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CONSUMER FINANCIAL PROTECTION EFFORTS:

ANSWERS NEEDED

HEARING

BEFORE THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

JULY 14, 2011

Serial No. 112–88

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform
(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director
(III)

C O N T E N T S

Page

Hearing held on July 14, 2011 ............................................................................... 1

Statement of:

Warren, Elizabeth, Assistant to the President and Special Advisor to

the Secretary of the Treasury, Consumer Financial Protection Bureau .. 36

Letters, statements, etc., submitted for the record by:

Connolly, Hon. Gerald E., a Representative in Congress from the State

of Virginia, prepared statement of .............................................................. 88

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 7

Issa, Chairman Darrell E., a Representative in Congress from the State

of California:

Followup questions and responses .................................................................. 107

Prepared statement of ...................................................................................... 4

Tierney, Hon. John F., a Representative in Congress from the State

of Massachusetts:

Democratic staff report ............................................................................. 12

Prepared statement of ............................................................................... 30

Warren, Elizabeth, Assistant to the President and Special Advisor to

the Secretary of the Treasury, Consumer Financial Protection Bureau,

prepared statement of ................................................................................... 38

(1)

CONSUMER FINANCIAL PROTECTION

EFFORTS: ANSWERS NEEDED

THURSDAY, JULY 14, 2011

HOUSE OF REPRESENTATIVES,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The committee met, pursuant to notice, at 9:30 a.m., in room

2154, Rayburn House Office Building, Hon. Darrell E. Issa (chairman of the committee) presiding.

Present: Representatives Issa, Mica, Platts, McHenry, Jordan,

Chaffetz, Mack, Walberg, Lankford, Amash, Buerkle, Gosar, Labrador, Meehan, DesJarlais, Walsh, Gowdy, Ross, Guinta,

Farenthold, Kelly, Cummings, Towns, Maloney, Norton, Kucinich,

Tierney, Clay, Lynch, Cooper, Connolly, Quigley, Davis, Braley,

Welch, Yarmuth, Murphy, and Speier.

Staff present: Thomas A. Alexander, senior counsel; Robert Borden, general counsel; Lawrence J. Brady, staff director; Katelyn E.

Christ and Tegan Millspaw, research analysts; Benjamin Stroud

Cole, policy advisor and investigative analyst; Drew Colliatie, staff

assistant; John Cuaderes, deputy staff director; Gwen D’Luzansky,

assistant clerk; Adam P. Fromm, director of Member services and

committee operations; Linda Good, chief clerk; Ryan M. Hambleton,

professional staff member; Frederick Hill, director of communications and senior policy advisor; Christopher Hixon, deputy chief

counsel, oversight; Hudson T. Hollister and Christine Martin, counsels; Justin LoFranco, deputy director of digital strategy; Mark D.

Marin, senior professional staff member; Laura L. Rush, deputy

chief clerk; Rebecca Watkins, press secretary; Peter Warren, legislative policy director; Michael Whatley, professional staff member;

Beverly Britton Fraser and Davida Walsh, minority counsels; Lisa

Cody, minority investigator; Kevin Corbin, minority staff assistant;

Ashley Etienne, minority director of communications; Jennifer

Hoffman, minority press secretary; Carla Hultberg, minority chief

clerk; Lucinda Lessley, minority policy director; Leah Perry, minority chief oversight counsel; Jason Powell, minority senior counsel;

Dave Rapallo, minority staff director; Susanne Sachsman Grooms,

minority chief counsel; and Mark Stephenson, minority senior policy advisor/legislative director.

Chairman ISSA. Good morning. The hearing will come to order.

We exist for two fundamental principles: First, Americans have

a right to know that the money Washington takes from them is

well-spent. And, second, Americans deserve an efficient, effective

government that works for them.
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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 products. We 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 2,000-page document, whether the guidance has been sufficiently

clear; and whether or not the American people can feel comfortable

that what was envisioned in Dodd-Frank 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 Dodd-Frank.

Dodd-Frank was about making sure that we never again have 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 sub-agency, independent as it might be, but

fully funded and accountable to the Federal Reserve, could well become an agency that, while well-intended, is not well-understood or

transparent to Congress or to the American people.
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These concerns and others will be voiced here today. We 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.

Last, 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 Dodd-Frank, 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 Dodd-Frank, 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.

[The prepared statement of Chairman Darrell E. Issa follows:]
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Mr. CUMMINGS. Thank you very much, Mr. 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 into 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 their 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, illegal—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 admitted to by

the banks.

Over the past 6 months, I have urged this committee to conduct

a thorough—thorough—bipartisan investigation of these systemic

abuses. Initially, we had positive signs. On February 11th, 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, ‘‘wrongful foreclosures and other

abuses by mortgage servicing companies.’’ We also held a bipartisan field hearing in Baltimore, where we heard heart-wrenching

testimony from a disabled veteran who suffered abuses at the

hands of a mortgage servicing company, including an illegal eviction.

But since hearing that testimony, the committee has done nothing. I asked the chairman to join me in sending document requests

to the top 10 mortgage servicers, but he declined. 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.
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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 face financial ruin.

Ironically, it appears 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 with my 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 to 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.

And, with that, Mr. Chairman, I yield back.

[The prepared statement of Hon. Elijah E. Cummings follows:]
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Chairman ISSA. The gentleman yields back.

We now recognize the chairman of the Subcommittee on TARP,

Financial Services and Bailouts of Public and Private Programs,

Mr. McHenry, for his opening statement.

And by previous agreement, any unused time you may yield on

our side, and they will do the same.

I recognize the gentleman.

Mr. MCHENRY. Thank you, Mr. Chairman.

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 July 21st.

Although the CFPB is not 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 CFPB 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 CFPB 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 non-answers 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.
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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 that, Mr. Chairman, I would yield the balance of my

time back to you.

Chairman ISSA. Thank you.

And I won’t use it for a further opening statement, but I would

like to answer the ranking member’s inquiry.

As you know, we held a field hearing in Baltimore 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 fact-finding. 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,’’ etc. 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. Tierney for his opening statement.

Mr. TIERNEY. Thank you, Mr. Chairman.

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
11

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 Dodd-Frank’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. And

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.

Mr. Chairman, I would like to enter in to the record a report

compiled by the Democratic staff entitled, ‘‘Fighting on the Home

Front: The Growing Problem of Illegal Foreclosures Against U.S.

Servicemembers.’’

Chairman ISSA. I look forward to it.

Mr. TIERNEY. Thank you.

[The information referred to follows:]
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Mr. TIERNEY. The report describes in detail the systemic nature

of these problems.

Particularly troubling is that these abuses are already illegal.

Congress enacted the 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 as

thousands of affected service members were identified, it became

clear the problems were more widespread. This year, three banks

were forced to pay multimillion-dollar settlements related to these

abuses. The largest was JPMorgan. At first, it announced it would

pay $2 million, but it ended up paying $56 million 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, ‘‘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

actions are so much more widespread, Mr. Chairman, than originally thought, however, I believe a comprehensive investigation by

this committee is urgently needed.

And, with that, I yield to Mr. Quigley for the balance of my time.

[The prepared statement of Hon. John F. Tierney follows:]
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Mr. QUIGLEY. Thank you.

Thank you, Mr. Chairman and 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 Dodd-Frank. 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 2007:

‘‘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 number-one priority. And I thank Ms.

Warren for her efforts so far and in the future.

Chairman ISSA. I thank the gentleman.

Mr. CUMMINGS. Mr. Chairman.

Chairman ISSA. Just a moment.

Members will have 7 days to submit opening statements and extraneous material for the record.

For what purpose does the ranking member——

Mr. CUMMINGS. Mr. Chairman, I have a motion.

Chairman ISSA. The gentleman will state his motion.

Mr. CUMMINGS. Mr. Chairman, since listening to your statement

a few moment ago, and since a key focus of today’s hearing is the

abuses by mortgage servicers, I move, pursuant to House Rule XI,

clause 2(k)(6), that the committee authorize subpoenas for documents from the five mortgage servicing companies that have not

been responsive.

By the way, Mr. Chairman, you said that there were some—you

were right—that there are some that have admitted wrongdoing.
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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 cases—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 that hearing

can be considered in order for witnesses. However, we will take the

motion and work with the ranking member on a business meeting

where it could be in order.

Mr. CUMMINGS. Well, we have consulted carefully with the House

Parliamentarian, and they tell us that, under Rule XI, clause

2(k)(6), this motion is in order and must be recognized.

Chairman ISSA. Under committee and House rules, we notice

business of the committee differently than hearings. Today we have

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 notice a business meeting so that it would be. At the next business meeting, including the

markup of a post office, it would be ordinarily in order for that.

Mr. CUMMINGS. Very well.

Chairman ISSA. I thank the gentleman.

Mr. TIERNEY. Mr. Chairman.

Chairman ISSA. Yes?

Mr. TIERNEY. I would like to appeal the ruling of the chair.

Chairman ISSA. If the gentleman insists on his motion, we will

take a 5-minute recess.

Mr. CUMMINGS. I insist.

Chairman ISSA. We stand in recess.

[Recess.]

Chairman ISSA. The hearing will come back to order.

Mr. Tierney, I have consulted with the House Parliamentarian.

And he informs me that, under ‘‘Hearing Procedures,’’ which is

throughout the ‘‘800’’ pages, at page 802 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 paragraph six says, ‘‘Except as provided in paragraph 5,

the chair shall receive and the committee shall dispose of request

to subpoena additional witnesses.’’

Do you have an additional witness?

Mr. TIERNEY. Yes, sir. If you look at the subpoenas, we are moving the subpoena to custodians of the record for the five banks to

produce the list of documents.

Chairman ISSA. And what would that have to do with today’s

hearing? It is additional witnesses for the hearing that has been

noticed.

Mr. TIERNEY. Right. So the ranking member’s motion here is relevant and germane in the following way. The title of today’s

hearing——

Chairman ISSA. But no, no. Just before you——

Mr. TIERNEY. I will answer your question.
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Chairman ISSA. But let’s get to the first question. It says ‘‘witnesses.’’

Mr. TIERNEY. Yes.

Chairman ISSA. Your subpoena is for documents.

Mr. TIERNEY. Is for the custodian of the records to bring the documents.

Chairman ISSA. It is for documents.

Mr. TIERNEY. It is for the custodian of the records to bring them

in.

Chairman ISSA. It is for documents, not witnesses.

Mr. CUMMINGS. If the chairman would yield?

Mr. TIERNEY. I have been through this a few thousand times in

my life, all right? And I don’t know about you. But the subpoena

is to the custodian of the records for the documents. But the custodian is the one we are subpoenaing in here to produce the documents.

Chairman ISSA. So I want to understand your subpoena. So what

you want is for 10 bank executives to be here with documents?

Mr. TIERNEY. I don’t know if they are executives or not. I want

the custodian of the records.

Chairman ISSA. So you don’t want documents. You just want the

custodian.

Mr. 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 person to produce them as a witness under

oath in front of this committee. That is what the subpoenas are for.

Chairman ISSA. I appreciate that.

I have been additionally——

Mr. CUMMINGS. Mr. Chairman.

Chairman ISSA. Yeah, go ahead.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

Mr. Chairman, since there is some question as to what our motion is all about, Mr. Tierney is absolutely correct, we are talking

about the custodian of the records. And we are not talking about

10 or 12 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 us, Mr. Chairman, with one syllable of information.

And the relevance is, Mr. Chairman, we have before us Professor

Elizabeth Warren. And her bureau, the bureau that she is putting

together and 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 looking at things prospectively, Mr. Chairman. We are looking at them from a historical standpoint.

And so, that is what it is all about.

Chairman ISSA. And I appreciate the gentleman’s comments.

Additionally, the Parliamentarian informed me 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 hearing to hold a vote on your appeal of the ruling of the chair.

And, with that——
35

Mr. CUMMINGS. Parliamentary inquiry? Parliamentary inquiry,

Mr. Chair.

Chairman ISSA. I recognize the ranking member for——

Mr. CUMMINGS. Thank you very much.

Just one quick question: At what time—based upon your understanding of the parliamentary rules, is that where we have an opportunity to debate our motion? Do you follow me? In order words,

you are talking about——

Chairman ISSA. An appeal is not debatable.

Mr. CUMMINGS. Okay. And so, basically, we will not have an opportunity—it is my understanding——

Mr. TIERNEY. Point of order, Mr. Chairman.

That certainly is debatable. An appeal of the ruling of the chair

is debatable. And we get to discuss the germaneness of that motion

that was made by the ranking member. And I am happy to do it

now, if you like, or if you want to set it aside for later, we could

do it later. But it is debatable.

