Dems Gone Wild
Bloomberg (the news outlet, not the mayor) is calling for Bob Rubin to give the Democrats a "reality check." What are the Krazy Dems up to that requires a family intervention? It seems that Charlie Rangel and John Edwards are talking about raising the capital gains tax rate. Pass the smelling salts.
The other evidence of Dems Gone Wild is my proposal in Democracy: A Journal of Ideas for a Financial Product Safety Commission. The idea is that consumers should have a Commission to put in place some national safety standards on home mortgages, credit cards and other financial products. I have argued that we need one federal agency with expertise on financial products whose primary mission is consumer protection instead of protection of bank profits. The person who takes out a $120,000 mortgage or $12,000 in debt on a credit card should have at least as much basic safety protection as the buyer of a $12 toaster. At least one presidential candidate, John Edwards, agrees.
Bloomberg characterizes a Financial Product Safety Commission as the same as Robert Reich's call to spend "billions on labor and education." Just in case anyone missed the point, the discussion of a FPSC is under the heading "Nanny State."
Regardless of the pros and cons of Reich's proposals back in the 90s and whether we ought to spend more of our tax dollars on education and labor, the analogy amazes me. Has there become such identity between our federal government and abusive business practices that any attempt to rein in business is the same as spending tax dollars? The Bloomberg piece seems to say that telling mortgage companies that they can't slip in exploding ARMs and huge prepayment penalties without making it clear to the homeowner what's going on is the same as spending billions of tax dollars. And suggesting that double-cycle billing or universal default should be regulated is just another form of wild government spending.
Sure, a commission costs some money--but peanuts compared to the billions drained out of the pocket of middle class families on trumped up credit card fees and penalty rates of interest, deceptive mortgages, and the like.
Maybe this is just another game of shouting "boogeyman," and I shouldn't respond. But someone needs to point out that regulating an industry to protect citizens is not the same as spending tax dollars.
Dems Gone Wild? How about Defenders of Industry Gone Wild?
I am becoming more and more attuned to Edwards as "my candidate" for president. This idea is another that should be adopted by all Democrats, and probably will be by those who can be pried away from the corporate teats.
I just watched the movie "the Eleventh Hour" tonight, which also brings up the point that our Congress is largely a servant to the corporations in our country, even at the cost of destroying the entire global environment. If we can regulate financial instruments, maybe we can also cut the umbilical cord that seems to tie the oil industry to our government. I would give Edwards the best odds of accomplishing that feat too.
Hoppy in Sacramento
September 12, 2007 9:25 PM | Reply | Permalink
The Bloomberg article is another attempt to attack on the basis of the capital gains tax, while not addressing the core issues of abusive financial product practices which are undermining the quality of life for middle class society. Focusing on capital gains allows the status quo to maintain a position that a FPSC would hurt the economy and consumers.
What about the current situation of all the abusive financial product practices that have hurt and continue to due damage to consumers? The market has not corrected itself as the status quo has suggested. If the market is in trouble, the Fed intervenes to cover and bail out the investment vehicles in trouble, as it did in the case of the Bear Stearns hedge funds.
Where is the consumers advocate? Consumers hurt by abusive financial product practices such as credit cards and mortgages that have them trapped do not have access to the same type of market rescue the way the financial market does. The abusive practices such as double cycle billing, exorbitant interest and penalty fees and exploding ARMs on mortgages are taking advantage of consumers and the industry is allowing this to happen. I would ask those companies: where are the business ethics?
Yes, the cost to establish an FPSC would be minimal compared to the billion $ profits in the credit card and banking industry. Imagine if some of the big companies contributed a small percent of profits towards an FPSC. This would show that they actually do have a vested interest in eliminating abusive practices in these products – not just pretending. This would be a win/win as it would allow consumers to have a voice that cares about consumer advocacy while also holding companies to higher standards and allowing those that have fair practices to flourish.
September 12, 2007 10:32 PM | Reply | Permalink
I think I'm with you on this new agency. But, I hope the point here is about disclosure and that the government won't tell people that they can't take out loans, even if they're eyes are open and they want to.
thosethingswesay.blogspot.com
September 13, 2007 4:37 AM | Reply | Permalink
I suspect the goal is to limit the availability of financial products that the government considers too dangerous, If I understand the unsafe toaster example.
September 13, 2007 8:04 AM | Reply | Permalink
Congress and Fed Collude to Cause Mortgage Crisis
"Once there were regs,
now there are none."
GOP Green $$$ fields forever.
Lessons of Great Depression give way to greed.
The history behind the mortgage fiasco and bank liquidity is a complex long intertwined affair.
After the Great Depression new financial regulations were put in place. For one, banks were barred from equity deals or brokerage operations. Then, fairly recently, Congress and the Fed gave in to the natural greed of the banks and let them return to brokerage/equity dealings. It is in no way surprising that subsequent to dismantling safeguards the present catastrophe should occur. It is axiomatic to allowing banks to invest in speculative fashion outside of regulated asset lending scenarios.
cognitorex blogspot
If you're not afraid, you're a coward." Giuliani bumper slogan.
