Tag Archives: Brad Miller

Consumer Protection When All Else Fails (Written Testimony)

I took three points away from yesterday’s hearing in the House of Representatives.

  1. We need layers of protection against financial excess.  Think about the financial system as a nuclear power plant, in which you need independent, redundant back-up systems – so if one “super-regulator” fails we don’t incur another 20-40 percentage points in government debt through direct and indirect bailouts.  A consumer financial products protection agency should definitely be part of the package.  Update: The Washington Post reports that such an agency is now in the works; this is a big win for Elizabeth Warren, Brad Miller and others (add appropriate names below).
  2. Congress will work on this.  The intensity of feeling with regard to the need to re-regulate is striking, and there is much that resonates across the political spectrum.
  3. In the end, much of banking is likely to become boring again.  Special interests are convinced that they can fend off the regulatory challenge, but I find this increasingly unlikely.  Enough people have seen through what they did, how they did it, and what they keep on doing.  No doubt the outcomes will be messy and less than optimal, but at this point “less than optimal” is much preferable to “systemic meltdown”.

There is still much to argue about and, no doubt, there will be setbacks.  We’ll get a better or a worse system, depending on how the debate goes.  And if the external scrutiny slips away, so will point #3 above.  But this was still by far the most encouraging hearing I’ve so far attended.

The main points from my written testimony to the subcommittee are below.

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Insolvency And Consumer Protection (House Testimony Today)

Congressman Brad Miller has some interesting ideas about how to respond to the financial crisis; not exactly on the same page as Treasury.  He’s called a hearing for this morning to talk about, in the first instance, how to assess insolvency in the banking system – and what to do about it (he chairs the Investigations and Oversight subcommittee of the House Committee on Science and Technology.)  But my guess is that the conversation will cover considerably more ground, including his idea that we establish a Financial Products Safety Commission.  (A full preview is now available at our joint venture with the Washington Post.)

The basic notion behind this commission is that consumers were taken advantage of by unscrupulous lenders.  Of course, you could also say that consumers fooled themselves, but if that is pervasive and has systemic implications then we need to take it on.  In his recent testimony before the Joint Economic Committee, Joe Stiglitz emphasized the need for more consumer protection, and this idea is also strongly advocated by Elizabeth Warren – against the odds, she continues to make some progress. Continue reading