“Elizabeth Warren, the Obama administration appointee now establishing a consumer financial protection agency, plans to name the wife of General David Petraeus–the top American general in Afghanistan–to a new position tasked with protecting military families from predatory lenders, according to sources familiar with the planning.
Holly Petraeus, a longtime advocate for military families, is expected to be named to the senior post sometime later this week, according to the sources, who spoke on condition they not be named. They characterized her selection as part of the administration’s designs to crack down on unscrupulous lending operations that have thrived by focusing on vulnerable Americans–not least, military personnel and their families, who have been contending with a weak economy at home just as many breadwinners are serving overseas in the dangerous conflict zones of Iraq and Afghanistan.
Petraeus’s appointment is aimed at empowering the agency to target abusive lenders without running afoul of Republicans in Congress, said the sources. Member of the GOP have portrayed the new institution as an enemy of free enterprise, warning that it could restrict credit by impeding the financial industry.”
Since 2004, Mrs. Petraeus — who herself grew up in the military as the daughter of a four-star general — has served as director of the Better Business Bureau’s Military Line, which offers consumer education to U.S. military personnel and their families. It’s an excellent cause.
“You see that strip outside (military) installations — the pawn shops, the tattoo parlors, the shady auto dealers,” she told the United Services Automobile Association in its November magazine. “I once heard those businesses described as bears lined up at a trout stream.”
It’s an apt description, as were the words of Major General Mike Lehnert, who in a 2006 speech said that payday lenders lined up outside the gates at Camp Pendleton, Calif., “are parasites, bottom feeders and scumbags.”
Last spring, over objections from the Pentagon, Senate Republicans led by Sen. Sam Brownback of Kansas tried to bar the Bureau of Consumer Financial Protection from regulating loans issued by auto dealers. Brownback and his colleagues weren’t swayed by Pentagon warnings that such loans pose a significant danger to the financial stability of U.S. military personnel, many of whom aren’t sophisticated consumers of financial products.
According to the Pentagon, surveys of service members found that “finances were second only behind work and career concerns and ahead of deployments, health, life events, family relationships, and war hostilities. Since auto financing represents the most significant financial obligation for the majority of service members; particularly in the junior enlisted grades, we believe the intervention of the CFPA in overseeing auto financing and sales for service members will help protect them and will assist us in reducing the concerns they have over their financial well-being.”
At the time, Holly Petraeus supported that authority for CFPA. “It’s a fact that military personnel love their cars,” she told reporters. “Sadly, many of them end up paying far more for them than they should.”
(Clearly, Mrs. Petraeus and those Pentagon liberals fail to understand that if service members are foolish enough to sign up for those loans, the nanny-state government shouldn’t try to protect them from their stupidity. I think that’s how the rhetoric would go, right?)
Brownback, however, was clearly less interested in protecting young enlisted personnel than in guarding the right of businesses to prey on them. Rejecting the Pentagon’s conclusion, he warned that allowing the CFPB to regulate such loans would actually cut access to credit for military personnel. In a letter to an undersecretary of defense, he claimed that his position had been endorsed by one of the nation’s top financial services experts, and even quoted a CNN Money article to that effect:
“Raj Date, executive director of the Cambridge Winter Center for Financial Institutions Policy, agreed that the additional regulation might cause some dealers to stop arranging loans.”
In trying to defend shady behavior, however, Brownback had engaged in some of his own. Here’s the CNN quote that he cited, but in full rather than truncated form:
“Raj Date, executive director of the Cambridge Winter Center for Financial Institutions Policy, agreed that the additional regulation might cause some dealers to stop arranging loans. ‘There will be some dealers who say, ‘If I have to play by an honest set [of] rules, then I can’t be in this business anymore’,” Date said. ‘I’m not going to shed any tears for these dealers.’“
A rather different story than that depicted by Brownback in his letter, wouldn’t you say? As Date himself later confirmed to the Pentagon, “It is my strong opinion that only those auto dealers who cannot play by honest rules would exit the business.”
Those are the dealers whom Brownback and others sought to protect. And unfortunately, with the help of both Democratic and Republican members of the House, where local auto dealers have more sway than in the Senate, they eventually got their way in the final legislation.
As a result, whatever else she might accomplish in her reported new role, Mrs. Petraeus won’t be allowed to touch fly-by-night auto financing.