DN Editorial: CONSUMER WATCHDOG SHOWS HER TEETH

IN HER FIRST two months as the nation's top consumer advocate, Elizabeth Warren is turning out to be just as dedicated and smart a champion of ordinary people as advertised - unlike, it must be said, the rest of the Obama administration.

So of course Warren - and the Consumer Financial Protection Bureau she was appointed to organize - is at the top of the hit list of the new Republican House of Representatives.

According to Shahien Nasiripour of the Huffington Post, Warren was the first administration official to recognize the potential for disaster posed by a law that would have made fraudulent foreclosures even easier to pull off than they are now. She met with state and federal officials to discuss the bill, which had already passed both houses of Congress, and convinced President Obama not to sign it in a "pocket veto" that the House failed to override.

The current foreclosure crisis, like most of the machinations still being practiced by Wall Street, is incredibly complex, but here's the relevant piece: Up until a few years ago, when a bank or mortgage company gave you a mortgage, it kept the documents and was required to produce them in order to foreclose on a house. Then financial firms began bundling hundreds of thousands of subprime mortgages together and selling them as securities. (The failure of these securities led to the economic meltdown two years ago.) Now it turns out that many banks don't have the paperwork from the mortgages. So they allegedly have employed people to sign foreclosure documents without reading them or making sure the facts in them are valid. All 50 state attorneys general have launched investigations into the use of these so-called "robo signers."

If President Obama had signed the Interstate Recognition of Notarizations Act, every state would have been required to accept all notarized documents from other states. So those with lax standards could have become centers for bogus foreclosure documents that other states would have been forced to accept.

According to records of her schedule, Warren pretty much hit the ground running after she came on board as a special adviser to the president, spotting the law's problems quickly. (The same records also show that - contrary to charges that Warren is anti-business - she has met with more representatives of big banks than with consumer groups.)

Warren's M.O. in this case is exactly what we would expect, given the Harvard professor's straightforward critiques of the TARP bailout process as the leader of a congressional oversight panel. It showed the kind of sharp analysis and decisive action that is needed at the bureau created by the financial regulation law passed earlier this year. (And it begs the question of what might have happened if Warren hadn't been there.)

The new bureau's goal is to guarantee fair treatment for consumers - starting with mortgages and credit cards. It should be easy for homebuyers to see the costs and risks of a mortgage up front, Warren says. For credit cards, she aims to reduce the fine print in agreements so that responsible borrowers can make direct comparisons between products and prices. What could be more friendly to the "free market"?

Yet Republican leaders in Congress make no secret of their intentions to defund and defang the bureau. They have asked the inspectors general of both the Treasury Department and the Federal Reserve to investigate the work being done to create the new bureau. The fight will be played out in committee hearings, but it's already clear just who's on which side.