About that terrible Consumer Financial Protection Agency …

July 13, 2009

I just debated the CFPA on CNBC with Conn. Attorney General Richard Blumenthal (who also said he was not going to challenge incumbent  Chris Dodd for US Senate in that state). A few things about the CFPA:

1) The financial crisis was not caused by duped mortgage borrowers, so this is an answer to the wrong question.

2) This bill is not just about clearer disclosure for credit card and mortgage debt. If a person gets a mortgage or credit card that he can prove was not suitable for him — or didn’t get something he should have — then it won’t matter how exhaustive or clear the disclosure of risk. There will be loads of litigation here, driving up credit costs. And determining suitability will also drive up costs.

3)  You will see a two-tiered financial system with most people having access to vanilla products only. The wealthy or supereducated will get access to financial boutiques and more personalized products. It is the hedge fund-ization of consumer finance.

Two good articles on this topic, one from my pal Stephen Spruiell; the other from Peter Wallison.

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