If you are interested in killing some time on the internet today before Thanksgiving, check out this Aspen Institute event, Financial Reform for America: Strengthening Our Economy and Our Communities. It’s a moderated debate between Edward Yingling, President & CEO of the American Bankers Association, and Damon Silvers, Director of Policy and Special Counsel for the AFL-CIO.
I was asked to submit a question on Consumer Financial Protection. I wrote this long question and told them they were free to use whatever parts they’d like:
Several approaches to the concept of consumer financial protection have been proposed and discussed in the recent past.
1) Around 2006 Congress passed a series of laws, recommended by the Department of Defense, that created rules for offering financial products to service members. These rules instituted usury caps and limited certain features thought to be predatory. (link)
2) Economist Robert Shiller has proposed independent government sponsored advisors who would advise through contract details with consumers. (link)
3) Law Professor Elizabeth Warren has suggested creating a government agency that would take the regulatory regime, currently split among many different agencies, and consolidate it. (link)
4) AEI’s Peter Wallison has discussed preempting nonrecourse mortgages which would have borrowers be liable for the full difference between the loan value and the house value after foreclosure – switching the narrative to protecting lenders from consumers. (link)
5) Still others have considered forcing the standardization of financial contracts to make comparisons shopping between institutions easier – the so-called ‘vanilla contract.’ (link)
Is there a government role in providing consumer financial protection, and if so, what are the strengths and weaknesses of these various approach?
They ended up asking about approach #1 as a question. What approaches did I miss, and which ones do you like?