Elizabeth Warren was the first senior Obama administration official to recognize the potentially incendiary impact of a bill that would have made it significantly easier for mortgage companies to foreclose on homes, and her subsequent warnings played a crucial role in persuading the President to veto the measure, according to freshly released documents and people familiar with the deliberations.
The disclosure that Warren was instrumental in halting a bill that would have streamlined the foreclosure process comes as she confronts fierce criticism from Republicans on Capitol Hill for the way she was appointed to construct a new consumer financial protection bureau, and characterizations that she is inclined to take an overly punitive tack with Wall Street.
A long-time advocate for greater regulation of the financial system and a prominent critic of predatory lending, Warren now finds herself at the center of an intensifying debate over the relationship between the Obama administration and the business world.
For consumer advocates, who have long decried what they portray as Wall Street's outsized influence in Washington, Warren represents their greatest hope that big banks will be more tightly supervised following the worst financial crisis since the Great Depression. For a vocal group of business leaders and their Republican allies, Warren has become Exhibit A in their case that the Obama administration is anti-business.
The decisive way in which she labored behind the scenes to stymie a bill that would have eased requirements for documentation in the foreclosure process underscores how her arrival has altered the administration's relationship with major banks.
The bill, which passed both houses of Congress and awaited President Obama's signature to become law, essentially would have compelled notaries to accept out-of-state notarizations, regardless of the rules in those states.
State officials across the country–who have been pursuing probes looking into wrongdoing within the foreclosure process– feared that those jurisdictions with lax standards could have become hotbeds for foreclosure documentation fraud. Lenders and mortgage companies could have used those states as central clearing houses to produce bogus foreclosure paperwork, and then export those documents to other states with more stringent regulations–an expedient bypass around the strictures.
Obama ultimately declined to sign the law, and the House of Representatives failed to override the veto.
Officials said Warren was among the first federal officials to recognize the significance of the notary bill, titled the Interstate Recognition of Notarizations Act of 2010. She met with authorities from several states and then relayed their concerns to influential administration officials.
During the morning of Oct. 6, Warren's team at the Treasury Department wrote the first memos on the bill, raising questions about the possible consequences if it became law, these people said.
That evening, Warren met for 30 minutes with Peter Rouse, Obama's interim chief of staff, her calendar shows. She later spent an hour on the phone with Illinois Attorney General Lisa Madigan, who once sued Countrywide Financial and exacted an $8.4 billion multi-state settlement.
The next day, Warren participated in an afternoon meeting on the bill, her calendar shows. During that meeting one of Obama's top spokesmen, Dan Pfeiffer, posted an entry on the White House Blog explaining why Obama would not sign the bill.
On Oct. 8, Obama declined to sign the bill into law, citing the need for "further deliberations about the possible unintended impact" of the bill on "consumer protections, including those for mortgages."
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