Chairman ISSA. I have set it aside for later. The parliamentary

office of the House is available to all Members. We will have plenty

of time——

Mr. TIERNEY. We consulted them fully.

Chairman ISSA. We will have plenty of time for you to check on

what they just told me.

And, with that——

Mr. CUMMINGS. Mr. Chairman, just one quick question.

Chairman ISSA. Yes, sir.

Mr. CUMMINGS. Mr. Chairman, Rule V requires that if a vote is

postponed, as you are doing, you shall take reasonable steps to notify Members as to when that vote will be held. Pursuant to this

rule, I ask that you provide all Members with at least half-an-hour

notice before holding a vote on the pending motion.

Chairman ISSA. It will not happen before 10:40.

Mr. CUMMINGS. Very well.

Chairman ISSA. At this point, Professor Warren, I appreciate

your being here.

Pursuant to committee rules, all witnesses will be sworn before

testifying. Please rise and raise your right hands.

Thank you.

[Witnesses sworn.]

Mr. CUMMNGS. Please have the record reflect that the witness

answered in the affirmative.

Professor Warren, we have a number of items which are obviously pending. I want to and will allow you to go through your full

opening statement before we deal with this that is unrelated to

today.

So, the ordinary rule of the committee is 5 minutes. 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.
36

STATEMENT OF ELIZABETH WARREN, ASSISTANT TO THE

PRESIDENT AND SPECIAL ADVISOR TO THE SECRETARY OF

THE TREASURY, CONSUMER FINANCIAL PROTECTION BUREAU

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 the 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 head-to-head.

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 head-tohead 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.

We 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 high-risk 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 sub-prime lenders peddling high-risk 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.

The 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 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 Dodd-Frank 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.
37

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 400 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 50

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.

So, with that, Chairman 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 of the committee, and we thank you

for your interest.

[The prepared statement of Ms. Warren follows:]
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Chairman ISSA. I thank the gentlelady.

With that, I will recognize myself for 5 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 am 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

request, which you had—or, actually, 1 second—okay. And we are

going to leave you with a copy of it. We are a little—I think he

works sort of for you through Treasury.

Ms. WARREN. No, sir. I am sorry. He doesn’t work for me.

Chairman ISSA. Okay.

Ms. WARREN. He works for the Secretary of the Treasury——

Chairman ISSA. Okay, then——

Ms. WARREN [continuing]. And is part of the Treasury. We have

a——

Chairman 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 300 pages from what we

asked for. The gentleman said that it was voluminous, but we actually only received about 300 pages, most of it public. But Justice

said that some of the document we requested—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 Warren, you are not in law enforcement, you are not involved—you wouldn’t be involved in things

which are criminal investigations at this time by your agency,

would you?

Ms. WARREN. No, Congressman, Mr. Chairman, I am sorry, but

I am afraid that there may just be a little bit of confusion here,

and I want to make sure we don’t get down the wrong path here.

I believe there are requests for the Department of Treasury. It

is not to us——

Chairman ISSA. Okay. Well, the problem is, you are not stood up

yet, so we put to it the agency that is custodian of your records.

Let me go through a couple more. And, again, we are going to

have you take these with you, because, come July, the 21st——

Ms. WARREN. It is a week from today?

Chairman ISSA. A week from 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, apparently, pretty inadequate, so inadequate that Judicial Watch is appealing the CFPB’s search for production of

records, stating that it was an abuse of disclosure.

The problem is, they received, Professor, they received these documents—actually, that is not—yeah, that is their letter. And, Professor Warren, they received documents that looked like this. And

when you take over and have a FOIA department, I guess, under
51

your control, what I would like to let you know is that, when someone redacts something so that you don’t know what was 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 countless—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 on how you have resolved the inconsistencies

between what State AGs under their FOIA laws thought they had

to give and what Justice on your behalf didn’t give?

Ms. WARREN. I——

Chairman ISSA. Please.

Ms. WARREN. Yes, Mr. Chairman, I have never seen this. But I

do want to say, Mr. Chairman, we will do our best here, but I am

not sure I can explain or would be in a position to speak for the

Justice Department.

Chairman ISSA. Actually, what I am asking you to do is, you are

going to 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 out—which, in this case, Judicial

Watch, having unredacted forms, is saying Treasury violated the

law—and what is full and 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.
52

Ms. WARREN. My only—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 seen——

Chairman ISSA. For documents related to your activities during

the lead-up 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 a—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 one way or another because they do not involve an ongoing law enforcement matter. And so——

Chairman ISSA. Well, thank you. My——

Ms. WARREN. I am sorry.

Chairman ISSA. Please.

Ms. WARREN. No, no. I am sorry.

Chairman ISSA. I just want to be respectful of the time.

The ranking member is——

Mr. CUMMINGS. Your name is not Geithner, is it?

Ms. WARREN. No, sir.

Mr. CUMMINGS. Well, the request that he is talking about, the

chairman is talking about, it is dated June 20, 2011, and it is addressed to Timothy Geithner.

And I don’t want the press to get confused and to get the—there

is an implication that you were trying to hold back documents. You

didn’t try to hold back anything from this committee, did you?

Ms. WARREN. No, sir.

Mr. 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 their issues. And we heard from

a veteran who was illegally foreclosed on and a retired steelworker

who was tricked by a phony debt-consolidation company. These are

real people who work hard, play by the rules, and expect others to

do the same. And, by the way, they are the constituents of Chairman Issa and every single member of this committee. They are the

same kind of people that I guess you have seen all over the country.

What struck me most about the town hall meeting, however, was

the 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 constituents, and how have you been

moving around to gather information? Can you tell us about that

very briefly? Because I have a number of questions I want to ask

you.

Ms. WARREN. I can, Congressman Cummings. And I appreciate

just even the brief opportunity to do this.
53

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, Americans of all races,

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 in 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.

Mr. 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 want to do okay.

And, sadly, so many of them are drowning.

Now, let me ask you about the mortgage abuse issue. On April

13, 2011, the Office of the Comptroller of the Currency, the Federal

Reserve, the Office of Thrift Supervision, and the Federal Deposit

Insurance Corporation issued a report finding widespread problems

at 14 mortgage servicing companies.

Let me read the major finding, ‘‘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 two-thirds of

the servicing market. Thus, the agencies consider problems cited

within this report to have widespread consequences for the national housing market and borrowers.’’

Professor Warren, these are massive and systemic weaknesses.

When the Bureau is up and running, what role will it play in addressing them?

Ms. WARREN. 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.

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 default and potentially foreclosure, to make sure that the

large financial institutions that handle these transactions are complying with the law. That will be our job, sir.

Mr. CUMMINGS. Now, with respect to service members, the report

found cases in which foreclosures should not have been proceeded,

including against borrowers who were covered by the
54

Servicemembers Civil Relief Act. However, this review was based

on only a sampling of a relatively small number of files. To address

these widespread abuses, the agency has initiated enforcement action against all 14 banks. They directed a comprehensive review of

all files of affected owners to identify borrowers that have been financially harmed and provide remediation.

Professor Warren, when will we know the full extent of this problem, this year or next year? Do you know?

Ms. WARREN. Congressman, I do not. I rely on Sheila Bair and

her most recent testimony, who pointed out, even with this, we

really do not yet know the full extent of the problem.

Mr. CUMMINGS. And it is pretty bad, huh?

Ms. WARREN. Yes, sir.

Mr. CUMMINGS. Thank you very much.

Mr. MCHENRY [presiding]. The gentleman’s time has expired.

I now recognize myself for 5 minutes.

Investor’s Business Daily reported on July 8th that the Justice

Department has an investigation ongoing about biased banks,

about lending in minority communities. And I was wondering, you

know, you have been an advisor to Justice before, under your testimony, regarding the mortgage issue, the mortgage servicer issue.

So I wanted to know if you are serving as an advisor for this investigation.

Ms. WARREN. The Secretary of the Treasury asked us to get involved in the mortgage servicing issue——

Mr. MCHENRY. I am asking—you have already testified about

that. But I was wondering about this biased bank investigation

that has been reported in the New York Times and Investor’s Business Daily.

Ms. WARREN. He has not asked us to be involved in that, I don’t

believe.

Mr. MCHENRY. Okay. Thank you.

Now, in terms of—in my opinion, financial terms 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 one-page mortgage disclosure issue you mentioned in your testimony that you have mentioned before, that I mentioned in my opening statement, I think

that is positive.

Ms. WARREN. Good.

Mr. MCHENRY. I think it gives individuals the terms that they

need. And it is very similar to legislation that I put forward a couple years ago.

So, disclosure, I think, is an important piece in all of this.

Ms. WARREN. Uh-huh.

Mr. MCHENRY. Do you agree?

Ms. WARREN. Yes, sir, I do.

Mr. MCHENRY. Okay. Now, in terms of what you see for the

CFPB, do you think your actions mainly pertain to enhancing disclosures? Do you think that is going to be the core work of the

CFPB?

Ms. WARREN. Well, I think the best way to understand it is that

there are multiple tools available in order to try to promote a functioning market. And there is no doubt that no market functions if
55

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 is 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 responsibility on consumer financial education. We are required by Dodd-Frank to do that, and so, sir, will

be doing that, as well.

Mr. MCHENRY. Okay. Now, do you think—in terms of financial

products now, do you see a financial product that is so 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 then-president 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.

Mr. MCHENRY. Do you see a financial product out there today

that needs to be eliminated?

Ms. WARREN. I don’t know of one, sir.

Mr. MCHENRY. Okay.

Ms. WARREN. But if you had a particular suggestion you would

like me to take a look at or others to take a look at——

Mr. MCHENRY. Well, I don’t——

Ms. WARREN. And there may be others.

Mr. MCHENRY [continuing]. I don’t have a half-billion-dollar

budget, so I would leave it to you and the 400 people working for

you.

Ms. WARREN. Oh, we——

Mr. 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 forward—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 enforcement—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 law.

Mr. MCHENRY. But wouldn’t 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
56

about, the mortgage settlement issue, that is a significant piece of

this, prescribing terms going forward?

Ms. WARREN. Yes, 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

produces more value for consumers. And it is a form, and they will

be required to follow the form, just like under current law, only it

would be an easier and, we think, more effective form.

Mr. MCHENRY. Ms. Maloney is recognized for 5 minutes.

The minority presented the list, and I am reading the list. If the

gentlelady wants to——

Mr. TOWNS. Thank you for considering me, but I think it is based

on arrival.

Mrs. MALONEY. Thank you very much.

And welcome, Professor Warren.

Ms. WARREN. Thank you.

Mrs. MALONEY. I would like to ask you that, after we went

through the great recession and almost had the great depression,

in which $18 trillion in personal wealth in this country 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.

Mrs. 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 21st?

Ms. WARREN. Yes, ma’am, I do.

Mrs. MALONEY. Well, what has concerned me deeply, not only in

this committee but in the Financial Services Committee on which

I serve, is the number of questions against you, because 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 consumer specialist, advisor. Is it unusual for—well, you are an advisor to the President

now, and to Secretary Geithner. But is it unusual for other members of government, Congress Members, AGs, 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, I have been giving advice for a

very long time. I hope it has been valuable, but I have always been

willing to answer the phone and always been willing to talk to people.

Mrs. MALONEY. 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.

Ms. WARREN. Yes, ma’am, that is right.
57

Mrs. 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.

Mrs. MALONEY. Okay. I would like unanimous consent to place

in the record an article that was in the American Banker, entitled,

‘‘A Leaderless CFPB Is Not a Blessing for America’s Bankers.’’

Mr. MCHENRY. Without objection.

Mrs. MALONEY. And it talks about, banks will likely pay a price

for a leaderless CFPB. And it talks about what the CFPB on July—

what they can do on July 21st, but what they can’t do if they don’t

have a confirmed leader.

Now, what they can do is write and 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 level 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 nonbank activities, with the sub-prime mortgages and with

the credit default swaps, of higher leveraged derivatives, that led

us to this crisis.

So not allowing the leader to 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 say that I think

when the consumer agency has its director and has its powers

ready to go, fully operational, will be a very good day.

Mrs. MALONEY. I would like to also comment on the ranking

member’s first statement. I have 3 seconds to go. I have——

Mr. MCHENRY. The gentlelady’s time has expired.

Mrs. MALONEY [continuing]. Four seconds. Oh, my time has expired? Oh, my goodness.

Mr. MCHENRY. All right. Thank you.

