WARREN: Good morning. 

HOCKENBERRY: So in some sense your track record of overseeing of the TARP fund gives you pretty good standing to decide what's an appropriate and good and robust and functional kind of consumer protection regulation that is now being debated on the floor of the Senate. In your view, are they talking about something serious here? 

WARREN: I think they're talking about something serious. Uh, the bill that's been put forth out of the committee, out of the banking committee, is strong. It's not perfect, I don't like everything about it, but it basically is a functionally independent agency that has teeth to get the job done, and that's where we need to be. 

HOCKENBERRY: I think we need t outline the Warren principles here; you've heard of the Warren Court, what are the Warren principles of the consumer protection agency that you believe would actually do something? 

WARREN: Well, you know, the problem we have to remember is one that is structural. At the government level we've got seven agencies, all of whom own a piece of consumer financial protection, and you know what that means: nobody really owns it. So, nobody really gets the job done, we have this bloated, ineffective bureaucracy not responsible to anyone, easy to get captured by the banks. What the agency would do, is it would come with a pair of scissors, it cuts all that stuff out of the other seven agencies, slims them down, and then gives them aim and responsibility, and says now you've gotta do something about consumer credit. And the principle idea behind it, is to say "no more tricks and traps in the consumer credit area," we gotta make this market work again. So no more 30-page credit card contracts where you find out about that fee back on page 14, no more long incomprehensible mortgages that nobody can understand, and critically, nobody can make any comparisons, nobody can see which one is cheaper, which one is riskier. So the agency is designed ultimately to support a good market, the same way, think about it this way, when you open a bottle of aspirin and you shake a couple of little white pills out, it didn't cross your mind that you need to worry about "well gee, maybe it's aspirin, then again, maybe it's rat poison or maybe it's just baking soda," you know because that would've been cheaper for the short-term profits of the company.   

HOCKENBERRY: It's important to me, that's for sure. 

WARREN: That's right.  We have a good market because we have regulations that say, hey listen, the parts that consumers can see are the parts they should be able to compare and let that market work.  And the parts you can't see, y'know the fine print hidden in the back, the chemical formulation that went into the aspirin, that's the part that the government makes sure is pretty straight up here, so that's what the agency's about. 

HOCKENBERRY: So let me tell you what I’m hearing here, you want an independent, consolidated agency that has a chief with some authority, maybe appointed by the president? 

WARREN: Mmm-hmm. 

HOCKENBERRY: Alright, and it would have independent funding that's not necessarily going to get yanked every year. 

WARREN: That's right, that's the idea. 

HOCKENBERRY: And the regulations and the rules are robust enough that people trust them like they trust the aspirin bottle. 

WARREN: That's right, and, they apply to everybody. It doesn't make any difference whether you are the biggest, fanciest bank on Wall Street, or you're some non-bank fly-by-night guy on the internet. Same set of rules, if you issue a mortgage, same set of rules for everybody. 

HOCKENBERRY: Alright, so let's back up here, what’s a good model in Washington for actually enforcing something like this, or even talk about State's attorney's general, they’ve handled this stuff in the past is that a good model, is it the EEOC, the Equal Employment Opportunity Commission, that adjudicates employment discrimination, or the FCC, what is it? 

WARREN: I think the best model is an ecumenical one; I wanna be all-embracing here. I think that the agency needs its own police, its own cops on the beat, and it should be able to enforce directly but I think this is one where working in partnership with the state is really valuable. You know, those state attorneys general, they're out there on the front line, they see the action, they see what's going on, and this is an agency that ought to be able tot tap into that, so that the two of them oughtta be able to work together in tandem... 

HOCKENBERRY: All right but that's sounding a little bit like... it's sounding like we're sliding back into the bureaucracy, we got 50 agencies, consumers aren't going to know what's going on... 

WARREN: Not, not... you still got primary, I’m going to put it this way, primary rule-making authority and primary responsibility. One single agency, one person in charge, at the federal level.  But it can make friends with anybody around the country. Those state attorneys general, by golly, they can jump in and help with the enforcement as well. 

HOCKENBERRY: Okay, so, Elizabeth Warren, the Dodd bill seems to satisfy, at least on the surface, some of these principles, if not all of them. The Republicans it seems don't want anything like this. 

