On Wednesday, President Obama appointed Richard Cordray as head of the Consumer Financial Protection Bureau “without Senate approval under the constitutional provision for making appointments when lawmakers are in recess.”
This appointment begs an obvious question. In an era of runaway government spending, why the heck does the country need the Consumer Financial Protection Bureau?
I think the answer is simple:
To protect stupid people from themselves.
Nothing seems to be anyone’s responsibility anymore. Do you make $1,000 a month, but you signed up for a interest-only 5-year ARM on a $500,000 house? No problem. Call the CFPB and complain about your manipulative mortgage broker. It’s not like you need to understand how an ARM works before you buy a house it would take you about 42 years to pay off just the principal, assuming no taxes, no interest, and every dollar you own pays the mortgage each month.
In his rabble-rousing speech, Mr. Cordray suggested that, “nearly 20 million American households use payday lenders and pay roughly $7.4 billion in fees every year.”
So what? If you are daft enough to take out a 20% weekly interest pay-day loan, then you deserve to pay a $370 penalty for your stupidity. The taxpayer should not have to bear the cost of an agency that caters to glue-sniffing cretins.
In fact, from henceforth, the CFPB should be renamed the Cretinous Fool Protection Bureau, because it protects cretinous fools from shiny object syndrome.
Reflections of a Rational Republican 
Yes, but it’s easy to under estimate the power of marketers and people who seem to be experts who assure people that deals are good. It’s not that people are stupid, it’s just that the world is so complex that people don’t know about a lot of things and are therefore vulnerable. Also you and I are well educated. I wouldn’t touch an adjustable rate mortgage even on good terms, I’d say you and I are financially savvy. Yet I don’t think most people are, and maybe it’s not such a bad thing in this complex world of schemers, marketers and con-men — often with official titles at banks and companies that sound hyper-legit — that we do things to protect the less educated or those whose knowledge is about something other than, say, mortgages.
There was, to be sure, some rationality in buying a mortgage with an ARM set to go to a payment you can’t afford in two years. For awhile property values were going up at a rate that would allow a refinancing or even sale at a profit before the higher mortgages kicked in. In a world where property values go up rapidly, that kind of mortgage is perfect for someone who plans to sell before the two years are over. A lot of experts on CNBC and elsewhere did not foresee the property bubble collapsing as dramatically as it did, there’s that famous video of Peter Schiff against “experts” who constantly say the housing market will do fine. So even smart people can be fooled (though I — and I suspect you — could tell it was an insane speculative bubble doomed to burst).
“So even smart people can be fooled (though I — and I suspect you — could tell it was an insane speculative bubble doomed to burst).”
Indeed. 😉 I read the Economist in 2004 when that magazine did an analysis of rent-to-mortgage ratios. I was convinced we were in a bubble and didn’t buy until late 2009. I didn’t time it perfectly, but better than most.
“I was convinced we were in a bubble and didn’t buy until late 2009. I didn’t time it perfectly, but better than most.”
My insight went the other way – I avoided buying and missed out on two opportunities to almost double my equity in 3-4 years. DOH! I should have got in and got out quickly.
Instead I put money into businesses and now sit debt-free and am now looking in a market that is 1/2 to 1/3 the price it was when I was first considering buying, so not all bad. 🙂
The problem is that I would have never bought and sold within a 3-4 year period. Selling a house is too much of a pain in the ass to go through it twice that soon.
I was single at the time, and no kids, so the decision was basically a matter of where I wanted to store my suitcases. 😉
There’s an inertia that comes with ignorance and/or stupidity which convinces people that since they don’t know when something’s going to crash/come down, they just stay on the ride with the crowd.
In short, I share Bill Maher’s belief that no matter how smart we are individually, collectively we become a bunch of morons.
It’s not that people are stupid, it’s just that the world is so complex that people don’t know about a lot of things
Reflect on that comment Scott.
I’d have to side with Pino on that one. Nothing too complex about “I can only afford “x”, yet I’m buying ‘2x”
Stupidity was all-around. When I first got to Vegas, which was shortly before the crash, I looked to rent. In starting my last company I had a couple R2’s on my credit bureau from some time ago with some credit cards tied to the business. Had I simply defaulted on a mortgage, an R9, the rental company said they would have turned a blind eye to that but since this was credit card debt, “it may either increase my rent or outright prevent me from getting approved.”
I asked the leasing agent, “Wait a minute – so if I was someone who walked away from a $2000/month mortgage last year because I couldn’t afford it, you’ll disregard that if I’m now trying to ask for a place with a $2,000 monthly rent? Yet if I was late on two credit cards in starting a business that now guarantees that I can afford at least $2k a month rent for at least the next 3 years, that’s a negative?”
