Elizabeth Warren, left, talks with House Financial Services Committee… (Harry Hamburg, Associated…)
Reporting from Washington— — House Republicans proposed watering down the powerful top job at the new Consumer Financial Protection Bureau as they attacked Obama administration advisor Elizabeth Warren, accusing her of overstepping her temporary position overseeing the bureau.
The new agency is the centerpiece of the financial regulatory overhaul enacted last year, but two leading Republicans said they would introduce legislation to change the bureau's still-vacant position of director to a five-member bipartisan commission.
"It's just really concentrating too much power into one single person," Rep. Shelley Moore Capito (R-W.Va.) said as she and House Financial Services Committee Chairman Spencer Bachus (R-Ala.) announced their bill Wednesday.
The U.S. Chamber of Commerce, one of the fiercest opponents of the new agency, said it backed the legislation.
Along with many in the industry, most Republicans dispute the need for a bureau and are particularly concerned about Warren, the tough-talking Harvard law professor and financial consumer advocate who first proposed such an agency in 2007.
They have tried to limit the budget for setting up the bureau, which begins operation in July. And they have said they don't like the idea of Warren as its director. She now works for the administration and the Treasury Department in overseeing the launch of the agency.
But Warren didn't back down in the face of sharp Republican criticism in testimony Wednesday.
Appearing before the Republican-controlled House for the first time since joining the administration last fall, she strongly defended the bureau by pointing to the harm done to millions of consumers by the financial crisis.
"If we had had this agency six years ago, eight years ago, we would not be in the mess we are today," she said.
Several Republicans on a House Financial Services subcommittee slammed Warren for her role in ongoing state and federal negotiations with mortgage servicers to resolve an investigation into botched foreclosure paperwork. The lawmakers said Warren should not be involved because she hasn't been nominated or confirmed by the Senate to head the new agency.
"You have a lot of discretion and a lot of power, but I see very little accountability," Bachus told Warren. Other Republicans complained that the bureau was a "self-regulated, unchecked body governed by one person" and an agency committed to "consumer restriction" instead of consumer protection.
But Warren sought to ease fears that the agency would be too heavy-handed. She said it would focus on making mortgages and other financial products simpler to understand.
"The consumer bureau's mission is straightforward — make prices clear, make risks clear, so consumers can compare one product to two or three others," Warren said. "Fine print is great for those who want to hide something, but not good for families who want to know what they're getting into."
As an example, Warren said she wants the agency to merge and simplify the two lengthy mortgage disclosure forms that consumers must sign at closing.
"We're looking for a one-page mortgage shopping sheet," she said. Such a form would be easier for consumers to understand and cost less for lenders to produce.
Once it is operational, the bureau will be funded from the Federal Reserve outside the congressional appropriations process. Until then, the agency's funding comes from Congress — and the House this year voted to cut the amount to $80 million from $143 million.
Warren said that other banking regulators, such as the Federal Deposit Insurance Corp., also are funded outside the appropriations process. She argued that the bureau has less power than other agencies because its regulations can be voided by a two-thirds vote of other financial regulators on the new Financial Stability Oversight Council.
"It is the only agency in all of government whose rules can be overruled, obliterated, wiped out, negated by other agencies," Warren said. "I hope that every time we talk about accountability, we also talk about the accountability of financial institutions, that there will be … a cop on the beat to make sure they follow the law."
Republicans have been particularly critical of Warren's role in negotiations over a settlement with mortgage servicers. Warren said she has provided advice to the Justice and Treasury departments on the settlement because the agency will have authority in July to set standards for mortgage servicing.
Treasury Secretary Timothy F. Geithner wrote to Bachus this week saying the consumer bureau would not be a party to any formal settlement, but he defended its role as an advisor in the negotiations
Rep. Patrick T. McHenry (R-N.C.) criticized Warren for acting as the agency's director and being involved in the foreclosure settlement talks.
"You have no statutory authority to engage in these matters you're engaging in," he said. "Do you understand why it's controversial?"
President Obama did not nominate Warren as the agency's director, out of concern Senate Republicans would block her nomination. He appointed her to a dual White House and Treasury advisory position last year to help start the agency.
Republicans at the time worried that Warren would invoke executive privilege and not agree to testify before Congress. But she spent more than two hours Wednesday facing lawmakers' questions. Committee Democrats came to her defense.
"I think you're fighting the good fight," said Rep. Stephen F. Lynch (D-Mass.). "You're on the side of the angels. Hopefully, you'll be nominated and you'll be confirmed."