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Consumer Financial Protection Agency: A Cure for Lobbyist Deficit Disorder?
Plans to create a new federal consumer watchdog have been met by predictable reactions as NGOs cheer the idea while industry advocates warn of serious consequences. The proposal would create a new federal agency to regulate mortgages, credit cards and other consumer financial products.

One industry-oriented think tank decried the plan as "elitist" claiming that it "would allow the educated and sophisticated elites to have access to whatever financial services they want but limit the range of products available to ordinary Americans." There is some merit to this view. That merit, however, should be viewed in light of the fact that ordinary Americans demanded and obtained zero-down loans and other instruments that allowed them to turn the residential real estate market into countless mini Ponzi schemes.

Meanwhile, the usual assortment of NGOs and unions are not only lobbying for the plan but also have created yet another umbrella group to demand massive new regulatory regime. Americans for Financial Reform describes itself as "a coalition of nearly 200 national, state and local consumer, employee, investor, community and civil rights organizations..." who seek a "consumer watchdog who can give the American people the security they expect and deserve when making financial decisions." In short, these well funded, purportedly selfless groups want to essentially place themselves in charge of the financial system.

A new regulatory agency may or may not prevent some consumers from making foolish decisions. It may or may not prevent unscrupulous businesses from taking advantage of public credulity and may or may not replace innovative financial products with government-approved gruel. What is certain is that creating a CFPA would ensure that a great many NGO and industry lobbyists have plenty of work for years to come.

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