Why Forming Elizabeth Warren's CFPB Looks Smarter by the Day

During an all-hands meeting of the brand-new Consumer Financial Protection Bureau on Wednesday morning, Elizabeth Warren had an epiphany.

"We really are an agency," Warren told a gathering of 25 writers and editors at the first-ever White House Personal Finance Online Summit.

Indeed, the CFPB has a building, a website, and has already begun a dialogue with the American people. It even Tweets. This is all by Warren's design -- she told us Wednesday that she sees the CFPB as an "agency with a real vision," one meant to serve the "regular folks."

Mounting evidence suggests that the agency couldn't have come online at a better time. The Huffington Post reported this week on a new working paper from the NBER that had grim details. A few of the lowlights:

  • "Although many [Americans] haven't mastered basic economic concepts, such as inflation, nearly 40 percent ... gave themselves high scores when asked to rate their own financial literacy."
  • "One in five Americans borrowed money in the most expensive ways -- from a pawn shop, a pay day lender or through a tax return advance."
  • "20 percent of those with home loans did not know whether they held an interest-only mortgage or a loan that includes this option."

Warren made very clear to us that standing for consumers didn't mean standing against businesses. She described the CFPB's key principles as ensuring that:

  1. Prices are clear.
  2. Risks are clear.
  3. The ability to compare like products is relatively easy.

If the agency can achieve that, then consumers can ask two key questions:

  1. Can I afford this product?
  2. Is it the best deal I can get?

The output of all this, Warren says, is a competitive marketplace -- which should be good for both consumers and businesses.

At least, the legitimate businesses
She gave us a useful analogy: Prior to the formation of the FDA, it was common for "drugmakers" to sell snake-oil or rat poison and call it aspirin. Because consumers didn't have access to the information they needed -- "what ingredients go into this product?" -- it was impossible for them to make an informed decision before purchasing said product. That's terrible not only for consumers, but also for the legitimate businesses trying to sell actual aspirin, because their illegitimate competitors could sell fake or risky products for cheaper prices.

The market for financial products today is like the pre-FDA market for aspirin. Some banks offer up-front, honest pricing for mortgages and credit cards. But it's difficult for consumers to differentiate between good, safe loans and deceptive loans that charge lower prices by burying risk in the fine print. Financial contracts are so long, dense, and incomprehensible that consumers are frequently unable to make informed decisions, and markets don't work to match them to good products. As Warren frequently says, the crash of 2008 started one lousy mortgage at a time.

Today, Warren is in charge of standing up the CFPB -- the first-ever FDA for the financial industry. The agency aims to work with consumers and lenders to ensure that financial contracts are understandable, so that markets can work better.

For example, the CFPB recently boiled down the 50-page "mice print" legalese in mortgage disclosure forms into a clearer, two-page layout, so that consumers and lenders can both better understand what they're agreeing to. The agency has collected 14,000 (and counting) comments for how to improve on these agreements further on its "Know Before You Owe" website.

We hope Warren will be allowed to lead the agency she conceived and is now building. The White House has not yet nominated her, and Senate Republicans have vowed to filibuster any nominee unless the agency is dramatically weakened. She's personable, smart, yet tough enough to be the kind of regulator to make real progress. She also reads Fool.com -- a plus in our book!

For more from our visit:

If you'd like us to keep you up to speed on what's going on these days in financial reform, you can send a blank email to imoscovitz@fool.com.

Brian Richards is the managing editor of Fool.com. Follow Brian on Twitter @brianlrichards. Ilan Moscovitz is Fool.com's public policy and macroeconomics editor. The Motley Fool has a disclosure policy.


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  • Report this Comment On June 10, 2011, at 4:23 PM, mm5525 wrote:

    Change "smarter" by the day to "dumber" and we'll be just fine. Lower the profitability by lenders for risky, down-and-out risky borrowers? Insane. Lenders will counter with no loans whatsoever to this market. How will that help the less fortunate? It will just push them toward the government handout, which hurts all. Should we just throw out FICO scores, too? Make everyone equal, regardless of credit worthiness? No wonder this country is so messed up. Riskier borrowers with nowhere else to turn need to pay higher rates. No one puts a gun to their heads and tells them to do sign up for a 40% interest short-term loan. They, ummm. do this on their own free will because they are willing to, ummm. "pay the price." Nanny state run amuck. Thanks for the "contribution" from the Huffington Post. How about a counter from the Cato Institute? It's kind of like a convenience store, is it not? You pay more for not having to stand in line at a mainstream grocery store. You choose to do this. Quick cash comes at a price, and if you lower the price to the borrower and increase the risk to the lender, the "quick cash" suddenly is no longer available. Do government do-gooders have any idea how the private sector reacts to such ridiculous "ivory tower" policies? The worst borrowers will simply not be able to get money, which will increase crime and other social problems. In the case of mortgages, a borrower signs 17 pages of RESPA documents prior to even finalizing anything. If they buy a house, they sign 8-9 pages of a purchase contract. At closing, they sign @50 pages of paperwork. If the borrower doesn't understand what they're getting into, don't do it! What a concept. Personal responsibility. Has Elizabeth Warren ever heard of such a concept? Doesn't seem so to me.

  • Report this Comment On June 10, 2011, at 6:06 PM, hondamikesd wrote:

    @mm5525- While normally I'm all for caveat emptor (we don't get a bailout when we make stock picks that blow up in our face...) I think we've tried the "Wild West" approach in the financial product market and if I remember right it ended badly for all of us. I care less about irresponsible people paying more money due to their own personal risk and more about the systemic risk that it creates for all of us. I don't think it'd be a bad thing if the very riskiest borrowers weren't able to get these loans...

  • Report this Comment On June 10, 2011, at 6:21 PM, mclaugph wrote:

    love the friendly discourse.

    "What is wrong with an agency that makes sure businesses aren't screwing people? Nothing is the answer to that."

    I agree. My knowledge of chemistry leaves something to be desired. Using the analogy in the article, I DO want the FDA makes sure pharma isn't screwing me over. In theory, I don't see a problem with an agency helping people who aren't financially savvy.

    "personal responsibility plays a role "

    This is true, and I think people should try to educate themselves...that's why I visit this site. There is a lot of information and misinformation, and some people don't know who or where to get straight answers.

    I've purchased several homes (including one with an ARM) and during the closings there is such a rush for the agents to get to the next closing it's easy to feel pressured into not reading all 40 pages of legalese...nevermind trying to understand it.

    I think everyone has heard stories of predatory lending. Even smart people can be victims of fraud.

    If you don't like the Huffington Post, that's your opinion. To suggest this is a copy-paste job from that site is an accusation of plagiarism and an insult to both writer and reader.

  • Report this Comment On June 10, 2011, at 6:23 PM, mm5525 wrote:

    Very well said, hondamikesd. I ask: If you're a bank, credit union, or, at worst, some sort of pay-day lender or pawn shop, will you loan your money to the irresponsible at way lower rates commensurate with the masses who are far more responsible? That is the issue. Some might, most won't. That is the consequence. All I know is I would not loan money to the far less likely to pay me back without hedging my risk appropriately. To limit this when rules are already in place seems to be nothing more than a witch-hunt IMO.

  • Report this Comment On June 10, 2011, at 6:25 PM, modeltim wrote:

    mm5525 - I worked in real estate from 2002-2006 as an agent and worked with many mortgage companies. Financial deregulation signed into law by Bubba Clinton and passed by a GOP congress in the late 90's allowed banks to invent all sorts of deceptive mortgage financing products that were very deceptive and consumer unfriendly and I'm not just talking about subprime loans.

  • Report this Comment On June 10, 2011, at 6:51 PM, mm5525 wrote:

    Those are fair points, yet someone signing 70+ pages of paperwork is off the hook? Dare I point this out, but listen to what some of you are saying: "The closing agent was in a rush" and the banks invented "all sorts of deceptive mortgage financing products that were very deceptive." When is the borrower responsible for a darn thing here? Yet people who could never got loans before got them? How did this happen? People with horrible credit scores who never deserved a loan in the first place got these loans, yet since there's a safety in numbers of illiterate borrowers who simply throw up their hands and claim they had no idea what they were doing after the 70+ pages of signing their names, the politics of the day swing toward slamming the banks. Yet FNM and FRE are not responsible & are not reformed, nor are people like Barney Frank, who helped mandate that people with horrible credit have the "right" to buy a home, yet they are as responsible as the banks if not more so. Seems to be a crock. This guy helps to write the Dodd-Frank legislation? Can you say "the fox is guarding the hen house?

    Yet all of us wonder why the banks are lending. I'd like to ask all of you to ponder why this might be so considering such outrageous and over-reaching legislation that doesn't even solve the problem. Too big to fail? That didn't work. The 5 biggest U.S. banks are even bigger today. Consumer Financial Protection Bureau? All this means is banks will charge for checking accounts to make up the different. Durbin Amendment? More fees on checking accounts. Regulations have consequences, and if all the blame is going to go toward the banks when there are a PLETHORA of other bad actors in this play are around who go blamless (FNM, FRE, rating agencies, Congress, the FED) it still seems as nothing more than a witch-hunt against the banks since they're the easiest and most convenient target. The madness against our banking system has to stop.

  • Report this Comment On June 10, 2011, at 6:53 PM, mythshakr wrote:

    Anyone who thinks they completely understand all those documents you sign when you purchase a home with a mortgage is either stupid, a liar or in the business of selling them. You can't even get two real estate lawyers to agree on the meanings of all those wherefore and whereas statements.

    I love it when you pay a real estate lawyer to review these documents for you and all they say is "a court could interpret this to mean X, or not X, or maybe Y, depending". Yeah, that is real understandable.

    And my $0.02, people who are so financially irresponsible or ignorant to need unregulated 40+% loans should not be able to get them. They will never ever get out of that hole, only dig themselves deeper with each successive instance.

  • Report this Comment On June 10, 2011, at 7:10 PM, mm5525 wrote:

    I don't know, sir. Last time I closed on a loan, I confirmed the property address and other pertinent personal information, confirmed the fixed rate, made sure the loan did not include escrows, checked the ammortization table, checked for no prepayment penalty, and I then, ummmm, paid my mortgage as agreed thereafter. Let's not make it more difficult than it really is.

    Fear not, with this new Financial Consumer Protection Bureau, the financially irresponsible will not get loans at all. Oh how happy the likes of Elizabeth Warren will be.

  • Report this Comment On June 10, 2011, at 7:52 PM, rd80 wrote:

    I guess however many agencies regulate banks now isn't enough. The thinking appears to be x agencies wasn't enough, but x+1 will do the trick. Let's add another agency.

    Insanity - trying the same thing over and over again expecting different results.

  • Report this Comment On June 10, 2011, at 9:11 PM, skypilot2005 wrote:

    Currently, The Fool has an article by Lomax singing the praises of stockholder proposals that are supported by just 30% of shareholders. Housel’s positions are always left of center.

    I feel The Fool is being used by the White House via the CFPB. I hope they don’t morph into being a CNN – Huffington Post hybrid.

    I’d like to see them stay out of politics all together. Politicians are famous for using others to advance their agendas.

    We’ll know it’s all over when they have Al Franken start writing columns.

    Seriously, I hope they stay away from politics and stick with what they are good at.

    Sky Pilot

  • Report this Comment On June 10, 2011, at 9:14 PM, skypilot2005 wrote:

    June 10, 2011, at 7:52 PM, rd80 wrote:

    "I guess however many agencies regulate banks now isn't enough. The thinking appears to be x agencies wasn't enough, but x+1 will do the trick. Let's add another agency.

    Insanity - trying the same thing over and over again expecting different results."

    Ditto

    Sky Pilot

  • Report this Comment On June 10, 2011, at 9:21 PM, skypilot2005 wrote:

    June 10, 2011, at 4:45 PM, buffalonate wrote:

    "mm5525, you are an idiot."

    You really make your case. Top-notch intellect. Very well spoken. Don’t waste out time.

    Sky Pilot

  • Report this Comment On June 10, 2011, at 9:32 PM, vidar712 wrote:

    @rd80

    Don't be ridiculous.

    This isn't insanity.

    It is insanity + 1.

    I hope the Republicans do filibuster. As long as Congress is wasting time, they aren't making things worse.

    @mm5525 - I bet you were very upset when credit card companies had to list offers in a standardized format. That one page with all the useful information on it, that must make your blood boil.

    If I had the opportunity to choose between having the same information in two pages, or spread over 50 pages, I'm going to choose the two pages. But, if I was a mortgage lender for many years, and I was used to the paperwork being filled out in a certain way, I would choose the traditional model because that is what I would be comfortable with.

    I think idea of condensing the information into two pages would take away the 'It's too much to read, so I just signed it. Boo-hoo.' excuse.

    Many of your criticisms you bring up are not referenced in the article, (Or, maybe they are and my reading comprehension is down today) you must be pulling information from other sources. I believe this difference in information is causing the 'discussion' with other posters.

  • Report this Comment On June 10, 2011, at 9:36 PM, vidar712 wrote:

    @skypilot2005 9:11 PM

    You are wrong. It will all be over when Geraldo Rivera writes an article on the Motely Fool giving away our upcoming troop movements.

    :p

  • Report this Comment On June 10, 2011, at 9:51 PM, 76GT77 wrote:

    @Vidar712

    The 50+ pages of mortgage legalese are the result of government regulation (most forms were designed by FNMA/FHLMC). The Truth-in-Lending Act was supposed to make it easier for borrowers to understand the cost of credit. It only confused most borrowers. The new Good Faith Estimate was supposed to make things clearer, it hasn't. IMO, the CFPB will design new forms to explain the other existing forms, which will only add to the confusion.

    The old adage that "a horse designed by committee/bureaucracy is a camel" is applicable here.

  • Report this Comment On June 10, 2011, at 10:07 PM, whereaminow wrote:

    Before I get to the meat of this article, let me ask the authors about this particular line:

    "Prior to the formation of the FDA, it was common for "drugmakers" to sell snake-oil or rat poison and call it aspirin. Because consumers didn't have access to the information they needed -- "what ingredients go into this product?" -- it was impossible for them to make an informed decision before purchasing said product."

    What in the heck are you talking about? It was COMMON?? What is your definition of common? How many "drugmakers" were found guilty of this practice? Where were they prosecuted? What are the dates of the cases? How many people were injured?

    Present some evidence to back up this insane claim, which apparently is meant to justify an agency that routinely uses SWAT teams to terrorize honest producers of products that compete with the FDA's big business partners.

    Then I'll take a look at the rest of this article.

    David in Qatar

  • Report this Comment On June 10, 2011, at 10:46 PM, Lynken wrote:

    Would you rather people be bogged down financially by loans they quasi-blindly accepted out of desperation or would you rather them be able to get a loan of some kind that they actually comprehend? Personally I want consumers, not debt-laden husks that would either default or take out another risky loan to pay off the first.

    Say what you will about personal responsibility. I'm sure that the vast majority of people you know in your circle may be of sound mind financially and don't have debt oozing out of their pores, but there are people out there that just don't any better.

    Consumers help drive this economy. Debts kill it.

  • Report this Comment On June 10, 2011, at 10:46 PM, TMFDiogenes wrote:

    "The 50+ pages of mortgage legalese are the result of government regulation (most forms were designed by FNMA/FHLMC). The Truth-in-Lending Act was supposed to make it easier for borrowers to understand the cost of credit. It only confused most borrowers. The new Good Faith Estimate was supposed to make things clearer, it hasn't."

    If you're opposed to all that garbage, then you should be okay with simplified, streamlined disclosure forms, which is what Warren is proposing.

