Protect the consumers

Seattle Times: Congress now proposes to create a Consumer Financial Protection Agency. If it will actually do something to oversee mortgages and other financial products, we are for it.

An agency whose central goal is regulating consumer financial products is needed. But let us go into the venture with some skepticism about how this will promote stability and safety of the system as a whole.

Most regulators didn’t see the crash coming.

Alarm

PBS’s “Frontline” recently told the story of one who did, Brooksley Born of the Commodity Futures Trading Commission. She raised the alarm about derivatives back in the Clinton administration. More powerful regulators told her she was wrong.

During the Bush administration, Simon Johnson of the International Monetary Fund raised an alarm about financial risk. He was ignored. He went to talk to the French and Germans — and they ignored him.

Regulators can try to do better. They should. But in the financial world, they will never be as close to the action as the people they regulate, nor as well-paid. Always there will be a risk of inattention and error — and also of lobbying.