Mrs. MALONEY. I just want to say, 160 service members were

foreclosed on unfairly, according to the Department of Justice. And

I feel that his subpoena is rightly in order and should—on the merits, we should look at this information on the abuse to the American military service men and -women.

Mr. MCHENRY. The gentlelady’s time has expired.

Mr. Chaffetz is recognized for 5 minutes.

Mr. CHAFFETZ. Thank you, Mr. Chairman.
58

The House Appropriations Committee was quoted in their report

as saying, ‘‘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, ‘‘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?

Ms. WARREN. Well, Congressman, we started 5 months before the

date that we are supposed to go live building a Web site, trying to

put as much information out there as possible——

Mr. CHAFFETZ. Okay. Now, on the Web site——

Ms. WARREN [continuing]. About our operations——

Mr. CHAFFETZ. My time is so limited. My apologies. What I want

to get is very specific about the budget that you put forward.

In this document, which is just seven pages, it has just 10 line

items. The two biggest line items are full-time permanent positions, followed by personnel benefits. That accounts for about $225

million in expenses. The third item is contractual services, which

has a very specific number of $48,907,000.

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 helpful. And if it is not, I will try——

Mr. CHAFFETZ. Please.

Ms. WARREN [continuing]. A 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, half——

Mr. CHAFFETZ. No, I am worried about the fine print, the details.

The Appropriations Committee, this Oversight Committee, we don’t

have the details of how you are actually going to organize and put

this forward.

Let me read, for instance—go ahead. Go ahead.

Ms. WARREN. Also, Congressman, the—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——

Mr. 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 5- to 10-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.’’
59

How do we get the details of all of this information? You obviously have a top-line 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 in—it is not called a Federal Register. There is

a special place these are published. But I just want to say——

Mr. 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 contract. They may also want to——

Mr. CHAFFETZ. What about all these other items? For instance—

not just the contracts—performance measures and goals, budgetary

resources, what are these people going to be—where do we find all

that information? Because it is not on the Web site, compared to

other agencies.

Ms. WARREN. Congressman, we are in the process, for example,

of developing our performance metrics. And we are not yet standing up as an agency, but as soon as we are stood up, we are putting

as much of this as possible——

Mr. CHAFFETZ. So are you saying by next week——

Ms. WARREN [continuing]. On the Web site.

Mr. CHAFFETZ [continuing]. You are going to have this?

Ms. WARREN. Let me say it this way, Congressman.

Mr. 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.

Mr. CHAFFETZ. You are not familiar with the Appropriations report?

Ms. WARREN. Of course I try to stay up with the Appropriations

work. I am just trying—I am not sure what particular paragraphs

and lines——

Mr. CHAFFETZ. He is going to hand that to you right here. It is

the budget justification, which is dramatically different than any

other agency moving forward.

Ms. WARREN. I am sorry, Congressman, is this——

Mr. CHAFFETZ. Your document.

Ms. WARREN. This is our document?

Mr. CHAFFETZ. Yes.

Ms. WARREN. I think you were reading from something else.

Mr. CHAFFETZ. Based on your giving that document to the Appropriations Committee, the Appropriations Committee said, ‘‘Unlike

other agencies’’—and it listed out all the other things that they

normally see, that we normally see as members of the Oversight

Committee. And all of that is absent.

Ms. WARREN. Congressman, we——
60

Mrs. MALONEY. Point of information? Mr. Chairman, could we

get a copy of this document to also look at it so we could understand the questioning?

Mr. MCHENRY. Sure, sure.

Mrs. MALONEY. Yeah.

Mr. MCHENRY. We will do that.

Ms. WARREN. And could I also ask, is there a request outstanding from the Appropriations Committee——

Mr. CHAFFETZ. That is my understanding, yes.

Ms. WARREN [continuing]. For more information?

Mr. CHAFFETZ. Yes. And I think this committee is also asking for

that same sort of transparency.

Ms. WARREN. Congressman, if that is the case, we would be glad

to come back, we would be glad to brief you, we would be glad to

work with you in order to find something that is adequately transparent, both to Congress and to the American people.

Mr. CHAFFETZ. I have to yield back.

Mr. MCHENRY. The gentleman’s time——

Mr. CHAFFETZ. My time has expired. But I would hope that that

information would be on Web site for the public, as well.

Thank you.

Ms. WARREN. Thank you, Congressman.

Mr. MCHENRY. Ms. Norton for 5 minutes.

Mr. Tierney for 5 minutes.

Mr. TIERNEY. Thanks, Mr. Chairman.

Mr. Chairman, this is stunning, I really have to say, this whole

display of being concerned about a consumer group that somebody

might actually be standing up to protect the consumer and the taxpayer here, as opposed to flacking for the banks. This is a not-tootransparent attempt here to sabotage the——

Mr. CHAFFETZ. Will the gentleman yield? Will the gentleman

yield for 15 seconds?

Mr. TIERNEY. No, I won’t, sir. I won’t. I only have 5 minutes, all

right? And I probably won’t get to go over, as you did.

But the fact of the matter is, this is absolutely incredible. We

have no concern here about responding to subpoenas to the banks

asking them to show us documents related to their foreclosing on

service men and women acting in Afghanistan or Iraq on behalf of

the American people. But we are——

Mr. CHAFFETZ. Will the gentleman yield?

Mr. TIERNEY [continuing]. Going around and around and around

here about——

Mr. CHAFFETZ. With the gentleman yield?

Mr. TIERNEY [continuing]. An agency that is in the process of

standing up.

Professor Warren, you know, I think the abysmal record of these

mortgage servicers is pretty well-chronicled. I have over 100 cases

at any given time in my office alone. You know, they lose documents, they are unresponsive, they give conflicting guidance, they

refuse to process payments, they have false 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.
61

And so I want to ask you about a particular case, the case of

Captain Kenneth Gonzales in the U.S. Army.

Would you put that up, please?

I think you may be familiar with this case, and I want to ask

you about it.

He was deployed to Iraq as a lieutenant from December 2009 to

December 2010. His bank, Chase, told Captain Gonzales’ wife to

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 to 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 48 to 72 hours. 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 responsive.

Mr. TIERNEY. Well, you know, Chase had clear errors and clear

abusive practices. They then tried to charge Captain Gonzales

fees—fees—when they finally admitted they were wrong on the

whole process and tried to help him unwind all the damage that

had been done to him.

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 full investigations of this, and there is no public information

on this.

Mr. 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 are in Iraq or Afghanistan trying to unwind customer service mistakes from a bank that just isn’t doing

the job they should do, nor should their family be evicted from

their home being foreclosed upon.
62

Thank you. I yield back. Or I will yield to Ms. Maloney, if she

likes.

Mrs. MALONEY. There have been a number of settlements—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 $20 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. Tierney 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.

Recently, Holly Petraeus, who is heading up a very special division for the military, testified in the Senate and also—on the very

extreme problems.

I yield back. Thank you.

Mr. MCHENRY. Ms. Buerkle is recognized for 5 minutes.

Ms. BUERKLE. Thank you, Mr. Chair.

And thank you, Ms. Warren, being here today.

We had 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 10 to 40 percent 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 body—and

this is a bipartisan issue—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 $500 million department if that is the 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. And

we know of three specific mortgage servicers who have publicly admitted to wrongdoing and engaged in a voluntary settlement——

Ms. BUERKLE. Excuse me. And, again, we have such a short period of time.

Ms. WARREN. I am sorry.

Ms. BUERKLE. But, again, that wasn’t your department—you are

not up and running yet——

Ms. WARREN. No, ma’am.

Ms. BUERKLE [continuing]. That shed light on those abuses to the

military.

Ms. WARREN. That is right.
63

Ms. BUERKLE. Okay.

Ms. WARREN. But the question I thought you asked is how the

consumer agency may be helpful. We are there to 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 25 servicers

asking them to review their practices. And we have heard back

from about half of those servicers and engaged in some

discussion——

Ms. BUERKLE. Thank you. I don’t wish to cut you off, but I know

in Veterans’ Affairs we have handled this issue up front, close, and

so——

Ms. WARREN. Yes, ma’am.

Ms. BUERKLE. I do want to talk to you about a couple of issues.

Number one, this past week, the jobs numbers came out, and they

were horrific. As you know, only 18,000 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, I should say 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 McHenry also talked about. Congress

and the regulatory agencies have been working for 15 years to

try——

Ms. BUERKLE. Well, excuse me. Again, our time—I watch my

time clicking away.

Do you intend to raise compliance costs on companies, which will

further add to the unemployment and the difficulties that our companies and small-businesses owners are facing in this economy?

Ms. WARREN. Congresswoman, I am sorry. I was——

Ms. BUERKLE. That is a ‘‘yes’’ or a ‘‘no.’’

Ms. WARREN. It is a ‘‘no.’’ We already have our first 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 embraced by

bankers and mortgage originators across the country because it

will reduce their——

Ms. BUERKLE. So that is a ‘‘no.’’ You don’t intend to raise compliance costs for companies——

Ms. WARREN. No, ma’am. We are trying to lower costs for them.

Ms. BUERKLE. Never, ever?

Ms. WARREN. Well, 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
64

for all of our work. We are working closely with community banks;

we are working closely with credit unions——

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 traps—I think

that was your word.

If that is the case and you are sitting here saying that this world

is fraught with all of these issues—and this goes back to the chairman’s question—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

tricks and traps, what is it that you intend to change and to——

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 compare one product to two or three others.

Ms. BUERKLE. But then why do you need the power and a $500

million budget? That is my concern.

Mr. MCHENRY. The gentlelady’s time has expired.

Ms. BUERKLE. That is my concern.

I yield back. Thank you, Mr. Chairman.

Mr. MCHENRY. The witness may answer.

Ms. WARREN. I am sorry?

Mr. MCHENRY. The witness may answer the question.

Ms. WARREN. Oh, I just 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.

Mr. MCHENRY. Ms. Norton is recognized for 5 minutes.

Ms. NORTON. Thank you, Mr. Chairman.

I do want to welcome Professor Warren, and to indicate that I

have asked staff to look, and they informed me that the salaries

are in line with all banking regulatory agencies.

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 from 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 the

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 activated—and he

had been activated three times—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; send it again.

Have you heard similar accounts?

Ms. WARREN. Yes, ma’am, I have.

Ms. NORTON. I want to ask you about what 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 of
65

the CFPB 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 bank?

Ms. WARREN. Thank you. If I can, I will give a two-part answer.

The first part is that, last week, the Consumer Financial Protection Bureau, led by Holly Petraeus, signed an 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 a Web site.

We have hired more people——

Ms. NORTON. Well, Professor Warren, this is just the kind of

thing we had hoped you would be doing.

I would like to ask you, though, about the kinds of complaints

that you expect to receive first when you come on line on July 21st.

Have you anticipated what kind of complaints are likely to come

to the forefront? Do you expect these servicemember complaints to

be among them?

Ms. WARREN. We have reason to believe, because we have already been reaching out to service members and service-member

families and, actually, are already in active communication with

many families and with many of those who serve service-member

families—we anticipate that this will be a significant part, over

time, of our workload at the Consumer Financial Protection Bureau.

Ms. NORTON. Thank you, Mr. Chairman.

Ms. WARREN. Yes, ma’am.

Mr. TIERNEY. Mr. Chairman, a point of order? Is there any recent

update on the disposition of the subpoena motion that was going

to be addressed at 10:40?

Mr. MCHENRY. Well, the chair announced that it would not happen before 10:40. There is no update.

The gentleman——

Mr. TIERNEY. So midnight might be 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.

Mr. MCHENRY. The chair will give a 30-minute notice, which was

the ranking member’s request. And the chair has—will now announce that you will have a 30-minute heads-up before the vote

happens.

With that, Dr. DesJarlais is recognized for 5 minutes.

Mr. DESJARLAIS. Thank you, Mr. Chairman.
66

And, Professor Warren, thank you for being here today.

I have a pretty simple question. I represent Tennessee and also

sit on the Agriculture Committee. And I was just curious to know

your take on an issue central to ensuring credit for Tennesseeans

and farmers in general.

Title X in the Dodd-Frank Act, of the act which creates your

agency, the CFPB, 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 FCA?

Ms. WARREN. Dr. DesJarlais, this is evidently a question that is

what lawyers are all about. The language you have read, as I have

been briefed on this, I think you used the word ‘‘persons,’’ and then

there is a 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 this through

to make sure there aren’t any gaps and there aren’t any overlaps.

That is my understanding at this point, sir.

Mr. DESJARLAIS. Okay. I am not sure that I fully understood

your answer. So is it your interpretation that the CFPB has any

enforcement authority over 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 all I am saying, sir, is I 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.

