One of many bureaucratic boondoggles in the Senate financial “reform” legislation is a “Bureau of Consumer Financial Protection Protection.” Just how exactly would the proposed new bureaucracy protect consumers? The same way bureaucrats do everything: with more paperwork and fewer choices.
A few years ago, a TV commercial showed a man in a trench coat slinking through a grocery story, slipping items into his pockets. He glided past the registers without stopping to pay, only to be stopped by a friendly security guard. “Sir, you forgot your receipt.”
This sort of instant checkout remains a dream in the United States, where many of us wasted hours waiting in supermarket lines ahead of February’s big snow storms. But it’s becoming common overseas. Shoppers in India, for example, can pay for their purchases by swiping their cell phone.
When might this innovative technology arrive in your grocery store? Maybe never, if the bill racing through the Senate (it cleared its committee in 22 minutes, less time than it would have taken to actually read the bill, if senators had been inclined to do so) becomes law.
The Dodd bill, named after Senate Banking Committee chair Christopher Dodd of Connecticut, would supposedly “reform” the financial industry. Its goal is to make financial meltdowns, such as the one that locked up the markets in 2008, impossible.
What it would really do, though, is prevent innovation in the financial industry. While that probably sounds appealing to anyone who pines for the days of 30-year fixed-rate mortgages, it would also mean suppressing new technology.
Debit cards, for example, are common today. Just a decade or so ago, though, customers had to carry bulky checkbooks and two forms of ID in order to pay for many purchases. What might be the next innovation to revolutionize how Americans pay for products? It’s impossible to say, and under the Dodd bill we may never know. Under a CFPA, a cell phone company that wants to offer an even more convenient payment mechanism would have to submit to a massive set of regulations. Even if the CFPA didn’t just say “no,” the prospect of a lengthy and expensive approval process, and restrictions on marketing, might be enough to discourage companies from even considering new services.
Who would benefit from such regulation? Big banks: they would be protected against competition and be given an excuse for failing to offer new products. That’s no way to help consumer or to avert the next financial crisis.