September 13, 2007 8:51 AM | Reply | Permalink
cognitorex is right on point.
The abandonment of the lessons learned back in the 1930's has been a very expensive proposition when it comes to the financial industry and banking these past 20 years or so. Deregulation has been a bad deal in most instances that I can think of. People forget that regulations were put in place for good reason and now we are rediscovering some of them.
What is most incredible about it all to me is how little in the way of argument was offered as justification for the abandonment of regulations and rules that served us very, very well and prevented the sort of extreme swings of fortune we have seen in the business world of late. I recall how Democrats fell right in line when flimsy claims were made about how responsible industry was now and that they would never make the sorts of mistakes that were made in the past and so on. But the sad fact is that human beings cannot resist the temptation to make a fast buck today unless there is some check on the natural excesses that greed and short term thinking fuels in the business world.
September 13, 2007 9:18 AM | Reply | Permalink
I agree that Bloomberg's comparison is overblown, but do we really need a whole new agency for this?
Why not just pass good laws saying what can and can't be done and give the DOJ money specifically to enforce those laws? Why add on the overhead of a whole new buearocracy?
September 13, 2007 9:42 AM | Reply | Permalink
I agree that government should not mandate who gets to take out loans if consumers qualify, have the desire and understand all the product risks. The key is the information to fully understand all the risks involved and make an informed decision – all things considered up front. This is not about hidden fees, changing rules on products after consumers have signed the contract, as in the case of credit cards for example.
This means more effective and simple information to evaluate the risks, make informed decisions based on all the risks, and understanding the implications of those risks as a result of entering into a contractual obligation with the product. A FPSC can provide consumers with guidelines and fair and not misleading disclosure. It’s about holding companies accountable that continue abusive financial product practices and providing consumers with the protection they deserve. When toys have too much lead or are otherwise deemed unsafe - those products are pulled from the market. Why should companies that continue abusive and misleading lending practices continue to thrive?
September 13, 2007 11:04 AM | Reply | Permalink
Why do we have a FDA, an FAA, an OSHA, etc.? The answer is that without those specialized agencies the Justice Department pays little attention to business abuses. Can you imagine any Republican Justice Department enforcing any law that could potentially reduce business profits? The agencies are, in theory at least, run by professionals protected by Civil Service rules, and can take on corporations without losing their jobs. A Republican administration can still bring regulatory activities to a near halt - Reagan's first act as President was to halt all pending regulatory activities. But, at least a follow on Democratic administration can restart the process.
Hoppy in Sacramento
September 13, 2007 9:18 PM | Reply | Permalink
I guess that I don't think it's "too bad" if the listed agencies were disbanded.
I tend to think that things like "transparency" and "justice" are much more important than a bunch of bureaucratic agencies who may or may not be advocating sensible policy.
You slander all republicans with one swoop and I know several that care about the environment. A republican pilot, of course, wants a safe airspace, food to eat, etc...
To boldly go...
September 14, 2007 6:27 AM | Reply | Permalink
How would you achieve "transparency" and "justice" without the means to enforce them?
What would you do to replace the watchdogs?
As every American can plainly see, the deregulation of business has given us mad cow scares, spinach scares, lead paint scares, three-card monty credit and banking systems, and oil that is based on everything but "supply and demand."
Tell me, what system are you proposing here?
CSPAN junkies visit http://spannerbackup.ipbhost.com
September 14, 2007 6:44 AM | Reply | Permalink
Common Dreamer is quite right. If you want to stop high fee and interest rates, pass a law that limits them. 15%, 18% outright, 10% above some Treasury, whatever. If you want to stop teaser rates, write a law that says no teaser rates.
The argument that an FPSC will stop deception is very weak. We already have TILA and state laws on disclosure. A loan closing is full of disclosures. We already have lots of government agencies that can regulate disclosure. The problem is obviously not a lack of disclosure or regulatory power over it. It is simply that there is a cohort of borrowers who are not responsive to disclosure, either because they can't understand what they are told or they don't value the risk correctly. If you want to protect them from paying too much, limit what they can be charged.
The further benefit of doing it thru legislation is that legislation is harder to undo than administrative agencies' policies which can be changed simply by a change in the executive branch.
September 14, 2007 9:08 AM | Reply | Permalink
How would you achieve "transparency" and "justice" without the means to enforce them?
basically, enforcement would be through populism. when books are open and people can see the plain facts, they get pissed pretty fast.
What would you do to replace the watchdogs?
but then, whose interest are the watchdogs watching out for? I suppose that I like Ron Paul because I believe that people should have the power. when we eleveate our problems to someone else, we have to yield our thinking and sense of justice to someone else.
For example, NCLB seems nasty because a lot of energy goes into regulation instead of rectifying the problems; i.e the NCLB regulation has become so distracting (teaching to the test) that the "culture of learning" dies.
