we exist for two fundamental principles first americans have a right to know that the money washington takes from them is wellspent and second americans deserve an efficient effective government that works for them our duty on the oversight and government reform committee is to protect these rights our solemn responsibility is to hold government accountable to taxpayers because taxpayers have a right to know what they get from their government we will work tirelessly in partnership with citizen watchdogs to deliver the facts to the american people and bring genuine reform to the federal bureaucracy this is our mission today's hearing is an important one because the consumer financial protection bureau is intended to bring protections to the american people in and around financial are here not to micromanage every aspect of that the financial services committee has a responsibility to look at the details of that what we are here to do is our oversight role as to government organization whether or not this agency is properly designed and prepared whether the funding stream is appropriate and verifiable whether it will be transparent whether or not as it is being organized from  a page document whether the guidance has been sufficiently clear and whether or not the american people can feel comfortable that what was envisioned in doddfrank is in fact what they want we appreciate professor warren's willingness to clear her schedule testifying for the second time before this committee first time before the full committee i know the american people want to know more about an agency that you have dedicated in some ways your whole life but certainly the last year to building up the american people do not understand all the history that goes in to your preparation for this and i believe today is an opportunity for us all to get a better understanding of that additionally the definition of consumer financial products protection is one that people don't understand quite frankly it may apply to payday loans but that wasn't the basis for doddfrank doddfrank was about making sure that we never again had a meltdown because certain types of credit instruments were unsafe unsound poorly documented and ultimately worth less than they were intended to but it is clear today that we will be dealing with an agency that will be far larger the budget for next year is estimated to be larger than the two largest consumer protection agencies presently in existence combined that is a lot of money additionally the authority of this agency is extremely broad today we also will ask some important questions that this committee has been dedicated to along with the financial services committee for some time the federal reserve is not transparent the federal reserve does resist any kind of congressional oversight and considers it unreasonable interference there have been limited and i repeat very limited ability to get transparency in some cases related to the financial bailout from the federal reserve it is likely that without the specific and documented ability to have guaranteed transparency and legitimate oversight that this subagency independent as it might be but fully funded and accountable to the federal reserve could well become an agency that while wellintended is not wellunderstood or transparent to congress or to the american people these concerns and others will be voiced here today are delighted to have a witness who more than anyone absolutely understands the intention of her agency often you have used the term cop on the beat oddly enough we use it here too today we will ask the questions that will include does the cop on the beat have a district attorney overseeing the cop on the beat is there in fact a defense counsel available to check on the cop on the beat is there an independent judge of the cop on the beat is there in fact a court of appeals and by the way if i am accused by the cop on the beat can i get an attorney paid for by the state these and other questions are important because we are not talking in the case of your oversight about only large international banks we may be talking about a small organization formed for the purpose of one financial instrument potentially finding that product in disfavor with the large banks who complain that that product is in some way deceptive i have no problem with the idea that that will be looked in to by your entity i do have a question about whether or not that small company will have their day in court and their ability not to be in financial ruin if in order to save their company they must disagree with your determination that and many other issues we will be concerned with lastly there is a concept of individual liberty one of the concerns that the chair has and i believe many members of the committee have is at what point do the american people have a right to say i want to be informed i want to be protected by being informed but quite frankly i want something which you may not want me to have in america unless it is incredibly dangerous to others or may cause harm to society generally we let people have what they want even if we don't want them to have it we could use many examples i will simply quit with adult beverages under doddfrank the cfpb will have the power to regulate all consumer financial products and to prohibit the ones it deems unfair or abusive today i hope we will be able to understand what under doddfrank is the scope created by that language and others i appreciate again your being here and i yield to the ranking member for his opening statement mister cummings thank you very much mister chairman and thank you professor warren for being here today and at today's hearing we have a fundamental difference of opinion about what we believe is important and who we are here to serve the difference can be distilled in to one simple question whose side are we on on one hand a homeowner who has been illegally evicted foreclosed on and charged inflated fees they include thousands of u s military service members and their families who lost their homes were charged millions of dollars illegally and were subjected to other abuses in violation of federal law the chairman asked a question about someone having a day in court and facing financial ruin they did not necessarily have their day in court and they have faced financial ruin many of these service members are deployed overseas their credit has been  impaired and their security clearances have been suspended while they are fighting to defend our nation abroad they are also fighting their banks back home professor warren is on the side of these service members these homeowners and their families holly petraeus the wife of general david petraeus is now working at the bureau as the head of the office of service member affairs to educate service members and banks about the legal rights and obligations they have joined with our nation's top uniformed lawyers the judge advocate general to protect service members from the predatory practices of these banks i too am on the side of service members and other homeowners across the country who have been the victims of these illegal and i emphasize illegalh actions in my opinion none of our troops fighting overseas in iraq or afghanistan or anywhere else should also have to fight illegal actions by their banks back home just to keep a roof over the heads of their loved ones and by the way a number of these illegal actions have already been februaryhth we formally adopted the committee's oversight plan the blueprint for our committee's investigative priorities as part of that plan we voted unanimously to investigate and i quote wrongful foreclosures and other abuses by mortgage servicing companies end of quote we also held a bipartisan field hearing in baltimore where we heard heartwrenching testimony from a disabled veteran who suffered abuses at the hands of a mortgage servicing company so i sent them myself i asked the chairman to invite jpmorgan to testify about their illegal foreclosures against service members but he declined when some mortgage servicers refused to provide even a single responsive document not a single syllable i asked the chairman to issue subpoenas but he declined instead of conducting a bipartisan investigation to help service members and other homeowners this committee has now trained its eyes and sights on professor warren who is trying to protect these very same families so that they may have in his words their day in court so that they might not fa financial ruin ironically it appear that the majority's single biggest criticism of professor warren is that she is somehow being too hard on these mortgage banks professor warren has now been summoned to testify before the committee not once but twice and the committee has demanded that she produce a massive range of documents all while the mortgage banks are given a pass so let me end w original question whose side are we on the side of service members risking their lives and their safety and their health and the side of other homeowners and their families or on the side of the banks that are committing violations against these folks and these are violations that they have admitted to i hope we can come together and work with a common purpose to do what this committee has the opportunity do best to help millions of american families improve their lives by demanding accountability and compliance with the law i have often said to my constituents we have one life to live this is no dress rehearsal and guess what this is that life i do believe that professor warren is doing her very best to make sure that every american lives the very very best life that they can  back we now recognize the chairman of the subcommittee on tarp financial services and bailouts of public and private programs mr hmchenry for his opening statement and by previous agreement any unused time you may  our side and they will do the same i recognize the gentleman mister mchenry thank you mr hchairman as we sit here today the economic health of the united states remains fragile unemployment numbers continue to be unacceptably high while small businesses struggle to access credit and families struggle to simply pay their bills with that in mind this committee remains committed to examine the economic tradeoffs of current and proposed regulations and to define the limits of regulators in an effort to put this country back on the path to growth and prosperity in the spirit of this process the house oversight committee again welcomes professor warren who has led the formation of the consumer financial protection bureau set to launch on julyhst although the c directly subject to congressional appropriations i hope that our witness will be forthcoming to congress and the american public about its processes decisions and budget today and for years to come it is not a secret that the activity and formation of the cfpb has been controversial numerous questions regarding the scope of the cfpb's activity in the mortgage settlement case and the bureau's regulatory limits remain unanswered with the cfpb's inauguration next week it is imperative that professor warren explain to this committee and to the american people the specifics regarding activities of the consumer protection agency as of today and its broadly defined authority to regulate access to credit we all agree that protections are needed in fact one of the cfpb's first initiatives is nearly identical to the mortgage disclosure simplification act that i introduced along with democratic congressman green of texas it was a bipartisan piece of legislation so that is a positive with that said the majority of rules and regulations coming from the  will not be based on bipartisan ideas and will never require a vote that is a concern it will be conducted by a single regulator single director who will be given authority to author the terms for access to credit for the american consumers and small businesses with meager oversight they will be left outside the window of congressional appropriations to make matters worse professor warren has continued to evade questions about the types of financial products that the cfpb would ban or restrict businesses and investors are sitting on the sidelines due to regulatory and economic uncertainty there are many questions left unanswered what will the c do how will it proceed and what are the costs incurred by the american consumers through these regulations because there will be costs professor warren's evasive nonanswers only further contribute to this climate of tepid investment and slow job growth i fear that actions by the cfpb that limit access to credit and increase its costs will only further damage a struggling economy the only clear thing about the cfpb in its current form is that it will have extraordinary reach and control over individual consumer decisions while having an unparalleled lack of oversight and accountability by the american people as professor warren continues to work to stand up the cfpb by next week it is the oversight committee's obligation to continue to ask the questions of the bureau to be clear about its regulatory limits and proposals to restrict access to credit i look forward to addressing these issues and many others today with ms warren and i thank ms warren for returning and being here today and answering members questions and with th on the mortgage crisis