Mr. DESJARLAIS. Okay. So what do I tell my farmers?

Ms. WARREN. Well, you tell your farmers that, because of the

language in this particular part of the statute, the lawyers are

working on it right now.

Mr. DESJARLAIS. Well, I don’t know if that would be very comforting to them.

Ms. WARREN. I certainly understand that, sir.

Mr. DESJARLAIS. I do have a second question.

Ms. WARREN. Sure.

Mr. DESJARLAIS. As you know, nearly half of small businesses

use personal credit cards when they are first founded. Can you

commit that none of CFPB’s regulations will remove financing possibilities for these businesses?

Ms. WARREN. Oh, Congressman, you hit on a very important

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.
67

I have actually had small-business groups reach out to me, and

small-business 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 constrained authority at the Consumer Financial Protection

Bureau, sir.

Mr. DESJARLAIS. Okay. So it is going to be a struggle, you are

saying, to determine whether credit is being used for personal use

or business use?

Ms. WARREN. Well, what I am saying is, the way Dodd-Frank

was established, it is clear that we can help beat down the fine

print in the case of consumer credit cards, but in the case of business credit cards, our authority is limited.

Mr. DESJARLAIS. Okay. Would there be a situation where there

is a credit card that has a 20 percent interest rate and you step

in and say, ‘‘No, you can’t have that?’’

Ms. WARREN. No. Congressman, the statute is quite clear that we

are not in the business of establishing usury laws. Congress spoke

unambiguously. I know there are some parts of the statute that

ambiguous, but I think that part is pretty unambiguous, sir, pretty

clear.

Mr. DESJARLAIS. Okay. So small businesses can breathe comfortably that they are going to have access to credit?

Ms. WARREN. I want to say it this way: Small businesses are

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 and that it will be good for them if

they know prices, if they know risk, if there is not so much fine

print in their contracts.

Mr. DESJARLAIS. Thank you, Professor Warren.

My time has expired. I yield back.

Ms. WARREN. Thank you, sir.

Chairman ISSA [presiding]. I thank the gentleman.

We now recognize the gentleman from Missouri, Mr. Clay, for 5

minutes.

Mr. CLAY. Thank you, Mr. 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 is the area that I represent in

north St. Louis County, where homeowners, middle-class, AfricanAmerican homeowners, were steered into high-cost, 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 our uniform, who bravely—who bravely defend this coun-
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try. And if you don’t think this is an abuse, then I have a bridge

to sell you.

You know, illegal foreclosures against U.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 14 banks, and they directed a comprehensive review to identify borrowers who have been financially

harmed 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 consumers from unfair, deceptive, and abusive financial practices. And if people here don’t

understand that, then I don’t know what we can do about that.

But it is 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 have to endure 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

families?

Ms. 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

Petraeus—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, on-the-ground 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.
69

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,

putting a cop on the beat, to make sure that these who are dealing

with military service members are following the law.’’ That is our

job.

Mr. CLAY. Thank you so much.

Chairman ISSA. The chair now recognizes the gentleman from

South Carolina, Mr. Gowdy, for 5 minutes.

Mr. GOWDY. Thank you, Mr. Chairman.

‘‘Free of 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 don’t support legislative micromanaging? What about legislative macromanaging?

Ms. WARREN. I am sorry, Congressman. I don’t——

Mr. GOWDY. It is a quote from an article you wrote, ‘‘free of legislative micromanaging.’’ So my question to you is, what is legislative

micromanaging? Because, to me, it is a euphemism for ‘‘oversight.’’

Ms. WARREN. I am sorry, Congressman. I may have written it,

but I am not sure what the context is. Was it an article?

Mr. GOWDY. The context is it is in the Democracy Journal——

Ms. WARREN. All right.

Mr. GOWDY [continuing]. And it is the first public notion that we

have of an agency similar to the one that you are going to head

in a week. And you wrote an article about——

Ms. WARREN. Yes?

Mr. GOWDY. And you said, ‘‘Free of legislative micromanaging,

the Financial Product Safety Commission could develop nuanced

regulatory responses. Some terms might be banned’’—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

consumers. For more than 15 years, the various regulatory agencies have been negotiating to try to bring those together. And, as

Congressman McHenry said, there have been multiple attempts

from Congress trying to do it. The problem——

Mr. GOWDY. Ms. 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.

Mr. GOWDY. Some of us think that that is oversight. So do you

concede that 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
70

nuanced response to a specific problem. And, in this case, it was

combining two forms.

But what we have been able to do as 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 to consult with groups in ways that is not possible in the legislative process.

Mr. GOWDY. Well——

Chairman ISSA. Would the gentleman yield for a moment?

Mr. GOWDY. Yes.

Chairman ISSA. I think Mr. Gowdy is very happy, you doing

what you are doing. I think what he is really asking is, does Congress have a right to look over your shoulder? And did that statement indicate that you think that Congress not—looking over your

shoulder, second-guessing your funding or, in fact, your actions?

That is, I think, the question, and I haven’t heard an answer.

Ms. WARREN. I am sorry, 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 24 hours a day, 7 days 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——

Mr. 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 nuanced point. And so I will ask a less nuanced question.

Ms. WARREN. Yes, sir?

Mr. GOWDY. What about congressional involvement in your budget? Is that micromanaging, or is that oversight?

Ms. WARREN. Congressman, I think it is neither. I think that is

a 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.

Mr. 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 trillion-dollar financial institutions.

Mr. 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 Mr. 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?

Ms. WARREN. Well, Congressman, I think there is a real question

about whether there has been adequate investigation in to what

financial——

Mr. GOWDY. What have you done with respect to Attorney General Holder and the 90-plus U.S. attorneys, most of whom have
71

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?

Ms. WARREN. 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 agencies

as they are trying to work through holding responsible the parties

that violated the law.

Mr. GOWDY. You were criticized for referring people for criminal

prosecution?

Ms. WARREN. Congressman, we were criticized for trying to

help——

Mr. GOWDY. By whom?

Ms. WARREN. Congressman——

Mr. GOWDY. Not me.

Ms. WARREN. Congressman McHenry, Congressman——

Mr. GOWDY. Well, I am going to let Congressman McHenry speak

for himself. But as a former prosecutor, when I hear the term ‘‘illegal,’’ which I have heard 12 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 Tennessee, Mr. Cooper.

Mr. COOPER. Thank you, Mr. 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, make a partisan hit, look

like we are smart, and then leave. That is not good governance regardless of which party is in charge.

I didn’t vote for Dodd-Frank. It had many good 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.
72

I would urge Members to read Ms. Warren’s—one of her books.

I have only read the ‘‘The Two-Income 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 discord 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 record-low 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? Isn’t 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 hope that this committee will be

part of those.

So I thank the chairman. I see that my time is about expired.

Chairman ISSA. Would the gentleman yield?

Mr. COOPER. I would be delighted.

Chairman ISSA. We have worked together for a long time, and I

join with you in wanting this hearing and any talking points in

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 Dodd-Frank 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 400 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 right—

we will, in fact, be talking about an organization that Professor

Warren may head as the first head, she may not, but she is cer-
73

tainly the most knowledgeable witness. And I have said, this hearing will be about civil behavior for Professor Warren and about a

dialog 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.

Mr. COOPER. Well, Mr. 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 sometimes that is the only exercise they get.

It is unfortunate that this——

Chairman ISSA. It is one of the things we really do well here,

isn’t it, is make conclusions?

Mr. COOPER [continuing]. Nice lady has been treated as a partisan punching bag before she has even had a chance to really

serve. So let’s give all American citizens the benefit of the doubt.

Thank you, Mr. Chairman.

Chairman ISSA. Thank you.

We now go to the gentleman from Pennsylvania, Mr. Kelly, for

5 minutes.

Mr. KELLY. Thank you, Mr. Chairman, and Ms. Warren, thanks

for being here today.

In my previous life, I was in the automobile business, and I know

how critical it is——

Ms. WARREN. Sorry, sir?

Mr. KELLY. I said, in my previous life, I was in the automobile

business, and the availability of credit is so critical and I know

that. And I have looked at your background. You really have an

impressive background and you—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 predatory lending. Tell me, how would your agency work

toward that end, because we already are governed by the FTC. So

is there going to be some overlap there, and how is that going to

work, and how are we going to be able to sift through that?

Ms. WARREN. Just to make sure I am being responsive, and you

help me if I am not in the right place.

On automobile loans in particular, you do know that dealer-initiated automobile loans, that automobile dealers are not within the

jurisdiction of the consumer agency, that Congress made that distinction in Dodd-Frank. And so the place where we are focused—

and I just want to be clear about this—it is really about saying,

consumers just need to know—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 straight-up 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 avail-
74

able to consumers. Consumers can trust that when they sign on the

bottom line, I get it, I know what is happening here.

Mr. 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.

And so I guess what I am coming to you for, and I want to hear

from you, because this is critical—this is critical. I am looking at,

the American taxpayer is actually a cosigner to loans that are

being asked for right now by a body that governs these folks, like

to buy them, who governs them, borrows money on their behalf,

and they actually sign up as the cosigner, the coborrower.

And I guess I’m a little bit intrigued. The emphasis is on credit

availability, how much money you can borrow, and rightfully so,

the banks actually put a limit 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 that’s 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 these 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 to—

you have a big experience in this—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 stomachs because they will be sick. So I know you only have a couple of seconds left, but how would you advise these consumers on buying the

product that they’re being asked right now to buy into and cosign

for?

Ms. WARREN. Well, Congressman, I think the one distinction I

would make is I am very familiar with creditors putting limits on

how much you can spend in the future. That’s a—that’s a world I
75

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

those a 100 cents on the dollar.

Mr. 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 time.

Chairman ISSA. Thank you. The gentleman’s time has expired.

The gentleman from Kentucky, Mr. Yarmuth.

Mr. YARMUTH. Thank you, Mr. Chairman.

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 so-called Ryan plan for Medicare

was part of that, and under that plan, for those people under 55-

years old, Medicare would no longer exist. Instead, citizens who

then reached 65 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 curb in place. We

have a lane we are supposed to swim in—I think I just explained

that—about consumer credit, consumer credit products, the issuing

of consumer credit, credit reporting, and we are not 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.

Mr. 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.
76

Mr. 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 in 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 found the

eviction notice, foreclosure notice, I’m sorry, posted on the door.

And so he is here trying to—also, he was current on his mortgage,

which was—I guess adds insult to injury, 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 seven—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 what we had been discussing earlier and the incredibly good, positive effort that Holly Petraeus is making from

the CFPB and trying to deal with this, I certainly think it would

be appropriate if this committee would use its subpoena power and

its oversight responsibilities to make sure that we have all the information possible to make sure that people like Chief Warrant Officer Pickett are not abused in this way in the future.

Do you have any comment on that? I have 20 seconds left.

Ms. WARREN. I would just say in that very 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 security clearance in the United

States now is a problem over credit. Servicemembers who are deployed abroad have talked to us multiple times about what it

means to try to fight a war on two fronts, one in a foreign location

and one back at home, to take care of their families. This is wrong.

Chairman ISSA. I thank the gentleman.

The gentleman from New Hampshire, Mr. Guinta.

Mr. GUINTA. Thank you, Mr. Chairman.

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
77

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 the—excuse me, on May 24—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

FDIC, the 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.

Mr. GUINTA. Okay. Well, let me read your comment again. On

May 24th, 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 if there are differences between you and other agencies?

Ms. WARREN. Well, I hope this is responsive, but please if it’s

not, stop me. In terms of funding, yes, we are different. We have

capped funding. 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 are—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 Dodd-Frank, 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.

Mr. GUINTA. Would it be fair to say that the CFPB is different

in the sense that, with respect to the director position, it is subject

to removal only for cause and is, therefore, exempted from Presidential control?

Ms. WARREN. I would have to go back and look at the statute

again, Congressman.

Mr. GUINTA. My concern is this: It appears as 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—I’m not talking about you personally—just the individual who would oversee this agency would

appear to have greater powers and authority simply by the fact
78

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 agency—banking

agency, at least as far as I know agency anywhere, whose rules or

regulations can be thrown out by a vote of other agencies. So, yes,

there is a difference. The consumer agency operates under a unique

constraint that is not there for others.

Mr. GUINTA. Okay. Thank you. I see my time has expired.

Chairman ISSA. I thank the gentleman.

We now go to the gentleman from Illinois, Mr. Quigley.

And Mr. Quigley, I apologize, I did not see you on the last round.

So I’m taking you late.

Mr. QUIGLEY. No problem. Thank you, Mr. Chairman.

