Are the Deregulators Trying to Destroy the Economy?

The Big Picture & Consumer Protections (cont.)

Years of irresponsible borrowing, spending and lending brought us here. Gone are the days of genteel financial transactions like exchanging property by twigs and clods of earth or neighborhood bankers granting mortgages and loans to folks they knew for decades. We’re talking about yield hogs that were paid significantly more for luring consumers into mortgages they could neither understand nor ultimately afford. We’re talking about 400% payday loans, credit card rates and fees that spiraled out of control, ever changing due dates and times that triggered onerous late fees for payments received one hour past artificially set deadlines, interest charges on balances previously paid off, Cheshire cat phraseology snaking through rivers of small print in long documents specifically designed to obfuscate true consumer cost. We’re talking about a never ending economic tailspin where consumers literally watched their financial security disintegrate day-by-day, mortgages voraciously consuming the value of their homes, investment portfolios withering like roses in a hot desert sun and credit card minimum payments coming to resemble little more than blood money installments to the company store. Clearly, we are way beyond a couple of hours in the time-out chair.

“I’ve talked to a lot of people about whether they like the freedom to be cheated on credit cards, to be cheated on mortgages, to be cheated on overdraft fees, and I found that was not really a freedom they valued,” Rep. Brad Miller (D-N.C.) said on the House floor last week. “They don’t really value that any more than Americans 100 years ago valued the right to buy rancid beef.”

Elizabeth Warren Special Advisor of the Consumer Financial Protection Bureau.

Elizabeth Warren warned against creating a paper tiger during congressional debate regarding the appropriate level of authority, independence and resources that should be granted to the agency. She made it clear that the importance of its mission required a strong regulator that had adequate resources to do its work. In an interview with the Huffington Post, she said, in her inimitable style, ”My first choice is a strong consumer agency. My second choice is no agency at all and plenty of blood and teeth left on the floor.”

The CFPB has three distinct missions:

Financial education
The supervision of banks, credit unions and financial companies to ensure their compliance with Federal consumer financial laws
Research

Are we not better served by a financially literate consumer population? A better educated, more economically savvy borrower is stronger and less risky— and that should be in the best interest of the financial services community. They should want to have an open dialogue with consumers about rates, fees, terms and conditions so that they may earn a fair rate of return as well as better ensure their repayment. But, no. For the TGODs in the financial industry and Congress, the concept of comparison shopping through the use of short, clear and concise documentation is an anathema.

The TGODs’ mission is to undo all of the sensible reforms of the past two years. After all, we are where we are because they undid so many consumer protections in the name of deregulation and getting government out of our lives that business went wild, consumers got credit drunk and an emasculated government retreated into its turtle shell.

Just after passage of the CARD Act, Chase’s Jamie Dimon warned that, “If you run a restaurant and can’t charge for the soda, the burgers get more expensive.” It looks like the TGODs have made it their mission to ensure that the health inspector never even walks through the front door.

Image: Official White House Photo