  • Report this Comment On June 10, 2011, at 10:55 PM, TMFDiogenes wrote:

    To the "not another agency" point.

    Currently consumer protection is spread out among several different banking regulators, none of whom particularly care about it because they're concerned much more with bank health or bank profits.

    The idea of the CFPB is to streamline gov't by consolidating all of those functions into one agency so that it does a more effective job.

    To the numerical point, Dodd-Frank puts the OTS out of its misery, so actually the number of banking regulators doesn't change. (I might be okay with dissolving the OCC too because it's basically a lobbyist for Wall Street -- the previous head was literally a former lobbyist --, but that's another story.)

    In theory, to me, the idea of more streamlined and effective gov't and more fair and competitive markets should be something everyone, no matter their political ideologies, could get behind (except for plutocrats.)

    Ilan

  • Report this Comment On June 10, 2011, at 11:09 PM, TMFDiogenes wrote:

    "Would you rather people be bogged down financially by loans they quasi-blindly accepted out of desperation or would you rather them be able to get a loan of some kind that they actually comprehend? Personally I want consumers, not debt-laden husks that would either default or take out another risky loan to pay off the first. "

    That's my take too. I'm for better outcomes.

    For those who have a gut instinct that it's something the gov't is doing so it has to be bad, I'd suggest checking out their first attempt at a form. To me, it looks like they're trying to cut through red tape by making a form that's better than the status quo of 50 pages of gov't-mandated legalese:

    http://www.consumerfinance.gov/wp-content/uploads/2011/05/di...

    Some politicians have been spreading a lot of bs about her, but Warren is a major believer in free markets, if that's your concern. Here's her speaking at an event I attended a few years ago that might change your mind:

    http://www.youtube.com/watch?v=gVuR10C2eCo

    Ilan

  • Report this Comment On June 10, 2011, at 11:17 PM, TMFBoiseKen wrote:

    Just wanted to say that this may be the best move of Obama's first 4 years. Elizabeth Warren has my trust and support. She is up against very powerful interests and needs all the help she can muster.

    Thanks for the article.

  • Report this Comment On June 10, 2011, at 11:34 PM, TMFBrich wrote:

    @whereaminow,

    Our discussion of the FDA is as an analogy -- we're not interested in detailing the history of the agency.

    <<What in the heck are you talking about? It was COMMON?? What is your definition of common? How many "drugmakers" were found guilty of this practice? Where were they prosecuted? What are the dates of the cases? How many people were injured?>>

    Well, the period to which this analogy points is before laws were on the books. Muckraking journalists at the turn of the century exposed many fraudulent practices:

    Upton Sinclair's "The Jungle"

    "The Great American Fraud," published in Collier's magazine: http://www.museumofquackery.com/ephemera/oct7-01.htm

    "Nostrums and Quackery," by Arthur Cramp

    http://www.uh.edu/engines/epi2511.htm and http://books.google.com/books?id=AY_gAAAAMAAJ&printsec=f...

    -Brian Richards

  • Report this Comment On June 10, 2011, at 11:42 PM, whereaminow wrote:

    I'm going to add a couple more thoughts here.

    1. It always concerns me when an author has to include a lie in order to promote their point of view. In this case, concerning the formation of the FDA, it is perplexing, since it doesn't add or take away from the position. How and why the FDA was created has nothing to do with this article. The FDA was created in response to a Horse named Jim. If you don't know the story, please google it.

    2. I'm also wary fo Ilan's history. How can he claim to understand banking and be a protector of the little guy when he was one of TMF's top cheerleaders for the bailout?

    3. No matter how wonderful the CFPB and Warren look on paper, this agency will be like all others. They have no way of knowing if they are actually acting in consumers' best interest. At the end of the day, there is no profit and loss statement. There is no competition. They will resort to arbitrary measures backed by violence. They can't know what effect they are having. They won't know. Pundits will guess but they won't know either. The only way to know if you are using scarce resources in ways that consumers want is profit and loss.

    4. A free market supporter does not regulate the market.

    5. A free market supporter would understand that this entire fiasco was caused by government intervention. Namely the creation of a Soviet-like central planning agency called the Federal Reserve.

    6. The Federal Reserve already had regulatory power over every instrument banks created, and did nothing to stop these abuses. Yet, when they failed, their power actually grew, and the author of this article cheered that response.

    7. Separating power among regulatory agencies isn't any worse than the current situation, except that it makes it harder to roll back and abolish unnecessary agencies. Each of these agencies creates their own little fiefdom in which they seek out every monster, real or imaginary, in order to justify their insane budgets and grow their power.

    8. Even if you believe in the fairy tale of an all powerful and loving government, that somehow just can't stop these greedy capitalists from running amok despite the US government owning the most powerful military force in human history (welll almost, since they can't even pacify the Taliban, I don't know how powerful they really are - maybe they're just the most expensive.) The point is that we hear all the time about how the government just can't seem to take down these greedy bankers, yet who has all the guns? Perplexing, isn't it?

    9. There is another theory that is quite realistic and we see it in action all the time. Even if a regulatory agency begins with good intentions, the Capture Theory of Regulation, shows that eventually these selfless angels will go on to work for the companies they are regulating, and in turn, will lobby back to have regulations changed to work in the favor of those companies. This happens with every agency. Why will the CFPB be different? It won't.

    10. When the CFPB fails, and it will, the free market will be blamed. Bet on it.

    David in Qatar

  • Report this Comment On June 10, 2011, at 11:43 PM, TMFBrich wrote:

    Just want to say thanks for the great debate, everyone. @rd80, even though I'm in favor of Warren and the CFPB, I think yours is a strong critique.

    -Brian Richards

  • Report this Comment On June 10, 2011, at 11:48 PM, whereaminow wrote:

    Brian,

    Upton Sinclair wrote fiction. His novel, The Jungle, forced the closing of several meatpacking companies. They closed because consumers stopped buying their products. In other words, the market worked by enforcing the best kind of regulation: bankruptcy.

    In response, American meatpackers formed the AMA, in order to protect themselves and use regulation to keep out newer, more safe and consumer friendly competition. Government enforced regulation kept these old dogs alive. In other words, the government worked as it always does: it rewarded the rich at the expense of the consumer.

    In time, the CFPB will be no different.

    David in Qatar

  • Report this Comment On June 11, 2011, at 1:05 AM, TMFDiogenes wrote:

    @David

    I can honestly see both sides of the bailout argument. Given that the options were probably: Depression, or bailout, I chose bailout with the caveat that we break up the banks, reinstate Glass Steagall, impose safer capital standards, and clean up the derivatives market. I think that's a consistent position and the correct position. I argued desperately for cleaning up Wall Street post-bailout.

    http://www.fool.com/investing/general/2009/11/13/its-time-to...

    http://www.fool.com/investing/general/2010/04/28/nows-your-c...

    http://www.fool.com/investing/general/2010/05/17/61-senators...

    http://www.fool.com/investing/general/2010/06/08/the-end-gam...

    etc.

    "They have no way of knowing if they are actually acting in consumers' best interest. At the end of the day, there is no profit and loss statement. There is no competition. They will resort to arbitrary measures backed by violence. They can't know what effect they are having"

    Yes they can know, by asking them. There is competition -- it's called "democracy", as the cfpb head is appointed by the president who is elected by the electorate. You and I have a different definition of "violence" if you think that's what a 2 page mortgage disclosure form is. Yes they can know... by asking people. As noted, over 14,000 consumers have offered their feedback so far. They plan to do up to 5 iterations of the disclosure form based on feedback from consumers and industry before settling on the most streamlined form.

    "A free market supporter does not regulate the market."

    This is where we fundamentally disagree. I think a free marketer supports the breakup of the Standard Oil monopoly because it was anti-competitive. There is no Law of Nature that says free markets happen by themselves -- they are a social creation and sometimes require rules so that they can work.

    "The Federal Reserve already had regulatory power over every instrument banks created, and did nothing to stop these abuses. Yet, when they failed, their power actually grew, and the author of this article cheered that response."

    I've written a fair bit about the revolving door, but this is a fair point. I've not ripped on the Fed enough for their deregulatory streak.

    Separating power between different agencies can be a problem when regulators have to compete for banks' favor. Also, it can sometime mean less accountability and complicate the regulatory process.

    http://www.fool.com/investing/general/2010/06/17/the-giant-r...

    "The point is that we hear all the time about how the government just can't seem to take down these greedy bankers, yet who has all the guns? Perplexing, isn't it?"

    Not really. You'd be surprised how powerful lobbyists and campaign contributors can be.

    "Capture Theory of Regulation, shows that eventually these selfless angels will go on to work for the companies they are regulating, and in turn, will lobby back to have regulations changed to work in the favor of those companies"

    Yes. The world is an imperfect place, and this is a terrible, terrible problem that I try to ask officals about whenever I get the chance. I've heard some okay ideas, but no silver bullet yet. I still think it's better to have someone who's at least democratically elected in the mix than having no rules at all. The outcomes will hopefully be somewhat better than the robber barron era. But regulatory capture is a major problem. In a perfect world, my preferred solution would be less money in politics so that gov't better reflected the wishes and interests of the electorate, rather than totally dismantling the regulatory state and completely ceding market power to oligopolists. I'd be curious to hear what your solution would be and what you think would be the result.

    I'm seconding Brian. Thanks for the great debate, everyone. I'm glad it's on a pretty high level with good points raised on both sides and minimal name-calling.

    Ilan

  • Report this Comment On June 11, 2011, at 1:11 AM, whereaminow wrote:

    Ilan,

    If I just show you one argument to be a myth, will you consider that some other things you believe are false?

    "I think a free marketer supports the breakup of the Standard Oil monopoly because it was anti-competitive"

    This is a myth. Totally untrue. Facts prove this wrong. All monopolies exist because of government intervention. Every single one.

    Speaking of the situation that faced Standard Oil, Gabreil Kolko writes:

    "In 1899 there were sixty-seven petroleum refiners in the United States, only one of whom was of any consequence. Over the next decade the number increased steadily to 147 refiners. Until 1900 the only significant competitor to Standard was the Pure Oil Company, formed in 1895 by Pennsylvania producers with $10 million capital…. By 1906 it was challenging Standard’s control over pipelines by constructing its own. And in 1901 Associated Oil of California was formed with $40 million capital stock, in 1902 the Texas Company was formed with $30 million capital, and in 1907 Gulf Oil was established with $60 million capital. In 1911 the total investment of the Texas Company, Gulf Oil, Tide Water-Associated Oil, Union Oil of California, and Pure Oil was $221 million. From 1911 to 1926 the investment of the Texas Company grew 572 percent, Gulf Oil 1,022 percent, Tide Water-Associated 205 percent, Union Oil 159 percent and Pure Oil 1,534 percent".

    Standard Oil’s decline preceded the antitrust ruling against it in 1911, and was "primarily of its own doing – the responsibility of its conservative management and lack of initiative."

    Gabriel Kolko, Railroads and Regulation

    So now that we see that the Standard Oil story is a myth, are you willing to engage the idea that other stories we have learned about government regulation and intervention may also be bogus?

    David in Qatar

  • Report this Comment On June 11, 2011, at 1:38 AM, JamsDuke996 wrote:

    Great arguments on both sides. Apologize first for not doing much research on my comments. But, my first impression of FDA is though it does regulate drugs and food to make it safer. However, as pointed out it has grown so big and powerful, it doesn't know if it really is protecting the public. Too often FDA process of drug approval have become so cumbersome and time consuming, that mostly big corporations with big budgets have the time and money to get drug approved. Small players with potentially good products may not have the resources to go through all the bureaucracy.

  • Report this Comment On June 11, 2011, at 2:49 AM, ershler wrote:

    David in Qatar,

    "The only way to know if you are using scarce resources in ways that consumers want is profit and loss."

    Would you support abolishing the FDA so private companies could provide certifications for profit?

  • Report this Comment On June 11, 2011, at 3:45 AM, whereaminow wrote:

    "Would you support abolishing the FDA so private companies could provide certifications for profit?"

    As long as those certifications were not mandated by government and used to restrict entry into the field.

    David in Qatar

  • Report this Comment On June 11, 2011, at 6:52 AM, mcampbell8 wrote:

    Most companies are honest and do what's in the best interest of the business to gain customers and their loyalty. Those out to game the system and the consumer will be the big losers with the new agency and the American people.

    Businesses hire armies of lobbyist so they can craft laws that give them an advantage and hurt the consumers. Not all, just a few big bad apples pursue these tactics. Having a strong agency looking out for the consumer is a good thing.

    It doesn't take away from personal responsibility. In fact, it adds more personal responsibility on the side of the industries and provides easier to understand disclosures. For those who gain from a lack of clarity and understanding, it will be a bad thing.

  • Report this Comment On June 11, 2011, at 6:59 AM, skypilot2005 wrote:

    On June 11, 2011, at 1:05 AM, TMFDiogenes wrote:

    “Given that the options were probably: Depression, or bailout,”

    I believe this to be a false premise.

    **

    I’ll just let this statement speak for itself:

    "Never let a serious crisis go to waste. What I mean by that is it's an opportunity to do things you couldn't do before."

    White House Chief of Staff Rahm Emanuel in November, 2008.

    Sky Pilot

  • Report this Comment On June 11, 2011, at 7:15 AM, dbtheonly wrote:

    David,

    Your faith in the goodness & truthfulness of corporations is remarkable; as is your faith in libertarian theology.

    Do I really need to cite examples of corporations lying/misleading/defrauding the public? Does the name Enron mean nothing to you? How about thalidomide?

    Your arguments about the bailout are contra-factual & thus unprovable. We can never know what would have happened if Sec.Paulson & President Bush had not acted. Asserting the bailout was a hopeless failure is an act of faith equivalent to those most reserve for the Almighty.

  • Report this Comment On June 11, 2011, at 7:34 AM, whereaminow wrote:

    dbtheonly,

    "Your faith in the goodness & truthfulness of corporations is remarkable; as is your faith in libertarian theology."

    Thank you for resorting to condescending argumentation. This merely serves as evidence that you have no understanding of my position.

    Corporations are created through a political act and their limited legal liability is granted by the state.

    The original corporations were businesses owned and directed by European government officials. They, of course, ran these entities into the ground, so they conveniently rewrote laws to limit their own liability. Thus, you have the birth of the corporation.

    I hope this helps your understanding of how government intervention in the economy creates and exacerbates the problems that you have identified.

    David in Qatar

  • Report this Comment On June 11, 2011, at 9:02 AM, broadmoor wrote:

    mm5525,

    Your boy, Adam Smith, is tied at the waist to my man, Thomas Hobbes. There is no way that the CRA forced banks to lend money to people who couldn't pay it back. Read Michael Lewis' "The Big Short", or, just think for a zeptosecond, and ponder how those who, supposedly, are not unsophisticated, or dumb, found themselves in possession of massive numbers of subprime loans, or derivative collections of same, nearly destroying the world economy, then say that the naive, or stupid, deserve to be financially fleeced.

  • Report this Comment On June 11, 2011, at 9:26 AM, jacksprat1 wrote:

    The Consumer Financial Protection Bureau is simply about leveling the playing field. Why should big financial institutions that have a monopoly in the market place? Of course, if you are a bank president and not a consumer, a level playing field is not such a great thing.

  • Report this Comment On June 11, 2011, at 10:00 AM, Bert31 wrote:

    The last thiing the Federal Government needs is ANOTHER agency. I am all in favor of protecting consumers but there are already a FTC consumer protection agency. Why does this President insist on installing czar's over every sector of the economy? There are already way to many inefficiencies and overlap in responsibilities.

