by Jeff Sovern
On April 5, the Senate Banking Committee held a hearing titled Assessing the Effects of Consumer Finance Regulations. I've been listening to the hearing, which has three witnesses–selected by the GOP majority–who spent much of their time attacking the CFPB, and one witness- chosen by the Democratic minority– who supported the CFPB. One of the witnesses critical of the CFPB was Leonard Chanin, currently of Morrison and Foerster LLP. When it was her turn to question the witnesses, Senator Warren conducted an extraordinary takedown of Chanin. I recommend watching the Q&A. It's available at various places, including here on Youtube. Those who don't have time to watch the video and want to read a transcript can find one here, but the transcript might not have the same impact. Really, to have the full impact, you have to listen to the entire hearing, because like the thirteenth stroke of a clock, the exchange calls into question all that came before it, including the criticism of the CFPB. But that's a big time commitment, so just give the Q&A a listen.
A couple of comments on Chanin's defense for the Fed's failure to act from 1994, when Congress gave the Fed the power to act, until 2008, when the economy tanked: Chanin said that no statistical evidence existed to show a meltdown in the mortgage market. Even assuming that to be true, shouldn't the Fed have conducted its own information-gathering? And does Chanin believe that regulators should not prevent predatory lending until there is statistical evidence of a mortgage meltdown? How is it that the investors portrayed in The Big Short figured out that there was a problem when they didn't have access to the Fed's information-gathering resources but the Fed didn't? Should the Fed really take nearly a decade and a half to figure out that something is wrong with predatory lending? And isn't the fact that it didn't another argument for the CFPB?