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Tuesday, January 18, 2022


Bureau for what?

The newly-created Consumer Financial Protection Bureau finally has a leader, and the nation’s progressives — who have never seen a new federal agency they didn’t like — are cheering like they haven’t since “affordable housing” disappeared in the last decade.

For these people, the goal of any federal agency may be enough to secure their blessing (The CFPB is supposed to protect consumers against financial predation. Who would be against that?), but for those who live in the real world, the truth is rarely what it seems.

For one, the entirety of the Dodd-Frank bill, creator of the CFPB, fails to address any of the root causes of the financial crisis. It certainly has no effect on the Federal Reserve, whose artificial creation of money and credit throughout the decade fueled a bubble in the housing market that was destined to pop.

There is a similar dearth of action regarding the continued existence of government-sponsored enterprises such as Freddie or Fannie, whose exclusive lines of credit at the Treasury and government-grade credit ratings allowed them to distort the housing market and amass piles of worthless subprime mortgages.

Nor does it address any issues concerning government-created incentives for personal and company use of debt financing over alternative, more reliable sources.

The Obama administration’s tireless line that Dodd-Frank and the CFPB is a necessary response to the financial crisis is untrue and absurd. They would have you believe that opponents of the Consumer Financial Protection Bureau are defenders of corporations and Wall Street who don’t want their cronies being held liable while they swindle their customers and wreck the economy.

This couldn’t be further from the truth.

This new agency will do nothing but further entrench large financial interests and insulate them from small and decentralized competition. The regulations created by the CFPB and its Dodd-Frank sister agencies will impose fixed costs on the effected businesses.

These fixed costs increase wealth to the wealthy companies, driving out the little guy whose per-unit costs are prohibitively high.

In this way, the newly-created bureau will only do further harm to small and independent businesses and encourage “too big to fail.” UH professor Dr. Craig Pirrong, who regards the CFPB to be “a monstrosity,” stated in October that such policies “favor the big over the small and encourage the big to get bigger and the small to go away.”

Despite the fact that it parades itself as a protector of the consumer, the Consumer Financial Protection Bureau is nothing of the sort. The average citizen will be no more protected than they were before the bureau was created, and they will now have to pay for a new parasitic bureaucracy that will never be eliminated and whose budget will probably increase when it fails to do its job.

The federal government already has 22 administrations, 9 agencies, 13 boards, 12 bureaus, 5 councils and 23 commissions. What on earth has convinced us that adding one more — and paying for it with borrowed money as the national debt exceeds 100 percent of the gross domestic product — is both necessary and wise?

We cannot afford to continue to be fleeced by the media and politicians in Washington in such a manner. If the last 10 years of American history should have taught us anything, it’s that another government bureau will only make our problems worse.

Steven Christopher is an economics alumnus and graduate finance student in the C.T. Bauer College of Business and may be reached at [email protected]

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