Her response: “Well, we don’t want to discriminate against people who have been foreclosed on, otherwise we’d be turning down everybody.” “Well, you’d be turning down people wanting a $2,000/mo place who’ve just recently proven they can’t afford $2,000 a month.” She was a deer in the headlights. Insert facepalm here.
The old R2’s turned out to be no problem at all, but I was still shaking my head at the logic. Now I’m facing the issue that while I have a substantial amount to put down on a place, the fact that I’ve been self-employed for the past 3 years is working against me vs. whether I was in a local job for 6 months with a company that might go under in month 7.
My experience with most things is that the laws are mostly there to protect the stupid from themselves. I have to agree, and cite two other examples as proof:
1) The fact that we have to put “don’t try this at home” disclaimers on ads that show a car driving off a cliff,
2) The fact that we have to put “do not ingest” warnings on shampoo bottles (not to mention, instructions on how to use shampoo as well)
Wait until you have kids. The stupidity of some California paternalism laws is mind-boggling.
“Yes, but it’s easy to under estimate the power of marketers and people who seem to be experts who assure people that deals are good. It’s not that people are stupid, it’s just that the world is so complex that people don’t know about a lot of things and are therefore vulnerable.”
I have to agree with Scott here. There’s a difference between being confused by all the technicalities that go with buying a home, and being stupid.
Though my husband and I also stayed away ARM’s, and didn’t buy more home than we could afford, we got caught by the bubble anyway. Because prices were rising rapidly and showed no signs of slowing down we thought it wise to buy before they leveled out at a price we would never be able to afford. Since neither of us have degrees in economics, it seemed like a logical assumption for average people with an average education. I turned out to be the wrong decision and now we are way upside down. Because we stayed within our monthly budget we can make our payments and are not in danger of foreclosure. We don’t plan on moving anytime soon, either. (Had enough of that during my husband’s military career.) After going though the process myself I can see how easy it would be for a slick talking mortgage broker to convince someone that with a little creative financing he could move them from cramming their family into a 3 bedroom house into a four.
As a teacher I deal with that daily. It’s easy to be arrogant about all the “stupid people” that do stupid stuff. But I think that arrogance is misplaced. Most people are pretty smart. But most people know the world they’ve experienced, and not a lot about things outside of that. A few of us get the education and the broad exposure to be able to better navigate the complexities of life; a lot of people don’t, and work hard to simply make a living. Look, I have a Ph.D., but I swear that my mechanic is smarter than I am. He just focuses on cars, not academic material. He’s brilliant in his realm, but I doubt he is astute about real estate or lending practices. That’s just not his world. If mortgage brokers and the media (who all said that housing prices would not fall) get his attention, he’s actually smart to listen to them — they’re the experts. But when they’re wrong he gets burned. Blaming him or calling him stupid if that happens is simply wrong.
I think a lot of people confuse ignorance with stupidity. An ignorant man simply doesn’t know, he can be taught. A stupid man, well as Ron White says “you can’t fix stupid”.
That being said, I also feel that when we make mistakes, we should take responsibility for them and not look to the government to bail us out. I agree with Allan Scott and Sean that we don’t need another government bureaucracy. I’m afraid that the CFPB would be more about restricting the financial industry to the point of stifling growth, than about really protecting consumers.
“Look, I have a Ph.D., but I swear that my mechanic is smarter than I am. He just focuses on cars, not academic material. He’s brilliant in his realm, but I doubt he is astute about real estate or lending practices.”
But here, Scott, I think you’ve made my point. For instance, I had my brakes replaced in June of 2011. They failed again in November 2011. I know nothing about fixing cars, but it was my responsibility to determine whether these mechanics had screwed up the job (My opinion is that they did). So, rather than blindly accept their advice that it was my wife’s driving that resulted in brake failure, I called around and read the fine print of my contract. I also poured through our previous service records on the car and noted that we tended to replace our brakes every 60,000, not 15,000 miles. It also turned out I had a one-year warranty, and they were required to fix the car for free. Of course, they wouldn’t do it, so I beat them up pretty badly over the contract terms and with threats of a lawsuit, etc. I also raised a big stink with Toyota corporate. Ultimately, they agreed to fix the car for free labor, but I had to pay for the parts. I decided not to take them to court, because the costs of said litigation would likely outweigh the cost of just paying Toyota for parts.
Do I feel ripped off? Absolutely. Toyota breached its contract. Do I feel compelled to reach out to big brother to go after Toyota? Absolutely not. The system that already exists works. I simply won’t do business with Toyota ever again.
I have been saving money so that I can live for a full year without a job or unemployment insurance, so we only have one car, and it is about 8 years old. If the economy ever turns around, my wife and I will be in the market for not one, but two new cars. Up until this local Toyota dealership stole money from us to mask its own incompetence, these two cars were going to be Toyotas. Now, they won’t be.
