The Incredible Ms. Warren

Let’s start with that “most accountable” howler. The bureau is part of the Federal Reserve System, but the Dodd-Frank law that created it explicitly says that Fed Governors can’t “intervene” in the bureau’s functioning, “appoint, direct or remove any officer or employee” or “merge or consolidate the bureau . . . with any division or office of the Board of Governors or the Federal Reserve Banks.” So while the bureau is part of the Fed, it isn’t at all accountable to anyone at the Fed.

No matter, Ms. Warren told Congress, because the bureau is “the only agency whose rules can be overruled, obliterated, wiped out, negated by other agencies.” That’s called exaggerating a small truth to obscure a larger untruth.

It is true that the new Financial Stability Oversight Council can overrule the bureau’s rules if two-thirds of its 10-member board vote to do so. (The bureau director is one of the 10 voting board members.) But the legal and political bar is set very high: A bureau rule may only be overturned if it endangers the “safety and soundness of the United States banking system or the stability of the financial system of the United States.”

How often do you think an Administration’s financial bureaucrats will risk pulling that five-alarm-fire reason for killing a rule? The first time a consumer bureau director leaks to her media retinue that someone in government is trying to “protect the big banks,” her fellow regulators will run for cover.

How about funding? Ms. Warren told Congress that the bureau is “the only one of the banking regulators who actually does not have full control over its own budget,” adding “its budget is effectively set by the Fed”—and repeated these claims on CNBC Tuesday.

That’s another beauty. The reality is that the bureau’s director will set her own budget under the law, with the amount capped at 10% of “the combined earnings of the Federal Reserve System” in fiscal 2011. The Fed must transfer those funds without question to the bureau, which Ms. Warren’s written testimony estimates at “approximately $404 million.”

Our sources say this is a lowball figure because the Federal Reserve System includes the Federal Reserve Board and the Federal Reserve regional banks, which would imply a number closer to $539 million. The key point is that Ms. Warren’s budget is not set by Congressional appropriation and cannot be reduced by anyone—though a director can ask Congress to increase it by $200 million per year for five years.

Ms. Warren was also disingenuous about the bureau’s role in the ongoing mortgage settlement negotiations with banks, telling Congress the Justice Department and other agencies asked for the bureau’s “advice.” She added the bureau “will not be a party to any formal settlement,” which is technically true because its powers don’t vest until July. But that raises the question of the legality of its involvement in the negotiations now.

Everyone knows that Ms. Warren and a handful of state attorneys general are driving this settlement to punish the banks and reward voters with mortgage principal writedowns, despite profound doubts among bank regulators at the Fed and the Comptroller of the Currency. Ms. Warren’s weak-little-bureau routine is belied by the fact that she is rolling over other regulators even before the bureau is formally up and running.

We’re glad to say that attorneys general from Florida, Texas, Virginia, Oklahoma and elsewhere are resisting the Warren rush to impose onerous new foreclosure demands because they could conflict with some state laws, impose vast new legal liabilities, and further damage the U.S. housing market.

Ms. Warren’s media idolators are trying to shield her from Congressional oversight precisely because they understand her lack of accountability. They, too, want to punish the banks one more time and grab another $20 billion to redistribute to voters before 2012. The banks and clutch of AGs are right to resist, and Congress ought to put Ms. Warren’s unaccountable bureau under Treasury with an annual budget—or, better, put it entirely out of business.