When Sen. Dick Durbin (D-IL) was convinced by a retailing giant to enact legislation imposing price controls on credit card transactions he engineered a massive wealth transfer from credit card companies to retailers – a cost that would ultimately be borne by consumers. Opponents of Durbin’s fee warned of the consequences of his actions including increased costs for consumers and elimination of credit card incentive programs. As Milton Friedman said, “there is no free lunch.”
After the government imposed their fee cap, the marketplace responded predictably. Banks, including Bank of America, raised fees on consumers in order to cover the cost imposed by the Durbin Amendment. Caught with his tail between his legs, Durbin and his allies declared war on the banks. In a letter to the newly codified Consumer Financial Protection Bureau (CFPB), Durbin accused banks of trying to “sneak fees past” consumer and “urge[d]” the CFPB to “swiftly require financial institutions to post on their websites a standardized, concise and consumer-friendly disclosure form that lists the fees and key terms associated with checking accounts.”
Whether Durbin is successful in fighting back remains to be seen but what we do know is we now have a government agency at the disposal of elected officials that will police marketplace policies, fee structures and pricing decisions. If it’s not bad enough that the Bureau will make regulatory decisions based on the political whims of politicians, their own justification for regulations are worse. Much worse.
Testifying before Congress, Raj Date, the temporary head of the Bureau, laid the groundwork in an 802-page document not only for an avalanche of new regulations but their justification for them. The CFPB’s reasoning for new regulations constitutes nothing less than government imposing its version of social justice on the free market.
Date said that the CFPB would target “abusive” companies but refused to define what exactly abusive means. It is clear that abusive will be subjectively defined on a case-by-case basis – they will know it when they see it. Is a fee increase “abusive?” Based on the actions and rhetoric offer by Durbin, President Obama and the like, it is if that fee is unpopular. How else could they justify advocating government intervention to overturn bank fees?
Empowering an agency to implement the whims of any politician, much less leftists like Obama and Durbin is clearly dangerous. Throw in a little identity politics and you have a perfect storm of social justice toxicity.
As the Wall Street Journal pointed out that the bureau’s drive to regulate will “focus on consumers” and a “data-driven” and “consistent” approach. Some groups will get more attention than others, however–namely, ‘students, Older Americans, Service members, and the underserved.’ Underserved would seem to be a highly subjective standard.”
That is classic “social justice” lingo that treats Americans differently based upon their social status. In their worldview, students, service members and the “underserved” require special government protection. How is that equal protection under law?
Our economy is already suffering from the strain of costly and wasteful government regulations. Should the Senate confirm Richard Cordray, it will unleash a regulatory reign of terror and uncertainty in the name of social justice. It may make the leftists feel better but won’t create any jobs. But of course, jobs were never the point.