  • Report this Comment On June 11, 2011, at 10:14 AM, Bert31 wrote:

    "For example, the CFPB recently boiled down the 50-page "mice print" legalese in mortgage disclosure forms into a clearer, two-page layout, so that consumers and lenders can both better understand what they're agreeing to. The agency has collected 14,000 (and counting) comments for how to improve on these agreements further on its "Know Before You Owe" website."

    Yup thats right, maybe we can turn its attention to obamacare and Dodd-Frank to reduce the number of pages in those bills

  • Report this Comment On June 11, 2011, at 10:21 AM, Bert31 wrote:

    "Fair lending rules" will mean you can not deny a loan to someone with a lower credit rating, or require a higher interest rate. This will be considered discrimination under the rules and punished with fines.

  • Report this Comment On June 11, 2011, at 10:22 AM, rd80 wrote:

    Is there any provision giving the banks immunity from civil or criminal action if there's some important piece of information that isn't on the CFPB 2-page form?

    Does the CFPB have liabilty if its actions wrongfully cause harm?

    Will use of the two page form mean an accelerated foreclosure process in the event of default since, by design, there can't be any argument that the borrower didn't understand the terms?

  • Report this Comment On June 11, 2011, at 10:24 AM, Bert31 wrote:

    "Fair lending rules" = discrimination based on credit score will be punishable with fines.

  • Report this Comment On June 11, 2011, at 10:26 AM, Bert31 wrote:

    rd80 no in fact the rules make it easier for borrowers to SUE lenders to get out of mortgages

  • Report this Comment On June 11, 2011, at 10:42 AM, Bert31 wrote:

    But hey the lawyers should make out well!

  • Report this Comment On June 11, 2011, at 10:42 AM, Bert31 wrote:

    and community organizations

  • Report this Comment On June 11, 2011, at 11:09 AM, TMFDiogenes wrote:

    "Will use of the two page form mean an accelerated foreclosure process in the event of default since, by design, there can't be any argument that the borrower didn't understand the terms?"

    That's not the main issue that's screwing up the foreclosure process -- it's that originators cut corners in the securitization process to save a few pennies and now title is unclear.

  • Report this Comment On June 11, 2011, at 11:12 AM, TMFDiogenes wrote:

    @David,

    To clarify, you're opposed to the legal existence of corporations because they're government-chartered entities?

  • Report this Comment On June 11, 2011, at 11:20 AM, dbtheonly wrote:

    TMFDiogenes,

    Exactly right. Title of foreclosed &"foreclose-able" property is unclear.

    I've been trying to raise the issue of what that means for bank's "book value" but have been ignored. It's an honest question, If banks don't know what they own, i.e. "title is unclear" how can they carry those properties on their books & value them accurately?

    rd80,

    Once adopted, the CFPB form would become the community standard, & use of it would not be negligent.

  • Report this Comment On June 11, 2011, at 11:23 AM, skypilot2005 wrote:

    On June 11, 2011, at 9:02 AM, broadmoor wrote:

    "mm5525,

    Your boy, Adam Smith, is tied at the waist to my man, Thomas Hobbes. There is no way that the CRA forced banks to lend money to people who couldn't pay it back. Read Michael Lewis' "The Big Short", or, just think for a zeptosecond, and ponder how those who, supposedly, are not unsophisticated, or dumb, found themselves in possession of massive numbers of subprime loans, or derivative collections of same, nearly destroying the world economy, then say that the naive, or stupid, deserve to be financially fleeced. "

    Do you feel the Government’s requirement that banks had/have to report the race and gender of mortgage loan applicants, among other things, was/is a from of coercion intended to force a desired result? I do.

    Is this something we want the government to do?

    Where does it stop? Who decides where it stops?

    Sky Pilot

  • Report this Comment On June 11, 2011, at 11:31 AM, caltex1nomad wrote:

    The SEC was created in the aftermath of the Crash of 1929 when it was discovered a handful of Money Men had been manipulating the market thus causing a domino effect and crashing the economy. The SEC is not perfect but, it does help. I'm willing to give the CFPB a shot but, there is no excuse for ignorance. Consumers need to be more responsible and stop expecting to have a Babysitter for everything in life.

  • Report this Comment On June 11, 2011, at 12:18 PM, lw67 wrote:

    Makes one wonder who the GOP wants 2 protect. It doesn't look like the consumer 2 me. Why should a business B allowed 2 screw a consumer just because they can HIDE some off the wall rule that does just that. It's clear 2 me that what we had before didn't do the job and if anyone is afraid of Warren well so B it. Clear,plain & simple makes sense 2 me on any loan. Anyone that doesn't see it that way is a crook or an idiot. U figure Out Which U Are.

  • Report this Comment On June 11, 2011, at 1:02 PM, broadmoor wrote:

    "Do you feel the Government’s requirement that banks had/have to report the race and gender of mortgage loan applicants, among other things, was/is a from of coercion intended to force a desired result? I do."

    Mr. Burdon,

    Of course it was. It was intended to end red-lining, to yes, coerce banks to lend money to people in neighborhoods which were, at best, being ignored. Unless you would like to maintain that there were no qualified loan applicants in those areas, and, that the poor brokers and loan officers were, on a grand scale, hoodwinked by the financially sophisticated residents of these communities, there is no way any money had to be lent to applicants unable to make their payments. Those decisions were made by the banks, and the reason they could was because there were no regulations in place to prevent subsequent packaging and selling.

    "Is this something we want the government to do?"

    This is the philosophical question. Is it fair to ask whether discrimination exists, and if so, does the Federal Government have the right to attempt to redress it? Libertarians have to say "no".

  • Report this Comment On June 11, 2011, at 2:07 PM, Bert31 wrote:

    This is redistribution of wealth. Its a heads I win, tails you lose proposal. A borrower can get out of a loan that they agreed to, but a lender can not enforce the terms agreed to. Is it good for the consumer? Of coures it is. Is it ethical? NO. And THAT is the philisophical question.

  • Report this Comment On June 11, 2011, at 2:13 PM, Bert31 wrote:

    "The idea of the CFPB is to streamline gov't by consolidating all of those functions into one agency so that it does a more effective job."

    So you are in favor of reducing the size/number of federal agencies? Are other agencies going to shut down? Which ones?

  • Report this Comment On June 11, 2011, at 2:50 PM, ETFsRule wrote:

    "This is redistribution of wealth"

    No, it's just a plan to make consumer agreements more open and transparent. This is explained in the article.

    "So you are in favor of reducing the size/number of federal agencies? Are other agencies going to shut down? Which ones?"

    Obama is working to eliminate a number of gov't agencies in order to reduce waste and increase the efficiency of the gov't. Some info:

    http://www.govexec.com/dailyfed/0111/013111rb1.htm?oref=rell...

    http://www.govexec.com/story_page.cfm?articleid=47967&dc...

    http://www.ignet.gov/randp/cigieinttrade0511.pdf

    http://www.americanprogress.org/issues/2010/12/pdf/competiti...

  • Report this Comment On June 11, 2011, at 4:00 PM, steveG1967 wrote:

    My doctorate is in game design, and the problem is less with those trying to create rules and more with those seeking to skirt the rules. The creativity applied in skirting laws invokes a series of series of patches and plugs to fix it - factor in politically lobbied loopholes - and you have a mess.

  • Report this Comment On June 11, 2011, at 4:14 PM, skypilot2005 wrote:

    On June 11, 2011, at 1:02 PM, broadmoor wrote:

    "Mr. Burdon,"

    Who is Mr. Burdon"?

    You lost me there.

    Sky Pilot

  • Report this Comment On June 11, 2011, at 4:52 PM, skypilot2005 wrote:

    June 11, 2011, at 1:02 PM, broadmoor wrote:

    "Of course it was. It was intended to end red-lining, to yes, coerce banks to lend money to people in neighborhoods which were, at best, being ignored. Unless you would like to maintain that there were no qualified loan applicants in those areas, and, that the poor brokers and loan officers were, on a grand scale, hoodwinked by the financially sophisticated residents of these communities, there is no way any money had to be lent to applicants unable to make their payments. Those decisions were made by the banks, and the reason they could was because there were no regulations in place to prevent subsequent packaging and selling"

    Are you familiar with the history of Credit Unions?

    Sky Pilot

  • Report this Comment On June 11, 2011, at 5:52 PM, LAVol wrote:

    The supposed intent of the agency is good. But, show me one, just one, government agency/department that has been in existence for more that 20 years that has maintained the initial intent and done more good than bad. You can't. There isn't one. Not one. For every positive you give, I'll show you 10 negatives. More government is NEVER the answer. It's the problem. Those of you that point to the banking crisis need to look at what caused the crisis. It was Congress! Not the banks. The banks/lending institutions were encouraged, mandated to make home loans to people who could not afford it, and Congress then instituted accounting standards (mark-to-market) which should never have been applied to long-term performing loans, and that's in a nutshell what caused the banking meltdown. It really is that simple. Remember Chris Dodd, earlier this year, when asked why banks should not require a down payment of 10% responded: "If we did that, then the only people who could buy homes would be the people who could afford it." DUH! We have complete idiots making laws and policies that only serve their political interests and not those of the majority of Americans. Fool on.

  • Report this Comment On June 11, 2011, at 5:53 PM, Tsinky wrote:

    A free market supporter regulates the market. For a free market to thrive, it must have regulations agreed upon by all parties (including those pesky consumers) and fairly and vigorously enforced. That enables all the players to have a level playing field. That gives consumers confidence in business, which is good for both. That protects business from unscrupulous competitors whose transgressions would give them an unfair edge over the good guys and would shake consumer confidence in the entire industry if a third party did not exist to police them.

    Breakdowns in the enforcement of those regulations occur sometimes because the regulations are flawed and other times because the people charged with writing and enforcing the regulations are flawed. Anytime you involve human beings in an endeavor, mistakes will be made. It's still better to have rules written, adopted, and enforced by human beings than to have no rules at all.

    A free market supporter would understand that this entire fiasco was caused in part by greedy people who created indecipherable financial instruments in an unregulated market; in part by builders who built far too many houses (a problem that was exacerbated when banks started foreclosing on home mortgages en masse); in part by regulators and policymakers who were asleep at the switch; and by other factors.

    To assume TMF is in the tank for the Obama administration ignores the possibility that they might be right.

    "The Jungle" is fiction. So is "Atlas Shrugged."

    Finally, kudos to the Motley Fool writers for their respectful treatment of all those who have posted here.

  • Report this Comment On June 11, 2011, at 7:10 PM, broadmoor wrote:

    "The banks/lending institutions were encouraged, mandated to make home loans to people who could not afford it,"

    Many people like to talk about quotas when discussing government actions which are designed to correct perceived social ills. Well, after passage of the CRA, if the banks really didn't want to make these loans, why didn't they just contact their friends in Congress and learn away with how few of them they could get? Oh, sorry, how could I forget that those institutions have no influence at all in Washington, and no friends there? It is of course also inconceivable that an avenue might just have been found to increase profits by lending to those who couldn't pay--again, "The Big Short".

  • Report this Comment On June 11, 2011, at 7:37 PM, CFADude11 wrote:

    Unfortunately, looks like we're doomed to the jackboot heel of St Elizabeth...

    Ultimately, the big banks will be fine - they will simply pass the costs on to folks they used to pay to use their products (coming soon: lower rewards, more fees, minimum balance requirements, etc.)

    Sure, the lower and middle class will know how much credit costs them - when they can get any. The true losers in this will be the lower standard of living they enjoy, along with the general economy, due to the lack of credit because it won't be profitable to offer them any below certain credit levels with federal maximum rates, and no penalty rates or fees.

    And please spare me the fiction of how this is about "transparency". I challenge anyone to look at a current regulated finance contract and not be able to tell what rate you're getting. You have to be blind because it's currently printed out in 60 pt. font thanks to existing regulations.

    Ah well, I'm comforted by the fact that it's a cycle, so the next administration will undoubtedly look to cut this boondoggle of an agency with the economy and budget issues they inherit.

  • Report this Comment On June 11, 2011, at 8:01 PM, Bert31 wrote:

    The CFPB will have a single director with virtually limitless regulatory power that is not accountable to congress, the president, or even the federal reserve, with the power to punish what it deems "abusive" business practices involving any financial product or service. The intervention and interpretations are endless and most certainly is a way to redistribute wealth. I know what the article says, but I am referring to what it doesn't say but should.

  • Report this Comment On June 11, 2011, at 9:51 PM, TMFDiogenes wrote:

    False. The CFPB has to follow the same laws concerning rulemaking as other regulators Moreover it can be overruled by a 2/3 majority of the other bank regulators. That's actually pretty unusual.

  • Report this Comment On June 11, 2011, at 9:56 PM, TMFDiogenes wrote:

    The reason this is is significant is that some of those regulators have traditionally placed a greater emphasis on bank profits than consumer protection. So it doesn't have "virtually unlimited power" -- you could make the case it's less powerful than the other bank regulators.

  • Report this Comment On June 11, 2011, at 10:26 PM, whereaminow wrote:

    This is still a very interesting discussion. Ilan, I'd like to answer this question:

    "@David,

    To clarify, you're opposed to the legal existence of corporations because they're government-chartered entities?"

    Absolutely, but to be more accurate, I'm opposed to the existence of a monopoly power (the state) that claims the absolute authority to use force.

    I'm going to break into some philosophy here, and explain why it is that libertarians and the Left have not been able to find common ground despite their common opposition to the militarism and police statism that is growing in America.

    The Left of today is not your father's Left. Today's Left are Nationalists. They believe completely in the ability of government to promote social change, but ONLY if it is the National Government. There will be no separation of powers with competing sovereigns. No states rights. No individual rights. (In a libertarian society, the individual is sovereign.) There will be no compromise. The proper term for this type of Nationalism is Etatism.

    Curiously, to use an analogy, the Left loves the peach tree but it hates the peaches it delivers. The peaches would be big business, war, and the loss of civil liberties. That is what the national government gives you. I always crack up when a Leftist tells me that he hates corporations but he loves the federal government. Corporations can only exist with a government. They are a necessity, because the government needs to be able to pick winners and losers in the market place. One way to do that is through the use of legal tricks.

    Many people here are confused about what a free market actually is. A free market is simply the sum of the voluntary transactions of market actors who exchange goods and services. That's it. Why you would feel the need to regulate that from an imperial capital, and somehow think that this will work and that 309 million people will cooperate, is beyond me.

    Elizabeth Warren is no selfless, omnipotent, angel. She is, like most everyone in government, possessed with psychopathic narcissism to think that her way is so correct that 309 million people need to line up and do it her way or else she will fine or jail them.

    It is a strange position to be in. Many people here are only looking at the impact on the banks. And certainly, I am no friend of the fractional reserve banking cartel headed by the Federal Reserve. But the other element is the consumer. I find it hard to understand why people think that regulating what the consumer will purchase, and by how much, is in the best interests of the consumer. How can you possibly know what is in the consumer's best interest. The consumer is me and you and your brother and sister and neighbor. Can you read inside our minds? Can you know what is always best for us? Or perhaps you think that we are mindless rubes that will all walk off a cliff if you don't post a guard on every one.

    Economics is about incentives. If you don't understand the incentives that placed the housing market in the current predicatment (cheap credit from the Fed that fueled a speculative bubble), then how you can possible think you will fix it? Elizabeth Warren has not shown me any understanding of business cycle theory or the role fo the central bank in the economy. Yet, I am supposed to believe that she will work in my best interest to regulate these entities?

    Don't you find that point of view to be just slightly naive?

    David in Qatar

  • Report this Comment On June 11, 2011, at 10:29 PM, rfaramir wrote:

    Ilan: "You and I have a different definition of 'violence' if you think that's what a 2 page mortgage disclosure form is."

