Shahien Nasiripour, Huffington Post
The nascent consumer agency dedicated to protecting borrowers from abusive lenders, a cornerstone of the Obama administration’s efforts to reform the financial industry, will not be able to regulate the kinds of lenders that helped cause the crisis if the White House doesn’t meet a key deadline, federal auditors say.
Firms like New Century Financial, Ameriquest, Fremont General and Countrywide Financial — lenders that aren’t banks and fall outside the bounds of regular federal supervision — made the kinds of shoddy mortgage loans that ultimately led to the housing crisis. The Bureau of Consumer Financial Protection, currently led by Elizabeth Warren on an interim basis, is supposed to change that by putting them under the umbrella of a robust federal regulator.
But if the White House can’t get a nominee through the Senate by July, the bureau will lack the authority to supervise nonbank lenders, according to a Jan. 10 report by the inspectors general of the Treasury Department and Federal Reserve obtained by The Huffington Post. In six months, the agency officially assumes the power formally held by bank regulators. Bloomberg News first reported on the existence of the report Wednesday afternoon.
The dilemma poses a challenge to the Obama administration, which sold the agency to Congress and the industry in part based on the promise that it will help level the playing field between banks and nonbanks when it comes to government oversight. Banks have long been regulated by federal agencies and subject to regular audits. Nonbanks, like home mortgage and payday lenders, have been subject to sporadic oversight, at best. Such companies have been hit with billions in fines and legal settlements in response to accusations they engaged in abusive and predatory lending.