and i hope that hearings held here are not somehow weighted greater than those held in your own district with your mayor and your governor there for the same factfinding the time of the committee is limited we are trying to do things which in this case financial services should be the lead if they are not we certainly want to make sure that we fill in any of the gap originally i said we were not going to let this go we are not going to let this go we are going to continue to look at those abuses whether there is a government nexus or whether we believe this committee can make a difference and i want to reiterate nothing has changed from february until now and i would hope the gentleman would realize that i am happy to continue working on specific opportunities in the case of the mortgage industry in your opening statement you did say illegal admitted et cetera if we already know something is illegal if in fact it is already known and prosecution or corrections are being made then it is appropriate for this committee to say what more do we need to do and if the answer is nothing more there compared to other areas where people are not admitting or not in fact known to have done wrong we are going to choose to go to those who are still hiding behind a veil of we didn't do it we are not wrong and i would hope that both of us would always put our investigations first on those who are saying there is nothing wrong or on government agencies and i again will join with the ranking member at any time if we see a wrong that is not being righted that we can help make right i look forward to working with him i would recognize mr htierney for his opening statement mister tierney thank you mr hchairman professor warren let me welcome you and thank you for your dedication to the interests of the american consumer i think you are doing an excellent job on that you know the costs for lack of regulation certainly are pretty clear to all of us and it culminated in the recession that we have been suffering through for some time it is amazing that some people in both branches of this legislature seem to be flacking for wall street banks attacking an entity that has been set up to be the champion of the american consumer and the taxpayer some seem bent on sabotaging doddfrank's consumer taxpayer protections in order to cover for the wall street banks who most of america believe wrecked our economy got a taxpayer bailout sometimes two who built nothing of value for america except for financial products that ended up bilking the american public  since then there has been too little legal moral or financial reckoning by these wrongdoers and frankly the lack of accountability for this greed and misdeeds is stunning on that so i want to add some comments and reiterate what the ranking member talked about in terms of foreclosure abuses that hit service members particularly hard and this is one thing that this committee can continue to do because it is an ongoing matter as the ranking member of the national security subcommittee i understand that readiness can certainly be affected by troops who struggle to deal with issues back home whether that includes negative credit reports security clearances that are suspended and worst of all losing their homes due to the illegal actions by banks mister chairman i would like to enter in to the record a report compiled by the democratic staff servicemembers civil relief act to protect our men and women in uniform against foreclosures without court orders and against inflated fees this report finds that when initial accounts of illegal foreclosures began surfacing the banks downplayed these problems but  thousands of affected service members were identified it became clear the problems were more widespread this year three banks were forced to pay multimilliondollar settlements related to these abuses the largest was jpmorgan at first it announced it would pay two  but it ended up paying hmillion to settle claims by active duty military personnel justice department officials also condemned the actions of the bank of america this is what they said and i quote the bank failed to protect and respect the rights of our service members failed to comply with clearly mandated procedures and foreclosed against homeowners who are valiantly serving our nation i want to thank professor warren and holly petraeus who have been working hard on this issue at the bureau since these illegal professor warren with due respect i fear that this hearing is focused on issues which distract from the obvious task at hand helping professor warren and others in our attempts to avoid another economic catastrophe caused in large part by unregulated greed on one hand we are trying to balance things here or balance a known entity the greatest economic downturn since the depression caused by this lack of regulation versus the concerns about what an agency is going to do whose full effect doesn't go in to place until later this month so if we balance this i think the american public recognizes the real concern out there is what we have gone through what we are still experiencing because of those problems and how to face them rather than some extraordinary concerns about an agency which really hasn't done anything yet to challenge those  concerns that we have faced so far and like any agency the cfpb needs vigilant oversight from congress but we should not obstruct the agency from carrying out the intent of doddfrank as i said millions of americans are still suffering the consequences of the housing and financial crisis which was caused by weak or nonexistent regulation we all here have the beauty of hindsight about what took place but let's remember what professor elizabeth warren said in two thousand and seven nearly every product sold in america has passed basic safety regulations well in advance of reaching store shelves but credit products by comparison are regulated by a tattered patchwork of state and federal laws that have failed to adapt to changing markets the cfpb was explicitly designed to address these regulatory shortcomings just like the consumer product safety commission protects consumers against exploding toasters this agency will protect consumers against faulty mortgages one key strength of the cfpb is to focus on the shadow financial services sector and that should be a focus today instead of concerns about what we might do these unregulated lenders will for the first time be held to the same standards as banks and credit unions this should be our numberone priority and i thank ms warren for her efforts so far and in the future chairman issa i thank the gentleman m said that there were someh you were righth that there are some that have admitted wrongdoing the five that we are talking about have not admitted wrongdoing and i think that it would be appropriate based upon what we have done in other casesh just like you said we want to make certain things are priority those things that we need to continue to look in to i think this is an appropriate situation for us to look in to chairman issa i thank the gentleman at a hearing only motions for subpoenas related to not noticed any business of the committee so although members would be advised that if a witness had not shown up a subpoena could be in order to compel that witness no other business would be appropriate i will work with the ranking member to hearing will come back to order have consulted with the house parliamentarian and he informs me that under hearing procedures which is throughout the eight hundred pages at page eight hundred and two and beyond of the house rule xi which you have referenced if you will look at hearing procedures what it says is it goes through paragraph five of what is in order which is not included in what you have asked and then  custodian of the records chairman issa so you don't want documents you just want the custodian mister tierney what part of the english language sir don't you understand we want the custodian of the records to bring the documents here that person will be the custodian of those records and is the appropriate records and we are not talking about ten or twelve banks we are talking about five banks and we are talking about the five banks where the minority requested information and these banks did not provide  syllable of information and the relevance is mister chairman we have before us professor elizabeth warren and her bureau the bureau that she is been putting together is working so hard on part of their task is to look at mortgage issues and you said a little bit earlier that with regard to financial services they are doing the same thing they have basically been tasked with that an appeal of the ruling of the chair although in order is not immediately votable under the rules so we will continue this hearing and it is my intention before the end of the the ordinary rule of the committee is hminutes your opening statement is in the record in its totality and what we will do is not look at the clock very carefully obviously if you are summarizing or have additional items we want to hear them today is about hearing what you have to say your vision for this bureau and with that the gentlelady is recognized ms warren thank you chairman issa ranking member cummings and members of the committee for inviting me to testify about the work of the consumer financial protection bureau we appreciate the committee's important oversight role and welcome the opportunity to respond to your interest in how the bureau is being organized and operating let me begin by assuring the committee that at cfpb we are working nonstop to build an effective organization with the goal of making consumer financial markets work better for consumers and work better for financial services providers we want to make prices clear and we want to make risks clear and we want consumers to be able to compare two or three credit cards or two or three mortgages headtohead we are opposed to complicated forms and fine print we believe they do not help consumers and they do not work for responsible lenders who are happy to have their products compared headtohead in a competitive market attend of the day we think every consumer should have the basic information they need to answer two basic questions can i afford this and is this the best deal i can get that is how markets are supposed to work and that is where this new agency is headed have all seen the consequences of a regulatory system in which no single regulator has the authority and the comprehensive tools necessary to ensure that consumer financial markets work for american families for years we have seen the growth of fine print that hides important and complex terms fine print that makes it almost impossible for consumers to know what they are really getting into before they sign on the dotted line we have also witnessed an explosion of highrisk credit consumer lending among largely unregulated companies such as payday and car title lenders and we have seen the economy driven to the brink of collapse by subprime lenders peddling highrisk mortgages to people who couldn't possibly repay them as a country we are all paying a high price for a broken consumer credit system cfpb will increase accountability in government under the old system seven different federal agencies had bits and pieces of consumer financial protection but no one had the authority and the comprehensive tools necessary to monitor what whether prices and risks were clear and to ensure that consumer financial markets work for american families in the wake of the worst financial disaster since the great depression the doddfrank act reformed this flawed regulatory structure by placing consumer financial protection responsibility squarely on the cfpb so it can be directly accountable both to congress and to the american people for getting the job done in my written testimony i describe in detail our achievements to date in standing up the new consumer financial bureau we have made significant progress in our efforts to combine two complicated mortgage disclosure documents into a single short form we are laying the groundwork to supervise nonbank lenders which will give better protection for all families and help level the playing field between banks and other kinds of lenders we are setting up of our office of servicemember affairs under the very strong leadership of holly petraeus we have put the basic building blocks in place for a functioning agency hiring approximately four hundred employees from diverse backgrounds we have people who are coming to us from financial services consumer advocacy community banking government service private legal practice and regulatory compliance and we have kept stakeholders informed every step along the way i have talked directly with community bankers in all fifty states i have spoken with literally dozens and dozens of credit unions and credit union officials i have also spoken with big bank executives with trade associations with government watchdog groups and with consumer advocates across the country i am pleased to report that our various initiatives on improving mortgage forms supervising nonbank credit businesses and setting up a strong military service office have received widespread support from both individuals and groups across this country in my written testimony i also describe in detail the steps congress has taken