I’ll be participating in a program tomorrow at noon at the Cato Institute on the question, “Did Lack of Consumer Protection Cause the Crisis?” Info is here. Participants include Janis Bowdler, National Council of La Raza; Thomas Durkin, Former Economist, Federal Reserve Board; Ed Mierzwinski, U.S. PIRG; and myself. Moderated by Mark A. Calabria, Director, Financial Regulation Studies, Cato Institute.
LarryA says:
Did Lack of Consumer Protection Cause the Crisis?
Absolutely. Consumers could not protect themselves from the government programs designed to “protect” them.
March 15, 2010, 2:17 pmjosh says:
I don’t mean to be so snarky here, but a program entitled, “Did Lack of Consumer Protection Cause the Crisis?” at the Cato Institute?
I’ll take a wild stab and say the answer will be “No.”
Time saved.
March 15, 2010, 2:18 pmAnonsters says:
My thought exactly. :)
March 15, 2010, 2:24 pmG. May says:
Because without protection from the goverment, consumers are totally unable to protect themselves from themselves.
The first person to tug on the heartstrings with ‘the American Dream of homeownership’ deserves to have their credit rating destroyed.
March 15, 2010, 2:43 pmJiffy says:
Yea, like the Cato Institute
March 15, 2010, 2:52 pmJiffy says:
Start with these guys.
March 15, 2010, 2:54 pmorca says:
I think they will be talking about protecting consumers from junk mortgage-backed securities.
March 15, 2010, 3:04 pmJeffH says:
Just because an event is hosted at CATO doesn’t mean it isn’t going to be a balanced discussion. Having been to a few of these events at CATO (they’re just up the street from my office, and the food is usually pretty good) I can say that they’re usually good about representing both sides of an issue. For example, the speakers at this event include Janis Bowdler, from la Raza, and Ed Mierzwinski from U.S. PIRG. La Raza is a minority advocacy group, and U.S. PIRG is a pro-regulation policy group. The other two speakers are a law professor and a former member of the Federal Reserve Board. I’m going to go ahead and assume that they’re the “No.” vote on this issue.
March 15, 2010, 3:08 pmBenjamin Davis says:
Repeal of Glass-Steagall was the heart of it, wasn’t it?
March 15, 2010, 4:24 pmNot sure that is characterized as consumer protection.
Best,
Ben
Houston Lawyer says:
Yes, the government should have stopped those people from buying houses at inflated prices, for their own good.
March 15, 2010, 4:46 pmElliot says:
Yes. I think that bill included a mandate banks develop innovative and novel instruments to serve the LMI population.
LMI = Low and moderate income.
March 15, 2010, 6:32 pmgeokstr says:
Can you expound on this part about Glass-Steagall mandating “banks develop innovative and novel instruments to serve the LMI population.”?
The feds, through bank examiners and others, helped along by ACORN and others mau-mauing the flak-catchers, were mandating that banks basically make very risky loans to the “LMI” folks from the 1980′s to the collapse, Glass-Steagall or not. When food stamps counted as “income”, no down payment was required, and no job history and bad credit were considered sufficient collateral for a mortgage loan, anyone with both halves of their brain tied behind their back should have been able to see this coming.
Be happy to. Just another reason to dislike the so-called “compassionate conservative”. Not being in the market for a home during the Bush years, I had no idea until afterward that they too were pushing this absolutely insane lending policy. But let’s not stop until we blame all the others who were just as complicit – Frank, Dodd, Raines, Gorelick, Carter, Clinton, et al, and ending with none other than Obama himself, the community organizer par excellence.
March 15, 2010, 7:02 pmElliot says:
I read that in a book by Thomas Sowell about the crash, but no longer have the book.
March 15, 2010, 7:22 pmRicardo says:
Cato asks exactly the wrong question and it is a bit frustrating to see them get this issue wrong. Their program should be called “Did Lack of Risk Controls at Financial Institutions Cause the Crisis?” I think the answer to that is clearly yes but I’d like to see the best opponents of that view take their best swing. Instead, by focusing on “consumer protection” they’ve practically set up a loss for their opponents. I don’t know of any serious economists or financial industry experts who take the view that lack of consumer protection caused the crisis.
Glass-Steagal is another red herring, by the way. The institutions that lay at the heart of the financial crisis are predominantly investment banks and hedge funds which were engaging in activity that was legal for them even before the repeal of Glass-Steagal. Goldman Sachs actually lobbied against the repeal of Glass-Steagal for many years: they didn’t want competition in investment banking from commercial banks who (so they feared) would steal their clients and slash traditional fees on investment banking services. On the other hand, one of the main beneficiaries of Glass-Steagal repeal, Bank of America, was actually doing pretty well before the Paulson Treasury Department strong-armed them into buying out Merrill Lynch (an action that, again, would not have been possible without the repeal of Glass-Steagal and that certainly saved the firm from Lehman-style bankruptcy).
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March 16, 2010, 12:44 amLarryA says:
IMHO the main problem was that the “risk controls” in place worked backwards. Fannie Mae and Freddy Mac guaranteed loans with public funds, thus reducing or eliminating the bank’s risk. At the same time government was pressing the lenders to make more and riskier loans in efforts to leave no homeowner behind. The result was entirely predictable.
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