Wall Street's Favorite Democrat Misrepresents Financial Watchdog Elizabeth Warren

Democratic Congresswoman Melissa Bean is earning the title of Wall Street's favorite Democrat.

The three-term Illinois congresswoman and leader in the New Democrat Coalition has pocketed almost $2.2 million since she's been in Congress from the banking and financial services interests she oversees as a member of the House Financial Services Committee, according to the Center for Responsive Politics [1], including $338,125 [2] so far this year.

Don't worry, though; she's working hard for her money. She's trying to amend a financial regulatory reform bill to nullify tough laws against predatory lending that several states have already adopted, and cripple the ability of states to regulate banks, credit card companies and other predatory lenders.

In doing so, Bean has spread the myth that even financial watchdog Elizabeth Warren, who is the chair of the Congressional Oversight Panel, would support such a move. In a dear colleague letter signed by six Democrats who have also received large sums of money from Wall Street this year—Rep. Jim Himes ($326,623) [1], Rep. Ed Perlmutter ($123,350 [1]), Rep. Jon Adler ($140,717 [1]), Rep. Suzanne Kosmas ($103,311 [1]) and Rep. Gary Peters ($134,553 [1]) —they misrepresent a statement [3] from an academic paper Warren wrote in 2008:

"In an era of interstate banking, uniform regulation of consumer credit products at the federal level may well be more efficient than a litany of consumer protection rules that vary from state to state. The problem is not in the federal preemption; it is in the failure of federal law to offer a suitable alternative to the preempted state law."

However, Warren has been clear that she supports the legislative approach backed by President Obama that would allow states to regulate banks and has said, when asked by Bean's office and others, that she opposes Bean's amendments.

Warren came out with a statement earlier today responding to Bean's letter saying:

“The CFPA should be able to set basic safety regulations – a floor – and states should be able to go beyond that floor if they choose. The CFPA will play a critical role in rebuilding a secure Middle Class, but no regulator is perfect. It is important that states have the chance to protect their citizens when federal enforcement is inadequate and to serve as a front-line defense against new threats.”

If Bean wanted to quote someone in favor of limiting the ability of states to regulate banks, she should have called up Goldman Sachs. Or perhaps the American Bankers association, which recently cried that a consumer financial protection agency "needlessly rips apart all the existing regulatory agencies . . . and creates a new agency with powers to mandate loans and services that go well beyond consumer protection."

Given the millions of families in thousands of communities whose financial foundations were needlessly ripped apart as these regulatory agencies either slept through the creation of the financial bubble or facilitated the move toward the inexorable burst, it is hard to argue against a "ripping apart"—or, more accurately, a sensible restructuring—of these agencies in ways that protect consumers and the economy.

Plus, allowing states to regulate banks is a key component of stopping corporate crime. The state are often the first entities to observe on-the-ground malfeasance by major banks; thus they are quicker to act.

In a letter from Bean's own Attorney General, Illinois Attorney General Lisa Madigan , says [4]:

National banks and thrifts claim that allowing states to enact tougher laws will result in a too great a burden on the system. The argument is disingenuous. Many of these lenders are multinational companies that currently have to comply with a vast array of varying rules both inside and outside our nation's borders. In fact, as demonstrated by the swollen dockets of our state's foreclosure courts, national banks seem to have no problem complying with the varying state and local laws governing foreclosure process.

In fact, not allowing states to pass tough laws on predatory lending [4] was one of the reasons for the financial crisis, Madigan argues:

Federal laws have frequently stymied state reform efforts. These laws preempted states from regulating certain risky loan terms and features. It was precisely these types of features that led to widespread abuses in the mortgage lending market. State attorney generals saw the abuses of prepayment penalties, which often locked burrowers into unaffordable sub-prime mortgages. Yet federal preemption barred the states from enacting tougher laws to address these abuses, even as applied to those entities we regulate.

This whole argument that allowing states as well as the federal government to regulate banks will hurt the economy is completely bogus. When you talk to bankers privately, they will acknowledge that they are not afraid of the administrative costs of 50 state rules. Companies have to deal with different laws in 50 different states when it comes to safety, labor practices and a host of other areas. It's standard practice for them, and in some cases, they will argue in favor of state over federal regulation when it's in their bottom-line interest to do so.

The real story is that these financial institutions just don't want more rules that will clamp down on the profits they make from predatory lending. They certainly don't want to have to pay for lobbying in 50 states. The banks have decided that buying off Melissa Bean is a lot cheaper than buying off state legislatures.

We won't let the banks get away with this. The American public is awake to the game that Wall Street is playing and we will hold people like Melissa Bean accountable for her work on behalf of the banks. The banks may be funding her political campaign but her paycheck still comes from us. It's time to tell Bean to work for her constituents, not Wall Street.