to provide meaningful oversight over the cfpb and to make sure that it remains accountable both to congress and to the american people i appreciate the opportunity to discuss that oversight today issa ranking member cummings members of the committee thank you again for inviting me to testify about the consumer financial protection bureau as we prepare this agency to begin its various responsibilities we appreciate the important oversight role  i thank the gentlelady with that i will recognize myself for five minutes for a first round of questioning as you know i am not on financial services and never have been so i am going to try and just do some business of the committee that i particularly interested in although both you and i use the term you know cop on the beat i received from kim wallace in your legislative affairs department i received a rather interesting response to our document issa okay well the documents though that we requested we requested from you and what we will do is we will give you a copy of this to take back because what we don't mind that we need to work through document requests we have gotten about three hundred pages  from what we asked for the gentleman said that it was voluminous but we actually only received about three hundred pages most of it public but justice said that some of the document we requestedh department of justice has concerns about responsive records that may implicate the department's equities the department has advised us that disclosing some of these records would adversely impact ongoing law enforcement efforts now just for you professor w today you are going to inherit these things during this intervening period foia requests have come in from thomson west and from judicial watch and they have been the problem is they received professor they received these documentsh actually that is not yeah that is their letter redacted you don't even know what page it is from from what request that is considered excess under foia you have to find a way to make sure that when you deliver a paper with nothing on it that you are able to tell those who asked what that is responsive to and literally in the case of judicial watch what they received were countlessh they received not as many pages as they should have but they received countless pages like this in the case of judicial watch the state ags have given them the information that justice on your behalf wouldn't give them so they have two pieces of paper they have the one that is responsive and they can see why they have a right to it and they have a black page so a week from today you are going to inherit an agency where you are going to have a claim by a number of you know transparency groups who are saying hey we have the document unredacted you redacted it over at treasury so much so that you violated the law that is going to be one of the first things on your table and like i say i am going to give them to you today my question to you is will you please address them immediately and report back to us inherit those requests and those appeals ms warren yes sir chairman issa you can resolve those appeals by having your own foia people go back through the document request and fully comply or you will inherit the appeal i am sure justice is not going to continue defending on your behalf their bad decisions so what i would like to know is will you look at them immediately because these foia requests i think are going to speak pretty loudly to whether or not the transparency that you speak of that we speak of is actually occurring and sometimes the best example of transparency is do you give all you can give when foia requests come in asking for it or do you hide behind every possible redaction and foia officials have a considerable amount between what the law absolutely requires they put outh which in this case judicial watch having unredacted forms is saying treasury violated the lawh and what is f complete and transparent and you could give out by saying we are going to give all we can your agency not being a law enforcement agency not dealing with current criminal activities as a general rule hopefully will be able to give more not less please my onlyh i am afraid i am just a little lost in the conversation because i am not sure what the foia request was for and i had not seenh chairman issa for documents related to your activities during the leadup to the formation ms warren but i am not sure which documents you would be talking about or what the subject matter is or whether it is subject matter in which the justice department has indicated it has some interest we have many activities and i will say sir we have had a lot of foia requests and  i believe we have answered foia requests we have had ah we have hired people who understand foia and it is my understanding we have been putting out a lot of documents on foia most of which the justice department has no interest in you were trying to hold back documents you didn't try to hold back anything from this committee did you ms warren no sir mister cummings very well professor warren you recently came to baltimore for a town hall meeting where many of my constituents were able to learn about the bureau and share with you the issues and we heard from a veteran who was illegally foreclosed on and a retired steelworker who was tricked by a phony debtconsolidation company these are real people who work hard play by the rules and expect others overwhelming excitement and i don't know if you know it but they literally had to turn people away one local several of our local papers said that you were treated like a rock star i don't know about that but they said it how often do you see our to do this one of the most exciting parts about setting up the new consumer financial bureau has been to be able to spend time talking to americans around the country and these are americans of all political persuasions americans of all ages american who say this is a real chance to see government work for me this is chance to have somebody on my side this is a chance to have a voice in a world in which it is all run by big companies who want to drown me  fine print and tricks and traps and surprises that always keep me down i think we have a real chance with this agency and it is a chance not only to help markets work better but a chance really to restore hope for many americans who are starting over mister cummings well what i heard from folks is that they said basically what you just said they are just glad that they have somebody looking out for them they said the banks are doing okay they are making record profits but they wan report finding widespread problems at fourteen mortgage servicing companies let me read the major finding and i quote the weaknesses at each servicer individually or collectively resulted in unsafe and unsound practices and violations and violations of federal and state law and requirements the results elevated the agencies concern that widespread risk may be presented to consumers communities various market participants and the overall mortgage market the servicers included in this review represent more than twothirds of the servicing market thus the agencies consider problems cited within this report to have well i think the best way to understand it is that we will be on the front line and the question is what kind of mortgages get fed in to the system on the very front end is it possible to use mortgages to surprise people to trick people to drown them in terms that no one understands so that consumers are neither able to ask the question can i afford this and is this the best deal i can get our job is to be there on the front end and we are taking enormous strides in that direction right now to make sure that in the first instance mortgages are clear people can tell what they can afford they can shop in a competitive marketplace rpts deandcmn hofstad a m ms warren it is also our job to be there throughout the process including at the end in mortgage servicing if there are problems all the way through a default and potentially foreclosure to make sure that the large financial institutions that handle these transactions are complying with the law only a sampling of a relatively small number of files to address these widespread abuses the agency has initiated enforcement action against all fourteen banks they directed a comprehensive review of all files of affected owners to identify  need to be accurately and correctly disclosed to individuals and individuals can make their decisions based on whether or not they would like to purchase the product for instance the onepage mortgage  available in order to try to promote a functioning market and there is no doubt that no market functions if people don't have meaningful and adequate disclosure but i never want to back away from the part that a significant part of what we will do will be supervision and enforcement more than half of our resources will go to supervision and enforcement over financial institutions to make sure that there is a cop on the beat making sure everyone following the rules and that includes both banks and nonbanks and if you will forgive me i would also add to that just because i think of this in terms of the central areas where we work we also will have a significant complex that disclosure wouldn't be a remedy ms warren it is a good and interesting question congressman mchenry i recall sitting in the house financial services  during long testimony and the question came up about banning products and i remember that ed yingling the thenpresident of the american bankers association said yes there are certain products that should be banned i am less certain if that is true i am a big believer in disclosure meaningful disclosure and i would at least like to start with the concept of let's get out there and try some real disclosure put some real power in to the hands of consumers and see if we can't get these markets working i believe in markets mister mchenry do you see a financial product out there today that needs to be eliminated ms warren i don't know of one sir mchenry that is why i thought you would have some ideas on this now in terms of enforcement mechanisms with the cfpb beyond disclosure do you think those enforcement mechanisms would prescribe terms going forwardh meaning setting interest rates and fee structures ms warren sir i think what enforcement mechanisms are about are making sure that the laws are properly enforced and it is done as i understand it both through supervision and through direct enforcementh that is if it can't be worked out otherwise suing banks if they don't follow the law or suing nonbank institutions if they don't follow the  part of the remedy be that they change their practices going forward in a way that you described for instance in the mortgage disclosure issue that we are talking about the mortgage settlement issue that that is a significant piece of this prescribing terms going forward sir that would be new regulations that would replace the older complicated more complex regulations that required higher regulatory costs for the financial institutions and probably produced a whole lot less value for consumers and what we are going to do now and i think what we have is something that is both cheaper for mortgage originators for banks particularly for community banks and credit unions to issue and  was lost would you say there was an overwhelming consensus that reforms were needed to prevent another crisis and that the cfpb and i would say the credit card bill of rights which i authored were and are important protections for consumers ms warren yes ma'am i would misess maloney and do you think that the cfpb as already carefully constructed urgently needed and should be free to protect consumers as intended and go into effect on july people have asked you for advice now i thought freedom of speech was in our constitution and a fundamental right of our country you have been described as a leading  states city council members other professors other leaders and captains of industry or managers in industry is it unusual for them to call you and ask you for advice ms warren congresswoman and you don't have a vote on anything right now you are just basically putting in place an agency that the president has asked you to put this agency in place so you basically don't have any power to force anyone to do anything yes ma'am that is right misess maloney but you can answer the phone and you can give advice well i would say that is a basic american fundamental principle and one that should be protected for every person and especially professors and academics that are leading specialists in areas if you talk about oversight if you talk about transparency the last thing we want to do is say people can't give advice would you say that is a fair statement ms warren well i like to think that it is good to get advice i should state congresswoman i believe in advice and i believe in it in both directions we have been the beneficiaries at the consumer financial protection bureau of a great deal of advice from many many people outside government and many people inside government and i am glad we have been able to do that misess maloney okay i would like unanimous consent to place in the record an a enforce the rules that are already in place from the ftc and hud and other banking agencies but what is interesting to