Good morning, Ms. Warren.

Ms. WARREN. Good morning.

Mr. QUIGLEY. Mr. Chairman, as to Mr. Cooper’s 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 200 criminal trials that crossexamination 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. Cooper’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 2009, the average salary, even for the back

office folks at hedge funds, is about $300,000. 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 just—we’re in a system. That’s what Dodd-Frank requires,

and we’re following the law in terms of the salaries we set.
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But there is a serious problem right now in the regulation of financial services, and that is—I want to put it this way: We have

been genuinely blessed 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

long-term problem, I’m proud of every single person who has come

to work for the Consumer Financial Protection Bureau.

Mr. 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 of—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.

Mr. QUIGLEY. Again, 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 understanding so that the American public

isn’t cheated. But I appreciate what your workers do and what you

do. Thank you.

I yield back.

Ms. WARREN. Thank you, sir.

Chairman ISSA. We now recognize the gentleman from Florida,

Mr. Ross, for 5 minutes.

Mr. ROSS. Thank you, Mr. Chairman.

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

enjoyable part 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 powers of the Dodd-Frank Act, and that’s found in Section 1031, which

gives the CFPB the authority to ban any product, any consumer financial product, service, or practice that it deems unfair, deceptive,

or abusive. Would you agree?
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Ms. WARREN. Yes, sir.

Mr. ROSS. And to that end, back in May, May 24th, when we had

the hearing here, Mr. Gowdy asked you a question as to how you

would distinguish between abusive practice and nonabusive practices of these financial institutions. And the reason for 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 year, I want 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?

Mr. ROSS. You’ve got 1 week to go.

Ms. WARREN. We’ve only been—we will be in effect next Thursday.

Mr. ROSS. Yes, ma’am, that’s pretty darn close. I’ll give you 51

weeks, you’ve been in effect.

Ms. WARREN. No, we have not been in effect.

Mr. ROSS. But you have had an opportunity for 51 weeks to interpret and understand the Dodd-Frank Act, and getting back to

my question, please answer this: Do you know of any 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 product——

Mr. 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.

Mr. 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, and

that’s, for example, in our TILA RESPA form.

Mr. ROSS. So would it be okay then if we just revoke the power?

Ms. WARREN. Congressman——

Mr. ROSS. Believe me, I’m being very respectful, ma’am. I’m from

the South.

Ms. WARREN. Well, I think the point is that we are starting our

work in the places that, for example, Congressman McHenry suggested was an important place to start, and that is where we can

reduce——
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Mr. ROSS. You have the power through the Dodd-Frank 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 choices.

Mr. ROSS. Professor, with respect to my time and yours, I will

yield the rest of my time to Mr. Gowdy so that you may adequately

answer his questions.

Ms. WARREN. Thank you, sir.

Mr. 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.

Mr. 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 product clearer to consumers.

Mr. GOWDY. But not including capping the interest rate; you

don’t have the power to do that.

Ms. WARREN. The statute is unambiguous.

Mr. GOWDY. So you do not think payday lending should be

banned?

Ms. WARREN. The statute is unambiguous that we have no authority to engage in usury caps.

Mr. GOWDY. That wasn’t my question. My question was, do you

think payday lending should be banned?

Ms. WARREN. Congressman, payday lending is one of the areas

that will be under our jurisdiction.

Mr. GOWDY. Do you think it should be banned, Professor Warren? You just said no one should expect to be treated well by them.

You also said, subprime lending, payday loans, and a host of predatory high-interest 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 banned?

Ms. 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 multiple

fronts at once.

Mr. GOWDY. So with respect to——

Mr. CONNOLLY. Mr. Chairman, I call for regular order.

Chairman ISSA. Excuse me, Mr. Gowdy, I apologize, but Mr.

Ross’ time has expired, which is why I was already gaveling.

We now go to the gentlelady from California, Ms. Speier.

Ms. SPEIER. Thank you, Mr. Chairman.

And thank you, Professor Warren.

I was at that hearing on May 24th and was shocked by the way

you were treated. A number of us members wrote to the sub-
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committee 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 for-profit 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 for-profit colleges, Kaplan University’s training

manual entitled, ‘‘military e-learning 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

4,000 active duty members of the military, has made $2 million in

refunds, and has paid a $56 million fine; Wells Fargo that has admitted to 55,000.

Now, back in January, I joined—asked a number of colleagues to

join in a letter to Mr. Bernanke 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 21st, 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 onthe-ground 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.
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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 6 percent 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 Servicemembers Civil Relief Act, and so what we are—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 us understand the problems better and makes sure there is more diverse

enforcement of current laws.

Ms. SPEIER. Thank you. My time has expired.

Chairman ISSA. I thank the gentlelady.

We now recognize the gentleman from Oklahoma, Mr. Lankford,

for 5 minutes.

Mr. LANKFORD. Ms. Warren, honored for you to be able to be

here. You are a fellow Oklahoman from the Fifth District of Oklahoma, and so let me say welcome to you for being here as well.

Ms. WARREN. Thank you.

Mr. LANKFORD. Let me ask a couple of questions off of you on

just some of the structure as it’s coming up. You’ve mentioned several times that the authority is coming over July 21st 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 agency has been downsizing as you are ramping up? I

know that’s not your agency that you’re dealing with, but have you

heard that they’re downsizing to accommodate for the transfer of

authority?

Ms. WARREN. Yes, sir, we have. Indeed, there’s been—if you will

permit me, 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 on-the-ground people who currently

work at the Fed.

Mr. LANKFORD. There are some people that are—those agencies

are downsizing as you are ramping up?

Ms. WARREN. Yes, sir.

Mr. LANKFORD. 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.

Mr. LANKFORD. Will there be a difference in the way the two are

handled, in the way that your agency will interact with payday

lenders or community banks?
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Ms. WARREN. Yes, sir, there will be.

Mr. LANKFORD. Dodd-Frank has about a hundred rules this year

that will be added to community banks. Between now and December 31st, 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 a hundred for the consumer agency.

Mr. LANKFORD. That’s what I’m saying. They’re already getting

hundred from Dodd-Frank, not from you. That’s what I’m trying to

say. If they’re getting a hundred already, they’re coming down from

Dodd-Frank. When y’all stand up, will there be more that will be

coming through?

Ms. WARREN. The one that we have teed up right now is this

TILA RESPA combination, trying to reduce the paperwork around

mortgage origination, something—and I will say to you, sir, because I think it might be relevant. When we first started this process, the idea for us 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 changes—I know it costs every time forms

are changed—is this something you want us to go forward with?

And they have said yes.

We also have as one of our very early rulemaking obligations will

be around payday lenders, but of course, I should say, not payday

lenders—other nonbank lenders, other than payday, 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.

Mr. 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 12 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 20 new rules to them, at the same time, OCC added 20

and FDIC 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. You made a statement that one of my community bankers notified me on, in forms of business, that there may be an exam

every 2 years on the banks from the—from your bureau. Do you

anticipate also engaging as a bank examiner role, not for safety

and soundness, but for consumer protection, there will also be an

audit of each bank from your agency?

Ms. WARREN. I’m sorry, sir, that’s for the 111 largest financial

institutions, not for the community banks.
85

Mr. LANKFORD. So community banks should not be concerned on

that?

Ms. WARREN. We are not the supervisor for the community

banks.

Mr. LANKFORD. But as far as engaging and doing auditing and

stepping in and being another person that’s on the ground for

them, will not be?

Ms. WARREN. As explained to me, they’ve run out of chairs for

that kind of——

Mr. LANKFORD. They actually have. They 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

are 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 and 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 one piece 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 to go, and we want to do that in conjunction with

community banks all around the country.

Mr. LANKFORD. Thank you.

Chairman ISSA. The gentleman’s time has expired. Thank you.

I want to announce that when we’ve completed with Professor

Warren we’ll take a recess of between 10 and 15 minutes. I estimate that that will occur within about 20 minutes 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 15 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 that—you have

been very kind with your time and answers; hopefully, we’ve been

kind back—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 5 minutes, Mr. Connolly.
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Mr. CONNOLLY. Thank you, Mr. Chairman.

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?

Ms. WARREN. By Congress.

Mr. CONNOLLY. No, but I mean in a piece of legislation?

Ms. WARREN. Yes, the Dodd-Frank Act, sorry, sir.

Mr. CONNOLLY. And was that act passed with overwhelming bipartisan support?

Ms. WARREN. No, sir, it passed, and I believe there were—there

was some bipartisan support, but I don’t think it was overwhelming.

Mr. CONNOLLY. How is—tell us about the governance of the Consumer Financial Protection Bureau.

Ms. WARREN. Well, 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 that it receives a capped amount of money

from the Fed.

Mr. CONNOLLY. But actually, I am asking more about the actual

governance. For example, are you appointed by the President?

Ms. WARREN. Oh, I apologize. I 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.

Mr. 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 appointment in the Consumer Financial Protection

Bureau.

Mr. CONNOLLY. And on a bipartisan basis in the other body, has

there been indication that they’re willing and receptive to the idea

of such an appointment and they’re ready to act on it?

Ms. WARREN. I have seen a letter that says 44 Senators will

block any nominee to head up the Consumer Financial Protection

Bureau unless the bureau is substantially changed.

Mr. CONNOLLY. From the Dodd-Frank legislation?

Ms. WARREN. Yes, sir.

Mr. CONNOLLY. Which passed into law but not with much of a

bipartisan vote, as you indicated?

Ms. WARREN. Yes, sir.

Mr. CONNOLLY. Mr. Chairman, I just want to say, I listened carefully with rapt attention to our colleague, my friend from Tennessee, admonishing this committee, 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 committee. 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
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really up against is a relentless attack on the creation of your 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 referenced 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.

Mr. CUMMINGS. Would the gentleman yield?

Mr. CONNOLLY. Yes, I will happily yield to the ranking member.

[The prepared statement of Hon. Gerald E. Connolly follows:]
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89

Mr. CUMMINGS. Thank you very much. I just wanted to add on

to what the gentleman just said, and I want to associate myself

with his words.

Ms. Warren, there’s absolutely no doubt 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 your 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.

Mr. MCHENRY. Gentleman’s time has expired.

Dr. Gosar is recognized for 5 minutes.

Mr. GOSAR. Hi, Ms. Warren.

I’m one of the junior members, too, and I’m from the private sector. I’m a dentist, so some of this makes a lot of sense to me, but

I also come with a different set of eyesights, 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 with, 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. Gowdy that no

product should be banned, okay. I thought I heard that you didn’t

say 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 start with much clearer disclosure. I don’t think

it’s appropriate to take any tool off the table. It depends on what

happens.

Mr. GOSAR. I love where you’re going with this.

Ms. WARREN. Good.

Mr. GOSAR. What I’d like to do is see us kind of work in, this

is a new agency; it’s got some breadth of powers. So, with that

being said, I mean so would you endorse repealing the specific

power of Dodd-Frank to that degree, that you could not ban any

specific item.

Ms. WARREN. No, Congressman.

Mr. GOSAR. You wouldn’t?

Ms. WARREN. No.

Mr. GOSAR. And you say that power, that law is perfect?

Ms. WARREN. Congressman, repeal the—giving the agency the

powers that Dodd-Frank has given it, you know I think what we

ought to do is we ought to get out there and get started on behalf

of the American people.
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Mr. 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 product, creates some uncertainty into the markets. So you can understand why me as a businessman don’t like that, right?

Ms. WARREN. Actually, I do have a little problem with why you

wouldn’t like that because when we’re starting and we’ve made

clear our initial regulatory actions, with the help of the consumer—

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 increases the ability of customers to read and understand a mortgage. You’ve seen that——

Mr. GOSAR. Well, I love where you’re going here. I’m sorry, again,

I’m going to interrupt. I’m not being rude, but I’ve got so little time

here. Okay. I also told you I’m from Arizona, and Ms. Buerkle

talked to you and you gave her some answers that you had a lot

of outreach, a lot of support from a lot of different perspectives, big

banks, community banks. Can you tell me specifically which banks

those are, the community banks?

Ms. WARREN. Sure, Roger Beverage at the Oklahoma Bankers

Association. I met with Roger and probably 25 bankers on the very

first day I was in office. They were here visiting from Oklahoma.

Mr. GOSAR. You have letters of support from all of those?

Ms. WARREN. Well, Roger’s their leader. I don’t know how every

single one of them feels.

Mr. 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?

Ms. WARREN. There’s some terrible problems in mortgage foreclosures in Arizona.

Mr. 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 banks in if you could?

