Tim Fernholz on Everything You Ever Wanted to Know About the CFPB

Tim Fernholz of The American Prospect and New America has written Everything You Ever Wanted to Know About the CFPB (pdf).   Here’s how it starts:

The CFPB’s objective is straightforward: To create access for all types of consumers to financial markets, products, and services that are fair, transparent, and competitive. That entails—
1) Ensuring that consumers have timely and understandable information.
2) Prohibiting unfair, deceptive, abusive, or discriminatory business practices.
3) Identifying and addressing outdated or burdensome regulations.
4) Promoting transparent, efficient, and competitive markets for consumer financial products.

I always find it funny how controversial this mission is.  One thing I always found weird about Stigler and the mid-century Chicago school is how viciously they went after the Security and Exchange Commission. Of all the things to attack, not even in practice but in abstract, the idea of the SEC struck me as bizarre.

But it’s a powerful statement to attack it, saying that the obvious information asymmetries embedded in being a medium of exchange and a matching function between borrowers and savers will go away, by a magic invisible hand, as long as the government doesn’t disrupt anything. It’s important to remember that this isn’t a natural condition, that this kind of system that sits at the center between so many agents with poor information can fall into abuse and manipulation without sensible rails and rules. Finding those rails and rules is what liberalism is all about.

Extra bonus:

Office of Financial Protection for Older Americans

A similar office is being created to focus on the problems faced by seniors, who have a higher incidence of being victimized by financial fraudsters. Dodd-Frank also requires that this office be led by an Assistant Director, once again suggesting the priorities of Congress.

This is something I think is really important, based on a lot of research. As people’s financial assets are moved from defined benefits to individually run, and our banking system has gone from upfront fees to a sweat-box hidden fee model, as the baby boomer’s age the risk of dementia will leave our older people particularly vulnerable to financial abuses. See this article, Dementia threatens aging boomers’ portfolios, for a depressing summary.  Godspeed to this office.

Tim has everything else you’d want to know. Check it out!