Why financial regulation is necessary

WORDS ON WEALTH

- MARTIN HESSE

IT SHOCKED me to learn that the Trump administration in the United States, with the assistance of Elon Musk and his Department of Government Efficiency, had dismembered and severely impeded the function of the Consumer Financial Protection Bureau (CFPB).

This US government agency was established in 2011 under President Barack Obama in the aftermath of the global financial crisis of 2008. According to the US Treasury Department, the bureau is tasked with the responsibility to “promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services”. On its website, the CFPB says its central mission “is to make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other products”.

Wikipedia notes that many thousands of consumer complaints about financial services providers, including banks and credit card issuers, have been received and attended to by the CEPB.

The CFPB is not the only US agency acting against unfair practices by financial services providers; there is the longer-running and more established Federal Trade Commission (FTC), which has wide-ranging powers across business sectors that include enforcing antitrust laws. This has also been targeted by President Trump, who in March fired two of the FTC’s Democratic commissioners, although the legitimacy of those firings is now being questioned in court.

Which brings me to the topic of financial regulation generally.