Ms. WARREN. Congressman, I’ve talked with community bankers

in all 50 States, including community bankers in Arizona, but I’m

afraid I’m not good enough to remember the names of everyone.

Mr. GOSAR. I’d love to know who they are, and why I ask is that

we’ve had to have outreach—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 that—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. Thank you.

Mr. MCHENRY [presiding]. The former chairman, Mr. Towns, is

recognized for 5 minutes.
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Mr. TOWNS. Thank you very much.

Let me begin by saying that I’ve heard some of my colleagues’

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 of 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, I 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 2005, 2006, 2007, 2008, 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 do better.

Mr. TOWNS. I really appreciate you focusing on it, and let me

again thank you, of course, Professor Warren, and Mrs. Petraeus

for your effort to bring accountability to the banks that unlawfully

foreclosed on servicemembers, especially during the course of deployment. I want to do that.

And on July 6, 2011, Mrs. Petraeus announced that the Consumer Financial Protection Bureau and the Judge Advocate General of the U.S. 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.
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Mr. TOWNS. One important aspect of this has to be education,

but another aspect has to be enforcement. When Mrs. Petraeus appeared at the forum on Tuesday, she emphasized this. Here is what

she said. Let me go repeat, ‘‘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 will be about

research, will be about rule writing, will be about the other things

it takes to keep an agency functioning. We believe in enforcement

at the consumer agency, yes, sir.

Mr. TOWNS. Let me say this before I yield back, Mr. Chairman.

You know, I’m excited about this agency, and of course, you are

launching on my birthday.

Ms. WARREN. I’m delighted to hear that. Happy birthday, sir.

Mr. MCHENRY. The subcommittee chair on government management, Mr. Platts, is recognized for 5 minutes.

Mr. PLATTS. Thank you, Mr. Chairman, appreciate you and

Chairman Issa holding this hearing.

Ms. Warren, appreciate your being here and your patience as all

of us have an opportunity to interact with you and your past and

current service to our fellow citizens.

I don’t want to be repetitive, and so I’ll try not to be, and I also

plan to try to focus specifically in areas that deal with the subcommittee I chair, which is Government Organization, Efficiency,

and Financial Management, and I chaired it 4 years past with Mr.

Towns, who was ranking member, and I was chair. Then he was

chair, and I was ranking member. And so I’m going to get into

some structure of the bureau and in the area of financial management.

In reading through your testimony, I know you’re standing up a

new bureau, a lot of hard decisions, and part of your testimony is

the commitment to accountability and transparency and seeking

comments and critiques, whether this falls under the area of comment or critique, it’s meant to be helpful. And that is, in your testimony, you talk about how you’re hiring. You talk about general

counsel, information technology, procurement, human resources.

An area that’s not mentioned specifically, there is financial management and a chief financial officer, and I guess if you could give

me an update, first. I know that you had a request for, you know,

resumes in essence for a CFO. I think it closed maybe in late June.

Where do we stand on getting a CFO in place, given how I see the

importance of that position?

Ms. WARREN. Right. And I’m glad you asked about this because

this is very important, and in the startup phase, we’ve also had to

lean on Treasury to make sure that we were following every letter

of the law and the spirit of the law and doing this appropriately.
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Would you permit me the tiniest little diversion? You stop me obviously at any second.

I actually want to start with COO because in the way I understand this, this becomes even more important. What we did for the

chief operating officer at the bureau, who is the person who is responsible for the——

Mr. PLATTS. The director——

Ms. WARREN. We hired someone who has been the head of a very

large financial institution. She has been responsible for a budget,

has been the person who has had to sign off on a budget, and I

may get my numbers wrong, I believe it’s over a billion dollars. She

has been responsible for the management of tens of thousands of

people. We hired her. She had not had government experience.

What she had had was private sector experience and private sector

experience in keeping up with every nickel and making sure it was

well spent.

We have an acting chief financial officer who has really been terrific and who has worked, not only to make sure we have the appropriate internal procedures but with Treasury and their existing

officers and I should say has worked with the Inspector General for

Treasury and the Inspector General with the Fed so that we were

getting external review of how we were setting our procedures up.

Mr. PLATTS. Your mentioning COO was kind of in line with what

I wanted to follow up in. Glad to hear the quality of the person in

that position, and hopefully someone of equal caliber will be in the

CFO permanent position. The one concern I guess is, one, on the

alignment, emphasizing that direct access in a major corporation,

any CFO has to be directly tied to the CEO, you know, to the director of the whole bureau. Is delineating within the organization,

great you have a good COO, but structurally make it clear that

that CFO is directly, you know, reporting, you know, to the director

because of the importance of financial management. We’re talking

hundreds of millions of tax dollars or fees and dollars ultimately

that your bureau is going to be handling.

Ms. WARREN. The organization chart, as it is set up right now,

is that the CFO reports directly to the COO, who in turn reports

directly to the director so——

Mr. PLATTS. I would encourage and when we sit—it is because

you are a new organization, when we set up the Department of

Homeland Security Under Secretary of Management, we had a

dual report where there was a CFO reporting there, we also had

it set up going directly so that it sent a message to the whole agency that CFO has direct access to the director, you know, does go

to the COO, but we want to make sure it’s sending a message, and

it does relate to the issue that I know—I don’t want to be a part

of the budget justification issues.

Another way you send a priority is how much is being allocated

to the CFO’s operation and internal control, and here at the base

level, you know, at the ground level, setting up really strong internal controls so that when you get into the audits by GAO, you

know, your financial reports, you’re not playing catch up because

you didn’t have good systems in place. I talk about internal controls over and over and over. So some suggestions in that area of
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financial management, I hope you’ll take to heart as you move forward.

Thank you, Mr. Chairman. I yield back.

Ms. WARREN. And I just want to—could I say, thank you very

much, Congressman.

Mr. PLATTS. Yep.

Ms. WARREN. Thank you.

Mr. MCHENRY. Mr. Davis of Illinois for 5 minutes.

Mr. DAVIS. Thank you very much, Mr. Chairman.

And thank you, Professor Warren, for your service to the country,

for your patience, and for being here with us this morning.

When you appeared the last time—and let me just say that I believe that consumer protection, consumer education, is one of the

most valuable functions that our government can perform for its

citizenry. And when you appeared before us the last time, on May

24th, the title of hearing was, ‘‘Who’s Watching the Watchmen?’’

But I think a better question is, who is watching the banks? We

certainly aren’t. I wonder if the committee as a whole is ever going

to watch the entities that have admitted that they need watching.

This committee has now summoned you twice to appear before

us. We have sent a massive document request seeking all manner

of emails, reports, and other items. At the same time, we have not

brought the mortgage servicers in even one time to answer for their

conduct. We have asked JPMorgan, that they be invited to testify,

but the chairman did not agree to that request. Nor has the committee made a single document request to a mortgage servicer the

entire year.

I want to ask you to weigh in on this, but it seems pretty obvious

that our priorities are somewhat backward.

Here is what I will ask you about. On July the 11th, Newsweek

published an article entitled, ‘‘The Billion-Dollar Bank Heist.’’ It

notes that the same financial institutions are spending vast

amounts of time and money to impede the Dodd-Frank Act and the

Consumer Bureau from becoming fully operational and effective.

As a matter of fact, I will read from that article. It states that,

‘‘JPMorgan Chase is on track to spend $7 million this year on lobbying. Wells Fargo, which spent $5 million last year, spent $1.9

million on lobbying in just the first quarter of this year. None of

that includes the millions in campaign contributions the banks and

trade associations have poured into the coffers of those Members

of Congress who sit on the relevant committees responsible for financial reform, especially those willing to take on Dodd-Frank,’’

end of the article.

Professor Warren, these are the same two institutions that publicly admitted to wrongdoing in State and Federal mortgage

servicer investigations, is that not correct?

Ms. WARREN. Yes, sir.

Mr. DAVIS. As I understand it, JPMorgan admitted to overcharging thousands of Active Duty military personnel millions of

dollars in fees and interest charges, in violation of the

Servicemembers Civil Relief Act. Is that correct?

Ms. WARREN. Yes, sir.

Mr. DAVIS. And Wells Fargo admitted to flaws in 55,000 foreclosure proceedings.
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And I guess my question is, do you think this kind of action and

activity has anything to do with what has been their opposition to

your agency becoming fully operational and carrying out its duties

and functions?

Ms. WARREN. Congressman, it was a hard fight to get this agency passed into law, but I thought, once it had passed and it had

become the law, that this kind of fighting would be over, at least

for a while, and we would have a chance to get on with protecting

families. Obviously, I did not fully understand the politics of the

situation.

Mr. DAVIS. Well, let me just thank you again for your service, because I believe that this agency is designed to function in the public interest and that you have demonstrated throughout your career

that you are a public-interest-oriented individual, and that is exactly what you will do. I thank you very much and appreciate your

service.

Thank you, Mr. Chairman. And I yield back the balance of my

time.

Ms. WARREN. Thank you, sir.

Chairman ISSA [presiding]. I thank the gentleman.

Professor, you have been very kind with your time. Would you

like a short break before we do the last few or——

Ms. WARREN. If we have a few more to go, could I just be excused

for about 3 minutes?

Chairman ISSA. Absolutely. We will take a 5-minute recess.

Ms. WARREN. Thank you.

[Recess.]

Chairman ISSA. The hearing will come back to order.

Professor Warren, we are down to just the last few. The ranking

member and I have agreed that we will conclude by approximately

1 o’clock. You will be dismissed, and then we will talk about other

matters. And I want to thank—that may be a very short, quick

‘‘thank you, goodbye,’’ so I want to thank you in advance for your

participation.

I have tried to let the clock run so that you get full answers.

Hopefully I have never cut you off. This has been the kind of hearing, at least as to your participation, that we strive for, and we appreciate your being here.

And, with that, we recognize the gentleman from Florida, Mr.

Mack, for his round of questioning.

Mr. MACK. Thank you, Mr. Chairman.

And I also want to thank you for being here and, your testimony,

not once, not twice, but a third time. And so I appreciate that very

much.

And I want to move in to another area a little bit, and maybe

you can help me understand a few things. And just to be clear, I

oppose the legislation. I don’t support the legislation. If my comments appear to some to be political in nature, it is because I don’t

trust what it is that we are doing. So, just wanted to put that on

the table at the outset.

Let me ask you—start with this. Are you still actively campaigning for your preferred settlement?

Ms. WARREN. Congressman, you mean in the mortgage servicer,

where the mortgage servicers——
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Mr. MACK. Yes.

Ms. WARREN. This is an effort that is led by the Department of

Justice——

Mr. MACK. No, but—all right. But are you still actively campaigning for your preferred settlement?

Ms. WARREN. Am I still—no, Congressman, but I am not—I just

want to be careful about the premise here. I am not sure what kind

of campaign I have ever had, but——

Mr. MACK. Well, haven’t you been—I mean, isn’t there a preferred settlement option that you think is right, and haven’t you

been out kind of campaigning around the country for that?

Ms. WARREN. Around the country?

Mr. MACK. Yeah, the country.

Ms. WARREN. On a settlement for mortgage servicers? No, sir, I

don’t think so.

Mr. MACK. Okay, so you haven’t been campaigning for a preferred settlement? Have you or haven’t you?

Ms. WARREN. Congressman, I don’t think I understand what you

mean.

Mr. MACK. Okay. Have you been engaged in trying to convince

people that your point of view is right in a settlement?

Ms. WARREN. Congressman, I am always engaged in trying to

persuade people that my point of view is right.

Mr. MACK. Okay. But have you been doing that with attorney

generals around the country or private industries, banks?

Ms. WARREN. I don’t think I have had a conversation with anybody in private industry about mortgage settlement for months.

And I——

Mr. MACK. But you have stated that——

Ms. WARREN. I don’t think.

Mr. MACK [continuing]. These are in negotiations with the private parties, are entirely directed by the Department of Justice, by

the States’ attorney generals, and by other Federal agencies.

Ms. WARREN. Congressman, I think, if I am following the same

thing you are reading, the negotiations over settling the

wrongdoing——

Mr. MACK. All right. Let me—wait, I am sorry, because my time

is going to go by, and I want to get to some specific things.

So you have been saying that you are only giving advice. Does

that advice mean to seek out meetings with States, attorney generals in different States?

Ms. WARREN. If it is helpful, I have been glad to talk with attorneys general, sir.

Mr. MACK. Does that mean you give advice to private parties to

the settlement?

Ms. WARREN. To private parties?

Mr. MACK. All right, maybe this will——

Ms. WARREN. No, sir.

Mr. MACK [continuing]. Help you. I would like to put an email

document up on the screen, if we could.

