Friday, September 17, 2010

Warren and Obama Throwing Glitter in the Air

In what has become one of the worst-kept secrets in the Obama presidency, Harvard professor Elizabeth Warren will most likely be appointed to a politically-contrived leadership post at the Consumer Financial Protection Bureau. Maybe before I even get to finish today’s essay.

Never heard of the Consumer Financial Protection Bureau (CFPB)? That’s because it’s brand new, only not the type of brand-new that excites most people. No, this is yet another layer of federal bureaucracy, proposed in the Wall Street financial overhaul bill approved this past July.

Ostensibly, the CFPB will act as a watchdog on the behalf of ordinary taxpayers who use credit to fund their American lives. Obama envisions a department which will hold credit issuers’ feet to the fire, eliminate small-print legalese, free debtors from extraordinary fees and rates, and in every way give the appearance that in fact, credit is virtually a right not to be denied anyone in the United States of America.

Which, if you have the intelligence of a worm, would sound pretty good. Who wouldn’t want free money? At least, loans free of responsibility. Plus, who can deny that banks and other lenders of credit haven’t written the current rules with weights in their favor? Even the most conservative capitalist can’t deny feeling nickle'd and dime'd to death by new fees. But is that really the problem with the credit situation we have in this country?

Consider this overview of the mandate for the CFPB, according to the New York Times:

The bureau will consolidate employees and responsibilities from a host of other regulatory bodies, including the Federal Reserve, the Federal Trade Commission, the Federal Deposit Insurance Corporation and even the Department of Housing and Urban Development. It is expected to have hundreds of employees and a budget of up to $500 million.

The bureau will nominally be part of the Fed, which is obligated to finance its budget, but the central bank may not influence its personnel or rules.

The bureau will have the authority to write and enforce new standards for mortgages, credit cards, payday loans and a wide array of other financial products, and the White House said it believed it was imperative that Ms. Warren promptly begin to shape that process.


Can Ivy Leaguer's Be This Clueless?

With this as the template for understanding the rationale behind creating the CFPB, one would think that mortgages, credit cards, and payday loans were responsible for the recent financial melt-down which helped spark our current Great Recession. But they weren’t, were they?

True, many mortgages were sold to people who couldn’t possibly afford them. Banks played a big role in colluding with various financial institutions to create our sub-prime scandal. But while the mortgage issuer bears culpability for selling something they knew their client couldn’t afford, their client also bears responsibility for knowing what they can realistically pay for, and what they can’t. You don’t purchase a home like you do a pair of shoes. If you’re looking at a house listed for $300,000, and you only earn $40,000, even the new math they teach today should tell you it’s out of your price range.

If you can't remember to pay your credit card bills on time, then why shouldn't your card issuers begin to wonder about your credit worthiness and make penalties kick in? And yes, the legibility of fine print can be challenging to read, but it's not what the fine print says that's objectionable, is it? It's more like how much it costs you by not playing by someone else's rules. We already have plenty of laws in place which provide consumer protection by regulating how and when lenders can change fees and rates. Why do we need a brand-new layer of bureaucracy? Doesn't this all smack of the traditional Democratic mindset of treating taxpayers like immature teenagers, instead of holding people accountable for their own decisions?

Isn’t the real problem with our financial industry pure and simple greed? Greed by banks, yes, but also greed by borrowers. And what have we said about legislating morality? It can’t be done. The current administration can try throwing Ivy League machinations at problems, but all the CFPB will do is provide employment to even more federal bureaucrats, and foolishly lend credibility to yet another spurious theory by a Harvard economist who appears to be, as a boss of mine used to say, educated beyond her intelligence.

Speaking of Professor Warren, whose idea this whole thing was to begin with, how discouraging is it to note that she has wholeheartedly agreed to join the administration in yet another fallacy? She and Obama have concocted an end-run around conventional Senate appointment protocols so she can jump-start her new baby. It’s hard enough to swallow the needless inflation of big government for such a silly idea as the CFPB, but then for the President to stage a defiant, controversial move for its de-facto head represents the epitome of arrogance on both of their parts.

Everyone acknowledges that Warren’s confirmation to head the CFPB would have sparked contentious hearings, but aren’t public hearings partly what government is about? America is still government by and for the people, right? And even though Warren has claimed propriety of this daft idea for another federal agency, is she really the best person to run it? Is there no logic in Republicans questioning how a person so supposedly intelligent as Warren could come up with such an irrational black hole as the CFPB? Or why we’d want somebody so obviously separated from reality to run it?

Painting the Titanic's Deck Chairs Before Rearranging Them

Several months ago, I wrote that Obama, with his scary flashes of incompetence, was turning me into a Republican. The President likes to chide conservatives for balking at his initiatives and policies, but when you throw so much glitter up into the air, a lot of it is going to come right back down, because glitter can’t stick to air. Sure, you've created the illusion that there's something to look at, but all you've done is divert attention onto something that accomplishes nothing. It's the same with exclusively blaming lenders for our financial mess by building another layer of bureaucracy. How will it solve the root cause of why we insist on spending beyond our means?

If Obama hadn’t showered so much money on his banking buddies last year, would there be the huge discrepancy this year between the foreclosure rate and high bank profits? If he hadn’t splurged on his stimulus plan that is spending an average of a quarter-million-dollars for every job it's creating, would the massive debt load he’s piling atop taxpayers be suffocating small businesses trying to sputter back to life and rehire workers?

I’ve never claimed to be an economist, but I know enough about common sense to realize when leaders don’t have a clue about how to fix a problem. Many other Americans appear to be realizing the same thing. Yet Obama, whose party has a big mid-term election coming up in a few weeks, seem intent on finding any way he can to get his fellow Democrats voted out of office.

Here – let me hold the door open for you and your moving boxes.
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