5 reasons why banks hate Elizabeth Warren

June 2, 2011

Elizabeth Warren, it’s not you they hate. It’s what you represent. You want to be an honest cop when so many before you in Washington have looked the other way and pretended that the banking industry could police itself.

I can’t think of a better reason why this presidential adviser shouldn’t be the new chief of an unfettered Consumer Financial Protection Bureau.

She knows where the bodies are buried — in countless toxic forms and statements that only bank lawyers fully understand. She’ll make every attempt to end the silent rip-offs and myriad shenanigans that cost consumers billions.

As the debate about Warren — and what she stands for — rages on, here’s a look at why the banks despise the idea of her as a strong regulator:

Weak consumer regulation was the norm, but banks love the status quo
Prior to the Dodd-Frank financial reform law, which established the consumer bureau, there simply was no real consumer watchdog over banks. The Comptroller of the Currency, Federal Reserve and state regulators wrote rules, but rarely enforced them in a meaningful way to consumers. The CFPB will be the first regulator in American history that didn’t answer to the banks, but to their customers. It will beĀ a true watchdog.

Mortgage abuses were rampant
More than three years after the biggest financial meltdown since 1929, we’re still trying to unravel what the banks did to foul up the global financial system. Did the banks fudge mortgage documents simply to grease the way to securitizing loans? Did they trigger foreclosures even when homeowners were paying their bills? Did they push people into bad loans they knew they would default on? If any or all of these things were true, it certainly wasn’t because the banks were over-regulated. Somebody fell asleep on their watch in Washington like Rip Van Winkle. A consumer financial bureau would keep an eye on an industry that’s operated in darkness for too long.

Credit abuses are rampant
Take a look at your credit card disclosure statement. Do you have any idea how much you will owe if you’re late or lose your job and can’t pay? This is not a mystery to the banks, who have conceived elaborate formulas for charging you more money for credit.

I recently received a letter from Bank of America for my business charge card, for example. They were pleased to inform me that if I was late just one month a new “penalty rate” would apply that would be triple my current rate. What they didn’t tell me is that a late payment fee of at least $15 would also apply and the penalty rate could be in effect for up to six months. I had to call the bank to find this out.

What’s more is the incredible profit they would make on just one late payment. It would be a variable margin — that could rise even more — of nearly 27 percent plus the prime rate of 3.25 percent. That’s a hefty penalty given that my taxes helped bail out the bank when it got in trouble in 2008 and they pay almost nothing for their funds from the Federal Reserve. My one errant transaction could lock in a short-term profit for the bank that would easily rival the near-20 percent margins from industries like pharmaceuticals, Internet services and network equipment. I’m all for profits, but I can get a better deal from Louis the loan shark. A consumer bureau might be able to rein in these practices.

Junk fees are abundant
You ever wonder what all those fees are that creep into your mortgage closing statement? They seem to come out of nowhere. A lot of them are negotiable or completely unnecessary. Do you need to pay a “document” fee when the bank is already charging you interest and closing costs? Can you get cheaper title insurance? Do you need exorbitant mortgage credit insurance, which simply protects the lender if something happens to you? The CFPB already is working to simplify this morass of incomprehensible forms and even wants your opinion on new proposed versions.

Making simple math simple again
Do you know what a LIBOR index is and “lifetime maximum rates?” The banks don’t want you to know this because this is how much your monthly payment can climb based on a variable index. If the index goes up, so does your payment. What triggers an increase? Why can’t credit forms spell this out in plain language? Why can’t they tell you what your payment should be including taxes, insurance and other fees? They should and will if the CFPB ever gets into this world unscathed at the end of July.

So nothing personal Elizabeth Warren.

It’s not the way you dress or the fact that you teach at Harvard and have been an advocate for banking customers. Or that you’re “so bloody disagreeable,” as one former Wall Street banker put it. It’s just that you’re so darned honest about banking abuses and are one of the best people in the country to enact change.

There’s something about your “speak softly and carry a big stick” demeanor that really bugs the money trust. That doesn’t play well in their country clubs as they bemoan government interference and conveniently forget who saved their bacon in the first place.

22 comments

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The banks probably consider the bailout just a return on their investment in the US Government via campaign contributions and lobbying. Their “insurance” paid off – don’t expect gratitude.

Along the same lines, Elizabeth Warren is a class traitor. That’s why it gets so personal. Good for all those who believe in informed consumers. There should be quite a few Republicans, too – what kind of a Free Market is it that relies on confusing consumers?

Posted by Saint999 | Report as abusive

Sign this woman up and give her what she needs to clean their clocks good.

Posted by MightyMoo | Report as abusive

Good Article

Posted by LMichael | Report as abusive

Ditto on both those comments … Elizabeth Warren should have been in the job weeks if not months ago … it is enough to bring back the days of Jesse James …. if not Bonnie and Clyde.

Posted by WBGriffin | Report as abusive

If Elizabeth Warren is forced out, it says everything about who runs the American political machine – big money (and banks are just a part).

Look at the attack on the EPA orchestrated by the GOP. Instead of concerns about mercury in the water, toxins from frackin or coal ash, the media continues to plant the headlines about EPA’s ‘no growth’ regulations.

Banks, investment firms and hedge funds are doing exactly what they did before. Nothing as really changed. Jobs are being lost, the middle class is barely hanging on, and the Federal Deficit is growing, but Congress can’t even enact a tax increase on hedge fund managers who are making billions.

