Financial Reform or Big Brother? The Issue with a Consumer Finanical Protection Agency

President Obama met with Chris Dodd and Barney Frank this morning to revisit the issue of financial regulation. Dodd reported that a bill containing financial reform would pass sometime this year, perhaps even before Memorial Day. One of the most controversial sections of the upcoming bill is the Consumer Financial Protection Agency, which Republicans vehemently oppose. Some of the provisions laid out in the draft legislation include the following:

Giving the agency broad authority to write rules about services or products including:

a. Deposit-taking activities
b. Extending credit and servicing loans (this could include mortgages, credit cards, etc.)
c. Check-guaranty services
d. Collecting, providing, or analyzing consumer report information
e. Providing real estate settlement services, including title insurance.

 (read more here)

Everyone is so worried about the banking industry having too much power, but wouldn’t the creation of a Consumer Financial Protection Agency just transfer that power to a government agency? This begs the question of how this agency will assure us of protection from the risky investments made in the financial industry. According to the legislation, by having the power to “write rules about services and products” they will help stop the next big financial crisis. How can the government guarantee this agency will have the knowledge necessary to hinder another financial melt down? Letting the government take control of the banking industry will simply lead to the micromanagement of financial institutions rather than having any extra foresight on future crises. By placing restrictions on banks, the agency will slow down investment for small businesses and put the brakes on economic growth. America does not need big brother to step in to the financial sector in the form of a Consumer Financial Protection Agency.

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