House Testimony Today: Insolvency And Consumer Protection

Congressman Brad Miller has some interesting ideas about how to respond to the financial crisis; not exactly on the same page as Treasury. He’s called a hearing for this morning to talk about, in the first instance, how to assess insolvency in the banking system – and what to do about it (he chairs the Investigations and Oversight subcommittee of the House Committee on Science and Technology.) But my guess is that the conversation will cover considerably more ground, including his idea that we establish a Financial Products Safety Commission. (A full preview is now available at our joint venture with the Washington Post.)

The basic notion behind this commission is that consumers were taken advantage of by unscrupulous lenders. Of course, you could also say that consumers fooled themselves, but if that is pervasive and has systemic implications then we need to take it on. In his recent testimony before the Joint Economic Committee, Joe Stiglitz emphasized the need for more consumer protection, and this idea is also strongly advocated by Elizabeth Warren – against the odds, she continues to make some progress.

On the other hand, perhaps we already have enough consumer protection-type agencies? Would it be better to focus our efforts on overseeing and constraining the behavior of lenders and everyone else in the credit production and distribution chain? There’s plenty of education and information available about financial products (or not), but somehow that doesn’t get through to people when they need it. How should consumer protection be conceptualized, designed, and implemented in this space?

Over on The Hearing this morning, you can vote for or against the Financial Products Safety Commission – or send it back to Congress, the experts, and the lobbyists for more discussion. Any opinions written up in your comments there (or here) may be taken down and used to construct a more sensible national debate.

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