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Congressmen Grayson, Clay and Miller Introduce CFPA Amendment to Help Reduce Looting
Congressmen Grayson, Clay and Miller are introducing an amendment to the Consumer Financial Protection Agency bill:
Today
we will offer the “Financial Autopsy” amendment. The
Grayson/Clay/Miller amendment is essential to attacking the root
problem of consumer bankruptcy and foreclosure because it requires the
CFPA to do a financial audit of products that have caused the highest
rates of bankruptcy and foreclosure annually. Not later than March 31st
of each calendar year, the CFPA will list these anti-consumer products,
submit their conclusions on why these products “fail” consumers, the
companies and employees that underwrote these products, and authorizes
the CFPA to take action to restrict these products.
Financial Autopsy Amendment:
-
Requires the CFPA conduct a “Financial Autopsy” of each state’s
bankruptcies and foreclosures (a scientific sampling), and identify
financial products that systematically led to a large number of
bankruptcies and foreclosures.
- Requires the CFPA report to
Congress annually on the top financial products (the companies and
individuals that originated the products) that caused consumer
bankruptcies and foreclosures.
- Requires the CFPA take
corrective action to eliminate or restrict those deceptive products to
prevent future bankruptcies and corrections
- The bottom line is
to highlight destructive products based on if they are making people
“broke”. Thank you for your consideration, we hope you will join us in
supporting this amendment.
Sincerely,
Alan Grayson Wm. Lacy Clay Brad Miller
Is this a good amendment or a bad amendment?
It is a great amendment.
Why?
Instead
of trying to pass a one-size-fits-all bill prohibiting certain
specified conduct, it will force an annual analysis of what financial
products are sticking it to the consumer.
Remember, credit
default swaps didn't bring down the economy because they are toxic
while all other financial vehicles are pure as the driven snow. CDS
brought down the economy because they were the choice du jour of the looters.
If we outlaw CDS (which I have argued for in the past), then the looters would create some other instrument for looting.
The Grayson/Clay/Miller amendment would help to force an annual review of the tool-of-trade of the rip-off artists.
Note:
Given the huge incentives for financial "innovation", the armies of
lawyers, mathematicians and other footsoldiers employed by the
financial giants, the pressure that the "too big to fails" to earn
their way out of the hole, and the rapidity with which imbalances in
the modern financial system can build up when alot of people are making
the same kind of trade, an annual review is probably not enough.
So my only suggestion for Congressmen Grayson, Clay and Miller is that the amendment require:
(1) Annual reviews generating formal written reports
Plus ...
(2)
Monthly informal reviews. If a review reveals a large number of
bankruptcies or foreclosures caused by a specific type of financial
product, this would trigger a formal report
Trust me . . . the boys can still cause the economy to thoroughly crash if their actions are not examined for a year at a time.
Call your congressional representatives and demand that they support the Grayson/Clay/ Miller amendment.
I agree that the use of the word "cause" is stupid (although I disagree that this stupidity reflects a liberal view of the world). How would anyone ever know if it was the product that "caused" the bankruptcy? What sort of causation are we talking about -- proximate, proximate efficient? Maybe we should outlaw job loss and divorce -- those probably "cause" more bankruptcy and foreclosure than any financial product,
It seems more sensible (but far less politically charged, which I suspect is the point of this amendment) to require reporting on products correlated with defaults.
Unfortunately borrowers need to plan on very bad things potentially happening when they take out a loan and evaluate whether they can pay it. Low leverage individuals and companies can ride out very tough periods. Borrowers need to control themselves - it is called personal responsibility. No one is foisting money on borrowers. If they do not understand the loan document, don't take out the loan. If they do not have enough reserves to fund the loan during bad times, do not take out the loan. Stop buying things on credit. Stop buying things generally and save. This stuff is really simple. But many (populists) just like to bash lenders.
And correlation is not causation.
More of the same liberal world-view. Bankruptcies and defaults are 110% due to the lender and 0% related to the greedy and/or stupid borrower who a)has no clue that sometimes things don't go precisely as they hoped or b) they just did not understand the terms of the loan or c) darn it are entitled to buy whatever they are borrowing for. All idiotic reasons to bail out borrowers.
Notice how the language assumes if there is a bankruptcy, it must be a "deceptive" or "destuctive" product making borrowers go broke -- bankruptcy "caused by" the loan agreement -- amazing.
This country is in trouble with folks writing laws like these. We might be able to stamp out personal responsibility in one presidential term. The responsible are suppose to subsidize the irresponsible. Sad.
Is that you, Rick Santelli?
Karl Denninger also brought up a very good point on this - it lacks any repercussion for those that have committed the looting. I sincerely hope this changes by the time/if this goes through. Otherwise it is just a rear-view mirror.