me is what they cannot do which i believe would be very beneficial to placing american banking on a le vel playing field and they cannot define which nonbanks should be supervised by the agency they cannot examine or enforce laws against the nonbanks and we know it was the unregulated come in and do this according to the american banker would be harmful to the financial institutions of our country particularly the regulated banks could you elaborate on that professor warren ms warren well congresswoman i will just appropriations committee was quoted in their report as saying quote disappointed that an agency dedicated to transparency and accountability was not more forthcoming about how it plans to spend the taxpayer money it also went on in there to say quote in the absence of this fine print the committee cannot discern what the consumer financial protection board plans to do how it will do it or how much it will cost given that your agency is about to open up here in about a week how do the taxpayers how do we see what you are going to do and how you are going to do it third item is contractual services which has a very specific number of forty eight million nine hundred and seven thousand dollars where is the detail about what you are going to do and how you are going to do it so how do we find the breakdown of that number and how you are going to organize this agency because you have obviously gotten some specificity in the numbers we are looking for the documents the transparency in how you are actually going to do that ms warren congressman let me try this at two levels and you tell me if this is different way the first level is to describe in a big sense where we will be spending money in the consumer financial protection bureau and if you just think of it like a pie halfh mister chaffetz no i am worried about the fine print the details the appropriations and i am afraid i am blocking on the name but every contract issued by the consumer financial protection bureau is done as you would know through the ordinary competitive process when appropriate through procurement but is posted mister chaffetz but in advance of those contracts for instance this is directly from the house appropriations committee unlike other agencies the consumer financial protection board does not describe or explain the relationship between its policy objectives and the budgetary resources performance measures or goals significant proposals that affect obligations in the five to year period and their relationship to the current year and budget year or the budgetary effect of workload strategic planning capital planning or investment in information technology how do we get the details of all of this information you obviously have a topline number and that was based on something but you seem to be hiding the details of how you came up with those numbers ms warren congressman no one is hiding anything we publish all contracts is not called a federal register there is a special place these are published but i just want to say mister chaffetz i am not talking about the contract you have only on your web site for a consumer i am worried about the person who is out you know in albuquerque or in provo utah how do they find out the makeup of all these numbers and the details as the appropriations committee suggested they can't see that information i doubt the public can see it either ms warren then they may want to go to www usaspending gov it will list the type of contract the awardee and the amount of the say it this way congressman mister chaffetz you just said you would have it when you stand up and that is next week so are you telling me that this will be available next week ms warren congressman i don't want to overpromise because i am not sure how many things you have read i am not familiar with the document you are reading from  negative credit reporting all of that is going on and it is terrible for the people generally but it is even more terrible when they do it with respect to our service members who are deployed overseas and so i want to ask you about a particular case the case of captain kenneth gonzales in the united states submit their mortgage payments by using money orders so she did it but chase then failed to process the payments then they submitted inaccurate and negative reports to the credit bureaus which then affected and badly impacted captain gonzales security clearance while he was still deployed the military jag officer tried to help him but she described the uphill battle that she had when she wrote an email to the american bar association i would like to quote a few she said to be honest i have not been able to do anything for this client i am just talking  clerks at the customer service section who refuse to talk to me without a letter of authorization which i have sent in four separate times to four separate fax numbers i am given a different one every time and told processing takes forty eight to hhours i have left voice messages with two supervisors and no one calls me back basically i just need to talk with a human being that will listen to the facts of this case and who will understand the need to make it right professor warren if this jag officer can't get any reaction you know from a mortgage servicer how do we expect that our members in the service who are overseas in iraq and afghanistan are going to get some response ms warren i think you have put your finger on the problem congressman these systems are not designed to be respons so how often are mortgage servicers initiating these types of unlawful foreclosures and fee collections or whatever and then charging them more fees at the back end how often does that go on ms warren congressman we do not know there have not been and there is no public information on this mister tierney well as i said at the outset you know this is far from unique the situation i think everybody on both sides of this dais have had these kinds of complaints coming in from their constituents some no doubt from people that are in the service and that is why it is critical that we get the documents the ranking member has subpoenaed and asked this committee to subpoena and that we go through and we thoroughly investigate all these illegalities and these abuses no service member no service member should spend his or her personal time while they maloney there have been a number of settlementsh i want to applaud the gentleman's work on this but there were a number of settlements with countrywide particularly with service members where they were fined i believe well over twenty  million for foreclosing and throwing the service members families out on the street while they were serving in iraq i have read those documents and i ask permission to put them in the record to support the fine work of mr htierney and also to say that we can talk about substance process appropriations but we are the investigative committee and i believe that we should  follow with a subpoena or with voluntary actions the leadership the ranking member has put forward to look at the bottom of this misess maloney recently holly petraeus who is heading up a very special division for the military the opportunity to question you in a subcommittee hearing where we called attention to the salaries of many that will be working in your new department and the concern that those salaries were anywhere from ten to hpercent higher than federal salaries and that the salaries you set for your employees are not subject to and not consistent with the federal salaries and that you have the autonomy to set your own salaries and the concern that in this economy that may be  a little more liberty than we would like with the american taxpayers dollars but i just want to talk about a couple of issues here first of all we heard about the service men and women and the particular issue with chase bank that issue was already declared illegal so i am trying to understand we all agree in this bodyh and this is a bipartisan issueh that our men and women should be protected and no home should be foreclosed on when they are overseas serving this nation but this action by chase was already deemed illegal we heard that countrywide has already had a settlement how do we justify this hmillion department if that is th gist of what we are taking about here ms warren well congresswoman i would put it this way we know about specific abuses that have come to light they were brought to light by the press not by government investigation be an ongoing monitor we have only talked with three mortgage servicers here so far let me put it this way we set up our office of servicemember affairs back in january it was one of the first groups we organized shortly after that press reports came out about illegal foreclosures against service members just to give you an idea of what we do holly petraeus wrote a letter immediately to twenty five servicers asking them to review their practices and we have heard this past week the jobs numbers came out and they were horrific as you know only eighteen thousand jobs were added in june my concern is what you are going to do will continue to hurt job growth in this country so i would like to know from you specifically do you intend to raise compliance costs or raise the cost of credit for consumers ms warren congresswoman we are trying to make prices clear risks clear and we are trying to make it easy for families to compare products i don't think that that is going to cost people jobs i think it likely makes them a little more secure in the case specifically of compliance costs our first initiative is the one that congressman  talked about congress and the regulatory agencies have been working for hyearshto try ms buerkle well excuse me again our time i watch my time clicking away do you intend to raise compliance costs on example of what we are doing lowers compliance costs that is why it has been embraced by the american bankers association by the independent community bankers association by the consumer bankers association by the credit unions it has been right now what we are trying to do we have lined up what we are trying to do and we hope it is the prototype for all of our work we are working closely with community banks we are working closely with credit unionsh ms buerkle thank you one last question you talked in your testimony about and it concerns me that you have this conception that the mortgage and the credit consumer world is fraught with tricks and trapsh i think that was your word if that is the case and you sitting here saying that this world is fraught with all of these issues and this goes back to the chairman's questionh what is it that you intend to ban what is it that you intend to change if you are saying this world is filled with tri what is it that you intend to change andhto ms warren congresswoman i don't think banning is the right way this is what we were talking about it is make the prices clear make the risks clear mow down the fine print so it is possible for consumers to didn't hear you thank you congresswoman we need a budget because these are very large and powerful financial institutions who hire armies of lawyers to design financial products that can't be read by ordinary american families we need some pushback we are the voice on behalf of the customer the american family mister mchenry ms norton is recognized for hminutes i want to go back to this report and to the bicameral forum and to some of what was said at that forum because this committee should be trying to find out whether what we found  law enforcement amounts to a systematic problem that needs further investigation holly petraeus the head of the office of servicemember affairs appeared at this bicameral forum and she was asked whether cases of the kind she had heard were isolated or more typical and let me read you what she said she recalled a national guard wife saying to me that every time her husband was activatedh and he had been activated three timesh she had to go through an extended fight with her bank to get the interest rate reduction and it was the same sort of thing send the paperwork oh we don't have the record on that send it again send it again you think the cfpb could do because we know it is not charged with enforcing the service act so i think it is fair to ask what would be the role in uncovering and doing something about these kinds of abuses and ensuring that what our service members are encountering does not happen again and again with bank after warren thank you if i can i will give a twopart answer the first part is that last week the consumer financial protection bureau led by holly petraeus signed  understanding with the judge advocates general of all of the services and it was for how we can cooperate and between the two of us use our resources more effectively to protect service members we had already been well into the process of working with the department of defense and this was just a more formal acknowledgment of that process and i think building a strong relationship going forward but i also want to say a second thing about it within the consumer agency and that is what it means to have a strong leader like holly petraeus what it means to make an office of servicemember affairs front and central in this organization and that is we have started reaching out holly petraeus and i went together to a joint base in san antonio