    Try NOT using that 2 page form and staying in business. If you decline to pay the government agency's penalties, they WILL use violent force against you.

    The State IS force. That's why its participation in the market makes it not free and therefore not efficient and not moral.

    It will take a long time to get back the liberties we've lost. It will take forever if we keep adding more government agencies.

  • Report this Comment On June 12, 2011, at 1:10 AM, LongTime108 wrote:

    The greatest threat to the nation is not that we don't have enough regulators but that government spending is way too large a proportion of GDP to have a healthy economy. To add more spending, for ANY purpose, compounds the problem. From 1790 to 1930 spending was about 3% of GDP on average (excepting some blips like the Civil and First World Wars). During that period we absorbed millions of immigrants, many who were not educated and were not English speakers. Now, with government spending approaching 25% we are not creating jobs, even with massive government spending.

    The economics are easily grasped but first it must be understood that not all work creates new wealth. Government spending, especially transfer payments, is consumptive, not creative. Here is an example to explain. Imagine you have a factory making widgets and you have 10 employees. One day you decide that someone may want to steal your widgets so you assign 1 worker to stand by the door as a guard. The next day you decide that it would be good if 1 worker was assigned to handle correspondence and bookkeeping. Later, they say that they are overwhelmed and need help, so you assign another worker to assist them. Now only 7 workers produce widgets (new wealth), 3 are overhead (consumption without creating new wealth) and you are hard pressed to pay your bills. At the same time there are 4 workers in the street that would like to work for you, and that you would like to hire, but you are not producing enough NEW wealth to pay for the expansion.

    I am not surprised that people in government and academia don't understand this because it is beyond their experience to create new wealth; all the money they get, and the good things that flow from it, was created by someone else. I am amazed though, that a Fool wouldn't see government expansion in this light. But then again, those of us who trade in stocks don't create anything new either, but we do feel entitled to the fruits of our gains. In our pursuit of lucre we should take care to learn the wisdom of eating the eggs but not the goose. It is the responsibility of financial analysts and reporters to understand and articulate these truths.

    For a look at the income statement and balance sheet of the US Government (with historical data and trends going back to 1790) go to http://www.kpcb.com/usainc/ You will be impressed by the depth and quality of the report (analysts who produce this kind of work get made partner;-).

    If your well being is affected by the condition of the US economy, and that's most of us, you have a stake in seeing the government move toward positive cash flow. I suspect this is the last thing on Elizabeth Warrens mind, but it should be on yours.

  • Report this Comment On June 12, 2011, at 2:21 AM, CFADude11 wrote:

    If this is such a positive for the industry, why will financial stocks tank the day that this monstrosity actually launches?

    Ilan, what experience do you actually have in the financial industry? Some of your fawning comments about Warren's qualifications and assumptions about how this new agency will make everything better are well, quite naive.

    My business deals with multiple regulators and not only are they currently passing all sorts of new mandates that were never voted on by anyone, they have shown very little consistency or alignment. I know this will be yet another agency passing out mandates that contradict the other ones', and then it becomes a real crap shoot figuring which one's rules to obey and which one to disobey, because you're going to get sued and the courts will end up sorting it out.

    The consumer financial industry is already highly regulated, contrary to the PR being pumped out by the CFPB supporters...

  • Report this Comment On June 12, 2011, at 6:38 AM, wvowell wrote:

    Just read this article. I'm hoping that Motley Fool is not becoming political. And in particular hopefully not becoming an endorser of bigger intrusive gov't. This agency has all the makings of becoming a massive intrusive gov't agency like the EPA.

  • Report this Comment On June 12, 2011, at 6:44 AM, skypilot2005 wrote:

    June 10, 2011, at 11:34 PM, TMFBrich wrote:

    “@whereaminow,

    Our discussion of the FDA is as an analogy -- we're not interested in detailing the history of the agency.

    <<What in the heck are you talking about? It was COMMON?? What is your definition of common? How many "drugmakers" were found guilty of this practice? Where were they prosecuted? What are the dates of the cases? How many people were injured?>>

    Well, the period to which this analogy points is before laws were on the books. Muckraking journalists at the turn of the century exposed many fraudulent practices:”

    Is anyone else concerned about Motley Fool writers posting unidentified analogies with insufficient explanation? As a reader, I am.

    Sky Pilot

  • Report this Comment On June 12, 2011, at 7:26 AM, skypilot2005 wrote:

    To: Brian Richards and Ilan Moscovitz:

    Please note that I was reading your piece and briefly double-checked my Brower’s address bar thinking my computer had been high jacked and redirected to a Liberal Blog.

    Since The Motley Fool is taking an active advocacy position on this important political issue:

    Please identify who “all-hands” are from this sentence: “During an all-hands meeting of the brand-new Consumer Financial Protection Bureau on Wednesday morning, Elizabeth Warren had an epiphany.” It’s not clear. Does that include White House operatives?

    In the interest of full disclosure to your readers, I think you should disclose the following:

    How many trips to the White House have there been by Motley Fool personnel?

    What types of conversations did they have with the White House before and after the trips?

    Is The Fool’s entrance in the political arena something we can expect to continue?

    Is a portion of the money we pay towards Premium Services being used for this activity?

    If we ask for a refund of the money we paid for Premium Service(s), is it prorated?

    What are the positions of the advertisers that appear on The Motley Fool’s website in regard to this issue? This piece currently runs/ran in the most prominent position of any of your articles. Unless disclosed otherwise, one may assume they implicitly support the Motley Fool and your support of the White House on this issue.

    How many visits to the White House in support of the creation of new Agencies did personnel from The Motley Fool make during the Bush administration?

    Does the Motley Fool have a position on the existence of the EPA? How about the war in Iraq? You see what I mean? It’s a “Slippery Slope”….

    That’s just me. I am just a Premium Advice Services paying loyal Fool and have been recommending your website for many years. I hope that doesn’t turn out to have been bad advice.

    I can envision a call from someone I recommended The Fool to going something like this:

    “Sky Pilot, I thought The Motley Fool website was going to be a resource to help me financially not indoctrinate me, politically…………”

    Sky Pilot

  • Report this Comment On June 12, 2011, at 7:35 AM, piinob wrote:

    If profit and loss are the only indication of success, what does the profitability of Moodys, S&P et al tell us. Especially after the CEO's of each, testified under oath, that they did not bother to actually evaluate the quality of the thousands upon thousands of AAA rated mortgages they turned out.

  • Report this Comment On June 12, 2011, at 7:56 AM, whereaminow wrote:

    piinob,

    Take a closer look at those ratings agencies and you'll see that they operate as part of a government-enforced cartel that keeps out possible competitors. So that's what you are stuck with. It's kind of funny too, since these agencies have to bite the hand that feeds them when they downgrade certain prominent US companies or say, the US debt rating. That could explain why they are so hesitant to do so.

    In other words, listen to them at your own peril.

    David in Qatar

  • Report this Comment On June 12, 2011, at 8:30 AM, richsue3 wrote:

    Another BLOATED goverment agency is born. More of my money being taken to secure the knowledge that government KNOWS BEST. We already have a credit agency that is not doing it's job, a regulator staff that is not doing their job, a security force that is incompetent in closing our borders, etc. I could go on but this is what happens when the majority of the populace EXPECTS govenment (us taxpayers) to babysit them through life after mommy and daddy already paid big bucks to send them to college.

    The ill informed just ride along with no real incentive to LEARN.

  • Report this Comment On June 12, 2011, at 9:22 AM, TMFBrich wrote:

    @skypilot2005,

    We've tried to not make this a political issue, but yes, in the larger national conversation about the CFPB, it is a liberal cause. Because Obama supports it and we do as well doesn't mean we're a "Liberal Blog."

    I'll handle your questions in a moment. First, let me say that the nature of the Motley Fool is that we celebrate being motley -- so there's no general Fool viewpoint to be advanced, no top-down editorial mandate, etc. That's why we take different opinions on the same stocks, industries, gov't actions, etc. Second, this column is the viewpoint/opinion of me and Ilan. Tom and David Gardner, or other Fool employees, may or may not feel the same way about the CFPB.

    Now:

    <<Please identify who “all-hands” are from this sentence: “During an all-hands meeting of the brand-new Consumer Financial Protection Bureau on Wednesday morning, Elizabeth Warren had an epiphany.”>>

    Warren relayed this story of the all-hands meeting (we weren't actually present at said meeting). It was among CFPB staffers.

    <<How many trips to the White House have there been by Motley Fool personnel?>>

    Two. This one, which was a policy briefing/q&a, and we were part of the 20-25 journalists present (other sites included Yahoo! Finance, Business Insider, The Economist, Morningstar, etc.). The other trip was when we took Fool reader questions (asked in the comments section of an article) and asked them of Austan Goolsbee: http://www.fool.com/investing/general/2009/10/16/report-from....

    If you're implying that TMF writers are never critical of White House policy, though, you'd be wrong. A few samples: http://www.fool.com/investing/general/2010/09/08/abominable-...

    http://www.fool.com/investing/general/2009/10/29/the-daily-w...

    http://www.fool.com/investing/general/2010/01/22/obamas-glas...

    <<What types of conversations did they have with the White House before and after the trips?>>

    We are hoping to get senior governmental officials made available to do things like live chats and Q&As to answer our readers' questions, similar to what we did with Treasury in 2009:

    http://www.fool.com/investing/general/2009/10/26/ask-the-us-...

    http://www.fool.com/investing/general/2009/10/27/the-treasur...

    <<Is The Fool’s entrance in the political arena something we can expect to continue?>>

    Look, we think the CFPB makes sense. The comments in this thread make excellent points both for and against it.

    <<Is a portion of the money we pay towards Premium Services being used for this activity?>>

    What "activity"? Attending a Personal Finance Online Summit with 20-25 other online organizations?

    <<If we ask for a refund of the money we paid for Premium Service(s), is it prorated?>>

    Yes.

    <<What are the positions of the advertisers that appear on The Motley Fool’s website in regard to this issue? This piece currently runs/ran in the most prominent position of any of your articles. Unless disclosed otherwise, one may assume they implicitly support the Motley Fool and your support of the White House on this issue.>>

    We have great advertising partnerships. Drawing the line from "appears on the side of this article" to "supports our viewpoint" is a stretch. We didn't discuss the topic of this article with any advertisers -- just as we never do with any article, be it about CFPB or Apple's iPad's or why we believe stock XYZ is a good value at today's prices.

    <<How many visits to the White House in support of the creation of new Agencies did personnel from The Motley Fool make during the Bush administration?>>

    I started at TMF in 2005. From 2005 through the end of Bush's time in office, we were never invited to discuss any of his policies or initiatives. Had we been, we gladly would have accepted. Obama's team has invited us twice -- last week, which we discuss in this article, and the link above when took reader questions and asked them of Austan Goolsbee.

    <<Does the Motley Fool have a position on the existence of the EPA? How about the war in Iraq? You see what I mean? It’s a “Slippery Slope”….>>

    Again, the opinions expressed in this column are not "the Fool's" opinion, but me and Ilan's.

    -Brian Richards

  • Report this Comment On June 12, 2011, at 9:29 AM, LatifK wrote:

    I think all you free wheeling capitalist need a xanax and take a wait and see approach to this.

    Deregulation of EVERYTHING from allowing leveraged speculators into the staple commodities market to the gutting of the Glass Steagull act has been done at the alter of Laissez-faire economics.

    This brings us to today. A nation where innovation has stagnated in all but the areas of financial wizardry and weapons of mass destruction.

    This country needs to retool itself for the next century if it is to remain relevant on the world stage. A part of that retooling is clawing back some of those "freedoms" that were granted during the last 16 or so years of deregulation.

    Much like pandoras box, once some of these regulations have been incorporated into the economy, they can not simply be rolled back.

    The much needed counterweight for those circumstance is this kind of agency. One that fights for the interest of the masses. Not at all unlike the army of lawyers that fight tooth and nail to defend the interests of their patrons.

    We've tried it your way, and it has not helped the average Joe one iota. Now your going to have to suck it up and give us our chance to make amend the country anew.

  • Report this Comment On June 12, 2011, at 10:24 AM, skypilot2005 wrote:

    Brian, Thank You for your prompt reply in: On June 12, 2011, at 9:22 AM, TMFBrich wrote

    You stated, “That's why we take different opinions on the same stocks, industries, gov't actions, etc. Second, this column is the viewpoint/opinion of me and Ilan. Tom and David Gardner, or other Fool employees, may or may not feel the same way about the CFPB.”

    Do you know when the article against the establishment of the CFPB is going to appear? I am looking forward to reading it and comparing it against the information presented your and Ilan’s piece.

    Fool On,

    Sky Pilot

  • Report this Comment On June 12, 2011, at 11:12 AM, TMFHousel wrote:

    Skypilot2005,

    <<Do you know when the article against the establishment of the CFPB is going to appear?>>

    I'll add that you are more than welcome to write a rebuttal to this piece in a CAPS blog post.

    -Morgan

  • Report this Comment On June 12, 2011, at 11:19 AM, TMFHousel wrote:
  • Report this Comment On June 12, 2011, at 11:28 AM, Cicciano wrote:

    @whereaminow:

    You might be interested in the following Smithsonian article detailing present-day prescription drug counterfeiting in areas of the world without competent regulations:

    http://www.smithsonianmag.com/people-places/Prescription-for...

    cicciano

  • Report this Comment On June 12, 2011, at 12:12 PM, skypilot2005 wrote:

    On June 12, 2011, at 11:12 AM, TMFHousel wrote:

    “Skypilot2005,

    <<Do you know when the article against the establishment of the CFPB is going to appear?>>

    I'll add that you are more than welcome to write a rebuttal to this piece in a CAPS blog post.

    -Morgan “

    Not my Job. I don’t work for an organization who has “To Educate, Amuse and Enrich” prominently displayed on it’s website. I don’t see Political Advocacy Group there.

    I didn’t see “both sides” represented in the article. That is my concern.

    Sky Pilot

    One more skypilot,

    <<Housel’s positions are always left of center.>>

    I beg to differ:

    http://www.fool.com/investing/general/2009/07/02/dangerously...

    http://www.fool.com/investing/general/2009/10/29/heres-why-t...

    http://www.fool.com/investing/general/2009/10/12/the-biggest...

    Little “dated” aren’t they? 2009…. My memory isn’t what it once was. :)

    When I get a chance, I’ll take a look at your links. A cursory look at the titles reveals they were written in 2009.

    I’ll get back to you on this blog later. The weather is perfect here, today.

    Fool On.

    Sky Pilot

  • Report this Comment On June 12, 2011, at 2:01 PM, Bert31 wrote:

    "False. The CFPB has to follow the same laws concerning rulemaking as other regulators Moreover it can be overruled by a 2/3 majority of the other bank regulators. That's actually pretty unusual."

    They can veto only in certain circumstances, when the safety and the soundness of the entire U.S. banking system is in jeopardy. Not if if it violates current law, not if it is detrimental to a specific business, only if it would take down an entire banking system. Not exaclty the unusual amount of oversight you make it out to be.

  • Report this Comment On June 12, 2011, at 2:09 PM, elpasovette wrote:

    This is "I'm from the government and I am here to help you". Government created the problem and now it is going to solve it? I don't buy it and frankly neither should you. This "agency" is one more nick in our freedom. It will put community banks out of business. Will you support the legislation when they come after your business or profession? Ask the doctors how they got dependent on the feds and are now beholden. No, this is just wrong.

  • Report this Comment On June 12, 2011, at 2:15 PM, Bert31 wrote:

    The times when the council will be able to override the directors regulations will be extremely rare and unlikely cases. The director herself is a council member. The others are presidential appointees. A huge agency with very little congressional oversight, or any oversight, headed by a single director, appointed by the president, deciding what financial services and products Americans can or can not have.

