The largest financial firms made out under the government's asset guarantee program. That's the conclusion of the panel overseeing the program for Congress. Harvard Law School Professor Elizabeth Warren chairs the panel. She says while the program hasn't lost taxpayers money so far, it has fundamentally changed our system. Now all big financial firms have an implicit guarantee by Uncle Sam. Warren says reforming the financial regulatory system is our "only hope" to fix that moral hazard.
Warren has also championed a new Consumer Financial Protection Agency to keep banks honest. Congressman Barney Frank wants Warren to lead that agency, but her critics say she doesn't have any "real world" experience. Warren says she hates banks that cheat their customers. Watch the video clip below to hear some of her thoughts on how banks treat their customers. Then let me know what you think.
Comments
It's nice that people are conversing more. I have doubts that any regulatory group can prevent multi-trillion dollar enterprises from finding and exploiting opportunities for outsized profits. The new agency may be as effective, but not sigificantly more effective than those before it.
These agencies are reactionary in nature - responding to official complaints or investigating after a problem comes to light, so they don't directly protect anybody. Considering the continued success of every type of scam and illegitimate business, no matter how suspicious, I doubt that consumers will stop being fooled by real financial institutions either. I guess my question would be will this new agency be the first ever to keep pace with the industry it regulates and actually make it unprofitable for businesses to cheat?
I also don't know that another government agency is the answer. But if it is, I think Elizabeth Warren's lack of "real world" banking experience would be an asset. After what the banking industry has demonstrated, including the most recent round of bonuses, I'd much prefer a highly intelligent and ethical person with no experience to an experienced recycle out of the world that is a major contributor to our problems today.
Sugrad,
You have a good point. The challenge for regulators (new or existing) is finding the balance between consumer protection and choking off credit.
Question is will a new agency, whose sole responsibility is the consumer be more adept at protecting them then the seven agencies that now have that responsibility.
I think it's great that the goverment is forming an agency that protects the consumer from the banks. But who is going to protect the consumer from the consumer? It doesn't matter if credit card interest rates are 20% or 10%. If a credit card is maxed out and the individual pays only the minimum payment, interest costs will be substantial and it will still take forever to pay it off. The problem is not with the interest rates; the problem is with the overuse and misuse of credit cards.