Government is always the answer
October 5, 2009 | federal legislation, industry | Comments (0)The Left-wing magazine, The Nation, believes a Consumer Financial Services Agency will bring peace on earth, cure acne, and usher in the Second Coming. Okay, I exaggerate, but they really love the idea of it.
The need for a CFPA couldn’t be more clear. Right now, responsibility for consumer protection is divided among agencies whose primary concern is the safety and soundness of financial institutions. Further, financial institutions — if regulated at all — not only are a key source of funding for those regulators, but they can also choose which regulator they prefer. Elizabeth Warren, a Harvard Law Professor who also chairs the Congressional Oversight Panel, first developed the idea for a CFPA. She writes, “This regulatory arbitrage has triggered a race to the bottom among prudential regulators and has blocked real consumer protection…”
Warren describes the benefits of the CFPA as bringing “existing federal consumer regulation under one roof”, and creating “a home in Washington for people who care about whether families are playing on a level field when they buy financial products…. It will focus on one, driving question: Are consumer financial products explained in a way that consumers can understand and that allows the market to work?” (It must also be said — what a better regulatory landscape we would have if Warren were at Treasury in some substantial way. Naomi Klein calls her “the anti-Summers”; Michael Moore suggests Warren as half of a future presidential ticket. )
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