Fannie and Freddie have already cost the government $127B, and it’s not done. That’s 90 Nick Leesons and counting…
The CFPA tries to do what most regulators try to do: improve efficiency, eliminate waste, consolidate regulations,simplify regulations, protect consumers, and protect jobs! It seems banks are greedy and basically unregulated, leading directly to the 2008 housing crisis. There are seven government bodies already regulating banks, highlighting how incredibly naive this proposal is. If there’s a magic bullet for improving efficiency, etc., share it with existing regulators…unless you think that all the regulators have been captured by some interest group, which if true just means we are bringing in one more interest group to advocate why they should get a better deal.
More importantly, if your concern is about the irrational poor people easily duped by huckster bankers, lower prices and penalties on the poor doesn’t help them, it enables them. Life has carrots and sticks, and one definition of a vice is that which generates bad outcomes in the long run. If you are constantly overdrafting your account, don’t have enough money to make a 20% down payment on a property, you need better financial discipline. Helping the poor from being trapped by debt should try to minimize the amount of debt they have, say by increasing rather than lowering prices on credit cards. That would still allow emergency spending, but make people do it much less, which is a good thing.
Peter Wallison raised objections to the CFPA here.