we have been to other places she has been on her own she has opened up have reason to believe because we have already been reaching out to service members and servicemember families and actually are already in active communication with many families and with many of those who serve servicemember familiesh we anticipate a good time is that the idea or could we have a little closer approximation some members have other business to attend to as well and in fairness to the members on both sides it would be nice to have some idea of roughly when you think that might occur mister mchenry the chair will give a minute notice which was the ranking member states that the farm credit administration will retain all of its enforcement authorities over persons regulated by the farm credit administration and that the cfpb will have no authority to exercise any enforcement powers under the doddfrank act with respect to persons regulated by the fca so is it your interpretation that the cfpb has any enforcement authority over institutions regulated by the question about whether that covers institutions covered entities which are different from persons in this and so as i understand it the lawyers are out just trying to work institutions regulated by the fca ms warren so congressman i am just going to have to back up the statutory language you used referred to persons and your question referred to institutions and what the lawyers are trying to figure out from multiple authorities here how is it that we get appropriate coverage which is what we all want and to carry out congress will so  think there is a little bit of a statutory interpretation question and we are just trying to work through it in a reasonable way we just want to make sure we carry out the intent of congress mister desjarlais okay so what do i tell my farmers ms warren well you tell your farmers that because of the language in this question as you rightly know it is consumer credit that we do at the consumer financial protection bureau and as you also know because i have said it probably every chance i get that we are about trying to make prices clear and risks clear and trying to mow down fine print so people can make real comparisons i have actually had smallbusiness groups reach out to me and smallbusiness individuals who would like to know that they are going to have coverage and that they will have the same kind of protection about clarity in pricing and clarity in risks and not face fine print if they are using a credit card to try to start a small business and i think this is going to be a real challenge because we have a struggling i understand that and access to credit is about a whole lot of issues but in terms of what we are doing here at the consumer financial protection bureau we are hoping we are going to make things a little better for all those good people out there who are trying to start businesses chairman and thank you professor warren for being here and before i go into the questions let me state that this is one of the most incredible committee hearings that i have ever attended in this committee because the two sides are so far apart i just can't help but give you two examples of abuses that cry for an agency like this bureau one highcost predatory loans and if you look at a map of the foreclosures in my community it is evident that they were steered and that these predators took advantage of them in the second example and let me say you know to my colleague patriotism also means standing up for the men and women who wear  uniform who bravelyh who bravely defend this country and if you don't think this is an abuse then i have a bridge to sell you you know illegal foreclosures against s service members is a growing problem multiple mortgage servicing companies have conceded that they violated the servicemembers civil relief act they illegally foreclosed on service members and charged fees in excess of the maximum amounts allowed under the law and we have only begun to understand the scope of these problems in april four federal agencies that regulate mortgage servicers issued a report finding critical weaknesses they initiated enforcement actions against fourteen banks and they directed a comprehensive review to identify borrowers who have been financially har and to provide remediation and it is good that these agencies are on the job but this highlights just one of the many reasons why we need the consumer financial protection bureau to protect good that the agencies work to enforce the law after the fact but consumers and especially active duty service members shouldn't have to go through an illegal foreclosure in the first  place think about it a service member stationed overseas fighting for their country risking their life while back here their family is losing their home illegally that is devastating and no one should ha that professor warren i understand that you organized an office of servicemember affairs with cfpb can you please explain the role of the cfpb in protecting the rights of service members and their warren yes sir when we set up the consumer financial protection bureau one of the first pieces that we tried to put in place and make active was the office of servicemember affairs i first met with holly petraeush i believe it was october although my calendar is public so it would be possible to find that and she had come to see me about what she thought were terrible abuses that were going on with military families and she said to me you now have this new consumer agency and you can do something about this i must say for a small woman she is very forceful and i listened to her and took lots of notes and she had lots of very specific instances of what she was concerned about and very specific recommendations for what we could do so about a week went by and i invited her to come back and we talked a second time and she had even more ideas and that is when i realized we had found our leader for the office of servicemember affairs and i made her  an offer and she came to work for us and that is really how i want to describe this this office started with someone who fully ontheground understands what is happening to military families she herself comes from a military family from generations of military service people and she has seen it firsthand she often describes that she has even lived parts of this she was there from the beginning to build an office of servicemember affairs that said we at this agency will be responsible for identifying what is going wrong for dealing with service members families who get caught in traps and for helping change legislative micromanaging the financial product safety commission could develop nuanced regulatory responses some terms might banned altogether while others might be permitted only with clearer disclosure so you week and you wrote an article about ms warren yes mister gowdy and you said free of legislative micromanaging the financial product safety commission could develop nuanced regulatory responses some terms might be bannedh my question to you is to some of us legislative micromanaging is a euphemism for oversight ms warren actually i think this goes to the point that congressman mchenry raised and that was the question you may recall we are trying to figure out how to combine the tila and respa forms complicated hard to read high regulatory compliance costs for the bank or at least higher very little value for the  warren my question is actually more general than that my question is what is the role for congressional oversight you don't like legislative micromanaging you wrote that ms warren no mister gowdy some of us think that that is oversight so do you concede th congress has the authority and should have the authority to for instance hypothetically set the budget for your agency is that legislative micromanaging or is that oversight ms warren congressman i was trying to respond to your question and what i was trying to point out is that it was an example of how difficult it is for congress to get an appropriate nuanced response to a specific problem and in this case it was combining two forms but what we have been able a consumer agency because agencies operate differently is that we have had banks in community banks credit unions we have been able to put out multiple iterations of the forms we have been able to adjust we have been able congress have a right to look over your shoulder and did that statement indicate that you think that congress not looking over your shoulder secondguessing your funding or in fact your actions that is i think the question and i haven't heard an answer  congressman let me give as straightforward an answer as i could my direct testimony this morning is of course we need to be responsible to the congress the congress should look over our shoulder hhours a day hdays a week and i was trying to explain once i understood where the passage came from i was just trying to explain what i thought that passage meant but mister gowdy well may the record reflect that your article did not go in to the detail that your answer this morning went in to on that n big policy and political decision as you know sir not one banking regulator in the history of the united states has ever had its funding through the political process mister gowdy so you agree that congress should not be responsible for setting the budget for your agency ms warren i believe that congress should treat all of the banking regulators alike and not say that the one that tries to watch out for consumers is going to be put through the political process and subject to lobbying by gowdy you did mention oversight in your opening statement and the distinguished gentleman from maryland for whom i have great regard used the term illegal seven times it has been used an additional five times since mister cummings used it criminal and civil engagement with companies is also another form of oversight if these practices are illegal then why isn't eric holder sitting here with you explaining what he has done why do we need your agency if they are already illegal  congressman i think there is a real question about whether there has been adequate investigation in to what financial mister gowdy what have you done with respect to attorney general holder and the plus united states attorneys most of whom have been appointed by this administration what have you done to cajole them to do their jobs because i have heard the word illegal and that has a very specific meaning to me if it is illegal what have you done to cajole the prosecutors to do something about it congressman that is what we did when we got involved in mortgage settlement and were so sharply criticized for having advised the department of justice and our sister heard twelve times this morning i want to know why there aren't criminal prosecutions why we need an agency and the department of justice can't do it chairman issa the gentleman's time has expired the gentleman from  chairman i don't have a question for the witness i do have a comment primarily aimed at the junior members of the committee on both sides of the aisle i think all of us realize that this congress is viewed as dysfunctional and i would submit that this committee is also viewed as dysfunctional and this alleged hearing is one of the reasons why it too easily degenerates into a partisan food fight and it doesn't have to be this way in fact just a few years ago in congress it was not this way so i would urge the junior members of the committee to resist the partisan talking points that enable people on both sides of the aisle to walk in here read a question features it had some less good features but i do not want to be part of a committee at least at the subcommittee level that treated ms warren with more rudeness and disrespect than i have ever seen a committee witness treated that is not the american way now some of us come here and we get so used to the food fight that we want it to continue and you will probably score brownie points if you make your partisan hit you might even get on a better committee well congratulations you will not have solved a problem i would suggest to the chairman and the ranking member that oftentimes a seminar format is much more instructive is much more educational than the sort of partisan charade we seem to continue to engage in with hearings like this one of her books i have only read the the twoincome trap it is outstanding your constituents back home should read this book your bankers back home should read this book then there would be a lot less hatred and a lot less  and a lot less anger because this lady is trying to do the right thing and we all recognize that consumers oftentimes get the short end of the stick i have tried to refinance my home mortgage several times to take advance of today's recordlow interest rates and the paperwork is a blizzard i went to a very good law school and it is almost impossible for lawyers to understand this stuff ms warren has pointed out that the existing regulatory agencies have taken over a decade to try to simplify a couple of the forms and they have failed what has this committee done to simply some of the forms nothing so isn't it time for a new approach is it time for fresh thinking to give the consumers a break and let us also acknowledge that congress is sometimes captured by vested interests sometimes that happens and we need to