  • Report this Comment On June 12, 2011, at 3:56 PM, Bert31 wrote:

    To those who continuously blame deregulation on the financial crisis please click here. There were many causes, but Graham Leachey Act is not considered one of them

    http://factcheck.org/2008/10/who-caused-the-economic-crisis/

    To LatifK who said innovation is stagnant, I disagree. We have robot assisted surgery. We have DNA based testing to help solve crimes and cure diseases. We have advances in science to make food healthier and more abundunt. Semi conductors have doubled their memory every two years since the 1970's. There have been countless innovation and I am not going to go on but you are just an Obama cheerleader or naive if you think this Bureau will stimulate innovation. Quite the opposite.

  • Report this Comment On June 12, 2011, at 4:31 PM, KCinAustria wrote:

    Just a question for anyone (David in Qatar, maybe?) who supports a completely free market, with no regulation. (I'm not being cynical; I'm truly interested in your thoughts on this.)

    Let's say I like to breath fresh air. Let's also say there's a number of companies who make something desirable (computers, houses, cars, crack, doesn't matter) but the manufacturing process somehow pollutes the air I (and others) breathe. How will the completely free market address this concern?

    The first possible answers that popped into my mind:

    1) Consumers like me will quit buying the product, until the companies are forced to change their manufacturing practices to be non-polluting

    2) A new company will sprout up that will sell me SCUBA type gear with fresh air tanks.

    3) A gated community will develop within a giant bubble, which will filter the air for me.

    I may be wrong, but I suspect your answer will be something similar to 1). My concern there is that my faith in the average consumer to not buy such an item (or even pay more for a non-polluting item) is essentially non-existent. I guess the point I'm getting at is, how do you envision the completely free market addressing the so-called 'Tragedy of the Commons'?

    Again, I know I sound skeptical/cynical/pessimistic, but I honestly am interested in hearing your answer.

    FULL DISCLOSURE: I haven't thought a whole lot about regulation/free-market arguments. I'm not convinced that big government handles the Tragedy of the Commons very well (at least in practice). I've never signed a mortgage, but if I do, I'd rather read 2-3 pages of fine print than 70. And I do, in fact, like to breathe fresh air.

  • Report this Comment On June 12, 2011, at 5:41 PM, skypilot2005 wrote:

    On June 12, 2011, at 12:12 PM, skypilot2005 wrote:

    On June 12, 2011, at 11:12 AM, TMFHousel wrote:

    “Skypilot2005,

    <<Do you know when the article against the establishment of the CFPB is going to appear?>>

    I'll add that you are more than welcome to write a rebuttal to this piece in a CAPS blog post.

    -Morgan “

    Not my Job. I don’t work for an organization who has “To Educate, Amuse and Enrich” prominently displayed on it’s website. I don’t see Political Advocacy Group there.

    I didn’t see “both sides” represented in the article. That is my concern.

    Sky Pilot

    One more skypilot,

    <<Housel’s positions are always left of center.>>

    I beg to differ:

    http://www.fool.com/investing/general/2009/07/02/dangerously...

    http://www.fool.com/investing/general/2009/10/29/heres-why-t...

    http://www.fool.com/investing/general/2009/10/12/the-biggest...

    Little “dated” aren’t they? 2009…. My memory isn’t what it once was. :)

    When I get a chance, I’ll take a look at your links. A cursory look at the titles reveals they were written in 2009.

    I’ll get back to you on this blog later. The weather is perfect here, today.

    Fool On.

    Sky Pilot

    ****

    I just tried the links again and I am getting a "Page Not Found" message.

    Ilan Moscovitz wrote in his article:

    "But it's also true that in the long run, we're all dead. By the Administration's forecast, we'll average 9.3% unemployment this year. It'll take at least until 2015 for unemployment to drop below 6%. Even for that to happen, the Administration is counting on the private sector to step up its game by investing enough to make the recovery self-sustaining."

    Did you and Ilan ask the President if he thought the looming approach of Obama Care was affecting the amount the private sector is currently investing?

    Sky Pilot

  • Report this Comment On June 12, 2011, at 5:58 PM, StateCollegeGuy wrote:

    I have unsubscribed from fool.com and articles like these re-affirm my decision. It is fascinating how a service can be set up to make money and yet fawn over czars like the one in this article. Pre-FDA, people sold use rat poison and marketed it as aspirin ?! Are you serious ?

    I do believe a lot of writers at fool.com are closet socialists. The writer(s) of this article is definitely one of them with the way he quotes the huffington post and innocently accepts the analogy given by Elizabeth Warren. Pre-FDA, a lot of people sold rat-poison and said it was aspirin ..... riiiiight ?

    The fool.com commentaries have thus devolved into a joke.

    Hey Brian/Ilan, here's some words of advice - The DOE does not produce energy, the FDA does not produce neither food nor drugs, the Dept of education .... well, you guys probably send your kids to private schools. So, quit schmoozing up to these ego-maniacal czars and read something productive. Like basic economics.

  • Report this Comment On June 12, 2011, at 6:09 PM, roryh55 wrote:

    I'd like to point out the irony of the above rant coming from someone with the moniker "state college guy." Damn those government socialists ....

  • Report this Comment On June 12, 2011, at 6:44 PM, deckdawg wrote:

    I really like TMF, but I think it might be wise to relocate the headquarters to somewhere other than Washington D.C. There appears to be some sort of unidentified pollutant in the air (or maybe the water... let's get the EPA right on it). Whatever this substance is seems to cause otherwise rational people to develop an irrational (almost religious, one might say) faith in the power of government. Recovery from this condition is rare.

  • Report this Comment On June 12, 2011, at 7:20 PM, Lynken wrote:

    Just short of privatizing your entire lives you have to try to stop swimming against the river. The government of today will only get stronger, more consolidated, and more regulating. Regulations do not mean a strangle-hold on any entity, quite the opposite. A child learns to color inside the lines, we drive inside the lines, and we need to live "inside the lines". This isn't advocating a straightjacket approach to living, but surely an unrestrained financial sector could never possibly work for the betterment of humanity. The financial sector is out to make money by any means necessary without getting caught. Some have been caught, a lot haven't

    I'm not about to sacrifice our nation's future blindly on the altar of the ideology of free-market capitalism. If put to the people, I'm sure the CFPB would be approved in a heartbeat. People advocating for zero regulations are kidding themselves and being entirely too short-sighted and if anyone thinks that the market can regulate itself then you surely must be mad.

  • Report this Comment On June 12, 2011, at 7:31 PM, Bert31 wrote:

    So imagine that after 9/11, president Bush wanted to create an agency called DHS, headed by someone who he appointed, who was allowed to interpret actions anyway he saw fit, and regulate everything remotely connected to securtiy, who did not answer to Congress, whose funding was not regulated by Congress, and whose decisions could only be vetoed by a 2/3 majority of a panel of 10 people appointed by the president, one of which was the Direcotr of DHS. Does this sound good to you? Because in essence that is what we are getting with the CFPB. No one wants another crisis but sometimes its not the disease that kills you, its the cure.

  • Report this Comment On June 12, 2011, at 7:38 PM, CFADude11 wrote:

    Rory55 - I agree with you there. LOL.

    The first fire-breathing Ayn Rand disciple I ever met graduated from... Ohio State University. He wasn't a particularly astute guys, so I'm sure the irony was lost on him. I'm sure he didn't mind the state subsidies for his education, and I'm fairly certain he didn't offer to pay them back.

    I know that I'm generally left of center on the political spectrum, which should be an indication of just how socialistic (or maternalistic, rather) the idea of a uber-Regulator of the Regulators actually is.

    What's next - an agency that oversees doctors to make sure that patients understand all their treatment options? An agency that regulates retailers so that consumers are told only the approved mesages about the clothes/appliances/sporting goods that they buy?

    There's information asymmetry with EVERY product out there - so where does the government's mandate to "save" the poor, unwashed masses from their ignorance end?

  • Report this Comment On June 12, 2011, at 7:43 PM, KCinAustria wrote:

    One other question/concern I have, regarding the theoretically completely unregulated free-market. Let's say I have the know-how to build a nuclear bomb. Do I really just get to sell it (the know-how or the bomb) to anybody willing to pay my stated price?

    To make it more relevant to this article: Let's say I have the know-how to create a complicated and confusing loan. Do I really just get to give it to any Joe-shmoe dumb enough to sign it? (Even if it ends up causing serious economic damage to the majority of the world?)

    Any thoughts? The more I think about it, the harder time I have accepting the premise of the 'completely free-market.'

  • Report this Comment On June 12, 2011, at 7:46 PM, CFADude11 wrote:

    "Just short of privatizing your entire lives you have to try to stop swimming against the river. The government of today will only get stronger, more consolidated, and more regulating."

    Terrifying thought. Strange that you should find it comforting.

    However, given the budget situation, I expect quite the opposite. A lot of government agencies will end up underfunded and left understaffed by future administrations as much out of necessity as ideology.

  • Report this Comment On June 12, 2011, at 7:48 PM, Bert31 wrote:

    Hey KCinAustria

    If you are intentionally misleading someone into doing something harmful to themselves involving a financial transaction that is fraud and punishable under current law. No need for aanother czar to enforce laws currently on the books.

  • Report this Comment On June 12, 2011, at 8:59 PM, meddguy wrote:

    I think that Obama should make a recess appt. already and get the agency up and running asap.

    Not everybody can know everything about all the things we buy these days. Whether it is a public or private agency, it is a good idea to have a place to go to learn the facts to make a reasonable decision.

    We have the FDA for drugs. We have Consumer Reports for TVs and refrigerators. I don't see any reason that we should not have an agency to help us understand financial instruments. And for those of you who are ideologues, and have a knee-jerk reaction just because it is gov't run, please try to keep an open mind.

  • Report this Comment On June 12, 2011, at 10:48 PM, whereaminow wrote:

    KCinAustria,

    Those are philosophical questions that might be outside of the scope of this discussion. I would recommend looking up the work of Thomas E. Woods, Robert Murphy and especially Hans-Herman Hoppe, who cover the topics you inquired about extensively. I hope this helps.

    David in Qatar

  • Report this Comment On June 12, 2011, at 10:48 PM, TMFBrich wrote:

    @StateCollegeGuy,

    Let me make sure I understand: I’m a closet socialist because I linked to a Huffington Post article and support the CFPB?

    Regarding the former: the source link is here: http://www.nber.org/papers/w17103.

    Regarding the latter: There’s been a good debate in this comment thread. If you’re opposed to the agency or Warren’s potential nomination, state your reasons -- ad hominem attacks don’t add anything to the dialogue.

    I answered the FDA question in a previous comment in this thread.

    -Brian Richards

  • Report this Comment On June 12, 2011, at 11:00 PM, skypilot2005 wrote:

    On June 12, 2011, at 9:22 AM, TMFBrich wrote:

    “I'll handle your questions in a moment. First, let me say that the nature of the Motley Fool is that we celebrate being motley -- so there's no general Fool viewpoint to be advanced, no top-down editorial mandate, etc. That's why we take different opinions on the same stocks, industries, gov't actions, etc. Second, this column is the viewpoint/opinion of me and Ilan. Tom and David Gardner, or other Fool employees, may or may not feel the same way about the CFPB.”

    “Why Forming Elizabeth Warren’s CFPB Looks Smarter by the Day” is your featured article all weekend. It is displayed prominently on the main page of your website.

    All comments by identified Motley Fool personnel strongly support the creation of the CFPB.

    Isn’t there anyone on the staff that could deliver an opposing viewpoint? Even by playing devil’s advocate?

    If this isn’t an official endorsement of an additional Federal Agency by The Motley Fool, pass me some more Kool-Aid. You insult my intelligence.

    Other news outlets have followed similar paths by offering one-sided political viewpoints. It’s a sure path to mediocrity. How smart is it to alienate a significant portion of your loyal readers? This type of behavior can “bleed” into your credibility as evaluators of companies.

    I sincerely hope you don’t continue to follow it and that you become apolitical like the “Old Days”. Please remember your competition is only one click away.

    Sky Pilot

  • Report this Comment On June 12, 2011, at 11:19 PM, TMFBrich wrote:

    Sky Pilot,

    To repeat: This column reflects the opinion of me and Ilan. It was featured on the main site because it's a timely issue that we believed would lead to a good debate (which it did).

    <<All comments by identified Motley Fool personnel strongly support the creation of the CFPB.>>

    I only see three in this thread -- me, Ilan, and Morgan. Morgan's comments say nothing of CFPB.

    <<Isn’t there anyone on the staff that could deliver an opposing viewpoint? Even by playing devil’s advocate?>>

    I presume so (I haven't polled everyone on staff). Without getting into any specifics of our editorial process, we are working on getting a rebuttal piece.

    I appreciate you reading Fool.com, and taking the time to post your thoughts and criticisms.

    -Brian Richards

  • Report this Comment On June 12, 2011, at 11:52 PM, Lynken wrote:

    There's someone here that can write up an article about how preventing businesses and corporations from taking advantage of middle-class Americans is a bad thing? You would have to be quite the Ayn Rand cheerleader to do such a thing.

    The less people we have devoting 40% or more (vastly more) of their monthly incomes to paying off loans they didn't comprehend when they got them the better we will all be. I want people saving, investing, spending their money on consumer goods, not being slaves to those loans.

    There was a person who called into this past Saturday's Marketplace radio program that was talking about how to manage the debt she had incurred while trying to go to school. She took a loan out at the age of 18 for $30,000 and wasn't aware of how much her interest rate could move. She didn't finish her schooling and her loan's outstanding payment is over $60,000. She's 23 now and has over $60,000 in debt. That's the kind of debt people kill themselves over. I can't imagine being that young with so much debt. If you can and would rather say "tough sh!t" then you truly are a monster.

    CFBP will happen.

  • Report this Comment On June 13, 2011, at 1:18 AM, Lynken wrote:

    CFPB*

  • Report this Comment On June 13, 2011, at 6:59 AM, ershler wrote:

    roryh11,

    There was a hard core Libertarian who wrote for the Iowa State Daily when I went to ISU, the oldest land grant college in the country. I sent multiple letters to editor pointing out the irony and asking for an explanation but I never got one and it never deterred him.

  • Report this Comment On June 13, 2011, at 9:37 AM, whereaminow wrote:

    The United States federal government is involved in nearly aspect of your life, whether you find that appealing or not. The government controls or heavily reguates every major road, every major industry, every transaction, and nearly every social arrangement.

    What is the difference between a libertarian that attends state college and one that attends Harvard (besides the academic criteria involved)? Harvard receives nearly half of its funding from federal sources.

    The state is so encompassing that even in places you thought a person could operate freely, you soon find out when you look closely that there is some form of perverse government intrusion where it does not belong.

    To show just how silly it is to mock libertarians who "touch" the public sector, imagine a scenrio where the federal government outlaw the private production and sale of toilet bowls (not all that unlikely anymore considering the heavy EPA regulation of toilet makers.) Imagine further that only govenrment issued toilet bowls should grace your home. Should the libertarian poop in the woods to remain pure?

    It's going to hard to configure your networks, update your Ipod applications, and code your webpages from the forest. You may think we want to turn back the clock, but it is the statist that truly turns back the clock. We simply want to cooperate with others on a voluntary basis. That's a novel idea. Giving orders and threats of violence has a much longer and darker history.

    David in Qatar

  • Report this Comment On June 13, 2011, at 11:18 AM, joaquingrech wrote:

    "What is wrong with an agency that makes sure businesses aren't screwing people? Nothing is the answer to that."

    and that's it.