WARREN: Yeah, sow hat the republicans have put forward is a new substitute, and what they want to do, they want to take the regulators that have already failed, like the head of the OCC and the Fed, and let's face, it, they already had the power to face this problem and didn't use it. So their idea is they're going to take the regulators that already failed, and put them together in a committee, and as a committee somehow, that's going to fix the problem. I mean this one is pure genius for the banks who don't want any regulation. 

HOCKENBERRY: So no enforcement, and it's a diffuse kind of committee that pretty much encompasses the kind of people who already got us into this problem.   

WARREN: That's it. 

HOCKENBERRY: Now, some people are going to say, Elizabeth Warren, you're a liberal Harvard law professor and Democrat controlled-congress person, of course you're going to go for the democrats. 

WARREN: Well, I have to say, I don't think this one is partisan, support for this agency runs 2-1 across the country and it runs the same among democrats and republicans. People are tired of having credit card companies and check overdraft companies and car lenders hide tricks and traps in the fine print, tricks and traps that are costing them, literally, billions of dollars every year, and that's true whether you're a democrat, whether you're a republican, whether you're an independent, whether you're just sick of hearing about politics. So, I like to think this one transcends. 

HOCKENBERRY: All right, well, y'know, there are also people who would ask the question; companies are tired of being responsible for the bad decisions of consumers.  

WARREN: Well, you know, I get that. And I wanna be real clear here, I think there's been a lot of irresponsibility, irresponsibility on the part of consumers, irresponsibility on the part of financial institutions, frankly irresponsibility on the part of government. But here's what I think is the key point, the fact that consumers make some really boneheaded decisions does not give anybody an excuse to cheat them. There's no reason fro a 30-page credit card agreement that's loaded with tricks and traps, whether you're selling to the most responsible or the least responsible person in America. Here's what I’d like to see happen, I’d like the credit products to be clear and easy to understand, people to make comparisons, frankly I think that's going to drive down prices on them, but, when somebody signs one, by golly you're held to it then, you have no excuse that you didn't understand it.  

HOCKENBERRY: And with all do respect, "by golly" does that apply to Goldman investors, who didn't understand the derivatives, who didn't understand the complex sort of, investments they were involved in and the side bets that Goldman was making?

WARREN: You know it's interesting that you would make that leap, isn't it something how the financial services industry seems to have developed as its profit model "let's see how complicated we can make things"? It started back in the 80's when they started making credit card agreements so complicated, you may remember, that in 1980 a bank of America credit card, are you ready for this, was 700 words long, that's a little over a page. Today, the average credit card agreement is more than 30 pages long. They figured out that complexity was a way to hide profits, and to be able to suck them out for the insider, fort he repeat player. You know, at some level, that's exactly what Goldman was doing at the other end of the line by the last few years. How do I make this so complex tat nobody ever figures it out. 

HOCKENBERRY: No it's a great analogy; you see a lot when you look at it that way. We're gonna make some news before we go Elizabeth Warren, you ready for this? 

WARREN: I'm ready. 

HOCKENBERRY: All right, the Supreme Court nominee, there's gonna be one in the next few weeks or months, right? Design for me a litmus test for that nominee that you say would be an important question for them to answer one way or another on financial regulation reform. 

WARREN: Oooh, that's a tough one, I wish I’d had a minute to think about it... 

HOCKENBERRY: Sorry about that. 

WARREN: ...but I think it really would go to that, what role should the government play vis-à-vis the banks in helping shape a consumer financial regulatory system.  Do you really think the banks should be turned loose and left to do what they can? Or do you think the role of the government has something to do with supporting markets so they’ll be honest markets so that basically nobody makes the huge profits they once made, but they're not making profits based on tricking and trapping people. Too long for a question but I promise I could polish it out by the time we get to the hearings. 

HOCKENBERRY: Hey, I’ll tone it down so the question is Madam or Mister Nominee, do you support a larger federal role in consumer credit markets? 

WARREN: Yeah, I think I would, but it's gotta be a good role, it can't be the kind of thing we've got right now, we've got a large role, a fattened bureaucracy that just doesn't get anything done.  This is the question that also has to do with accountability, so it's... I think really maybe I would reframe it along a different line and it's along the line of who gets to write the rules of consumer credit? Is it the banks, or do we get a cop on the beat to help watch out to make sure that those rules somehow create a level playing field?  

HOCKENBERRY: I like that one, we'll try and get some Senator to ask that question when the hearings begin. Elizabeth Warren, Harvard law professor and chairman of the congressional oversight panel, weighing in on the financial reform legislation being debated now in the senate, thanks so much. 

WARREN: Thank you.