Warren defended the young agency, arguing that it could have mitigated the foreclosure crisis. Warren squares off with GOP

Consumer advocate Elizabeth Warren squared off Wednesday against a panel of skeptical Republicans who have fought the consumer protection agency she has been in charge of creating since last summer, when it was mandated by the Wall Street reform law.

Republicans have always considered the Consumer Financial Protection Bureau, which President Barack Obama signed into law last summer, to be Exhibit A on government overreach and have never had much affection for Warren, who was a watchdog for the federal bailout of Wall Street. And the GOP-majority House Financial Services Committee showed that this stance hasn’t softened.


Lawmakers grilled Warren on who would oversee the bureau, whether Congress should have more oversight and if the agency is worthwhile. They also pressed her about her involvement in a pending case in which all 50 state attorneys general are demanding settlements from the nation’s largest banks for faulty foreclosure practices.

But Warren argued that had her new agency existed before the 2009 financial meltdown, “we would not be in the mess we are in today.”

“If there had been a cop on the beat, ... if there had been a consumer agency in place, these problems would have been caught early,” she said. The CFPB’s mission, she added, is to be “a cop on the beat that American families can count on.”

The bureau was conceived as part of the Dodd-Frank financial regulatory law, which gave it broad oversight of financial firms, big banks, mortgage companies and credit cards. After signing the bill, Obama picked Warren — a prominent law professor, dogged consumer advocate and former campaign adviser — to launch the bureau.

The president stopped short of selecting Warren to run the bureau, in large part because the bureau’s director must face Senate confirmation. Warren, who has attacked financial firms for risky lending practices, would need bipartisan approval — far from a sure thing.

“I understand there will be a nomination soon,” Warren told the committee.

Setting the tone for the hearings in his statement, Committee Chairman Spencer Bachus (R-Ala.) decried the CFPB as “the most powerful agency that’s ever been created in Washington,” adding that Warren has “quite the budget” of taxpayer dollars despite never having to undergo Senate confirmation. Warren answered that the agency has a “straightforward” mission of making prices and risks clear to consumers.

But Warren argued that her bureau “is not the strongest agency in government. It is the most constrained and most accountable agency in government.” The language in the Dodd-Frank banking bill, she added, makes CFPB the “only agency in all of government” whose rules can be “obliterated” by other federal agencies.

Rep. Carolyn Maloney (D-N.Y.), who sat on the conference committee for the banking bill, said that, under the law, any rule the agency writes can be overruled on the grounds of failing to meet “safety and soundness” standards by the Financial Stability Oversight Committee.

As the CFPB moves forward under the umbrella of the Treasury, it’s unclear whether Democrats and Republicans can move closer to an ideological agreement on the agency’s place in regulating consumer exchanges.

During bipartisan negotiations, Republicans fought to get car deals exempted from the agency’s purview, for example, a move that Democrats on the committee, such as Rep. Luis Gutierrez of Illinois, still lament. GOP lawmakers also worry that the agency will hamper community banks, despite Warren’s assurances to the contrary.

Then there’s the issue of funding the department, given the climate across the Capitol in favor of spending cuts and that the bureau would have to be funded through the Treasury Department.

“I think we can all agree there were lapses in the oversight and inherent problems with the regulatory structure, [but] many of my colleagues ... have serious concerns about the creation of a new bureaucracy with little congressional oversight,” said Rep. Shelley Moore Capito (R-W.Va.), who chaired the hearing. “Claiming Congress has the ability to overturn rules is not an effective way to conduct oversight.”