Elizabeth Warren talks about why we need regulation in Michael Moore’s Capitalism: A Love Story.
It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house. But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street–and the mortgage won’t even carry a disclosure of that fact to the homeowner. Similarly, it’s impossible to change the price on a toaster once it has been purchased. But long after the papers have been signed, it is possible to triple the price of the credit used to finance the purchase of that appliance, even if the customer meets all the credit terms, in full and on time. Why are consumers safe when they purchase tangible consumer products with cash, but when they sign up for routine financial products like mortgages and credit cards they are left at the mercy of their creditors?
The difference between the two markets is regulation. Although considered an epithet in Washington since Ronald Reagan swept into the White House, the “R-word” supports a booming market in tangible consumer goods. Nearly every product sold in America has passed basic safety regulations well in advance of reaching store shelves. Credit products, by comparison, are regulated by a tattered patchwork of federal and state laws that have failed to adapt to changing markets. Moreover, thanks to effective regulation, innovation in the market for physical products has led to more safety and cutting-edge features. By comparison, innovation in financial products has produced incomprehensible terms and sharp practices that have left families at the mercy of those who write the contracts.
According to the Huffington Post, Sen. Lindsey Graham (R-S.C.) said on Sunday that an agency established to protect consumers from financial fraud “is something out of the Stalinist era.”
Graham, speaking on NBC’s “Meet The Press,” was asked why Senate Republicans had filibustered President Obama’s nominee to head the Consumer Financial Protection Bureau, which was created as part of 2010’s Wall Street reform.
Graham spoke as if the bureau had yet to be created and debate was over how to shape it, rather than discussing the nominee, Richard Cordray, the former attorney general in Ohio.