Financial Autopsies


Mike Konczal writes today about the Grayson/Clay/Miller amendment, aka the “Financial Autopsy” amendment.  Basically, it would require the new Consumer Financial Protection Agency to take an annual look at the consumer products that have caused the highest rates of bankruptcy and foreclosure and report back on what ought to be done about them.  Here’s Mike:

The CDC has a response team for when it finds cancer clusters. I like the idea of the CFPA having a similar response team, that can be called in for expert opinion in the case of foreclosure and bankruptcy clusters. A team of forensic accountants and financial experts who can be called in by members of Congress, or as a result of their own statistical samplings, to give opinions on what is going on on the ground in a member’s district when it comes to the end result of financial innovations. Financial detectives, if you will, who can shift through all the noise one finds with dealing with consumer finances to see if there’s any signal that is the result of changing products and options available to consumers.

And maybe the producers of House could create a spinoff series called Plank that solves financial mysteries.  Ripped right out of the headlines!

Anyway.  My first reaction is the same cynical one that Felix Salmon has: this might actually be mildly effective, so it will never see the light of day.  At least, not in any way that runs the risk of keeping it effective.

My second reaction, however, is that this is exactly the kind of thing I was talking about a while back when I objected to the Fed trying to do stuff like this.  As Mike points out in his post (and as Alan Greenspan acknowledged a few days ago), the Fed is institutionally incapable of this kind of regulation.  The only way it will ever happen is if it comes from an agency in which this is part of its cultural DNA.  An agency like the CFPA.

So how can it survive the usual gauntlet of opposition from bankers who don’t want this kind of troublesome attention?  I’m not sure, but divide and conquer seems like the best bet.  There must be some corner of the financial industry (credit unions? community banks?) that mostly prospers from being careful and prudent, and would therefore benefit from having their least scupulous competitors put under an occasional microscope.  Bankers in general are so allergic to regulations of any kind that it’s not clear you could get their support even for one that clearly benefits them, but you never know.  It’s worth a try.

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