My latest AIP column is up and it deals with the passage in the House of the Consumer Finance Protection Agency (CFPA) and how another alphabet soup agency will protect us from our own stupidity.
I am often vexed lately when reading what our government is doing. On the one hand, I find it hard to fault the intentions of those who wish to make our lives “easier.” On the other hand, I want to throttle them for insulting my intelligence by proposing to do something for me that any reasonably aware 10 year old should be able to do for himself.
If the modern welfare state teaches us anything, it is that we must be cocooned and protected as if we were a newborn babe, or prevented from harming ourselves because we’re too stupid to know any better. It’s not enough that government warn us that the stove is hot. They must put on oven mitts for us and then place a 10 foot high sign in front of our face telling us not to touch anything.
I get this feeling of being patted on the head and told I’m a good boy when reading about the brand new Consumer Finance Protection Agency (CFPA) - another in a long line of alphabet soup government watchdog agencies who are ostensibly set up to protect us from rapacious corporations who would do us harm. And, as you might have guessed, the CFPA has also been constituted to protect us from our own stupidity.
In this case, it will be financial products from which we will be spared the consequences of any irresponsible, ill-informed decisions we might make. The stated reason is to prevent another financial meltdown like the one that occurred a year ago.
I am not against financial regulation - far from it. I am against government taking it upon itself to act as a knight protector against our own ill informed, lazy decision making.
There are already laws on the books to deal with unscrupulous mortgage consultants, crooked brokers, and other get rich quick schemers who don’t make any headway against those who conscientiously review and examine documents, ask questions, and generally take personal responsibility for their own decisions in financial matters.
If the crook lies, or misleads, he and his firm are not only liable for criminal penalties but losses can be recovered in civil court. The point being, we don’t need a whole new agency that will end up stifling financial innovation by limiting who can purchase complex financial instruments, while forcing financial institutions to offer “vanilla” products to consumers they feel are not savvy enough to understand risk.
Buying a mortgage is not rocket science. Sue and I took a night off from watching TV to read every word of the agreement, draw up a list of questions, and would not sign on the dotted line until every one of our concerns were met and questions were answered. We spent an hour with our insurance broker so that we completely understood that aspect of the purchase.
The potential for abuse by this agency is astronomical (the power to investigate and punish will be in the hands of the director - a political appointee). And there is the probability that fewer people will be able to get mortgages because the seller will not be able to offer a wide variety of solutions in order to get a customer into a home.
Credit cards are a different story, and I wholeheartedly endorse reforms in that area. But do we need a new agency for that? Or would common sense legislation that would prohibit industry practices that costs consumers and merchants billions of dollars in unnecessary fees be adequate?
The CFPA is good government gone wild. We don’t need it, and it should be defeated in the senate.