resist that so i would urge the members of the committee particularly the junior members who are not so entrenched in bad habits to consider new and fresher approaches to solve some of these problems so that we can protect consumers and also give legitimate industries a fair shake because all bankers aren't bad people but i am afraid that we are falling into a rut here that is going to be the detriment not only of this committee and this congress but of the nation it doesn't have to be this way we can be civil to each other we can be informed we can resist the partisan talking points but i am not seeing that sort of behavior at least so far so let's try to do better and let's try to be civil to witnesses like ms warren let's try to focus on the substance because i have actually heard very little substance here today and there are better ways to solve our problems and i front of any member junior or senior to be about our oversight i do agree with you on the simplification patrick mchenry offered a bill like that a number of years ago and continues to support it i hope that all of us understand that our jurisdiction here is limited we are here to discuss whether doddfrank got it right for the organization whether professor warren is now finding things which are poorly defined within the statute that she is working and her four hundred employees are working to try to resolve whether some committee probably financial services primarily needs to revisit to give her guidelines additional authority and so on if we do our job right and the gentleman is absolutely righth we will in fact be talking about an organization that professor warren may head as the first head she may not but she is certainly the most knowledgeable witness and i have said this hearing will be about civil behavior for professor warren and about a dialogue about the agency that she has put a year of her life in to standing up so i join with the gentleman in full agreement mister cooper well mister chairman a civil discussion would be a marked improvement over the subcommittee's behavior you are right that the financial services committee does have substantive jurisdiction but here we have had two hearings with ms warren before her agency is even stood up a lot of people are rushing to conclusions here and i know that and i have looked at your background you really have an impressive background and youh by so many people and so many things the availability of credit is one of those things and i know that automobile loans come up quite often and sometimes they are regarded as  and you help me if i am not in the right place on automobile loans in particular you do know that dealerinitiated automobile loans that automobile dealers are not within the jurisdiction of the consumer agency that congress made that distinction  in doddfrank and so the place where we are focusedh and i just want to be clear about thish it is really about saying consumers just need to knowh they need to know what the price is they need to kind of know generally what the risk is the difference between say a fixed rate mortgage and a variable rate mortgage and they need there to be less fine print so they really have a shot at comparing straightup three mortgages three credit card agreements three checking accounts they can actually look at those that is really the thrust of what we want to do my own view of that is that that actually makes credit if anything more available to consumers consumers can trust that when they sign on the bottom line i get it i know what is happening here mister kelly and that is true and i think that oftentimes when we are dealing with retail customers and they go to a lender and we try to guide them through that process and it can be very difficult and i think there is lot of good advice and over the years you have given a lot of good advice to people and one of the things we caution people about is you know the amount of money that you are borrowing the length of time that you are going to have it and the percentage that you are going to pay on it and these are all critical aspects of it i think we both agree on that on what you can borrow a ceiling as it were and we're looking now at increasing the debt ceiling again and i find that kind of amusing that we use the word ceiling because in my world a ceiling means  something that's actually established and you can't go beyond and all the lending institutions i've ever gone to they put a ceiling on what you can borrow and what you can't go beyond and so now we're involved in this measure and we're going to tell the cosigners who are responsible for making all the payments on these loans that don't worry about that ceiling this doesn't really matter we're going to continue the raise it because we've been so reckless and so irresponsible and you know what you put us here and you put us in the position to actually borrow money for you that you're cosigning us so as your past history and the way you have advised people and i know right now the consumers are the most important part of what we're talking about we want to protect these people because  i noticed in your testimony you did say an economy being driven to the brink of collapse and we use terms about companies that are predatory companies and what we're doing to the economy i think that maybe we should be expanding your role to taking a look at what this body is doing to not only the future of our children and grandchildren but also the present and i would like toh you  this amount of money that we pay is interest that's kind of artificially low right now if we think this debt limit now or this deficit is great now wait until we get the real interest rates out there then people instead of holding their heads they're really going to be holding their with creditors putting limits on how much you can spend in the future that's ah that's a world i live in but i do want to say people expect you to meet your obligations that you have already incurred and they expect you to meet one hundred cents on the dollar mister kelly that's why in the automobile industry you actually have a beacon score that tracks your past history and watches actually what your revenues are that's a big part of what you're allowed to borrow so i think that's maybe part of the equation we're looking beyond thank you though for your t gentleman's time has expired the gentleman from kentucky mr hyarmuth mister yarmuth thank you mr hchairman professor warren it's great to see you here again and i had the opportunity during the subcommittee hearing some weeks ago to ask many of the questions i would ask so i'm not going to repeat them  one of the things that i was curious about is in the republican budget that passed the house the socalled ryan plan for medicare was part of that and under that plan for those people  under years old medicare would no longer exist instead citizens who then reached sixty five would be given some kind of payment in some form to go out and shop for insurance in the private insurance market  would you envision that that might be a role at some point for cfpb that insurance contracts would be subjected to the same scrutiny in terms of clarity and  transparency that other financial documents would be ms warren congressman i would say i think there are some very real concerns about the difficulty that consumers have reading insurance contracts and that it raises some of the very same issues we'll be dealing with in the consumer financial protection bureau over other kinds of contracts that are unreadable but right now congress has put a very clear to stray into insurance and we are not to stray into investment products and right now sir that's exactly what we'll be doing mister yarmuth certainly i would think though that whatever progress you've made in making sure that financial documents were understandable and transparent might serve as a good model for other areas of the economy ms warren i certainly hope that's the case and i also want to say it's a little piece of the consumer agency since we're here doing oversight and you give me a chance to talk about the agency and the things it's going to do we have a research division in our agency in fact it's called research markets and rule writing we've combined it all together and we are building a robust research team i mean smart and very diversified in terms of approaches to how to think about research and a significant part of what we will do we will look at what it takes to take complicated ideas and get them into something that really works on the ground day in and day out for american families that research will be available to everyone and i hope it will be useful in places beyond its implications in consumer credit mister yarmuth i'm sure it will be in the remainder of my time i had the privilege the other day of sitting in on a forum that senator rockefeller conducted with holly petraeus and a couple of the servicemen who had been subject to these incredibly unscrupulous practices and one of them was chief warrant officer charles pickett and he was an apache helicopter pilot serving in the army national guard was flying missions  operation iraqi freedom and while he was on duty bank of america attempted to foreclose on his home or actually they ended up trying to foreclose four times one of those times his daughter came home from school and and here he is flying missions in iraq trying to spend his spare time on the phone with banks trying to clear this up was unable to do so finally he hired a lawyer who was familiar with the servicemen's  civil relief act and that lawyer took sevenh i think seven different times trying to find somebody four different people before he could finally stop this foreclosure procedure which was totally unjustified so in terms of  short period of time you know i think it's easy to put out of sight what the real implications are of these financial misdeeds on military readiness the number one reason for losing a thank you mr hchairman thank you very much professor warren for being here today i was listening to the questions and the testimony and part of the responsibility we have in this committee relative to this particular hearing is stated in the paperwork that we all received today and i just want to read from the conclusion what it says so we're all clear about what we should be doing during this hearing the committee will examine what oversight mechanisms are in place to ensure that this new government bureaucracy properly carries out its mission to protect consumers the committee will also examine the potential uses and consequences of the cfpb's powers and in keeping with a responsible line of questioning i think we all have an obligation to ensure that the country trusts what this new entity is going to do and that there's transparency with this new entity and this new agency and that we are charged with that responsibility in the last time we met back in march i had wanted to talk to you a little bit about  mayhh i wanted to you talk to you a little bit about the structure and what i think is somewhat unprecedented you had stated that there's no banking regulator who is subject to the political process or to the appropriations all banking regulators are funded independently and indeed all of the other banking regulators not the consumer agency but all of the other banking regulators are able to set their own funding levels i don't disagree with your comment in regards to the fed the f occ but i do think that there are distinctions and differences between those entities and this one so could you clarify for me if you think that there's any difference in terms of oversight relative to the appropriations process ms warren i'm sorry congressman i just don't know what you're driving at i don't mean to be unhelpful i just don't know what you're driving at mister guinta okay well let me read your comment again on mayh in the hearing that we had you had stated that there is no banking regulator who is subject to the political process or to appropriations and i was making the point that there is a distinction between this agency and others relative to power and authority can you comment on that and whether you think you are treated as every other banking regulator or  other banking regulators for example the occ determines funding levels and assesses financial institutions for them the fdic follows a similar structure the fed of course gets its money in yet a different way so as i said in my statement there areh there are limits on our funding if we want funding above the cap provided in the statute we must come back to congress and ask congress for an additional appropriation that's what's provided in doddfrank and we would be permitted to do that but it means we have to come back into the appropriations process and as i understand it the other bank regulators do not go into the appropriations process in order to get their funding mister guinta would it be fair to say that the c different in the sense that with respect to the director position it is subject to removal only for cause and is therefore exempted from  though there is some unintended power or powers that are vested in this particular position and that's what i would like to clarify because the concern i would have as an individual not talking about you personallyh just the individual who would oversee this agency would appear to have greater