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Potential Presidential Candidate Elizabeth Warren at Center of CFPB Scandal

Potential Presidential Candidate Elizabeth Warren at Center of CFPB Scandal

Possible presidential candidate Sen. Elizabeth Warren (D-MA), who came up with the idea and led the start-up of the “Consumer Financial Protection Bureau” as a federal watchdog to prevent financial institutions from abusing U.S. consumers, is now at the center of the a scandal regarding the vanished authorization to spend $215.8 million on a luxurious remodel that included a new penthouse floor and indoor waterfall for the bureau’s rented Washington, D.C. office space.

The Office of Inspector General of the United States Federal Reserve (OIG) was requested by the House Financial Services Oversight and Investigations Committee on January 29, 2014, to evaluate the Consumer Financial Protection Bureau’s (CFPB) headquarters renovation costs that rose from $55 million to at least $215.8 million.

The OIG report revealed that the CFPB “approved formalized policies for budgeting and funding investments prior to obligating funds” on October 1, 2012. These policies required a focus on “a return on investment when making a sound business case.” The policies also stressed that a “quantitative analysis” must be performed that included life cycle costs, cost savings, and productivity enhancements to promote “financial efficacy.”

But the OIG found that “According to CFPB officials, the CFPB saw this approval as a formality since the decision to renovate pre-dated these policies.”

Sen. Elizabeth Warren originally proposed a “Financial Product Safety Commission” in a 2007 article titled “Unsafe at any Rate.” She argued that despite President Ronald Reagan curtailing the growth of federal regulation that he described as the “R-word,” it was beneficial that nearly every consumer product sold in America has to pass safety regulations “well in advance of reaching store shelves.” 

Warren said the “time has come to put scaremongering to rest” and recognize that a regulatory agency for credit and financial services would “support and advance efficient and more dynamic markets.” She emphasized, “Just as the Consumer Product Safety Commission (CPSC) protects buyers of goods and supports a competitive market, we need the same for consumers of financial products-a new regulatory regime, and even a new regulatory body, to protect consumers who use credit cards, home mortgages, car loans, and a host of other products.”

Warren advised Barack Obama during his 2008 presidential campaign on the creation of the CFPB. After Obama’s victory, Warren was appointed by Senate Majority Leader Harry Reid (D-NV) to chair the Congressional Oversight Panel that reviewed $700 billion in spending by the Troubled Asset Relief Program on November 25, 2008.

While at TARP, Warren was instrumental in designing and pushing through Congress the “Dodd-Frank Wall Street Reform and Consumer Protection Act” that established the CFPB as an independent bureau within the Federal Reserve System. 

According to a 2012 Independent Performance Audit, the legislation uniquely guaranteed the CFPB an automatic percentage of the Federal Reserve System’s operating expenses and that “funding is not subject to the traditional formulation and review of the Congressional appropriations process.” In addition, “Receipt of funds from the Federal Reserve authorizes the agency’s budget spending authority.”

On September 17, 2010, Elizabeth Warren was appointed by President Obama as “Special Advisor for the Consumer Financial Protection Bureau,” and Treasury Secretary Geithner delegated “interim authority” to Warren to “stand up the CFPB.” 

The OIG found the Treasury and the Special Advisor both posted on their websites that the “future permanent headquarters of the CFPB would be located at 1700 G Street NW, Washington, DC on February 18, 2011.” Both announcements also noted that major building renovations were needed for efficient use and to meet current energy and environmental standards. 

According to “The Woman Who Knew Too Much” by Suzanna Andrews, Warren spent the “10 months working tirelessly to build the agency from scratch–hiring its staff of 500, including Richard Cordray, organizing its management structure, and getting the C.F.P.B. up and running for its opening on July 21” [2011].

Warren resigned to begin her run for the U.S. Senate on August 1, 2011. Richard Cordray did not receive a recess appointment from President Obama as the first CFPB Director until January 4, 2012, and he was not confirmed until July 16, 2013. 

The OIG found that the “Scope and Justification for Estimates” for the “$55 million and $95 million budget amounts for the renovation for fiscal year FY 2012 [beginning October 1, 20011] and FY 2013 [beginning October 1, 2012], respectively, were published in the CFPB’s public budget documents.” The OIG also found that “Approvals through decision memorandums were obtained for these amounts.” But the OIG reported that “CFPB was unable to locate any documentation of the decision to fully renovate the building.”

It therefore appears that although Sen. Elizabeth Warren was the responsible party at the CFPB who approved the “decision to renovate,” the design, and the cost “Scope and Justification for Estimates,” all documents regarding her decisions have vanished.

According to the OIG, the remodel of the CFPB’s 515,000 square feet headquarters into class “A” grade office space has cost $215.8 million, or $421.48 per square foot. This appears more than “double the $150 per square foot average cost for renovating Washington’s high-end commercial Class ‘A’ office buildings with high-end restrooms, lobbies, elevators, hallways and office suites,” according to the Washington Examiner.

The CFPB retained the “prestigious Chicago-based architectural firm of Skidmore, Owings & Merrill, for $7.2 million” for the remodel. The firm creates extravagant designs such as Dubai’s luxury Cayan Towers and Burj Khalifa, the tallest building on earth.

The OIG reported that CFPB is adding a seventh story on top of a thirty year old building. The Heritage Foundation blog revealed, “Some of the building’s extravagant features include a four-story glass staircase, two-story waterfall and a sunken garden.” Chairman Jeb Hensarling (R-TX) of the House Financial Services Committee compared the CFPB headquarters higher renovation cost with the $334 a foot for Trump World Tower and $330 a foot for the Bellagio Hotel and Casino.

Although Senator Elizabeth Warren has not declared that she is running for President, she is campaigning very hard. She went to Minnesota in April to headline the Humphrey-Mondale dinner, a fundraiser for the “battleground” state Democratic Party.

Warren told a packed crowd of Democratic activists it was the “big banks [who] looted the economy” and that they are still “hopping mad” at her for becoming regulated. She raised both hands into fists and said, “I’m fighting to level that playing field. I’m fighting to build real opportunity, fighting to give every child a chance to build something extraordinary. And I want you to fight alongside me. We are in this together.”

The OIG report appears to put Senator Elizabeth Warren “in this together” on the design and approval of the luxurious remodel of the Consumer Finance Protection Bureau Headquarters. With hundreds of millions of dollars of unauthorized money spent and the documents regarding the remodel mysteriously disappearing, Elizabeth Warren is about to be at the center of the Obama Administration’s newest scandal.

The author welcomes feedback and will respond to reader comments.
 
From July 15th to July 29th, Chriss Street will be teaching “Entrepreneurship and Capitalist Business Strategy” at Ho Chi Mihn University in Vietnam.

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