    We can argue about the best way to achieve this, but in principle, it's just right.

  • Report this Comment On June 13, 2011, at 12:29 PM, dullrich1 wrote:

    if people could reason there would be no rush,cheney,bush's brain andfox news

  • Report this Comment On June 13, 2011, at 2:43 PM, SeanFlynn1 wrote:

    If you can't read a mortgage contract or don't understand it, then you have no business buying a house. Period. MM5525 is absolutely right, the government is trying to eviscerate personal responsibility in this country and make everyone subject to government benovelence.

    It is not the government's responsibility to protect the uneducated or financially illiterate. It is government's job to create and ensure equality of opportunity, not hold the consumer's hand because they can't understand how interest amortization works.

    All the CFPB is yet another government agency designed to run people's lives for them. Bigger government means less freedom, plain and simple.

  • Report this Comment On June 13, 2011, at 2:58 PM, Lynken wrote:

    You think that Joe Schmoe working as a greeter at Wal-Mart for minimum wage with a GED is wanting to understand a mortgage contract? He needs a roof over his family's head and I'm pretty sure he'd sign anything to get it. It's not a solitary case, there are plenty of other circumstances out there that prove the point. People need the utmost necessities and don't have many options when the 50-page contract put in front of them is in a language they barely comprehend. Houses need to get bought, cars need to get bought, kids need to get sent to college. If you stopped all of these people from getting these modern necessities based solely on whether or not they truly understand the contract then we'd surely see a drop in production/purchasing/enrollment, etc. to the point where it would do irreparable harm. But then I guess everyone is entitled to the freedom to be living on the street according to you.

    The CFPB isn't handing out mortgages or car/student loans. It's not running people's lives. It's handing the would-be borrowers a post-it note describing every point of note in the contract instead of a phone book.

  • Report this Comment On June 13, 2011, at 3:42 PM, SeanFlynn1 wrote:

    Greeters at Wal-Mart buying houses is exactly why we got into the 2008 mess! Houses don't need to be bought by those who CANNOT afford them. Something the government can't seem to understand.

  • Report this Comment On June 13, 2011, at 4:16 PM, SeanFlynn1 wrote:

    Furthermore, there is absolutely not one scintilla of evidence that the 2008 financial crisis was due to a lack of regulation. Show me the evidence that says the crisis would have been averted had the CFPB been in place back then! You can't because there is none!

  • Report this Comment On June 13, 2011, at 4:20 PM, TMFHousel wrote:

    ^ No one can do that, but I can provide a fairly convincing quote from one of the largest mortgage brokers in California:

    "Fully documenting the borrows' income could have stopped [the bubble]. If I had said to you, the borrower, 'Fully document your income or you won't get this loan,' it would have ended. But I'm one lender, right? So you know what happens to my volume if I do that and no one else does? It goes to zero."

  • Report this Comment On June 13, 2011, at 4:42 PM, mm5525 wrote:

    Well through 2007, these stated income loans were still being gobbled up and insured by Fannie Mae and Freddie Mac. If Fannie's DU took it, or Freddie's LP system, these stated no-documentation-necessary loans had the blessing of being Federally insured and thusly were sold to the secondary market far more easily . Yet these agencies are not reformed, but the banks get demonized at every turn and their profits slashed because it is politically convenient to do so. Borrowers vote, and banks do not.

    Interestingly, among all these pages of paperwork a prospective borrower signs, not a single one indicates your home value is guaranteed to go up in value. Yet this prevailing belief was the status quo in both Washington DC as well as the everywhere else. Regulators missed the entire bubble. The "government watchdogs" were oblivious to it all... so, the answer is.... another government watchdog. Only in DC do you find such unbridled brilliance.

  • Report this Comment On June 13, 2011, at 5:34 PM, mesConfitures wrote:

    I do not understand how ensuring a contract is unambiguous and understandable would "eviscerate personal responsibility". How is personal responsibility damaged by clarity of terms?

    To go back to the FDA analogy, the FDA makes sure the ingredients are clearly listed on labels so that individuals can make their decision whether or not to eat something based on truth and information. The responsibility for eating it (or not) still falls to the individual; people are free to ignore the information or to not think about the ramifications of their actions as ever.

    I will argue that without truth of information and clarity of terms, it is impossible for any of us to exercise personal responsibility. Simplified contract language would only increase personal responsibility.

    Nor can I see how it would possibly take away any rights of the individual OR of a business. Unless there is some right to lie (whether outright or by omission) in pursuit of profit that I am unaware of, what rights exactly, would it infringe upon? Clarity of contract terms can only benefit both parties. They are still free to decide what those terms are between them.

    And on a side note, I always find it perplexing to hear the american government referred to as if it were a great evil by nature, and some external force, when it is ostensibly "by the people, for the people". As a citizen, I don't understand the seeming lack of personal responsibility people take for their own government. Whether or not I agree with all its individual actions, I am still culpable for them to a certain degree.

  • Report this Comment On June 13, 2011, at 5:49 PM, dbtheonly wrote:

    @SeanFlynn1

    You're missing the point. I don't care how "educated" you are; I can write a document that you will not be able to understand. As my Granddad use to say, "What the big print giveth, the small print taketh away." The goal is to write a document that is readily understandable.

    The rest mesConfitures said better than I could.

    And just for it, whether someone employed as a Greeter at Wal-Mart should (by what right do you decide should?) buy a house would depend on the cost of the house, available down payment, income, assets, among many other items.

  • Report this Comment On June 13, 2011, at 6:24 PM, mm5525 wrote:

    One thing I'd like to point out among all the cries of "deceiving" paperwork, "unreadable" documents no one can supposedly understand, and the horrors of fluctuating interest rates, is money was made available to a person upfront to buy a home. Including the Wal-Mart greeter. One would think people would be thankful to receive this upfront money to have this roof over their heads, but this is not the case. One would think borrowers getting a de facto savings account of a home they will eventually own free and clear would be appreciative of the entity supplying these loans. Instead, people want out of their contracts, they throw up their hands and claim they were duped, framed, tricked, conned, and manipulated. But why is this? And why did this outcry not happen 10 years ago?

    Of course, the reason is because the value of the homes crashed. It has nothing to do with "deceiving" paperwork, "unreadable" documents, and everyting to do with the fact many of these borrowers have the mark-to-market thinking that they don't like having a mortgage at 300k when the home is now worth 250k. Never mind the fact if they hold onto the home long enough the value will eventually recover, and never mind the fact people should simply be buying homes to live in, regardless of any short-term fluctuations in value. Just like when we buy a stock. It might go down when we first buy it, but if we believe in our thesis, we're willing to ride it out.

    If their home values continued to go up, I doubt there would be such an uproar over "unreadable" documents and "deceptive" lending practices. But, instead, so many people bought homes at the top of the market, or people who bought years before the top refinanced their loans over and over increasing their balances (aka using their homes as ATM machines) to where they essentially maxed out their equity at the top of the market, and finally since everyone on the block is in virtually the same boat, there's safety in numbers. We can all cry foul and blame the bank for our bad timing or poor money management and demand either a loan modification, principal reduction, or just walk away from our responsibility we signed up for, blaming it all on the banks in the process.

    Since all these people vote, the politicians are going to find a scapegoat other than their own policies at the Federal Reserve or over at Fannie and Freddie that helped cause this entire bubble to burst. Blame the banks. Demonize them at every turn, and do your best to turn them into zombie-like public utilities.

  • Report this Comment On June 13, 2011, at 10:21 PM, dogofthefuture wrote:

    Govmt. regulation is supposedly the only thing holding business back from ending this downturn in the economy. Thousands of pages to open a power plant, bank, or McDonalds. For corp's that have staff lawyers, planers, and lobbyists. Yet averege Joe withoutwhom this country would not exist signs 70 pages that Albert Einstein couldn"t understand, and can be forclosed upon by a bank that can't even proudce said 70 pages or his sigunature. Maybe two pages would be best for both. The free market like freedom isn't free. When it screams for protection from its coustomers its not even a market..

  • Report this Comment On June 13, 2011, at 10:47 PM, TMFHousel wrote:

    <<Govmt. regulation is supposedly the only thing holding business back from ending this downturn in the economy.>>

    NFIB surveys show this is decidedly untrue. Poor sales are overwhelmingly cited as the largest roadblock. The percentage of businesses claiming red tape and regulations are holding them back today is on par with the 20-yr average.

  • Report this Comment On June 14, 2011, at 1:54 AM, surfgeezer wrote:

    Just sad, the number of posters that are all for keeping it needlessly complicated and misunderstood. I would be one of the first to admit most Americans have no clue on money and finances, that does NOT mean we should NOT make it plainer or more transparent. The people advocating free markets are delusional if they think making the market dark is going to encourage business. Light and understanding encourage use, and proper use is good business. Forcing REAL competition from predators is a GOOD thing and you have to wonder at the motivation for wanting things done in the dark.

  • Report this Comment On June 14, 2011, at 3:49 AM, ershler wrote:

    David in Qatar,

    The biggest difference between ISU and Harvard is the average net worth of the students parents.

    Apparently I was getting screwed when I was going to college because I was paying for 61 percent of my education. I don't have any information about Harvard's finances and I don't care to look so I'll have to trust you but he could of went to multiple private colleges in Iowa for 3 to 5 times the cost but he decided to go to ISU.

    Using your analogy, if there were partially government subsidized toilet seats and privately produced toilet seats costing five times as much this guy was arguing we shouldn't use the GS toilet seats because it involved taxation for funding while writing the article on a GS toilet seat.

  • Report this Comment On June 14, 2011, at 4:23 AM, whereaminow wrote:

    TMFHousel and TMFDiogenes,

    I think the problem here is rather obvious. You see initial good intentions and either believe 1) it will always be this way with the CFPB and Warren OR 2) that if it goes astray some other noble angel of government will step in and make sure they don't get out of line.

    I see this worldview as being incredibly naive since it matches exactly zero history.

    The FDA, EPA, FCC, FTC, and the other dozens of worthless bureaucracies all started off with good intentions. And they all became impossible-to-stop fiefdoms that terrorize free people, play favorites among their big business partners, and generally operate completely outside their original intent as well as outside of any legal standards set before their creation.

    I have asked repeatedly why will the CFPB be any different.

    I concede that it appears to be formed with good intentions. That's NOT the issue.

    Will it become another fiefdom, like every other bloated government agency? Of course it will. And then the good intentions it began with will be erased.

    It's the difference between political reality and the liberal Regressive and naive world view of mother government.

    David in Qatar

  • Report this Comment On June 14, 2011, at 1:25 PM, feudi wrote:

    Interesting how so many posters feel so much animosity towards those who cannot read and understand 75 page mortgage documents deliberately written by Armani-clad attorneys whose sole job is to make the document as confusing as humanly possible. The same posters who see no problem with 40% interest rates on pay day loans, also see no problem with The Fed lending banks trillions at 1% which the banks then lend out at rates ranging from 4% to 40%. Money goes to money. As true today as it was 6,000 years ago.

  • Report this Comment On June 14, 2011, at 3:23 PM, mm5525 wrote:

    Nice patronizing of those who provide funding to buy a home by taking a risk of their capital. What's next? Let's round up people and force them to sign this paperwork and mandate "you must take out this loan."? Sign here, and never ask any questions. That's how you on the Left make it sound.

    "Deliberately written by Armani-clad attorneys whose sole job is to make the document as confusing as humanly possible" is your claim? Once again, the above poster has proven my point. Demonize the provider of the loan, and blame them for everything, and yet never blame the borrower for signing up for it in the first place. Of course, had house values continued to go up, there would not be such an outcry of these "deliberate" things or mentioning "Armani-clad attorneys" in the discussion.

    Let's dumb it down for those of you who think all or most in the private sector are simply out to get you and make everything "as confusing as humanly possible":

    The basics of a mortgage contract:

    1. What is my monthly payment?

    2. What is the interest rate?

    3. What is the term of the loan?

    4. Is the interest rate fixed, or is it variable?

    5. Is there a prepayment penalty?

    6. Can your loan be sold or serviced by someone else?

    7. Does my loan include escrows?

    8. Does my loan include PMI (private mortgage insurance)?

    9. If you do not pay as agreed, you will eventually be foreclosed upon.

    If a borrower can't understand these basic things in what is commonly known as "the most important financial decision you make in your life" should they be buying a home at all? If you don't understand, perhaps one should consider not signing it or asking further questions upon signing? What a mind-boggling concept this is for many of you.

    We already have the RESPA, we have the FTC, we have the Fed, we have the FDIC, we have the DOCC, and they are all responsible, collectively, for making these documents easier to read, such as the "Good Faith Estimate" or the "Truth in Lending" aspects every borrower must sign well before closing that already exist. In the case of a refinance, you have 3 days to mull over your refinance decision before the loan actually funds. If you do not like the terms, you are free to cancel the loan and continue with your current loan. These are good regulations that are already in place.

    Sorry, ladies and gentlemen, but personal responsibility plays a role here. To talk about the banks getting loans from the Fed is nothing but a smoke screen to steer the reader from the main problem: The government clearly helped cause this problem.

    This outcry stemmed from the fact borrowers don't like owing 300k on a house worth 200k in one snapshot of time. If house values continued to go up, would there be such an outcry?

    A scapegoat was sorely needed, and a scapegoat was quickly found in the banks.

    Don't get me wrong. Banks were negligent. They've paid the price. Their leverage was far too high. Their entire profit models have been obliterated. The ratings agencies were negligent. The mortgage brokers were negligent, as well as the appraisers, but so were Fannie, Freddie, Ginnie, the Federal Reserve, and Congress, and they did not pay such a price and continue un-reformed collectively today, but they are the ones that set lending policies in this country. Let's just demonize the banks for providing "the American dream" even though borrowers do not want this "dream" unless their mortgage is only less than the house's current value. Otherwise, it's "we were tricked, duped, conned, and had no idea what we were doing, so we need to be made whole" at the expense of those who did not bite off more than they could chew by taking out a loan, and, ummm... PAYING IT OFF/DOWN rather than acquiring more debt.

    I suppose we need some agency in place to where whenever I buy a stock I can cry foul when it goes down in value and just walk away without paying the price for a poor decision.

    I suppose I can buy something and sign 75 pages of paperwork indicating I'm willing to buy it, and then just throw up my hands and claim I had no idea on Earth what I was doing and was merely tricked into this. Someone took a gun to my head and brought me at gun-point to the closing table.

  • Report this Comment On June 14, 2011, at 5:44 PM, broadmoor wrote:

    "Someone took a gun to my head and brought me at gun-point to the closing table."

    I didn't think there could be so many articulate voices on the opposing side of this issue, but I was wrong. Yes, for many, a home of one's own is a dream, and, indeed, many were irresponsible when presented with what was believed to have been an opportunity to buy one. There is, though, one glaring falsehood implied in all of those arguments; you make it seem as if the borrowers were in control of the process.

    The bankers were the ones who granted the loans, and did so because they were saleable and packageable, therefore deemed essentially risk-free. How many fewer subprime and alt-a mortgages would have been given to people unable, or unlikely, to pay, if the institutions who offered them actually had had to hold them? Oh, sorry, I forgot; this is the perfect free market, where it is just fine for the savvy and smart to devise any legal means to take advantage of the inexperienced and stupid.

  • Report this Comment On June 14, 2011, at 8:42 PM, skypilot2005 wrote:

    June 14, 2011, at 4:23 AM, whereaminow wrote

    "I have asked repeatedly why will the CFPB be any different. "

    Brian & Ilan: Please answer David's question.