Number one, please?

This is a copy of an email from Iowa’s assistant attorney general

to someone with CFPB on February 24, 2011, where he states that,

‘‘It is my understanding that you,’’ Ms. Warren, ‘‘would like to
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make a loan mod presentation to the executive committee,’’ which

is referring to the National Association of Attorneys General. ‘‘We

would like to do this.’’

Did your presentation give advice on the mortgage settlement?

Ms. WARREN. Congressman, I think you might want to look at

the email that preceded this. Because, as I recall, there is an email

that precedes this that——

Mr. MACK. Did you give advice on your preferred settlement?

Ms. WARREN. Congressman——

Mr. MACK. All right.

Ms. WARREN [continuing]. I gave advice——

Mr. MACK. Let’s go to the——

Chairman ISSA. You know, I would ask unanimous consent that

the gentleman have 2 more minutes. In return, please, Ms. Warren, go ahead and finish your answer. I want it to be the time necessary to get a full answer and the additional followup questions.

Additional 2 minutes.

Ms. WARREN. I will try to be as right to the point.

The first point is, I think this email says that I was trying—I

was soliciting to make a loan presentation. And since you had

started your question there, I simply wanted to say, I think if you

look at the earlier emails, there may have been some misunderstanding. I was asked by the attorney general of Illinois, I think

it was, to make this presentation. It was their idea.

The second question about did I talk with the attorneys general

and give them advice, yes, I certainly did. Yes, sir.

Mr. MACK. That you gave advice on your preferred settlement?

Ms. WARREN. Sir, I said things I thought were right, yes.

Mr. MACK. Okay. But haven’t you been saying that you haven’t

been participating in these things? Hasn’t your quote been that you

have been giving advice to the Secretary of Treasury and other

Federal agencies? But you have been avoiding answering this pretty simple question. I mean, the question we want to know is, are

you out there trying to—part of the negotiations on this settlement?

Ms. WARREN. Congressman, on April 4th, I said, ‘‘We have provided advice to Federal and State officials regarding a potential

servicing settlement. In doing so, we have been an active participant in interagency discussions, sharing our analysis and recommendations in support of a resolution that would hold accountable any servicers who violated the law.’’

It also says in this letter, ‘‘The consumer agency is not conducting settlement negotiations with mortgage servicers.’’

Mr. MACK. Okay. Have you talked to private—have you talked

to any private servicers, private industry, about the settlement?

Ms. WARREN. We have not engaged in negotiations with any private—with any of those who are alleged to have violated the law.

Mr. MACK. Okay. Let me ask you this.

If we can put up Document 4?

Here is an email from the chief executive officer at Wells Fargo

to you on February 25, 2011, with the subject, ‘‘Mortgage.’’ And he

wrote to you, ‘‘Would you be interested in discussing what the

press is reporting on speculated terms and conditions to settle the

mortgage servicing issues?’’
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You replied later that day, ‘‘I apologize for not getting back to

you earlier,’’ and then you gave him your cell phone number to call

over the weekend.

What did you and the CEO of Wells Fargo discuss about mortgage servicing issues?

Ms. WARREN. I started that conversation by saying that ‘‘I am

not able to negotiate or discuss the settlement negotiations with

you in any way, shape, or form. I am sorry’’——

Mr. MACK. And was that the end of conversation?

Ms. WARREN. ‘‘I am sorry, but I am not able to do that.’’

Mr. MACK. And that was the end of the conversation?

Ms. WARREN. Yes, sir, it was.

Mr. MACK. And then the last document, if we can put up Document 5——

Chairman ISSA. If the gentleman would make this his last question.

Mr. MACK. This is my last question.

Document 5, in an email to—I believe it is Mr. Date, the associate director of CFPB, to the executive vice president of JPMorgan

Chase on February 24, 2011, with the subject, ‘‘Monday agenda.’’

And he wrote, ‘‘Given persistent rumors and headlines, I do not

want this meeting to be construed as relating to any potential settlement discussions or regulatory enforcement actions. And I think

that the meeting really has to be off the record.’’

Why was Mr. Date so worried about the meeting being construed

as relating to any potential settlement?

Ms. WARREN. Well, he wanted to make clear, as we have with

all of the mortgage servicers whom we have spoken with them,

that we are not engaged in any kind of settlement negotiations.

As Mr. Date explained in his testimony and I am glad to explain,

we have been receiving information and requests from people

throughout the industry. We are standing up an agency, and we

are trying to understand how this industry works. But we have

been completely unambiguous in telling participants, ‘‘We are not

part of the settlement negotiations.’’

Mr. MACK. So you still stand by the fact that you are not actively

campaigning for your preferred settlement?

Ms. WARREN. Congressman——

Mr. MACK. It is a ‘‘yes’’ or ‘‘no.’’ Yes, you are, or no, you are not.

Ms. WARREN. I just don’t know what you mean by the word

‘‘campaigning.’’ If it means I think my ideas are good and I would

rather have people follow my——

Mr. MACK. And are you actively campaigning with the participants?

Ms. WARREN. I am not—we are not talking to the participants

about mortgage servicing.

Mr. MACK. Is there a potential——

Mr. MILLER. Mr. Chairman, regular order.

Mr. MACK. Is there a resolution——

Chairman ISSA. Wait. No. The gentleman, I apologize, but your

time really has expired.

Mr. MACK. Thank you.

Chairman ISSA. With that, we go to the gentleman from Ohio,

Mr. Kucinich.
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Mr. KUCINICH. Thank you for being here, and thank you for your

service to the country.

Ms. WARREN. Thank you.

Mr. KUCINICH. I would like to go back to the way that you see

your responsibilities. What do you believe is the major purpose of

your job today in terms of protecting consumers?

Ms. WARREN. The purpose of the consumer protection agency, as

I see it, is to give consumers a fighting chance in the credit marketplace, to get enough basic information that they can make their decisions about what products they want to use.

Mr. KUCINICH. And is it your belief that, prior to the creation of

this agency, that consumers really didn’t have a fighting chance?

Ms. WARREN. Congressman, I just think there is a lot of evidence

that they have not had a fighting chance in the credit markets over

the last decade and, in some cases, longer.

Mr. KUCINICH. Would the proliferation in the past of no-document and low-document loans come within that observation?

Ms. WARREN. In my view, yes, sir.

Mr. KUCINICH. What is the area that you intend to focus on with

respect to banking today? What are some of the most important

consumer services you would like to perform, A? And B, what do

you say to the public about, if they have a complaint, how do they

get it to you?

Ms. WARREN. Yes, thank you, sir.

The first one is really about enforcement of current laws. One

part of the agency that I am enormously excited about is that we

will have bank supervision officers who will be in the banks, the

111 largest financial institutions in the country, very big financial

institutions, checking to see if they are complying with current

laws.

This isn’t about expanding the law. This is about taking the 19

Federal statutes that are out there, that are currently—7 different

agencies, bits and pieces scattered around—it is to bring it to one

place. We will have people who will be in those banks, looking at

their books, looking at their records, determining whether or

not——

Mr. KUCINICH. So you are functioning both proactively by looking

at the records but you are also functioning by reference, people referring complaints to you?

Ms. WARREN. Yes, sir.

Mr. KUCINICH. And when you are in the banks looking at their

records, what are their statutory obligations with respect to their

compliance with you? And are you finding any resistance?

Ms. WARREN. Congressman, we are not there yet. We will go for

the first time—next Thursday is the first day that we will be statutorily authorized to show up at the banks. Now, I don’t want to

overpromise; we can’t go to every bank on the first day. But we are

putting in place our plan for how to get out there——

Mr. KUCINICH. So walk me through that. Do you knock on the

door of the bank president? Do you call ahead of time? Do you send

them a letter? What do you do?

Ms. WARREN. We send a letter. First, we have to do a lot of internal work, partly because we have to do a serious risk assessment.
100

Mr. KUCINICH. Right. How many letters do you think you will be

sending out?

Ms. WARREN. At the beginning, I anticipate we will probably be

sending—I am worried that Steve Antonakes, my head of bank supervision, may fuss at me when I get back, but I am anticipating

it would be in the range of about 20 letters.

Mr. KUCINICH. And would they go to banks based on their annual revenue? Or how would you determine who you send it to?

Ms. WARREN. Bank supervision actually takes in to account a lot

of factors about how much risk you think any individual bank

poses and how to assess those risks. As you know, the risks could

sometimes be that it affects a lot of people but only few dollars; it

could be that it affects only a few people but really big dollars.

Some banks have——

Mr. KUCINICH. When you start—that you sent out the letters, it

is essentially a private process?

Ms. WARREN. Yes, sir.

Mr. KUCINICH. So that no one gets smeared because they get a

letter, but they are warned that they are expected to cooperate.

Ms. WARREN. Yes, sir.

Mr. KUCINICH. So then, how many people arrive at a bank, let’s

say?

Ms. WARREN. Well, it depends. These are—as you know, we are

dealing with the largest financial——

Mr. KUCINICH. Right.

Ms. WARREN [continuing]. Institutions. But a team could be anyplace from 4 or 5 people maybe up to 20, 30. It depends on the kind

of product we are trying to supervise at any given moment.

Mr. KUCINICH. One last question.

Ms. WARREN. Yes, sir.

Mr. KUCINICH. As you get the agency up and running, is there

a number or—and maybe you already said this—an address that

people can communicate to, an email or a Web address they can

contact to file a complaint?

Ms. WARREN. So let me say two things very quickly on that. We

have a Web site that is up and running right now,

www.consumerfinance.gov. Anyone——

Mr. KUCINICH. Www.consumerfinance.gov.

Ms. WARREN. Right. One word, consumerfinance.gov. Not very

catchy, but—people can email us now.

We will have a formal complaint process in place starting on July

21st starting with credit cards. We are going to do this by product.

We are trying something very innovative here. We will roll out the

first one on July 21st, and the others will follow, product by product.

Mr. KUCINICH. Thank you very much, Ms. Warren.

Ms. WARREN. Thank you.

Mr. KUCINICH. Thank you, Mr. Chairman.

Chairman ISSA. I thank the gentleman.

The gentleman from Michigan, Mr. Walberg, is recognized for 5

minutes. And you are estimated to be the last one.

Mr. WALBERG. Well, better last than not at all, right? Thank you,

Mr. Chairman.

And thank you for your endurance, Professor.
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In a press release, it has been noted that the CFPB has determined that it will consider supervising such things as debt collection, consumer reporting, consumer credit and related activities,

money transmitting, check cashing and related services. Is this list

now complete?

Ms. WARREN. So, Congressman, I appreciate your asking about

this. As you recall, the way Dodd-Frank was set up is that in the

nonbank financial institution space we will automatically be required to supervise three types of institutions, no matter their size:

private student lending, payday lending, and mortgages.

For the rest of consumer financial services that are not handled

by banks, we are required as an agency to supervise the largest—

I think it is called ‘‘large’’—the large institutions. We are required,

again by Dodd-Frank, to set up a rule to determine what that is

and what areas it goes in to.

What we have started doing is—we are not in the formal rulemaking process yet. We are bringing in people——

Mr. WALBERG. When will that be?

Ms. WARREN. The formal rulemaking process?

Mr. WALBERG. Yes.

Ms. WARREN. I am sorry. First, we have to get better information

before we are ready to do a formal rule. So we have started the

process by bringing in industry participants, community banks,

credit unions, large financial institutions, trade associations, consumer groups——

Mr. WALBERG. Any specific criteria that you use in determining

these, other than largeness?

Ms. WARREN. Well, this is the interesting question, given the

open texture of Dodd-Frank on this point. We have actually been

talking with all of the stakeholders about what is the right approach here, and we have gotten some very creative ideas. We are

trying to work with them, we are trying to work with industry to

find the right way to do this out of the box.

Mr. WALBERG. Well, the statement of the openness of DoddFrank doesn’t give me a lot of comfort about the—not simply the

consumer protection, but the protection of liberty——

Ms. WARREN. Fair enough, sir, but I——

Mr. WALBERG [continuing]. Choice, individual freedom, and selfdetermination as well. So I guess that is why I asked the criteria.

But you indicated that it is fairly broad.

Ms. WARREN. I want to say that, as best I can, we have gotten

enormous support from the industry, from consumer groups, from

banking groups for the process we are using to try to embrace everyone’s participation in this and to give them all an opportunity

to help us hammer out a rule that works best for everyone. That

is what we are working on right now, sir.

Mr. WALBERG. I appreciate that.

