Professor Alan White recently submitted an op-ed to the South Bend Tribune about the need for better financial regulations. Among other things, his piece says:
Much of the debate regarding the proposed Consumer Financial Protection Agency misses the point. The question is not whether banking, credit, insurance and investment services should be regulated.
Congress and nearly a dozen federal agencies have already put in place extensive, overlapping and confusing regulations in a variety of efforts to prevent market abuses like those leading up to the subprime crisis. Of course the new agency rules came after years of neglect.
As U.S. Sen. Evan Bayh, D-Ind., wrote in April 2007: “The Federal Reserve failed to fulfill its obligation to American consumers by repeatedly looking the other way as irresponsible lenders use aggressive and often abusive tactics to sell borrowers on loans they will never be able to repay.”
The issue now is whether to regulate in a coherent, effective and efficient way, with careful consideration of costs and benefits, or to continue the status quo patchwork of agencies and rules that we have. If we want smart regulation rather than just more regulation, the CFPA offers considerable promise.
White closes with this note:
The question is not whether to regulate, but how. A single, dedicated agency with expertise and a thoughtful, open and deliberative process can only result in a set of rules that are more rational than the incoherent system that brought us the current crisis.