More than 500 readers voted in Friday’s poll about whether we need the Consumer Financial Protection Bureau, one of the few meaningful reforms to come out of the bubble and crash fueled by Wall Street fraud. Nearly 73 percent said we did, even though congressional Republicans have been blocking President Obama’s choice to lead the agency and have expressed hostility to the CFPB even existing.
Fresh evidence for its need came with the Sunday column by the New York Times’ Gretchen Morgenson. She details the suit by Nevada Attorney General Catherine Cortez Masto against Lender Processing Services, the giant foreclosure and default outfit that works for major banks:
With this case, she demonstrated how enlightening an in-depth study can be. The complaint, which came after a 14-month inquiry, contends that L.P.S. deceived consumers by committing widespread document execution fraud, misrepresenting its fees and making deceptive statements about its efforts to correct paperwork. Investigators interviewed former L.P.S. employees and customers and examined foreclosures the company had worked on.
This is just the tip of a very large iceberg involving shady practices in mortgages, student loans, payday loans, etc. The argument that the industry is self-regulating is not worth our time: The post-deregulation disaster that precipitated the Great Recession shows this is not true.
Other concerns about the agency merit debate. With so many federal laws already on the books, do we need yet another federal bureaucracy generating yet more compliance red tape, which will eventually be paid for by customers? Apparently we do considering how many times existing agencies said they lacked the standing to go after these bad actors. Could new rules have merely given this power to the Federal Reserve, FDIC SEC, or Federal Trade Commission? Perhaps. A larger concern is whether in the future the new bureau will be captured by the industry, as happened with other regulators during the bubble. And will Congress even provide adequate funding?
Now we’ll see if the captured Congress also tries to intervene to stop state attorneys general from going after the bad guys.
And Don’t Miss: Unemployment scars to last years, if not generations || Wall Street Journal
Today’s Econ Haiku:
A Greek comedy
Athens spending bailout funds
(Tragedy requires nobility on the part of the protagonists).