If the bitter comments made by correspondents in e-mails I received today about the White House kicking Richard Cordray upstairs to the top job at the CFPB is any indication of the sentiments of community bankers and credit union directors and senior management generally, the announcement went over like a lead balloon. I take that back. It went over with the sound of a watermelon hitting the sidewalk after being dropped from the roof of a high-rise. Here's a sampling. From the chairman of the board of a community bank: Is it two years and then a run at the OH governorship or will the siren song of DC (and the prospect of an unlimited budget to persecute…er..prosecute all perceived enemies of the working class – not self employed plumbers who challenge presidential candidates but, you know, the real working class) be too strong? Not that there is the possibility of a good choice. DC would only choose a well credentialed TBTF banker who would have no concept of either the value of smaller institutions or the harm caused to consumers (folks we call friends and neighbors) by the protection racket. TBTF bankers understand only too well the logical (and obviously therefore well deserved) competitive edge that regulation hands to the big and bureaucratic. And to be fair, most TBTF bankers haven't had to think about the consumer in years. Community bankers who think the CFPB will be going after payday lenders and independent mortgage brokers are good examples of the triumph of hope (hype?) over experience. The CFPB and the trial lawyers who love it will go after institutions with yankable federal and state licenses, identifiable capital, reserves, D&O insurance, and wealthy board members who can pay civil penalties, not judgment proof strip mall financiers. Nobody ever expects the Spanish Inquisition. No, nobody ever expects the Spanish Inquisition, but when it fortuitously appears, the Torquemedas among us take full advantage of the availability of racks, wheels, bamboo splinters, and feral weasels to make their victims lives a living hell. Community banks who think that the CFPB will forget about them while they focus on easier pickings might want to recall the words of Martin Neimoller: First they came for the Jews and I did not speak out because I was not a Jew. Then they came for the Communists and I did not speak out because I was not a Communist. Then they came for the trade unionists and I did not speak out because I was not a trade unionist. Then they came for me and there was no one left to speak out for me. This from a caustic credit union commentator: Check out www.whitehouse.gov/blog/2011/07/18/big-week-new-consumer-agnecy for Warren's parting shots. She apparently plans to be rabidly partisan until the bitter end. I don't know how "rabid" Liz might be, but there's never been a doubt in my mind that she and her cohorts at the blog she used to write for (and may again, once Cordray tells her to keep her phone line open so he can call her whenever he needs her, then immediately forgets her number) have been a bit "fevered" in their bank-bashing. I suppose her comment in her "op-ed" piece regarding the opponents of the CFPB tests some folks' gag reflex. I remain hopeful that those who want to cripple this consumer bureau will think again and remember that the financial crisis — and the recession and job losses that it sparked — began one lousy mortgage at a time. I hate to break the news to Liz, but the CFPB isn't going to prevent "lousy mortgages" from being made in the future, other than by helping to make it more expensive to make mortgages, thereby limiting both the number of lenders willing to make them and (because of their increased cost) the number of borrowers who can qualify for them. The dream of transparent disclosure has been around, literally, since the 1960s, and notwithstanding layers of laws and regulations administered by even denser layers of bureaucrats, the dream remains simply that: a dream. Yet, this grand scheme will finally untie the Gordian knot and ensure a fair deal for the average Joe and Jane because we'll now have a federal bureaucracy with real teeth and a visionary fine-tuning its DNA. Not much accountability, not much effective oversight to restrain it if it abuses its power in ways entirely predictable to anyone who ever read Lord Acton. But to hell with all that, because this massive, powerful federal agency is finally going to achieve utopia here on earth where all previous efforts have failed. This time, by gum, the bureaucrats are going to get it "right." Let's say the CFPB succeeds in its quest to make the terms of loans perfectly understandable to even the dimmest bulb in the evolutionary lamp store. No moral human being thinks it's just fine to "trick" or defraud people, so if the CFPB succeeds, then the days of "lousy loans" are done and gone, right? If the CFPB effectively requires every maker of a "lousy loan" to place in block letters at the top of the page "YOU ARE ABOUT TO EAT A CRAP SANDWICH," nobody who clearly understands the terms of a such a stinker is going to down it, correct? Where there's a need to borrow and a willingness to lend, many are they who shall be willing to serve their fellow man the sandwich and many are they who shall be willing to munch it while washing it down with a hearty glass of motor oil (10W40), both parties assuring one another that it tastes like chicken. It's basic human nature, a nature governments have never been able to effectively "reform," although they certainly have been able to twist it. As Wittgenstein observed, "Nothing is so difficult as not deceiving yourself." I doubt that Liz is a fan of Wittgenstein, though. Hegel, maybe. Perhaps Marcuse, since she's a child of the '60s. Whatever her philosophical influences, it's obvious that she and her supporters are convinced that only through the application of massive centralized bureaucratic power at the federal level can human beings be made free from the injustice of a "lousy loan." She ends her piece for the White House blog with a cry meant to rally her followers. We got this agency by fighting, we stood it up by fighting, and, if takes more fighting to keep it strong and independent, then we can do it. Keep fighting, Liz, because you haven't seen anything yet. 2012 is right around the corner. The ancient Greeks had a word for this: hubris.
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