boston globe

Here’s my letter published in the Oct. 25th edition of the Boston Globe responding to an editorial advocating the creation of a Consumer Financial Protection Agency:

Your editorial, “To Fix Financial System, Protect Consumers First”, claims that a Consumer Financial Protection Agency will prevent a “recurrence” of the “financial pathology” that caused the banking crisis. But the source of that “financial pathology” was bad government policy, and your editorial calls for more of it.

Government subsidized toxic mortgages through entities like Fannie Mae and mandated many of them through laws like the Community Reinvestment Act. Government imposes entry barriers to the market for new banks. As a result, existing banks claimed a greater market share than would have been possible in a free market, becoming too big to fail.

Also, contrary to the Globe’s claims, Frank’s bill would give the new agency power over many non-financial businesses who can be said to “extend credit,” probably including merchants with layaway plans. It would also give state attorneys general unique power to interpret Federal law and hire private plaintiff lawyers to harass Main Street businesses.

When government subsidized, regulated, and protected banks caused the crisis, why regulate Main Street businesses that had nothing to do with the crisis?

Jonathan Moore

Research Associate

Competitive Enterprise Institute