With the case of NCLB, I think that many on this list would say that the regulation is aimed at destroying public schools, etc... and my point is that "the value of regulation is in the eye of the beholder."
To boldly go...
September 14, 2007 1:39 PM | Reply | Permalink
This makes absolutely no sense to me. How can populism enforce anything? Perhaps you are using a definition I am not aware of. Would there be penalties for non compliance? Who would decide that? A mob, appears to be what you are suggesting. Vigilanteism doesn't work very well, so you'd need an impartial body, like a court system, wouldn't you?
I'm just trying to undertand what you mean. If you could explain, I'd appreciate it.
They work for those who pay them. That would be "we the people," and for the most part, they do. Look how "well" China is doing without regulation. I don't want that here.
The power to do what? Are you saying everyone should regulate their neighbor? I'm afraid I don't agree. I want experts setting standards and coming up with a realistic compromise between safety and production. I thnk that one ought to respect people, that means respecting the fact that there are some things that others know better than you do. When you want to find out how to fix your plumbing, do you call a TV repairman?
I do believe that is called civilzation, when people compromise for the greater good. That means agreeing on standards, rules, regulations, and enforcement.
That is certainly a case of shortsighted, over-regulation, but it's only one. I can think of several cases where non-regulation has been worse for society and I mentioned a few of them above. NCLB isn't causing a couple of million of your fellow citizens to lose their homes, nor has it killed or sickened anyone yet.
Maybe I am just missing your point entirely. If so, I apologize.
CSPAN junkies visit http://spannerbackup.ipbhost.com
September 14, 2007 2:08 PM | Reply | Permalink
Would there be penalties for non compliance?
our jails are sufficiently full and don't seem to do much...
I want experts setting standards and coming up with a realistic compromise between safety and production.
but you're assuming that experts know how to solve the problem.
That is certainly a case of shortsighted, over-regulation, but it's only one.
there are many more but I mentioned this one because of the audience on this website.
Maybe I am just missing your point entirely. If so, I apologize.
well, in the Episcopal Church, for example, they say: "unity not uniformity." you seem to believe that uniformity can be legislated and I tend to think that people have to find ways to unify. regulation looks quick and efficient but it's necessarily blind to diversity because codification happens. that's why the Episcopalians, I think, lean on unity because they know our knowledge of the world changes and, as a community of communities, we have to keep adapting so we can live in peaceful coexistence.
unity and uniformity are both idealisms and our arguments usually grab onto one or the other as an assumption.
To boldly go...
September 14, 2007 3:08 PM | Reply | Permalink
Mt57, we had laws on the books in most states that did exactly that: put a ceiling on interest rates. But guess what? When rates rose back in the 80's to the limit (which I believe was 12%)state laws were almost instantly repealed to allow the banking and financial industries to make a killing and ostensibly to "keep the economy going", but funny thing is that since then the credit card people particularly have not only never gone back to reasonable rates, they now charge interest at virtually the loan sharking level and there's not even any discussion of reigning them in. I would certainly support a federal law capping interest rates as the state did previously but I don't think anyon in DC has the balls to stand up to them.
September 15, 2007 10:07 AM | Reply | Permalink
I'm sorry to say this Elizabeth but we just aren't going to see meaningful finance reform without first having meaningful campaign finance reform.
The fact is big business cares little about politics or ethical conduct. Their agenda is about money and establishing ways to promote their private interests.
This is precisely why big business should not be allowed to particiapate in the political process. Their behavior is guided by one thing and one thing only. It is not about this nation or the well being of our republic or the citizens of this country. The only reason they participate in the political process is to gain a political advantage over individual citizens with the result being the corruption of the political process. The goal being sought is fundamentally un-Anerican. It is impossible to argue against this or refute the facts of how money from big business has altered the legislative landscape. I don’t doubt that most of our elected officials would deny this. It is however way too obvious and marks everyone of those persons as liars. And most every senator or congressperson falls into this category.
Arguing that business entities are entitled to participate in the political process when their motivation diverges so demonstrably from how most Americans view that participatory right conveys all we need to know about why this is so thoroughly wrongheaded. Participation in the political process implies, by its original intent, that participants have the interests of the country as their motivation for doing so and there is no bigger lie than this. This lie is by far the biggest legal whopper ever told.
You simply cannot associate the concept of patriotism with the financially motivated conduct of business. They are mutually exclusive in every way. And I have to reiterate again that this is fundamentally a lie of huge proportion. When viewed from a legal perspective, this is all about intent, and the clear intent of business is not compatible with our constitutional rights or freedoms and frequently edges over legal limits. And ethical conduct isn't even in contention.
It is one thing to participate in the political process and quite another to actively seek to infringe upon the rights of the citizens of this country. This is very similar to the fact that the significant oil reserves in Iraq are one very big reason we are there but you don't hear politicians discussing it and you don't hear rountable discussions about it on CSPAN or elesewhere. It just reveals too much truth and we can't be having politics muddied up with such triviality.
September 23, 2007 6:52 AM | Reply | Permalink