Facebook Rss Twitter Youtube MSN

More disclosure? No, more clarity

Oct 27, 2010 | | Comments Comments Off

I wanted to make sure you didn’t miss the Los Angeles Times’ interview today with Elizabeth Warren, where she talks about the nascent Consumer Financial Protection Bureau and how it’s already having an impact.

Some highlights:

Is disclosure your priority?

No, it’s clarity. Disclosure has come to be a dirty word. Disclosure has become like shrubbery, a dense thicket of words that are a good place to hide tricks and traps. Clarity is about emphasizing the key pieces of information that someone needs to know: price, risk, easy comparison of other products.

I have great faith in the capacity of people to make good financial decisions — when they have good information. No one makes great decisions — consumers or businesses — if the relevant information is hidden from view. This agency is designed around the premise that with good information, consumers can make good decisions for themselves, their families and ultimately for the economy.

Had this agency existed 10 years ago, would we have the foreclosure problems that we have now?

No. If this agency had been in place a decade ago, the subprime mortgages that were sold to families across the country and that ultimately cost so many of them their homes would never have been marketed. Without those subprime mortgages fed into the system, the housing bubble would not have inflated with such speed, and an asset securitization market would not have … grown to such gargantuan proportions, built on a fundamentally unstable base.

We might still have had a housing bubble, but it would have been modest and most families would have survived without significant disruption. Too-big-to-fail would not have entered the lexicon, at least not through home mortgages.

I think that last point is particularly important. So many myths have grown up about the financial crisis already–that it was somehow caused by community-banking rules or government intervention, rather than lack of regulation.

I’ve spent much of my time at MSN lamenting the tricks and traps companies set for consumers. Playing foul, rather than fair, has been a profitable strategy for too many. If companies can’t behave ethically and responsibly on their own, then “a world with a cop on the beat,” as Warren puts it, will be a more stable and fair world for all of us.

Related Posts

Categories : Liz's Blog