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Monday, July 09, 2007

Major Holes in Financial Product Safety Net

A Los Angeles Times article airs the views of Elizabeth Warren, a Harvard law professor who wants the federal government to do a better job protecting Americans from confusing or misleading financial products.

Warren contends government does a much better job of regulating products like toasters than it does of regulating financial products like mortgages and credit cards. Warren is calling for a financial products safety commission which would operate much like the existing Consumer Product Safety Commission:

If Congress authorized a commission to monitor financial products, Warren said, it could respond more quickly and effectively to product innovations and a changing marketplace.

She said it was likely to result in fewer regulations rather than more.

"This isn't so crazy," she said. "I don't want to get tainted meat or take prescription drugs that are placebos. I don't want to buy toasters that have a 1-in-5 chance of bursting into flames. Regulation protects me from that.

"I think the same, minimal protection should extend to financial products."

The idea may find a receptive audience, thanks to rising consumer debt, soaring delinquencies and mortgage foreclosures.

Regulation, not red tape, is urged [Los Angeles Times]