Tuesday, June 21, 2011

Federal Government Meddling in Robo Signer Settlement

For something completely different, it appears that the federal government is over stepping its boundaries again. Representatives of the House have drafted a letter requesting copies of “any and all” communications between Elizabeth Warren and any state attorneys general since September 2010. The group is concerned that Warren has gone “far beyond the mere offering of advice” and that she may be unduly influencing the demands of the Attorney Generals in their negotiations with banks toward a settlement to resolve the robo-signer debacle. She is the White House adviser setting up the Consumer Financial Protection Bureau. In one email that has already been released, Warren’s division expressed concern that a $5 billion settlement with major banks would be “too low.” The figure has now risen to around $20 billion.
The crux of the issue appears to revolve around the fact that Warren is actively participating in settlement negotiations when her bureau will not even officially begin operations until July 21 of this year. Furthermore, she is not the director of the bureau, as the president has not yet appointed anyone to this position. The letter will be sent to Treasury Secretary Timothy Geithner. House Representatives such as Spencer Bacchus (R-AL) have been concerned about Warren’s level of input for several months, bringing it up first in March subcommittee meetings, where Warren insisted that “the bureau provided advice when asked.”
There must be some resolution to the bank errors from the robo signer fiasco, but why can’t they craft a solution that helps home owners?? Our experience with TARP should indicate that the government is not capable of resolving the crisis anytime soon. Punishing the banks is not likely to help distressed home owners. The banks were clearly part of the problem…but after all, it was the federal government (President Clinton) that required banks to lend on the sub-prime market and it is no surprise that many of these loans have gone into default.

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