James Kwak follows up my post about AEI’s critique of the Consumer Financial Protection Agency with his own post. James takes the argument apart piece by piece until there is nothing left. There are even bulletpoints at the end. 6 bulletpoints. (I only had 3!) It is a beatdown so severe it can only be captured with animated gifs:
James’ post is like the air conditioner of this exchange.
Can we get some more anti-Consumer Protection arguments? I feel James got more mileage (score is 6-to-3, James winning), and now I want to try to get the better of him over whoever steps up to the plate next. It’s like the Harlem Globetrotters of the blogosphere, with AEI playing the part of the Washington Generals.
Also, the writer of that editorial, Peter Wallison, is going to be on the Financial Crisis Inquiry Commission. The commission that we get instead of a Pecora Commission; the people who will investigate the cause of the financial crisis. For the Iraq Study Group, which I assume the new commission is modeled on, the Republicans pulled together James Baker, Sandra Day O’Connor, and Lawrence Eagleburger for their appointees. For this Commission, the new post-Obama Republicans are appointing for us someone who believes the financial crisis is the result of the CRA. Brilliant.
The Republicans do understand this isn’t grandstanding a stimulus bill that is going to pass anyway, but instead a real inquiry that needs to find real answers for people, say, working real jobs in finance who need objective answers as to what happened and how to prevent it from happening again?
Rortybomb 
I think the consumer protection will be a big score in the long run. No offense to most (myself included) but many people just do not understand the overly complicated trades on the market. Nor do many people understand the securitization of their mortgages. They probably don’t know the lingo of lawyers and aren’t too familiar with the paper they’re actually going to be signing. I think this group will act as a stable monitor to over ambitious amateurs. Or I hope so at least.
As for Republicans and how they feel about actually investigating things, well they just don’t seem to want to. Especially since it was their repeal of tons of regulation that inflated the housing bubble, not to mention Greenspan their economist in chief, who literally wanted to inflate the housing bubble to replace that stock bubble. Poor form Republicans, poor form.
Consumer protection: Seven years ago my sister and I had to step in to help our 85 year old parents move from their small house to an assisted living facility. Going through the house and papers, it was incredible the ways that they had been ‘fleeced’. Not an uncommon story here Florida. They were good ‘consumers’ all their lives, but had succumbed (in mostly small ways) to the swarms of parasitic sales people that descend on folks like them (i.e., getting a little old). My Mom ended up buying everything that Readers’ Digest sent, like several dozen vcr tapes that they never even opened (and lots more stuff too). And they had a cable tv subscription that had all channels, but they did not even know that because their tv could not go above channel 100! Apparently the cable repair guy got their signature on some extra piece of paper. And the GM credit card had recurring bills, such as travel service that was offered for free the first year (if they did not object), then rolled into a paid subscription automatically. (Older folks dealing with health issues just might not notice such things.) And then there was the financial advisor of some sort who sold them an annuity that tied up $10k for 10 years. Not the kind of investment that is appropriate for an 85 year old. And there were other pesky little obligations that were bleeding their finances. This is an industry in Florida. Thank goodness that they didn’t face the onslaught of the mortgage brokers with the fancy financial products. Many of the people selling mortgages in Florida in the past few years of subprime had criminal records. Moral hazard? That’s when consumers try to duck out of their financial obligations, right? Perhaps there would be less need for consumer protection if financial professionals were held to a code of ethics (backed up with criminal penalties and enforcement).