    Sky Pilot

  • Report this Comment On June 14, 2011, at 8:59 PM, skypilot2005 wrote:

    June 14, 2011, at 5:44 PM, broadmoor wrote

    "How many fewer subprime and alt-a mortgages would have been given to people unable, or unlikely, to pay, if the institutions who offered them actually had had to hold them?"

    I think this is a good question for Chairman Barney Frank to answer.

    Sky Pilot

  • Report this Comment On June 14, 2011, at 9:01 PM, skypilot2005 wrote:

    BTW:

    Was Barney at the meeting, too?

    Sky Pilot

  • Report this Comment On June 15, 2011, at 12:06 AM, TMFDiogenes wrote:

    "Why will the CFPB be any different?"

    We're starting from different premises. I think some gov't agencies haven't done a great job -- MMS, OCC -- and was fine with the OTC being eliminated by Dodd-Frank, but I tend to think the FDIC and CFTC are net positives. If you think everything the government ever does is bad, then sure, a priori the next thing it does will also be bad, but if you don't have that premise, it's possible to arrive at a different conclusion.

    "How many fewer subprime and alt-a mortgages would have been given to people unable, or unlikely, to pay, if the institutions who offered them actually had had to hold them?"

    I haven't run the calculations, but I believe Dodd-Frank requires institutions to start holding 5%. I think it should be far higher.

    "Was Barney at the meeting, too? "

    No, the summit was at the White House. We heard from White House officials.

  • Report this Comment On June 15, 2011, at 1:15 AM, ershler wrote:

    In 1999 the Gramm–Leach–Bliley Act repealed the Glass-Steagall Act. GLB had bipartisan support and the few people who said it was a bad idea were dismissed. We had a law on the books that worked for over 65 years and within a decade of its repeal we have the very event it was designed to prevent. It seems like this was a case of government regulation working well.

  • Report this Comment On June 15, 2011, at 6:03 AM, skypilot2005 wrote:

    Brian & Ilan,

    A couple questions occurred to me, today.

    1) Why can’t the Justice Department enforce the current laws relating to this subject? Their budget is approximately: $24 Billion. For those of us that don’t buy the consolidation “spin”……

    http://www.whitehouse.gov/omb/fy2010_department_justice/

    2) Why can’t The Department of Educate develop programs to educate consumers about mortgages, ect.? Their budget is approximately:$77 Billion.

    http://www.whitehouse.gov/omb/factsheet_department_education...

  • Report this Comment On June 17, 2011, at 4:23 PM, curiousinnc wrote:

    When I started reading this, I honestly thought this was a joke....but as I kept looking for a punchline, there was none. Have you ever listened to Ms Warren? She is out to build an empire at the tax payers expense and she has no accountability to anyone--not even Congress. This is bad news for all of us...unless, someone starts selling options on agencies abilitiy to deliver value...sign me up to short this one.

  • Report this Comment On June 17, 2011, at 5:25 PM, stambushy wrote:

    Skypilot is right. The Fool needs a "Fairness Doctrine" for any article that sounds like it comes from a liberal blog.

  • Report this Comment On June 18, 2011, at 2:21 AM, Citellus wrote:

    After reading much and scanning the rest of the above, I have to put in my two cents worth long after most of the discussion has occurred. I am not a lawyer, a realtor, or a financial guru. And I think that the basics of a mortgage that mm5525 proposed should be understood by anyone buying a house. Why does it take 50 pages to say it? And I also agree with others that it is often done in a very confusing manner. Why?

    But let’s address the FDA aspect. Or pre-FDA. Maybe the rat poison as aspirin was a poor example. But a century or so ago, coca cola had real cocaine. “Snake oil” may not have had snake oil, but it rarely did anything. If it did it was because it probably contained alcohol or opium. We also killed bugs on our crops with arsenic which did not come off easily, and we treated constipation with mercury compounds. “How could people have been so irresponsible to buy that snake oil, eat those crops, or take those laxatives?" Simple. They did not know any better, and that included judges, real estate dealers, businessmen, and financial gurus.

    I’m not dumb, but my doctorate happens to be in science, and before I retired I had a good international reputation and probably knew more than anybody else in the world in my very narrow specialty. How did I do that? By concentrating on science, and not by learning the details of how legalese could be twisted to my disadvantage in a financial document. Before you take a drug, do you learn its chemical structure, understand how it matches with receptors, know how quickly and where it is metabolized? Do you understand what happens if you take two or more different drugs at the same time? Do you understand how a heart condition will affect drugs you take or even food you eat?

    We live in an age of specialization. We are long past the point where someone like me can understand all of my scientific field, let alone all of the specialties that other people having been learning and which I need to participate in to live a reasonable life. We need an FDA because most people do not understand drugs beyond the basics. We need an EPA because most people do not understand pollution beyond the basics. We need regulation on hunting and fishing so these unowned organisms are not cornered by the richest or most powerful. Are the FDA, EPA, and FWS we have perfect? Not by a long shot, but they are certainly better than counterfeit drugs, rivers that catch on fire, and extinction of species that are part of our heritage. And we need a CFPB to do similar things in the financial arena. Rational financial protection (not nanny state) is just as important as the cop to protect our selves and our property and military to protect our freedom.

  • Report this Comment On June 18, 2011, at 3:24 AM, wolfman225 wrote:

    On June 13, 2011, at 5:49 PM, dbtheonly wrote:

    @SeanFlynn1

    You're missing the point. I don't care how "educated" you are; I can write a document that you will not be able to understand.

    Actually, db, I think it is you (and some others) who are missing the point. The most basic of all financial contract rules, the one most of us have had drilled into our heads from long before we even began thinking about investing was this: IF YOU DON'T FULLY UNDERSTAND THE TERMS, DO NOT SIGN!

    If any of the people claiming malpractice by lenders and "predatory lending practices" had followed that one simple, basic rule, most of the housing melt down would have been avoided. Was there greed on the part of some lenders? Probably. Was there greed (and fraud) on the part of some borrowers? Definitely (see any articles about "liar loans" and "no-doc mortgages".

    This same rule makes the CFPB completely unnecessry. If you don't understand, don't sign; if you sign what you don't understand, don't bitch later that you were "mislead".

  • Report this Comment On June 18, 2011, at 7:06 AM, skypilot2005 wrote:

    I asked, “Are you familiar with the history of Credit Unions?”

    No answer.

    This is an important point the supporters of the CFPB fail to answer. A quick review of the history of Credit Unions reveals that there is absolutely no need for the CFPB.

    Another point the CFPB supporters refuse to address is the large amount of money already being spent on The Departments of Justice and Education. If the Treasury Department is not currently protecting consumers, why would you form the CFPB there?

    Sky Pilot

  • Report this Comment On June 18, 2011, at 7:18 AM, skypilot2005 wrote:

    TMF Brich writes:

    “@skypilot2005,

    “We've tried to not make this a political issue, but yes, in the larger national conversation about the CFPB, it is a liberal cause. Because Obama supports it and we do as well doesn't mean we're a "Liberal Blog."

    I'll handle your questions in a moment. First, let me say that the nature of the Motley Fool is that we celebrate being motley -- so there's no general Fool viewpoint to be advanced, no top-down editorial mandate, etc. That's why we take different opinions on the same stocks, industries, gov't actions, etc. Second, this column is the viewpoint/opinion of me and Ilan. Tom and David Gardner, or other Fool employees, may or may not feel the same way about the CFPB.”

    TMF Brich is the Managing Editor and TMF Diogenes is the Commentary Editor. If that isn’t “top-down”, I don’t know what is.

    TMF Brich has promised an article examining the other side of the issue. It’s been awhile now. I wonder if they needed to recruit someone from outside of The Fool to write the piece?

    TMF Brich also, states: “That's why we take different opinions on the same stocks, industries, gov't actions, etc”.

    Unless, The Fool doesn’t feel creating the CFPB was a “gov’t action”, the lack of a different opinion in this piece is a deafening silence..

    It seems to me that the lack of a different opinion being published by The Fool with the piece or at the same time is not being “motley” and strikes directly at the credibility of the authors: TMF Brich and Diogenes’.

    But, that’s just me…..

    Fool on.

    Sky Pilot

  • Report this Comment On June 18, 2011, at 8:40 AM, devoish wrote:

    JMHO offered to the TMF writers here.

    If you have concluded that 2 plus 2 equals 4, and someone else is yelling two plus two equals six, you are under no obligation to surrender your freedom of thought or speech to "balance".

    It is always interesting to watch the defenders of the status quo at work.

    Actually I would like to agree with those who suggest we do not need another Government agency here.

    What we really need is to ban all penaltys, fees and adjustable interest rate loans. Keep it simple.

    You borrow x amount. You then pay x amount for x number of months. The lender can collect a default against whatever collateral the borrower puts up, listed on the loan, and specifically excluding the borrowers future earnings.

    Right now the private financial industry is a bunch of coddled wussies, too cowardly and incompetent to have the courage to trust their own judgement to make loans without taxpayer support.

    Or at least that is one way of looking at it.

    Best wishes,

    Steven

  • Report this Comment On June 18, 2011, at 10:40 AM, skypilot2005 wrote:

    June 17, 2011, at 5:25 PM, 5088 wrote:

    Skypilot is right. The Fool needs a "Fairness Doctrine" for any article that sounds like it comes from a liberal blog. "

    5088,

    If it looks like a duck, quacks like a duck………

    Have to go. I’ve been sitting on the edge of my seat waiting for the rebuttal. Maybe, they are farming it out to the WSJ or another reputable organization that has a variety of opinions in articles within its pages appearing at the same time.

    Re:

    “June 12, 2011, at 11:19 PM, TMFBrich wrote:

    I presume so (I haven't polled everyone on staff). Without getting into any specifics of our editorial process, we are working on getting a rebuttal piece.”

    Sky Pilot

  • Report this Comment On June 18, 2011, at 11:57 AM, broadmoor wrote:

    "I asked, 'Are you familiar with the history of Credit Unions?'

    No answer."

    I couldn't answer because, of course, you are correct that since Credit Unions exist as an alternative, it was therefore the fault of the consumer if he/she went to a bank. Never mind that, "Credit unions’ most direct competition, community banks, also stand proud above the current mess. Credit unions and commercial (sic) banks got a pass on the mortgage crisis because a minority actually trade in mortgages, a tiny sliver dabble in subprime loans and subprime mortgages are very rare between the two." (from the article, "The Crisis That Swallowed the Credit Union Debate", by Justin Dullum).

  • Report this Comment On June 18, 2011, at 4:28 PM, skypilot2005 wrote:

    Re.: June 18, 2011, at 11:57 AM, broadmoor wrote

    In your text, you miss my point. It is that Credit Unions make mortgages. Membership is available to everyone in the State I live in. That gives consumers a choice. I hope you don’t want to regulate peoples’ choices.

    I am disappointed in Brian and Ilan’s lack of knowledge - shoddy research of the subject and their "partisanship".

    FYI’s:

    http://www.cuna.org/public/press/credit-union-basics

    “Overall, 91 million U.S. consumers are member-owners of, and receive all or part of their financial services from the nation's 7,794 credit unions. Credit unions are not-for-profit financial cooperatives, serving members who share something in common: employment, association membership, or residence in a particular geographic area. As not for profit cooperatives, credit unions generally offer more attractive savings and loan rates as well as generally lower fees. Surveys consistently rank credit unions first among financial institutions in consumer satisfaction.”

    “Credit unions are democratically owned and controlled institutions that take pride in their "people helping people" philosophy. Credit union boards of directors are elected by members; each member has an equal vote, regardless of how much he or she has on deposit. Only members may serve as directors, and directors serve without remuneration. Volunteers are an important credit union resource. Presently, approximately 100,000 Americans volunteer for their credit unions, serving as board members, committee members or providing other assistance. Finally, credit unions have no outside stockholders, so after reserves are set aside, earnings are returned to members in the form of dividends on savings, lower loan rates or additional services.”

    Seems to me if there was such an urgent need, The Motley Fool would get behind Credit Union membership instead of creating another Federal bureaucracy that will cost up to $140 million dollars.

    This looks like an opportunity for The Fool to start one as well as adding a section to their website regarding mortgages and the related processes to provide education for those that need it.

    I wonder why they haven’t?

    Here’s a link to one site that lists the history of Credit Unions. http://www.ncua.gov/About.aspx

    Taking Brian at his word, I am growing tried of doing his job for him. That is, presenting a “motley” presentation of the “other side” of the issue that was sorely lacking in his and Ilan’s piece.

    Fool On

    Sky Pilot

  • Report this Comment On June 18, 2011, at 10:01 PM, broadmoor wrote:

    ."Credit unions and commercial (sic) banks got a pass on the mortgage crisis because a minority actually trade in mortgages, a tiny sliver dabble in subprime loans and subprime mortgages are very rare between the two."

    "Credit unions primarily engage in consumer lending and, to a lesser degree, residential real estate lending with their members."

    If the first cited sentence, credited in my last post (which did not not miss your assertion that borrowers had choices, were too dumb to take advantage, and therefore deserved to be saddled with bad home loans from the banks), and the one quoted directly above, from your link, are accurate, one must deduce that Credit Unions actually do not issue a massive number of home loans. Do you maintain that they would have ventured heavily into the subprime arena had the banks' risky, financially illiterate, and unable to pay, customers gone to them first; do we know if any had done so, and were refused?

    It would seem logical that these institutions, owned by their members, wouldn't have been able to bundle and sell the mortgages they might have issued, and therefore would have granted far fewer of them, indeed, only ones to people likely not to default. I don't like caps--crass and gauche--but imagine them here, as I repeat, the banks knowingly issued bad loans.

  • Report this Comment On June 19, 2011, at 6:41 AM, skypilot2005 wrote:

    broadmoor,

    Let me be upfront with you.

    The primary reason I posted on this piece is because I am concerned about The Fool not treating this subject in a “motley” manner. I manage my own investments via self directed IRAs and 401ks. I have used The Fool as one of my primary sources for gaining investment ideas and validation for holding current investments. So, I have an interest in their success.

    I participate in the community by sharing my investment ideas and research. I even have a Premium membership. I have referred many people to The Fool as an investment idea source.

    The one sided evaluation of this issue in this article caused me to be concerned about their objectivity and whether that will start “bleeding” into their stock analysis pieces. After reading this article, I think it is a reasonable concern.

    I’ll address the CFPB portion of your comment in my next post.

    Fool On

    Sky Pilot

  • Report this Comment On June 19, 2011, at 7:25 AM, skypilot2005 wrote:

    Broadmore wrote:

    "(which did not not miss your assertion that borrowers had choices, were too dumb to take advantage, and therefore deserved to be saddled with bad home loans from the banks)"

    I didn’t say or imply this: “your assertion that borrowers had choices, were too dumb to take advantage, and therefore deserved to be saddled with bad home loans from the banks”

    I do maintain that borrowers had choices.

    "had the banks' risky, financially illiterate, and unable to pay, customers gone to them first; do we know if any had done so, and were refused?"

    You say this, not me: “the banks' risky, financially illiterate, and unable to pay, customers”

    Your allegations put the responsibility of proving why Credit Unions were not a reasonable alternative to customers using commercial banks squarely on your, Brian and Ilans’ shoulders.

    "I repeat, the banks knowingly issued bad loans."

    I don’t know about the accuracy of this statement. I’d like to see the source you used and if true, the % of banks that did this. I repeat, the % of total commercial banks that supposedly did this.

    Fool On

    Sky Pilot

  • Report this Comment On June 20, 2011, at 12:28 AM, TMFBrich wrote:

    Hey all,

    To update a previous comment of mine: we'll be featuring a rebuttal article on Fool.com early this week.