Let me continue that. How will the Bureau undertake the analysis required under Dodd-Frank, such as the impact that a rule or

regulation will have on consumers? And what legal protection may

already be in place for consumers before the Bureau can promulgate a rule or regulation?

Ms. WARREN. Well, I think the best way to say this is we are

building a strong research function. We have—it is our view that
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it is our responsibility to study and understand how markets are

working, what consumers actually face, what community banks actually face in terms of their regulatory hurdles, how markets operate.

We will be a data-driven agency. I think we proved that starting

back in February, before we were even formally launched, when we

started a process to do an analysis of the CARD Act that had

passed Congress. And we brought in stakeholders from across the

industry, we developed data, we asked for their data so that we

could evaluate——

Mr. WALBERG. Let me ask just in the remaining 43 seconds I

have, how much weight—on another area—how much weight will

be given to the fact that many products and services that the Bureau could potentially regulate are already well-regulated by the

States, bringing the States into the whole equation here?

Ms. WARREN. It is certainly a part of our consideration how much

regulation already exists. And if there are no problems, then there

are no——

Mr. WALBERG. How much weight does that play, though, in making that determination?

Ms. WARREN. Well, it is—big. I mean, it is important, it is heavy,

it is very relevant, how much regulation, how effective the regulation is, how well-enforced the regulation is, how consistent the regulation is throughout the country. Those are enormously important

to us as we go forward.

And I should say, in our early meetings with the industry, with

consumer groups, this is exactly an issue that has been raised. And

there were some differences of opinion between, for example, the

community banks and the non-regulated financial services industry

about how much effective regulation was occurring at this point.

Mr. WALBERG. I appreciate that. I know my time has ended. I

would just encourage you to put heavy weight on the States, being

that the original intention was not for the Federal but for the

States to have that type of control.

Ms. WARREN. I understand——

Mr. WALBERG. Thank you.

Ms. WARREN [continuing]. And I appreciate that.

Chairman ISSA. I thank the gentleman.

Professor Warren, as I predicted, additional Members have returned from their other committee assignments. Could you be kind

enough to give us up to another 15 minutes?

Ms. WARREN. Of course, Congressman. I have cleared my schedule, and I am here for as long as you need me.

Chairman ISSA. It has still been a long day for you.

What I would like to dispense with during this intervening period is an announcement that the ranking member and chair have

agreed to a series of joint letters related to, specifically—and this

is germane to the area you will be involved in a week from now—

related to the members of the military and some of the loan activities.

We are going to inquire in different ways to all 10 entities, financial entities, some of which are banks, some of whom have given

responses, some of whom haven’t. Additionally, we are going to

make a request to the Veterans’ Affairs Committee, who apparently
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has done a quite a bit of discovery, which is why we thought much

of this was already done—bring that together, and then see where

we go from there.

I now recognize the gentleman from Maryland.

Mr. CUMMINGS. Mr. Chairman, I want to thank you for your cooperation. We are just merely trying to make sure we zero in on

this problem. And I know you share my concerns and all of our concerns. And so I really appreciate this.

And, with that, I will—I guess we are—I withdraw my motion.

Chairman ISSA. I thank the gentleman.

And, Professor Warren, this is an area that the committee, although it doesn’t have exclusive jurisdiction, does want to make

sure that this historical event is never to be repeated when it

comes to our military overseas.

With that, I recognize Mr. Braley for his round of questioning.

Mr. BRALEY. Professor Warren, I heard you calling my name

when you raised concerns about financial products that cannot be

read by average customers. And the reason I say that is because,

on October 13th of last year, President Obama signed into law my

Plain Writing Act that I fought 4 years to get through both the

House and the Senate. And that means that on October 13th of

this year, every Federal agency is going to be required to use plain

language in covered documents, using writing practices that are

clear, concise, well-organized, and written for the intended audience.

And this is something that has broad, bipartisan support but is

part of what is endemically wrong with the way we write regulations and the way that financial products are written. And I would

give you strong incentive to take a look at plain language and plain

writing standards as a way of looking at how consumers can be

protected in a much more powerful way and hope that that is

something that you would consider.

Ms. WARREN. Congressman, could I just add, I have already

looked, and I am a huge advocate of the notion, not only that financial services companies ought to be required to write in plain language, but that the government itself should be, as well.

And I want to say, it is an uphill battle. It is hard to push—even

within our agency. We have well-intentioned folks, but we have all

learned a different way of thinking about regulations, of reading

regulations, of writing them.

I have talked to community banks around the country who say,

‘‘I want to comply with the law. I can’t read it. And I can’t afford

to hire an army of lawyers to come in and read it for me and then

tell me what I am supposed to do.’’

I can tell you, the direction we want to go is exactly where you

are on this. I can also tell you, it is a battle to get there. It is hard.

But it is something I am very committed to. I am committed to it

on behalf of the American people, on behalf of community banks

and credit unions and others who really suffer under the notion of,

you are legally obligated to do something and you can’t figure out

what it is.

Mr. BRALEY. As the ranking member of the Veterans’ Affairs

Economic Opportunity Subcommittee, I have participated in hearings dealing with this underlying problem of these loan complica-
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tions to our service men and women, and I attended the forum that

we have been talking about here today.

But I have a concern, and my concern is, we hear a lot about ‘‘too

big to fail,’’ but as it comes to providing some level of responsibility

for these lenders, I fear we have gotten too big to punish. Because

when you look at the magnitude of this problem and you look at

the existing sanctions to punish it, it is obvious that it is not

achieving its desired effect.

And I want to give you an example. I went back to Dubuque,

Iowa, about 2 months ago for a welcome-home ceremony for a

young Marine who lost both of his legs above the knee. And thousands of people turned out that day to line the route from the airport in Dubuque to his home. And we passed by many community

banks and credit unions that had signs out front welcoming him

home.

And this gets down to the problem of who holds the paper in our

increasingly complex mortgage industry. Because I guarantee you,

if one of those local banks that we passed had engaged in the types

of practices we talk about at these hearings, they would have been

run out of town by the people lining that parade route.

And I am concerned because the American people are not as outraged about this practice as you and I are and members of this

committee are. And it is an insult to the people who put their lives

on the line every day that we allow this to continue while these institutions continue to profit.

And I will yield back.

Mr. MCHENRY [presiding]. Mr. Farenthold of Texas is recognized

for 5 minutes.

Mr. FARENTHOLD. Thank you very much.

I would like to yield my time back to you, Mr. McHenry.

Mr. MCHENRY. Thank you. I thank my colleague for yielding.

Ms. Warren, you have previously written, ‘‘Big corporate interests, led by the consumer finance industry, are devouring families

and spitting out the bones.’’

Ms. WARREN. Yes, sir, I sure have.

Mr. MCHENRY. Now, previously, this committee had a number of

questions about whether or not you would ban products. Now, has

your opinion changed in this time? Because it seems like what your

rhetoric was previously was that there are products that should be

banned.

Ms. WARREN. No, Congressman. Let me see if I can say this more

clearly.

There are a lot of tools available to make markets work better

for American families. It does not require—banning is not the only

tool. In fact, it is probably not nearly the most effective tool.

I think the best place to start in changing a world in which big

corporate interests chew up American families and spit out the

bones is to make prices clear, to make risks clear, to mow down

fine print so people can make head-to-head comparisons, looking at

three or four credit cards, three or four mortgages.

I believe in the power of individual Americans to be able to make

good decisions, and I believe in the power of markets, but they

don’t work if people don’t have good information.
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Mr. MCHENRY. Well, okay. And, actually, I think you sound very

similar to what I have said in Financial Services over and over and

over again. And so I like what you just said.

Is it your intention that the CFPB would not ban products? Or

can you say—can you make some statement about intention? Because we have a lot of folks in the consumer finance industry and

those that are accessing those products that have that concern

about your bureau. And so, if you can make some statement to

that, I think that would be a positive in terms of certainty, that

that is not an intention you have.

Ms. WARREN. We have made all of our priorities clear, and we

have no present intention to ban a product. But we are still learning about what is out there. And the world keeps changing and

new things keep developing out there. It is a tool in the toolbox,

and that is where it should stay.

Mr. MCHENRY. Okay. So you still think that the ability to ban

a product should be—it should continue for the CFPB, that that

rule should—that power should still reside with the CFPB?

Ms. WARREN. I think that Congress was smart when they put a

lot of tools in the toolbox. And I think, with the help of industry,

with the help of consumer groups, with the help of good research,

we are using those tools—or we are prepared to use those tools in

very effective ways.

Mr. MCHENRY. So the shorter way to say that is, yes, that you

think that that power should continue to reside——

Ms. WARREN. I am sorry, sir. Yes.

Mr. MCHENRY. Okay. Thank you. Thank you for your testimony.

With that, Mr. Farenthold, I would yield my time back to you.

And I think Mr. Guinta has——

Mr. FARENTHOLD. I will yield the remainder of my time to Mr.

Guinta.

Mr. GUINTA. Thank you very much.

Thank you, Mr. Chairman.

I want to follow up on two specific items, number one an item

that Ms. Buerkle had been focusing on. I just want to make sure

we were clear.

She had talked about possible concerns about raising compliance

costs. And I think you had said that your goal is it to reduce compliance costs. Can you just affirm that the stated goal and the expectation is it to reduce costs for credit to consumers?

Ms. WARREN. Our first item that we are working on out of the

box is to reduce the costs for the credit issuers, yes, sir.

Mr. GUINTA. Okay. So if in the next year they come to Congress

and say, ‘‘Look, that hasn’t happened, the cost is going up,’’ you

would like to hear from us.

Ms. WARREN. Congressman, I suspect we will hear from them

even before you do.

Mr. GUINTA. And then, second, you talked about greater disclosure rather than—and this is an important point—greater disclosure rather than banning, I think you said earlier in your testimony today.

Ms. WARREN. Yes, sir.

Mr. GUINTA. You just said you believe in the power of markets,

we need good information. I, too, share that belief with you and
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with the chair. But you also said banning should be a tool in the

toolbox. Can you give me an idea of when you plan to take that

tool out of the toolbox?

Ms. WARREN. Congressman, we don’t have any present plans. I

don’t—I can’t identify a specific product. But remember, this is an

agency we are building over a very long arc. And it is an agency

that is built in the aftermath of a consumer credit industry that

went wild. We could sit here—they invented new products, new approaches, new ways to surprise people, to sell people products that

the issuer knew was going to explode, and never make that clear

to the customer.

Whether or not there will be a day when a creditor will figure

out, I can make a fast buck with something that is so lousy that

the answer is it should actually be banned, that day could come.

Mr. GUINTA. Okay. I thank you.

And I see the time has expired.

Chairman ISSA [presiding]. Professor Warren, we are going to

wrap this up. And if it is okay, I would like the ranking member

and I to have a few minutes with you afterwards.

Additionally, I would ask at this time, would you be willing for

those who kindly said they will submit their questions for the

record, would you be kind enough to answer them for the record?

Ms. WARREN. Of course, Mr. Chairman. We would be delighted.

[The information referred to follows:]
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Chairman ISSA. With that, I recognize the ranking member.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I will be

very brief.

Professor Warren, I want to simply thank you. My mother used

to say, ‘‘Thank you for all that you are, but also thank you for all

that you are not.’’

When you were in Baltimore, you told a story about how you

came up and that it wasn’t easy and that you have never forgotten

your own struggles. And, in part, you were very fortunate to get

a good education and to end up at Harvard. And I just want to

thank you for never forgetting what you have been through, so that

you might use it as a passport to help other people.

I have met a lot of people in my life with a lot of passion. One

of them was the President of Colombia, South America, Uribe—so

much passion. And your passion is just phenomenal.

But I also thank you for doing something else; I thank you for

synchronizing your conscience with your conduct. And so, I don’t

know, you know, what your future may bring, but if it were to end

today, the fact is that you have already had a tremendous impact

on families and generations yet unborn.

And I just want you, when you walk out of here, to know that

there are a whole lot of people who really, really appreciate you

and what you stand for. And they are inspired by you. And that

is why, you know, in Baltimore people were—literally, we had to

turn people away. Because they just wanted somebody—somebody—to stand up for them. That is all they wanted. And you have

taken on that role. I know it has not always been easy. I know

there have been some difficult moments, but we thank you.

And I am so glad that we were able to have this hearing, because, like the chairman said, this is the kind of hearing that, you

know, we should have, where you actually get a chance to answer

the questions, to lay out your goals, where you are, what you are

trying to do.

But anyway, as I said before, we thank you.

Chairman ISSA. With that, the hearing stands adjourned.

[Whereupon, at 1:16 p.m., the committee was adjourned.]

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