Saturday, September 26, 2009

And Now for Something Completely Different

One of the great errors in modern policy is to confuse disclosure with information.

Steve Randy Waldman

After an extended and much-regretted absence, a voice of reason has returned to the econoblogosphere. Steve Randy Waldman has put up a post about the Administration's recent decision to drop the requirement that financial institutions provide "plain vanilla" (i.e., standardized, simple, understandable) financial services to consumers from its proposal for the creation of a Consumer Financial Protection Agency. This reversal is a serious mistake, and Steve explains why. While his post is lengthy (sound familiar?), it is a model of clear exposition and sound argument. Go read it, and learn something. I did.

Dedicated Readers of this blog already know that I do not write about consumer finance. It is not my area of expertise. I work in the wholesale financial markets. But I am a consumer of retail financial products and services, like everybody else. And I can say, in all moderation and fairness, that the state of consumer finance—revolving credit, mortgages, retail brokerage, etc.—in this country is appalling. The kind of crap, bullshit, obfuscation, misdirection, misinformation, and just plain awful customer service you have to put up with to transact personal financial business nowadays is a national disgrace.

And, as Mike Konczal points out elsewhere, financial sophistication is no defense. Hell, I write, read, and negotiate extremely complex, lengthy financial contracts between highly sophisticated institutional counterparties for a living, and even I can't understand half the shit in a typical credit card application or "account terms update" mailer. Plus, even if I could, why the hell would I want to spend the time to do so? Consumer financial products are supposed to be about convenience, right? Too bad they're all about information asymmetry and rent extraction instead. I shudder to think what a normal person—who (correctly) believes the use of the phrase ;provided, however, as a transitional modifier in a 300 word sentence in the middle of a 20-page contract is a Sign of the Devil—does in such circumstances. I imagine they just close their eyes, sign on the dotted line, and hope for the best. That is no way to run an economy.

* * *

Anyway, read Mr. Waldman and come to your own conclusions. I wish there was a way to convene a panel of intelligent economics bloggers like Mr. Waldman, Felix Salmon, and others before a joint session of the US Congress and have them debate such policy issues in front of them. Attendance for legislators would be mandatory, and there would be a quiz afterwards to check their absorption and comprehension of the issues discussed. I would be happy to attend as well, but I think the purpose of the gathering would be better served if I eschewed direct participation in the policy discussion. Instead, I propose to roam the aisles of Congress carrying a large, metal-edged yardstick, muttering curses to myself, and glaring menacingly at the Congressional numbskulls in attendance. I might need a substantial supply of yardsticks—to replace those I would break over the heads of idiotic or recalcitrant legislators—but I would be happy to absorb all other expenses.

Hell, investment bankers like to work pro bono on occasion, too.

© 2009 The Epicurean Dealmaker. All rights reserved.