It’s that simple. I don’t need a big brother government bureaucracy to take care of me. I can take care of myself.
To protect stupid people from themselves.
To buy votes.
Do you make $1,000 a month, but you signed up for a interest-only 5-year ARM on a $500,000 house?
It is my belief that people intuit what they can afford; they know when too much is too much.
nearly 20 million American households use payday lenders and pay roughly $7.4 billion in fees every year.
Yes. 5% of America takes advantage of payday lenders. If they didn’t have access to these lenders, they would take them out with less savory characters. In the end, folks feel the fee is worth not having the heat turned off.
Agreed. It’s all about pricing risk.
This post would be hilarious….if it wasn’t so sadly true.
Seriously.
I assume that there are already a lot of agencies who do what this new bureau does ? Why don’t they just liquidate Fannie and Freddie who caused a lot of this . Now that their Sugar Daddies, Frank and Dodd are gone it should be doable .
That’s what really upsets me. We have other agencies that do a lot of this stuff, yet we continue to create even more useless bureaucracy. I just don’t get it.
Sean,
Now come on, you get it. It’s partly about adding to the bureaucracy, which is a source of Democratic Party power. It is mostly about President Obama picking a fight with Congress to fire up his base for the coming election. His base thinks he has rolled over too many times to House Republicans. He will pick more of these partisan fights with the ” do nothing ” Congress as an election strategy . He knows what he did violated the Constitution, which to him is a roll of toilet paper . He deliberately did it with a totally meaningless position just to show he has guts .
It’s all red meat to the Barak Hussein Obama , mmm, mmm, mmm crowd . Their legs are getting all tingly .
Agreed.
There is a point at which government ought to protect those who do not know (whether from stupidity or ignorance) from themselves. We prevent a four year old from playing in traffic and fine or jail (but not prevent) the one in a mid life crisis who is driving recklessly in his new red convertible sports car. The trick is to find the point at which the person must accept full responsibility. Politics is about finding the proper point in addition to acquiring and keeping political power.
I think this point should be limited though. In its current conception, taxpayers are footing too much of the bill for the cretins who pay little-to-no taxes, but do the most irresponsible things.
I know this is off topic, but I think that it all boils down to a lack of education. My Parents were born just before the boomers, their parents lived through the Depression. They learned to live by their wits and wisdom. When I was old enough to have a bank account my mother taught my how to keep a passbook and endorse checks. In high school I took a class in household management that covered everything from buying life insurance to removing stains. It wasn’t enough to make me an expert, but when I got out of high school I could make a budget, balance a checkbook (and get mud stains out of my jeans). Skills that many college graduates don’t have today. This all started when the baby boomers refused to listen to what their parents were trying to teach them and looked instead to the government for their support. They then failed to teach life skills to their own children. The public school system is more about political indoctrination than education. This has created generations of financially ignorant people who are ripe for manipulation by the financial industry and the government and they don’t even know it.
“This all started when the baby boomers refused to listen to what their parents were trying to teach them and looked instead to the government for their support. They then failed to teach life skills to their own children. The public school system is more about political indoctrination than education. This has created generations of financially ignorant people who are ripe for manipulation by the financial industry and the government and they don’t even know it.”
I completely agree.
There must be a good in-between policy. Nothing drove me more crazy during my time as a platoon leader (maybe you had the same experience?) than my naive, fresh-out-of-high-school, 18-year-old privates going off post to buy a slick used POS car in crappy condition with all the extras (but no warranty) because the salesman (invariably a retired NCO) talked them into signing away half their paycheck, automatically deducted, no less, because those kids didn’t know any better. And that’s not to mention the young married E-4s and E-5s who get talked into buying a house (overpriced and overfinanced) off post even though they’ll only spend 2-3 years stationed there. And more, the proliferation of payday loan storefronts and buy-here-pay-here used car dealers right outside every Army post is downright ridiculous. These are professional, volunteer soldiers who just don’t understand what they’re getting talked into, and they’re getting ripped off without even realizing it. They don’t have the education or the experience. It disgusted me then, and I’m can’t imagine that the situation’s any better today. I do believe in taking responsibility for your actions, but, at some point, the “stupid” people do need protection from the predators.
I agree they needed protection. As a platoon leader, it was one of our responsibilities. My only point is that there are already hosts of government agencies and organizations that prevent stupid people from getting into these situations. But now it has gone way to far. For instance, my nine year old daughter has an IQ that is off the charts, yet she can’t stay home alone until she is thirteen because of California nanny state laws that were enacted because some idiot somewhere else decided to leave an eight year old at home while they went to Vegas for a week.
Also, there are far more efficient ways to prevent these problems from happening than creating another massive federal bureaucracy. Why not just mandate that all schools teach a six month basic finance course in high school?
