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CFPA: Should feds stop consumers, banks from dumb choices?

If the Fed, FDIC and Treasury can't make banks behave, why do we need another agency? asks bank-watcher Tom Brown

As the Democrats' bank-reform plan (HR 4173) was passing  the US House, 223-202, bank analyst Tom Brown weighed in at against Obama's proposed Consumer Financial Protection Agency, part of the plan.

"Bad idea," writes Brown, who bashes regulators and banks alike when they claim more than he thinks they can deliver. He's worried the CFPA is going to artificially hold down loan prices, keep consumers from paying fees and rates they're perfectly willing to pay, and make banks unwilling to lend, slowing the economy and crimping banks' profits. Read him here.

Bankers say it's ironic that the government, after pushing them to lend to the poor for the past 20 years, now wants them to pull back. But if the government is going to bail out Citigroup for financing subprime loans to people who can't afford them, it has every reason to try to limit future stupid loans, no?

It's weird, though, that Obama's Treasury Department is trying to make it harder for consumers to borrow more than they can afford, at a time when Democratic Governors like Ed Rendell in Pennsylvania and Jack Markell in Delaware are trying to get more retirees to pump their pension checks into slot machines and other gambling holes.