, it lacks checks and balances and lacks accountablity to Congress .. it would be dangerous to move forward with this without some changes". And Geithner, all smooth, steps out "Look, without a leader, people like this frail old 91 year old women was convinced to get a home mortgage they couldn't afford. You don't want to hurt old women do you? And you'll notice some work needs to be done with payday loans and finance companies. So why don't you sign on the dotted line and give this group a Director of our choosing. Trust us we'll do what's right if you put a leader in place. Just sign here and we'll handle all the paperwork.". He's spewing the same crap a broker told the old women, and expects the Republicans to buy it?

    December 4, 2011 at 7:36 pm | Report abuse |
  11. Patriot

    Two things brought us out of the Reagan Recession; deficit spending and the lowering of interest rates.
    In 1982 Reagan hiked corporate income taxes by 100 billion dollars. Within two years inflation was in the single digits again and corporate earnings were up by 29%.

    He was also the most protectionist president ever.

    The GOP is well aware of what your supposed to do to pull an economy out of recession, but if they allowed the democrats to do it they would loos the next election.

    Better to trash the economy and win.

    sad really.

    December 4, 2011 at 7:37 pm | Report abuse |
  12. Pearl

    And when the war ends, the economy will be brought back by cheap SLAVE labor, mimiking the Egyptian Roman days. Happens after every war.

    December 4, 2011 at 7:45 pm | Report abuse |
  13. AmericanAgainstRepublicans

    thank you republican overloads, your contract on America is nearly complete.

    Soon the architect, Lord Newt, will gather your forces to finish the job.
    i
    Your use of filibusters and holds have blocked committee appointments for three years, preventing legal quorums on executive branch meetings, paralyzing the country and govt.

    Lord Newt knows history, not making the same mistakes of the confederacy.
    What genius to infilitrate and take over the party of Lincoln, now controlled by the confederate ancestors, neo-fascists and wingnuts dominionists seeking a rapture and apocalypse.

    December 4, 2011 at 7:45 pm | Report abuse |
  14. CBR

    Those is Congress who refuse to bring the names of presidential appointees up for a yea or nay vote in committee or in Congress are not doing their jobs. Congress has gotten away with this tactic for too long and it hinders the ability of cabinet members and the president to get the job done. We make no demands on Congress so both sides think they can do whatever they please. Our response should be no – do the work we sent you to Washington to do. You have the responsibility and you cannot ignore responsibilities that do not meet with your approval. Go to work and remember who sent you to do the job and is paying your salary.

    December 4, 2011 at 7:54 pm | Report abuse |
  15. jamesnyc

    Pamela Warren would have been excellent for this job and the Republicans refuse to let anyone succeed in cleaning up these eggregious mess. They have to be insane.

    December 4, 2011 at 9:06 pm | Report abuse |
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