I know Larry Summers likes to devour working people for breakfast in order to amuse his dark Wall Street paymasters, but his reply to Michael Bloomberg about why you need real consumer financial protection authority and not just “financial literacy” education seems pretty smart:
We don’t allow you to sell baby seats that are unsafe for babies. We don’t allow you to sell baby seats that look good, but that have 20 pages of print that say ‘by the way, it’s not safe’…I don’t see the problem with some regulation that actually goes to the content of the product.
Disclosure and literacy are both good things. But you do have to step back and ask yourself what’s good about them. They could be good because they’re tools to help people avoid scam products. Or they could be good because they’re pretexts to avoid banning scams. If you’re interested in them for non-pretextual reasons, though, then you’ll see that a certain amount of scam-banning is necessary and appropriate to advance the very same goals that are advanced through literacy and disclosure.