Senator Shelby Takes on Elizabeth Warren

by Victoria McGrane and Alan Zibel, Wall St Journal
Saturday, March 12th, 2011

Elizabeth Warren’s role in working out a broad settlement against large banks that service mortgages isn’t winning her friends among Republicans on Capitol Hill.

Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, Wednesday accused her of leading a “regulatory shakedown” of the mortgage servicers. He cited news reports that certain regulators involved in the talks, including Ms. Warren, state attorneys general and the Federal Deposit Insurance Corp., may propose the banks pay a penalty of as much as $30 billion – and said Ms. Warren was leading the push.

“This proposed settlement appears to be an attempt to advance the administration’s political agenda, rather than an effort to help homeowners who were harmed by a servicer’s actual conduct. … The $30 billion would most likely fund a new slate of housing programs long sought by the administration, but previously rejected by Congress,” Mr. Shelby said in remarks during a hearing on housing policy.

“Just last year, I warned that the new Bureau of Consumer Financial Protection would prove to be an unaccountable and unbridled bureaucracy.  I did not expect to be proven correct so quickly,” he said.

The Obama administration is trying to negotiate a broad settlement among various federal regulators, 50 state attorneys general and mortgage servicers to settle allegations that the banks mishandled foreclosures. Ms. Warren has been involved in the talks behind the scenes, according to people familiar with the negotiations.

In a recent interview, Ms. Warren declined to detail her role, saying the Department of Justice had requested participants keep the talks private. She did note that the CFPB has no legal authority on the issue at the present time.

Last week, state attorneys general and federal agencies delivered a 27-page set of proposed rules that would reshape the way mortgage servicers deal with troubled borrowers.

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