By John Morrall, Richard Williams and Todd Zywicki
The opinions expressed are their own.
With Larry Summers leaving his post at the White House and Elizabeth Warren recently appointed as the special adviser to the new Consumer Financial Protection Bureau, the hot ticket is still to be the head of the bureau. All eyes should not just be on the appointment of the bureau’s first head, though, but on the bureau itself, for it is the centerpiece of financial regulatory reform.
More important than the innocent wagering among K streeters and Hill staffers, the horse-race to head this powerful new regulatory entity is emblematic of the incredible uncertainty surrounding new financial regulation. This makes it even more important to be clear about the effects, and not just the intentions, of this new regime.
Issuing regulations without trying to predict the consequences of those decisions is like shooting in the dark. It’s bad policy and it’s dangerous. You are not likely to hit what you are aiming for and more likely to hit something else — and the CFPB is the perfect example of this. It is a bureau that has virtually no oversight with the power to regulate every credit card, mortgage, and payday loan in America.
There is also no requirement for them to try and predict the likely results of their actions. Their result may be both higher prices and less access to credit for consumers.