CNBC — the same network that tirelessly defended bonuses for bailed-out bankers, claimed that only “suckers” and “idiots” were victims of predatory lending, and called struggling homeowners “losers” — is suddenly very concerned with the plight of low- and moderate-income Americans. However, it’s not because of massive job loss or rising foreclosure rates.
Instead, network anchors Larry Kudlow and Melissa Francis, along with CNBC contributor James Pethokoukis, spent a segment today claiming that the Obama administration’s proposed Consumer Financial Protection Agency (CFPA) is a terrible idea because it will inevitably be “extremely elitist” and its creation will result in only rich people having access to financial products. Watch it:
Fortunately, Connecticut Attorney General Richard Blumenthal was there to characterize the CNBC position as “unreal.” But CNBC is not the only one using this argument to try and deride the proposed agency. Here’s the American Enterprise Institute’s Peter Wallison in today’s Washington Post:
Conservatives have always argued that liberals are elitists who do not respect ordinary Americans; this legislation seems to prove it. For example, the administration’s plan would allow the educated and sophisticated elites to have access to whatever financial services they want but limit the range of products available to ordinary Americans.
Now, any regulation is bound to carry some cost increase and reduce some choice. For instance, mandatory seat belts and air bags make new cars slightly less affordable to some consumers. Do they make it such that only the wealthy can afford cars? No, of course not. This line of reasoning from CNBC and Wallison is simply a disingenuous distraction from those who fear any kind of regulation.
The point of the new agency is to ensure that consumers have to actively make the choice to purchase a riskier financial product. Consumers would have to opt-in to a non-standard financial product, and the firm offering the product would have to fully disclose that product’s risks. The agency would also be able to ban some of the worst practices of lenders, but as Tim Fernholz put it, “the loans the CFPA [is] designed to ban were premised on the idea that they were risky and consumers didn’t understand them, since that was a better way for banks to make money.”
The reality is that exploitative and predatory lending is often quite profitable for a financial institution, creating an incentive to push consumers toward riskier products, even when a standard product will suffice. This is what the new agency is meant to address. CNBC’s professed concern for the little guy is simply the same Wall Street-centric nonsense that the network always engages in, dressed up in different clothing.