powers and authority simply by the fact that it is treated differently than other banking regulators or agencies ms warren i see i think i understand the question yes there are differences the consumer agency is the only agency that is subject to a veto by other agencies there is no other agency subject to that kind of oversight there's no other agencyh banking agency at least as far as i know agency anywhere whose rules or regulations can be thrown out by a comments i think it's appropriate occasionally to catch ourselves at these hearings and ask ourselves if we're maintaining the proper decorum and respect i'm reminded as a veteran of about two hundred criminal trials that cross examination can be contentious but there's a respect due to the court as there is a respect due here and our witnesses and now it is incumbent upon our witnesses to answer questions succinctly and forthrightly and when they're not doing that it's fair for the member to push them along i would respectfully suggest that both sides have on occasion pushed the envelope on that and appeared to be disrespectful to the process and to our witnesses so i think mr hcooper's point is well taken and if we could all move in that direction it would be a better body overall ms warren salaries of your employees have been discussed and i recognize they don't necessarily come straight from the taxpayers but they're still important the concern i have is really toward the other end and that is your ability to attract qualified employees because you are really looking for folks who have the same knowledge set of people you're regulating i understand that in two thousand and nine the average salary even for the back office folks at hedge funds is about three hundred thousand dollars just the sheer volume of workers on the banking side and the salaries my concern isn't so much how much your folks are making it's your ability to track qualified workers and keep them to get the experience they  need to do the work you're supposed to do is this a challenge that you see as a real problem at this point ms warren yes congressman it is a serious challenge you know i just want to be sure that we're clear on the record since this question came up earlier we don't set our own salaries they're set by federal statute and we have exactly the same salary base as the fed as the occ as the other banking regulators we're justh we're in a system that's what doddfrank requires and we're following the law in terms of the salaries we set but there is a serious problem right now in the regulation of financial services and that ish i want to put it this way we have been genuinely  at the consumer financial protection bureau with people who have come to this agency who are incredibly smart and who have the opportunity to make lots more money somewhere else but they truly hear the call of public service they see an opportunity to make a real difference in a marketplace that they know sometimes from firsthand experience is badly broken i worry how long we will be able to keep those people when the siren song of money from elsewhere continues to play but it is where we are and i say today as much i worry about this as a longterm problem i proud of every single person who has come to work for the consumer financial protection bureau mister quigley how much of this is the institutional memory given the complexities of the new world of finance and learning how systems operate by the time people are experienced enough to really do this competitively they're really worth a lot more because of their experience with you ms warren that is a very fair point congressman we're doing a lot of training i want to put it this way we invest in our people we spend a lot of time with them on education in a formal sense we spend a lot of time in education in an informal sense that is working across groups running lots and lots ofh we call it lunch and learns around different topics we think that every time we make an employee of the consumer financial protection bureau smarter it's good for the bureau and ultimately inures to the benefit of the american people but i recognize it also makes them a lot more attractive to people with more money  for the record i have no problem with someone who's smart enough to go out in the financial world and make a good living but given that this is a new complex world i'm concerned that there isn't a balance here of equal experience and knowledge and hchairman let me preface my comments professor on first of all acknowledging that in your position where a lot of it is administrative you also have the responsibility to testify before congress and i'm very grateful to you for doing this i know that it is not always the most  of your day but i also understand that it's necessary and i do realize that while we may not always be philosophically aligned i'm grateful for your continued participation today and to that end i would like to ask you some questions specifically with regard to what i think is one of the most important that of course is because now that it has been in effect for a year we're looking to make sure that consumers as well as companies know what to look for when they're going to be deemed to either be an abusive or nonabusive product or service to the market and now that we've had a to ask you again because i believe your response in may was that we will go through the process of interpreting the language that congress has given us and i don't think that was quite where we want to be what we need to know so i want to ask you again specifically can you name any product service or transaction not already illegal that is unfair deceptive or abusive within the meaning of the doddfrank act ms warren congressman can i just start by saying we have not been in effect for a year  product that is not already illegal that is unfair deceptive or abusive within the meaning of the act ms warren congressman i can recall no producth mister ross have you had any discussion with your team as to any such products or how you would go about identifying such products ms warren i have not had a discussion with my team about a particular product no sir mister ross don't you think that's probably one of the most important things though i mean that's the power to ban to ban to stop the marketing of a certain product don't you think though that that would be something that you and your team should be addressing as you go into your first year next year ms warren congressman i appreciate the advice but actually no i think that what we should be doing is concentrating on the places where we can best make changes in the marketplace starting our work in the places that for example congressman mchenry suggested was an important place to start and that is where we can reduceh mister ross you have the power through the doddfrank act to ban any such products and you're telling me now that you've not even given them any consideration would it be safe to say then that there are no such products that you are aware of that are either unfair deceptive or abusive within the meaning of the act ms warren congressman what i'm trying to describe is that we have priorities and our first priority in terms of rulemaking is around the tila respa forms we are trying to reduce regulatory burdens at the same time that we're trying to increase the understanding for consumers so they can make good product  respect to my time and yours i will yield the rest of my time to mr hgowdy so that you may adequately answer his questions ms warren thank you sir mister gowdy payday lenders have a bad reputation for taking advantage of people no one should expect to be treated well by them do you know who said that ms warren probably me mister gowdy so that would be one group that should be banned ms warren congressman there's a lot of space between banning a product and making a payday loans and a host of predatory highinterest loan products that target minority neighborhoods should be called by their true names legally sanctioned corporate plans to steal from minorities that sounds like a wonderful thing to ban should they be warren or to make better we have a whole agency and we have a whole process to work on this we have a lot of different tools available at the consumer financial protection bureau one of the advantages we have is that it is possible to work on thank you mr hchairman and thank you professor warren i was at that hearing on mayh and was shocked by the way you were treated a number of us members wrote to the subcommittee chairman and asked him to apologize to you and i was curious whether or not he has extended an apology to you ms warren no ma'am ms speier well on behalf of the members that found that conduct absolutely beyond the pale in terms of professional conduct for members of congress please accept my apology for that behavior we have spent a great deal of time today on a number of issues that are probably premature because you are yet not operational but this committee just recently had a hearing on the department of education's regulations that they are going to impose on forprofit schools universities and colleges that you know provide not only an education but also do have financing through the federal government through pell grants and the like one of these forprofit colleges kaplan university's training manual entitled quote military elearning modules tells recruiters how to utilize fear uncertainty and doubt in the sales process with regard to competitors offerings and teaches them how to overcome objections that potential students may raise to signing an enrollment agreement the document states this technique was originally created within the computer hardware industry and uses these emotions to attempt to influence perception or a belief the technique is especially effective when prospects introduce the need to examine other online schools now this is particularly targeted again at our military that coupled with the fact that not only are we talking about a few incidents of military members typically abroad who have been foreclosed on we're talking about jpmorgan who has foreclosed on four thousand active duty members asked a number of colleagues to join in a letter to mr hbernanke and also to john walsh the acting comptroller of the currency asking them to audit these very banks i have not yet heard from any of them  and yet to my surprise and delight you've already undertaken to do this within the consumer financial protection bureau so my question to you is will you also look at this issue as it relates to military servicemembers ms warren yes ma'am we will starting next week on thursday july twenty one we will receive transferred authorities from the other agencies that have been  responsible before for the consumer financial protection laws it will come to the new consumer agency and we will be in the largest financial institutions  engaging in ontheground supervision of whether or not they are following the law as regards different consumer financial products remember i want to be clear about our approach we are not safety and soundness supervisors we are there to examine consumer products and examine to see whether or not the financial institutions have put appropriate procedures in place to assure that they are following the law and that they are in fact carrying out those procedures and are in compliance with the law that would be our job we will be there we will be cops on the beat to do that starting next week ms speier now as i understand it not only can these financial institutions not foreclose on military servicemembers but they cannot charge more than a hpercent interest rate will you be looking at that issue as well ms warren congresswoman i should make a caveat here it is the department of defense and not the consumer financial protection bureau that is specifically responsible for the enforcement of the  embers civil relief act and so what we areh our statutory part will be around truth in lending and other parts of the statute for consumer financial protection but we will be working closely over a long period of time with the department of defense to gather appropriate information through different channels and to be able to work with them in a way that makes u several times that the authority is coming over julyh to the agency from the other agencies comptroller of the currency fdic wherever it may be for some of these do you happen to know or have you heard if as that authority is transferring over from that agency that agenc there's been a lot of trying to coordinate with these agencies we've done some recruiting from these agencies you know there are some good ontheground people who currently work at the fed mister lankford there are some people that areh those agencies are downsizing as you are ramping up  okay let me follow through on a couple of things you had great emphasis on the unregulated businesses payday lenders you mentioned that a couple of times as well do you see a difference between engaging with a payday lender and a community bank specifically i know the big banks get tagged all the time on things i'm just talking about community banks today when i'm talking about banking do you see a difference between payday lenders and community banks as far as regulating them ms warren yes sir i do mister lankford will there be a difference in the way one they have a hundred rules to be able