Holly Petraeus To Be Elizabeth Warren's Pick For Top Post In New Consumer Protection Agency (EXCLUSIVE)
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.
A generally respected commander in the Iraq war and now in Afghanistan, General Petraeus enjoys the favor of both Republican and Democratic lawmakers--boosting the administration's hope that his wife and her initiative will be politically difficult to oppose, the sources said.
Holly Petraeus has spoken passionately about the often-ruthless lending operations that have proliferated outside military bases.
"You see that strip outside installations--the pawn shops, the tattoo parlors, the shady auto dealers," she recently told an interviewer for USAA Magazine, the official publication of the United Services Automobile Association, an insurance and banking firm that caters to current and former members of the military. "I once heard those businesses described as bears lined up at a trout stream."
Nearly three-fourths of financial counselors and attorneys said they have sometime in the last six months counseled members of the armed forces who had fallen victim to abusive or discriminatory auto lending, according to a survey commissioned by the Department of Defense, as cited in a Feb. 26 letter to the Treasury Department from Clifford L. Stanley, under secretary of Defense for personnel and readiness. Auto loans are the "most significant" financial obligations for the majority of military members, Stanley wrote.
He noted that members of the military and their families are under "increasing stress," ranking finances as second on their list of primary worries, behind only "work and career concerns." Among these families, he added, financial concerns trump even their places of deployment, "health, life events, family relationships and war/hostilities."
The issue is of top importance to the Pentagon. With two ongoing wars, the military can little afford to have troops anxious about the financial well-being of family members back home, who are seen as easy marks by predatory lenders.
"The Department of Defense fully believes that personal financial readiness of our troops and families equates to mission readiness," Under Secretary Stanley declared in his letter to Treasury.
In addition to active military personnel, veterans represent a potentially lucrative target for a wide range of scam artists, from online or over-the-phone identity theft rings to bogus charities set up to purportedly help service members.
Many veterans have steady access to benefits through the Department of Veterans Affairs and other government agencies that can be particularly attractive to con operations.
Consumer and veterans groups have warned about such scams for years. In 2003, the National Consumer Law Center, an educational and advocacy group, published an extensive report alleging that "a torrent of consumer-abusing businesses directly target this country's military men and women daily." The report noted the prevalence of cash advance businesses that charged astronomical rates of interest set up right outside military bases.
Three years later, Congress adopted rules setting a 36 percent cap on so-called payday loans made to active-duty military and their families.
Two years ago, the VA warned veterans of a telephone scam in which callers posed as VA employees and asked for credit card information over the phone, supposedly to update prescription information.
The Better Business Bureau last month warned of bogus e-mails seeking personal information that was sent out by someone who claimed to be an attorney with the VA.
Holly Petraeus has been active in assisting military families in their efforts to cope with financial strains. She currently serves as director of an initiative known as BBB Military Line, an educational program launched by the Council of Better Business Bureaus that informs military personnel on sensible financial management and warns them about scams. She helped develop the curriculum now used to educate service members.
Petraeus and Under Secretary Stanley both spoke in favor of creating the new consumer financial protection agency, despite the strident opposition of Republicans in Congress. The agency's creation was the long-standing vision of Warren, a passionate consumer advocate, Harvard Law professor and former federal bailout watchdog.
Warren met with Holly Petraeus for about 30 minutes on Oct. 12, according to Warren's daily calendar. A spokesman for Warren declined to comment.
The Pentagon has grown so concerned about the reach of abusive lenders in its communities that it entered one of the most pitched battles over the legislation that created the consumer financial protection agency.
Early last year, some members of the Senate tried to insulate auto dealers from the proposed agency's reach, claiming that new rules imposed on that sector would suffocate credit for car-buyers. Warren and the Obama administration insisted that the agency be able to regulate auto loans provided by car dealers. Some senators, led by Sam Brownback, a Kansas Republican, fought for a loophole.
The Pentagon lobbied to give the agency the authority to regulate. Still, the exemption survived, leaving only auto loans issued by banks under the new agency's purview.
That left the Pentagon's concerns unchecked, adding momentum to the process that is now expected to culminate with Holly Petraeus's appointment later this week.
Shahien Nasiripour is a business reporter for The Huffington Post. You can send him an e-mail; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; become a fan; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.
Chris Kirkham is a business reporter for The Huffington Post. He can be reached at email@example.com or 646-274-2444.