I hope Warren gets some traction, but she is up against a tidal wave of moneyed interests.

Posted by Acetracy | Report as abusive

She is a last hope for the US economy… Newsflash campaign contribution loving corrupt politicians.. without consumers, your supply of dodgy will dry up. How about doing something for the country instead of your selfish selves.

Posted by GA_Chris | Report as abusive

If we as a nation don’t realize by now that we need strong regulation, then it’s all over. We had the Depression, which led to the regulations that protected the financial system until twenty years ago when Wall Street and big business began a steady gutting of those very regulations that kept the money changers in line. Wall Street and big business has made billions if not trillions in the last decade, due to lax regulations. Of course they don’t want anything but business as usual. And the Republicans are still so high up in the food chain that they don’t realize that it ends before it ever trickles down to the middle class. Or maybe they just consider everyone underneath losers. If so, we’re a nation of losers growing fast.

Good article, thanks.

Posted by lhathaway | Report as abusive

One of your best articles. As a retiree, retail investor – mostly as a cranky geek, blogger and news junkie – I love it when Reuters cranks out a worthwhile piece like this one.

Bravo.

Posted by Eideard | Report as abusive

I think it is not just the US that needs a “Elizabeth Warren”, I think every country should have one. Its against common sense that when the banks are in trouble because of their own mess the taxes from everyone has to help them, and when the same people that worked to give them the money are completely forgot when they are in trouble.

A stupid idea (or not), would be to create a special bank, with money from the people, that would be used to give the money to the banks if they would need it, but the rate charged for the money given to help the bank would depend on the rate that they are charging their own customers, if they charge a big rate they should also be charged a big rate…

Best regards,
SimpleGuy
Anedotas e humor em www.kerorir.blogspot.com

Posted by SimpleGuy | Report as abusive

She has the got the right DNA for this clean up job.
Wonder if she has a sister or someone like her that can dig into lobbyists and clean up the dirty connections between foreign corporations and our politicians.

Posted by Butch_from_PA | Report as abusive

She is like Chicken Little claiming that the sky is falling. Her anti-business approach will hurt the consumer in the long run since it will be safer for a loan underwriter to decline a mortgage rather than approve it an risk non-compliance with the Dodd-Frank Financial Reform Act.
Read the law itself and you will see.

Posted by IrishSunDevils | Report as abusive

Nice to see some real people show their understanding of what this is all about…at least until 11:46 EDT when the first troll showed up.

Posted by Art_In_Seattle | Report as abusive

Sounds like she is EXACTLY the person we need in this position which is probably EXACTLY the reason we won’t get it. Sometimes I wonder if democracy isn’t its own worst enemy.

Posted by marguerito | Report as abusive

Elizabeth Warren is a big favorite of mine. I only wish she were given more power in the Obama administration.
I completely agree with her views. It is no surprise to me that she is always under attack from the right.

Posted by waswhaler | Report as abusive

Chicken Little claiming that the sky is falling? Um, the sky is already falling. Wake up!

Posted by KyuuAL | Report as abusive

[…] READ FULL ARTICLE […]

Posted by 5 reasons why banks (& their Members of Congress) hate Elizabeth Warren http://bit.ly/lTvTbs #CoffeeParty #reuters « cupofcoffeeinarlington | Report as abusive

Fine, but nowhere in this list do I see the greatest failing of all — the pressure from the federal government to make loans to people who were not creditworthy. I understand the Obama administration is again pressuring banks, under the Community Investment Act, to make bad loans. All those ridiculous banking and credit card fees represent the passing-along of the costs to those of us who do pay our bills; those costs are from the loans made to deadbeats. THAT is the real problem and so you can’t solve the abuses until you acknowledge the role of government policy in it.

Posted by Tedberens | Report as abusive

Ms. Warren gets little to no support from either the Rep or the Dem parties. Both parties abandoned the middle class for big money long ago. The Rep. never rep-ed the middle class and the Dem. began to move away in the 70’s. The middle needs a new party, one that will push hard for what we need, good affordable education through college, health care that uses the collective bargaining power of the middle class to off-set the power of the medical-insurance industry, foreign trade agreements that benefit domestic production and employment instead of designed to create tax breaks for international business, sensible business regulations that control predatory business practices and promote business growth.

Posted by ObjectivObsrvr | Report as abusive

sorry about posting twice but I can’t let the “government pressured banks to make bad loans” argument go unanswered. It’s simply not true. The loans that were made pursuant to the Community Reinvestment Act were a very very small percentage of all loans and made up a disproportionally SMALL number of defaults. Look it up.
The banks made those loans for one reason: profit. High risk loans opened up a huge market that the banks and mortgage companies were eager to get into. And when the banks changed the laws so the loans could be bundled and sold as securities they no longer cared if the loans were risky.

Posted by ObjectivObsrvr | Report as abusive

Elizabeth Warren has my unwavering admiration and support.

Posted by breezinthru | Report as abusive

Maybe now, people are starting to realize. That to these people, YOU are NOT a Citizen. YOU ARE PRODUCT !!!…

Livestock!

Posted by Wyzasse | Report as abusive

This nation needs more people like Elizabeth Warren in all branches of government.

Posted by coyotle | Report as abusive

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