to implement on that do you anticipate another series of rules on top of those coming down on community banks from the new consumer financial protection bureau ms warren i just want to say on the hundred it's not one that we have teed up right now is this tila respa combination trying to reduce the paperwork around mortgage origination somethingh and i will say to you sir because i think it might be relevant when we first started this process the idea to put that first came from the community banks and i asked them at many points along the line i know there have been other changesh i know it costs every time forms are changedh is this something you want us to go forward with and they have said yes because payday is automatically covered the large participants but of course that's not going to affect the community banks other than how it affects their competitive environment mister lankford the concern is is that right now they have a lot of rules that they're trying to put into place and you know well community banking that is not some large bank with a new york headquarters this is twelve people in a small town in oklahoma that they're trying to go implement a hundred rules and figure out how to do it and it's very overwhelming so while the rules come down and say that's not a big rule it's not the size of each rule it's the stack of all the rules that are coming down on them what i'm asking of you is in the days ahead will you please make sure that's coordinated that there's not just saying oh we just added twenty new rules to them at the same time o added a hundred and then suddenly they're getting overwhelmed in a small community bank if you'd make sure those things are coordinated that would be very helpful to them to able to continue to have the free flow of credit going on let me ask you as well on the way you will interact with the banks also have just about every week they have another auditor that's sitting there so they might as well leave an office set aside for the federal government because there's going to be somebody there the next time do you have a concern with the authority that's been given to the specific director to kind of determine products and services that  unfair that the next director has that same authority to come undo what you do on that ms warren i think you may overstate the power of the director there's a whole process in place for this that starts with research that starts with community outreach that goes into analysis of markets that has cost and benefit there's a big process in an agency before we get to a place where any rule whatever it's on can be issued i started to say earlier just to get an idea about how this agency functions half of our entire budget and our fte will be about supervision and enforcement supervision of the largest financial institutions  supervision of the nonbank financial institutions and straightforward enforcing the law about a quarter will be around consumer education which we haven't talked about much today and consumer complaint and the last quarter has to cover everything else writing rules is just onehpiece of how we can help make this market work better for american families i've given you our first priority that's where we intend recess of between ten and hminutes i estimate that that will occur within about hminutes based on the number of members here and i don't think i can accurately give everyone a half an hour notice but my intention is to in fact allow us to work through professor warren's completion dismiss our witness and we'll take a recess of not more than fifteen minutes and then reconvene for the vote related to the earlier  motion so i hope everyone's comfortable with that if people feel they need a half hour notice they have it but depending upon people coming back they may choose to then ask questions so they actually could make it longer but i want to make sure thath you have been very kind with your time and answers hopefully we've been kind backh that we get through it and allow you to get on with your day and we'll get on with our procedures so with that i recognize the gentleman from virginia for five minutes mr  and welcome professor warren it's good to see you again and let me ask you a question the agency you are representing here today the consumer financial protection bureau was created how  it's set up to have oversight in terms of its money its budget is set up outside the political process like other banking regulators so currently am the special advisor to the secretary of the treasury for standing up the consumer agency there will be a nominee from the president of the united states and there will be advice and consent presumably from the senate on that nominee mister connolly are there other members of the board who are also appointed and subject to confirmation ms warren that's the only senate confirmable or i should say presidential especially the junior members of this committee for lack of civility and for partisanship with all respect the tone of partisanship and civility is not set by the junior members of this committee it's set by the senior members of this committe they're the ones at the end of the day who make the rules enforce the rules and engage in certain practices or not and frankly while i also regret how you were treated before the subcommittee of this committee professor warren i think the issue of civility toward you begs the question because what we're really up against is a relentless attack on the creation of bureau of the legislation that created that bureau even to the point of blocking any nominee every single republican in the senate signed that letter you reference saying they will move to block any nominee of the president's so if we can't win legislatively we're going to use other mechanisms to make sure that your mandate is not enforced and that you can't really do your job and so while i wish the problem were just one of civility it goes far deeper than that it is in fact a political attempt to prevent the protection of consumers the legislation foresaw and tried to create a framework for i deeply regret that because i think you could provide enormous visionary leadership in protecting the consumers of america and i deeply regret that one party decided to make that a partisan issue  rather than try to come together and find a common ground with that i yield back that you bring to this agency something that is so very very important and that is passion and i say to my children i say to them if you can take what you believe to be  purpose in life and then match it up with a job then you are truly blessed and you bring that passion competence and integrity and we really do appreciate you just in case i don't have a chance to say that again on the record i want to make that very very clear too is that when you're at the dance it always takes two parties to dance and that there's problems not just from the private sector in wrongdoing but also from government and that's why i come with a different eyesight i 'm also from arizona so just to give you some perspective so the way i look at things and the way i've seen things is that legislation when it comes into new existence isn't always perfect and so what we're straining here and me as one of them is was that legislation crafted right did it have the proper checks and balances and i think i hope and i extend that's what the tenor is there is that question and when you don't get an answer to a question it just creates more questions i hope you understand okay so with that being said i heard you talk to mr hgowdy that no product should be banned okay i thought i heard that you didn't  any product should be banned ms warren no congressman i hope what i said is that i've been in hearings before the president of the american bankers association has been asked are there products that should be banned he said yes i've said i think the way we should go is i think we should get started on behalf of the american people mister gosar but i'm a businessman too and the last job numbers i saw are just plummeting and part of that is is the uncertainty we're creating in here and to have one individual truly heading an agency dictating that there won't be a our initial regulatory actions with the help of the consumerh with the community banks is that we're actually going to change the law in a way that reduces the regulatory burden for these community banks and at the same time roger's the leader i don't know how every single one of them feels mister gosar let me ask you a question i know we talked about the housing market could you agree that arizona is one of the epicenters for a problem with mortgages and home crisis would you say warren there's some terrible problems in mortgage foreclosures in arizona mister gosar give me some examples of some groups that you've reached out into arizona because it seems to me if we've got a problem of the magnitude like this that you'd reach out and have some support in arizona could you tell me specifically and throw a couple of community outreachh i'm from one of the poorest districts in the country i have a lots of native americans have a lot of veterans have a lot of senior citizens a lot of folks thath this agency is really easy in my district because there are no choices you cannot refinance your house right now most of the people are living not paying their mortgages and the banks aren't even putting it on their list because they can't take it as another hit and i'm not finding from my standpoint in district one any banks that have been contacted in my district from you and i'd love to know who they are so that we would find out and get a list from you if we could concern about the salary of the workers let me say to you that i applaud you for really paying wages that you can keep people to be able to do the kind of job that needs to be done i think that if we look back and if we're honest that i think some of our problems have been is because we did not pay people that had oversight responsibility the way we should have paid them and that led to some of the problems i do believe that i've not done any research on it but i do think that that's an issue but at least you have the insight and understanding to pay people so you will be able to hold on to them to be able to do the job that needs to be done to bring about the confidence that needs to happen in order for us to be able to move forward from this point on so i want to go on record saying i salute you you know for doing that and  course i was in afghanistan not too long ago and i had an opportunity to talk to many of the soldiers and their real concern was about the fact that they were having difficulty maintaining their homes and they gave me stories like for instance they were stationed in one place transferred them out and then of course they had a house there and now they're moving again and  what can we do how could you be a helpful to us so that was the outcry that was coming from many many of the soldiers as we talked and walked in afghanistan and to me  think that we have an obligation and responsibility to do something about it what suggestions do you have ms warren well congressman i will start by saying you're really showing how we are all paying a price for a broken consumer credit system that letting things get as far out of control as they got in two thousand and five two thousand and six two thousand and seven two thousand and eight and now we pay at a minimum what we can work on at the consumer financial protection bureau is giving servicemembers and veterans a place to come a place that we can at least get a better understanding of what's wrong to work with the department of defense to make sure that the servicemembers relief act is fully and fairly enforced that other tools that are available to us like truth in lending are also fully and fairly enforced and to make this issue a national priority for america you know we've done a lot to heal other segments in the economy but we have not focused on the impact on our servicemembers of a broken credit market and we must foreclosed on servicemembers especially during the course of deployment i want to do that and on julyh two thousand and eleven ms petraeus announced that the consumer financial protection bureau and the judge advocate general of the united states army marine corps navy air force and coast guard agreed to a number of steps to provide stronger protections for servicemembers and their families is that right ms warren yes sir mister towns one important aspect of this has to be education but another aspect has to be enforcement when mrs hpetraeus appeared at the forum on tuesday she emphasized this here is what she said let me go  quote you could have the laws in place but if the people on the other end of the phone are not aware of them or are not applying them properly then it is not going to work what is your reaction ms warren i think that is absolutely certain congressman she speaks truth on this you know one of the things i want to say about the consumer bureau and i'll just say it again quickly half of all of our money our employees eventually will be in supervision and enforcement not in trying to change rules but in making sure that the law is enforced a quarter of our people will be in financial education and consumer complaint dealing right on the ground with families and the remaining quarter