    Best regards,

    Brian Richards

  • Report this Comment On June 20, 2011, at 6:37 AM, skypilot2005 wrote:

    June 20, 2011, at 12:28 AM, TMFBrich wrote:

    "Hey all,

    To update a previous comment of mine: we'll be featuring a rebuttal article on Fool.com early this week."

    Great!

    I'll read the article and then be able to make an informed judgment on this issue.

    Fool On

    Sky Pilot

  • Report this Comment On June 20, 2011, at 9:10 AM, broadmoor wrote:

    "'I repeat, the banks knowingly issued bad loans.'

    I don’t know about the accuracy of this statement. I’d like to see the source you used and if true, the % of banks that did this. I repeat, the % of total commercial banks that supposedly did this."

    The following, from which I believe a reasonable deduction can be formulated, is from Wikipedia's *Subprime mortgage crisis".

    "Between 2004–2006 the share of subprime mortgages relative to total originations ranged from 18%–21%, versus less than 10% in 2001–2003 and during 2007."[19][20]

    "During 2007, lenders had begun foreclosure proceedings on nearly 1.3 million properties, a 79% increase over 2006.[26] This increased to 2.3 million in 2008, an 81% increase vs. 2007,[27] and again to 2.8 million in 2009, a 21% increase vs. 2008."[28]

    (19)"CARPE DIEM: The Rise and Fall of the Subprime Mortgage Market"

    . Mjperry.blogspot.com. 2008-07-17. Retrieved 2009-02-27.

    (20)"Harvard Report"

    (PDF). Retrieved 2010-10-03.

    (26)^ "U.S. FORECLOSURE ACTIVITY INCREASES 75 PERCENT IN 2007"

    . RealtyTrac. 2008-01-29. Retrieved 2008-06-06.

    ^ "RealtyTrac Press Release 2008FY"

    (27)Realtytrac.com. 2009-01-15. Retrieved 2009-02-27.

    ^ "Realty Trac-2009 Year End Report"

    (28)Realtytrac.com. Retrieved 2010-10-03.

    Do you maintain that all the banks, which issued all these loans, didn't have a clue they weren't safe, and would have had no trouble with the concept of holding them until expiration?

    Again, read Michael Lewis' "The Big Short".

  • Report this Comment On June 20, 2011, at 8:44 PM, skypilot2005 wrote:

    RE:On June 20, 2011, at 9:10 AM, broadmoor

    Broadmoor,

    Throughout our give and take, you have mischaracterized my position on this article. Please see my replies to your mischaracterizations, above.

    You clearly haven’t made your case relative to my two primary concerns.

    First and foremost, was this a “motley” review of the issue? It clearly is not.

    Second, do we need to spend another $140 million dollars doing something that the Federal government is already mandated to do? No. There are ample resources available and in place.

    Also: Does the consumer have choices? Clearly and indisputably, yes.

    Brian says part II is coming soon. You will have ample time and room to make your case. I guess I should wish for your mischaracterizations to continue there too because they clearly diminish your creditability and therefore the credibility of your position.

    But, I don’t.

    Fool On

    Sky Pilot

  • Report this Comment On June 20, 2011, at 10:17 PM, broadmoor wrote:

    "Does the consumer have choices? Clearly and indisputably, yes."

    Credit worthy consumers, yes, but they are irrelevant to this discussion, because very few of them, regardless of the originator of their loans, would have ended in the position of default.

    You must have missed my post from June 18, 2011, at 10:01 PM, which featured the following two quotes:

    "Credit unions and commercial (sic) banks got a pass on the mortgage crisis because a minority actually trade in mortgages, a tiny sliver dabble in subprime loans and subprime mortgages are very rare between the two."

    "Credit unions primarily engage in consumer lending and, to a lesser degree, residential real estate lending with their members."

    So, with great respect, and minus my admittedly provocative commentary which should have been eschewed, I repeat,

    "If the first cited sentence, credited in my last post (June 18, 2011, at 11:57 AM), and the one quoted directly above, from your link, are accurate, one must deduce that Credit Unions actually do not issue a massive number of home loans.

    It would seem logical that these institutions, owned by their members, wouldn't have been able to bundle and sell the mortgages they might have issued, and therefore would have granted far fewer of them, indeed, only ones to people likely not to default.

  • Report this Comment On June 21, 2011, at 7:04 AM, skypilot2005 wrote:

    RE: On June 20, 2011, at 10:17 PM, broadmoor wrote.

    Ah! I think here is our “disconnect”:

    You are talking about what happens to the mortgages AFTER, the transaction between a financial institution and the borrower.

    I am talking about the transaction between the borrower and the financial institution BEFORE and DURING the transaction.

    I feel that is the focus of the article:

    “Warren made very clear to us that standing for consumers didn't mean standing against businesses. She described the CFPB's key principles as ensuring that:

    1. Prices are clear.

    2. Risks are clear.

    3. The ability to compare like products is relatively easy.

    If the agency can achieve that, then consumers can ask two key questions:

    1. Can I afford this product?

    2. Is it the best deal I can get?

    The output of all this, Warren says, is a competitive marketplace -- which should be good for both consumers and businesses.”

    My comments are NOT directed at what happens to the mortgages AFTER the initial transaction between the borrower and the financial institution they choose.

    Those are two distinctly different issues.

    Wouldn’t you agree?

    I could get behind a “balanced’ article examining what happens to mortgages after their “closing”. That is, after the transaction.

    I may even agree with your position. I haven’t fully examined that aspect.

    I am sure it would benefit many Fools. For instance, what does it mean for an institution to sell “The Servicing” or not, on your mortgage? How do you tell whether an institution will sell “The Servicing” on your mortgage? Etc.

    Fool on.

    Sky Pilot

  • Report this Comment On June 21, 2011, at 8:39 AM, broadmoor wrote:

    “Warren made very clear to us that standing for consumers didn't mean standing against businesses. She described the CFPB's key principles as ensuring that:

    1. Prices are clear.

    2. Risks are clear.

    3. The ability to compare like products is relatively easy.

    If the agency can achieve that, then consumers can ask two key questions:

    1. Can I afford this product?

    2. Is it the best deal I can get?

    The output of all this, Warren says, is a competitive marketplace -- which should be good for both consumers and businesses.”

    If you believe all of the above is beneficial to the real estate marketplace, and the overall economy, then we absolutely agree with each other. It would also appear, from your commentary regarding post-transaction "Servicing", that some common ground might be found there as well. As I had you a Plutocrat masquerading as a doctrinaire Libertarian, you probably viewed me as a rigid disciple of Alexander Herzen and Karl Marx. I can now state with certainty that I was most incorrect; if you ever did think of me in the above described manner, I hope you can dial it down as well.

  • Report this Comment On June 21, 2011, at 6:12 PM, StateCollegeGuy wrote:

    @Roryh,

    " ..... I'd like to point out the irony of the above rant coming from someone with the moniker "state college guy." Damn those government socialists ...."

    Perhaps your statist peasized brain is capable of entertaining the idea that I once WORKED in State College, PA (not at Penn State but an actual firm located in State College, PA) and first became a member of fool.com there AND decided on the moniker.

    And "government socialists" ?? Man, you and the Obama administration deserve each other.

  • Report this Comment On June 21, 2011, at 6:19 PM, StateCollegeGuy wrote:

    @CFADude11

    "He wasn't a particularly astute guys, so I'm sure the irony was lost on him."

    Your education is showing. Look up singular and plural forms of the noun "guy".

    And about fire-breathing Ayn Rand pupils coming out of Ohio State ? .... Well, I've got one better - A no-good leftist crony-capitalist CEO heads ..... GE.

    Have a nice life.

  • Report this Comment On June 21, 2011, at 7:01 PM, StateCollegeGuy wrote:

    @TMFBirch,

    I am not accusing you of being a closet socialist only becuse you did those things BUT also because being a motley fool columnist, you have the duty to present both sides of the argument and you chose not to.

    You definitely KNOW which side the Huffington Post sides with AND you definitely know how Elizabeth Warren is going to, to justify her humungous power and fat government salary and her newly-found power. There are two sides of an argument as you can see from the current debate raging in this column. If the SEC, FTC, Fannie Mae, Freddie Mac and bunch of alphabet-soup of federal agencies could not stop the housing crises and financial fraud, you think and additional agency will ? Could you by any chance have raised this point also ?

    But regarding my accusation ..... Here's one of the most egregious lines in your article

    "She gave us a useful analogy: Prior to the formation of the FDA, it was common for "drugmakers" to sell snake-oil or rat poison and call it aspirin."

    This looks to me a very enthusiastic approval of a teacher by an enthralled student. "She gave us ..." No sir, it was not common for drugmakers to sell snake-oil and/or rat poison. Sure, there may have been some adulterers, maybe even a lot of them, but the making of an entire FEDERAL agency to regulate every drugmaker ? And what of today ? Some Drug-makers still sell snake oil eg. Enzyte, penis-enhancers ads are legion on TV ... I only wish you had woken out of your trance to ask Ms. Warren what the FDA is doing to regulate those drug-makers .... But I'm sure, Ms. Warren would sweetly smile her benevolent smile and say - "But my dear, that's why we need more power, don't we ?"

    Fool.com consistently is in thrall of government agencies, regulations and "shared sacrifice". A little after Obama sanctioned his mortgage relief boondoggle, I remember reading a column on fool.com about the different solutions to the housing crisis. IN addition to enthusiastic support for the boondoggle, a single line in the article struck me (and I paraphrase) - "And what about people who say they have diligently paid their mortgages and it is unfair that people who have been irresponsible are being bailed out ? Well, do unto others ..." That's it, the authors seem to be saying, suck it up. That pretty much decided (for me, at least) which side (THE LEFT) fool.com lands on. I'd welcome any efforts on your part to disabuse me of that notion. Otherwise, I choose to belabor under the notion that even though you have financial geniuses at fool.com who have made me a bundle with Hidden Gems, this is a pretty leftist site advocating crony capitalism.

  • Report this Comment On June 21, 2011, at 11:16 PM, skypilot2005 wrote:

    RE: On June 21, 2011, at 8:39 AM, broadmoor wrote:

    “Warren made very clear to us that standing for consumers didn't mean standing against businesses. She described the CFPB's key principles as ensuring that:

    1. Prices are clear.

    2. Risks are clear.

    3. The ability to compare like products is relatively easy.

    If the agency can achieve that, then consumers can ask two key questions:

    1. Can I afford this product?

    2. Is it the best deal I can get?

    The output of all this, Warren says, is a competitive marketplace -- which should be good for both consumers and businesses.”

    “If you believe all of the above is beneficial to the real estate marketplace, and the overall economy, then we absolutely agree with each other.”

    Dialing down…. :) No. I did not think of you as any of the above you mentioned. I thought of you as a sincere, well read person with an opposing honestly held opinion.

    It’s OK to disagree and learn from each other. Our opinions are either confirmed or changed in an honest “give & take”.. That’s good.

    While I do feel this information is currently readily available, I concede some folks may not have the skills or knowledge necessary to “put the information together”,

    As an aside, I am not sure how much experience you have had with mortgage transactions but some institutions will offer a lower interest rate if, you choose a mortgage in which the servicing is subject to being sold. Servicing means basically to whom you make your payments to. I’ve heard some horror stories about folks that have had these and service-ers change several times through out the life of the mortgage. It doesn’t bother some people but it would me.

    I still don’t feel we need a new $140 million dollar agency to accomplish this though. I feel the Departments of Treasury, Justice and Education have ample funds and personnel to make this “happen”. The White House or the heads of those Departments need to coordinate or consolidate so that it does happen using current personnel and resources.

    I’d rather see additional money go towards helping children or reducing the deficit.

    But, that’s just me. We can have an honest disagreement on this.

    I respect you and your viewpoint.

    I understand “Round 2” will start this week. :)

    .

    Sky Pilot

    Former Plutocrat

  • Report this Comment On June 22, 2011, at 5:29 PM, DJDynamicNC wrote:

    Funny how the response to the presentation of argument here is "you're being one-sided!" Which, of course, has absolutely no bearing on whether or not you are being truthful or right.

    As Devoish said above: "If you have concluded that 2 plus 2 equals 4, and someone else is yelling two plus two equals six, you are under no obligation to surrender your freedom of thought or speech to 'balance'."

    Don't surrender to the Fox News style of "you're being partisan!" non-argument which they always fall back on when they can't use any actual facts.

    Being partisan and being right are NOT mutually exclusive.

  • Report this Comment On June 22, 2011, at 8:38 PM, skypilot2005 wrote:

    On June 22, 2011, at 5:29 PM, DJDynamicNC wrote:

    "Funny how the response to the presentation of argument here is "you're being one-sided!" Which, of course, has absolutely no bearing on whether or not you are being truthful or right."

    You’ve presented a nice straw man. I bet you construct a nice snowman, too.

    Come on

    Sky Pilot

  • Report this Comment On June 24, 2011, at 11:17 AM, mcampbell8 wrote:

    If you really want to talk about unintended consequences, consider the following:

    Banks get access to easy cash at extremely low rates and feel no obligation to make loans to businesses in order to make a profit.

    Glass-Steagall Act repealed and investment and commercial banking assets are mixed and put into speculative products and a 2nd depression is happens. This is a factor in the issue.

    Mortgage companies and banks push sub-prime loans because they are more profitable while ignoring the higher default rates.

    Credit agencies rate these vehicles as the highest quality investment grade possible, so investors believe these are safe places to put their investment dollars. Then in court they claim these are only their opinions and as such they are protected under the first amendment and they shouldn’t be held liable for any losses as result of their opinions being wrong.

    Financial institutions charge excessive fees for services and pull billions from the economy for bonuses and such that would typically go for real services and products.

    Hedge funds and other speculators bet on the success and failure of companies, currencies, commodities and take positions that help to fulfill their positions. Supply and demand driven prices go out the window and many aspects of multiple markets are negatively impacted.

    Financial corporations create new liability products that allow them to pass on the default risks to others, all in the name of avoiding capital requirements and the quest for higher profits. Naturally the buck has been passed and the concern for any problems lies with the buyer. These instruments are valued at amounts that are bigger than the assets, revenue of companies and governments. In fact, you can have the same risks sold for 20 or 30 or 40 times and maximize the toxicity of the products to the point that they can destroy whole economies or corporations who take on the risks. And it’s not regulated too. What’s the worst thing that could happen?

    There should be reasonable regulations for capital requirements for banks and financial companies. They shouldn’t be allowed to avoid this requirement, period. Additionally, they shouldn’t be able to bundle and sell liabilities to other investors. They lose all incentive to ensure the product is actually safe and doesn’t pose a risk to their bottom line. And selling their liabilities contaminates the entire system and sets the stage for a massive financial collapse. They laugh and chant the mantra, let the buyer beware.

    You simply can’t allow any company to create products that have the potential to not only destroy a company, but also destroy an economy or interconnected economies. It only takes one toxic product, spread far enough into the system to bring the whole thing down. I’m laughing, the financial companies that were on the brink as a result of these things, doesn’t want the system changed. They have successfully pushed off the liabilities to others and the taxpayers and they are getting access to cheap money. What’s the real risk to them? None, they run the Fed and the Treasury, they purchased the politicians, they paint dire warnings of the world coming to an end, if we don’t bail them out or continue to allow them to access funding for next to nothing. What are the unintended consequences if we allow this system to continue?

  • Report this Comment On June 24, 2011, at 4:33 PM, skypilot2005 wrote:

    RE: On June 24, 2011, at 11:17 AM, mcampbell8 wrote

    Do familiarize your self with the responsibilities of the CFPB. They will have nothing to do with most of what you are stating.

    Sky Pilot

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