The CFPA was set up with a carve-out of Federal Reserve revenue, and thus is a new perpetual bureaucracy that will somehow do what the other regulators and various state insurance regulators were supposed to do but did not. The solution to a conspicuous disaster is to simply add another regulator. A recent nonpartisan GAO report noted wasteful redundancy in federal programs, as reported in today’s WSJ:
The U.S. government has 15 different agencies overseeing food-safety laws, more than 20 separate programs to help the homeless and 80 programs for economic development.
If they wonder how these things happen, the new CFPA is a good example.
Simon Johnson, former chief economist (!) at the World Bank, took time to defend Elizabeth Warren and the CFPA. Johnson is infuriated by the mockery of some groups, such as Congressman Bachus’s statement that “If you like TSA at the airport, you’ll love these guys.” He has all the naivite of a child, or MIT macroeconomist.
please remind all members of Congress, regarding their oversight role during 2000-08, that despite everything Countrywide did, including the horrible way it treated consumers and the many apparent deceptions in its practices, Angelo Mozilo walked away a rich man
Just like Henry Cisneros, Franklin Raines, Bill Syron, Jamie Gorelick, Robert Rubin, Herbert Sandler, who got rich(er) off the housing bubble and paid no price. You simply can’t say Mozillo was doing something ‘horrible’ because it was what the government wanted: more loans to poor people. He didn’t sneak anything by our regulators, he outlined his strategy at a Harvard speech in 2003 and government and academics thought it was a great idea.
Thus far the CFPA has merely highlighted they will be at least as bureaucratic as any other agency, as they note their mission to educate the public (I can’t wait for their The More You KnowTM adverts make TV), community affairs (surely essential), research (you can never have enough government research), Fair Lending and Equal Opportunity (which led to the last boondoggle), and tracking complaints (the old suggestion box, something that existing agencies could never have accommodated). Their first step will probably either be really lame (eg, adding places to initial on mortgage applications), or really destructive (making something consumers want illegal, thus driving it to less scrupulous markets as in pay-day lending).
There are some good things regulators can do, as when they outlawed Lawn Darts. In this case, they could not just allowing but requiring hedge funds to provide their returns and assets under management, so that investors are not duped into some fad based on selectively hinted returns released to the press and repeated by unskeptical reporters. They could also take over the job of monitoring the performance of the rating agencies, so that there’s a consistent and unbiased set of data on what various ratings mean (currently, the agencies do this themselves, and often do not report sub-categories like munis, government debt, or asset-backed securities). Yet, I’m sure other agencies have the ability to do these things, and for some reason do not, so I’m not optimistic.
My guess is they will simply give their agency some sort of sign-off authority, which will make them feel important, and not do anything but cost money. It could be worse.