Posts Tagged ‘sub-prime mortgage’
December 4th, 2009 at 12:07 pm
The Consumer Financial Protection Agency: A Triumph of Regulation Over Reason

Remember when sub-prime mortgages had Congress demanding more accountability (i.e. oversight) of the housing industry? It seems like a lifetime ago that the spark igniting the current recession (derivatives of risky mortgage deals) was a priority on Congress’s to-do list. That was before health care, cap-and-trade, and Afghanistan moved it to the back burner. Apparently, the issue is still simmering because there’s news of an impending compromise between Henry Waxman (D-CA) and Barney Frank (D-MA). At issue is whether to head the yet-to-be-created “Consumer Financial Protection Agency” (CFPA) with a single director or board of commissioners.

And just what would be the CFPA’s mandate? Here’s a description from the L.A. Times:

To begin with, be aware that the agency’s powers and oversight would extend far beyond mortgages and real estate — into all credit cards, debit cards, consumer loans, payday loans, credit reporting agencies, debt collection, stored-value cards and even investment advisory and financial advisory services, to name only part of the list.

And this from CNN:

The consumer agency would be a brand new regulator whose chief concern is looking out for consumers. It would write rules aimed at ensuring that financial products like mortgages and credit cards are fair, more transparent and more easily understood.

Raise your hand if you remember the last time a government agency made a process, form, or program easier to understand. At the end of the day, it doesn’t matter if the new regulator is a single director or a board of commissioners. The most direct effect of creating yet another federal agency will be an increase in both taxes to fund it and transactions costs to comply with it. If Democrats really wanted to help consumers and taxpayers, they’d step back and let prosecutors and plaintiffs sue for fraud. After all, no court will enforce a contract that was signed under duress.

Then again, that’s not really the point, is it?