Ummm…dude, I wouldn’t EVER leave a nine year old home alone. I don’t care how smart you think she is.
My parents left me home when I was much younger, and it helped me mature faster. What right does the state have to impose its views on my parenting? You probably believe that the state has no right to deny you an abortion? How is this any different?
Yeah, and my Uncle fought in WW2 and came home without a scratch. So much for that b.s. about war being dangerous, right? Hey, you ever run across the phrase “anecdotal argument” in your supposed education?
The state has no right to impose it’s views on your parenting? Oh, so I guess the cops should mind their own business if you’re whipping your child with an electrical cord on a daily basis.
As for the abortion thing..umm, how in hell is this in any way THE SAME? It’s like saying if the state has no right to deny you a facelift, then it shouldn’t be able to require pilot’s licenses to fly a plane.
So getting an abortion is like a facelift to you? Really?
Just like pilots licenses, I think face lifts should be mandatory. In certain peoples cases maybe duck tape too.
It seems to me that Republicans would want to protect as many stupid people as possible. After all, that’s their base.
Is that a serious argument?
Pretty much. Study after study finds out the more educated someone is, the less likely they are to vote Republican. And then there’s that curious correlation between a state’s average IQ and their tendency to vote for Kerry in the 2004 elections.
And then of course, there’s who you picked for your last President (Bush). Not to mention Sarah Palin, Michelle Bachmann, Rick Perry, etc. etc.
Really? Can you post some links to these studies here?
Certainly.
http://chrisevans3d.com/files/iq.htm
http://www.watchblog.com/democrats/archives/005153.html
http://www.cnn.com/ELECTION/2006/pages/results/states/US/H/00/epolls.0.html
Oh, and might I point out that 40% of Republicans think Obama was born in Kenya.
What’s more, Republicans are more prone to swallow easily disproven lies…”The CRA caused the financial crisis”, “Obama made a grant to the Venezuelan oil industry”, “global warming is a vast scientific conspiracy.” Not exactly a sign of intelligence.
Actually, the CNN poll shows that 64% of voters with no high school diploma voted Democratic. Thank you for posting this data, because it confirms an informal hypothesis I had about conservatives and liberals. My theory is that the intelligence distribution among liberals is bimodel, while for conservatives, it resembles a more traditional Gaussian distribution. For instance, the CNN poll shows a big hump among liberals in the least educated spectrum of the population (64% of those voters with no high school education) and a big hump at the highest educated range of the spectrum (58% of voters with a graduate degree voted Democrat). Republicans tend to have the most representation among people of middling education and less representation at the extremes.
So, based on the CNN data, your hypothesis is incorrect. The data suggests that Democratic voters are both the most and least educated.
Fascinating.
Oh, and
http://uspolitics.about.com/library/bl_education_vote.htm
Not so. If you take a closer look, you’ll see the people with no HS education account for only 3% of all voters. The next largest bracket is people with post-secondary education, 18% of all voters, which favor democrats 58% – 41%. For the other 97%, there is a clear correlation between increased education and voting Democratic.
Didn’t they teach you something about statistics at Harvard?
“Didn’t they teach you something about statistics at Harvard?”
Your incessant snark and ad hominem attacks aren’t helping matters, especially when you bring a knife to a gun fight.
And yes, they taught me statistics at Harvard, though why that is relevant on this site is beyond me. Only arguments have weight here. Someone’s background has no bearing. Haven’t you ever wondered why I provide you with a forum here? I have no idea what your background is. You could be a PhD or an elementary school dropout for all I care.
In regard to my argument. It still stands. If you apply these statistics to a a population of 10,000 people, 1,347 Democrats, but only 1,029 Republicans would have no college education – that is, Democrats are over represented at the lower end of the educational spectrum. Similarly, more Democrats had post graduate degrees – 1,044 to 738. Furthermore, 25.44% of Democratic voters had no college education, while only 22.63% of Republicans had no college education. 61.14% of Republican voters had some college education or were college graduates, while only 54.84% of Democrats did. That said, 16.23% of Republican voters had postgraduate degrees while 19.72% of Democratic voters did. Therefore my bimodel theory of liberals’ educational level still holds. Your “all conservatives are stupid” theory falls flat on its face.
I’m sorry that the actual data you supplied me doesn’t support your anti-conservative bigotry. It actually presents a far more nuanced picture. Don’t blame me. Blame the numbers.
“post-secondary education, 18% of all voters, which favor democrats 58% – 41%”
I think you meant postgraduate education. Post-secondary implies at least some college.
Since theres no “left at the altar bitter jaded man-hating radical feminist Party” you must be very happy that the democratic party took u in there lady so you have a place to put your vote. lol