Columnist Wants Consumer Bureau to Be "Big Brother"
"Big Brother." When commentators use that phrase to describe a government agency, it is most often not meant as a compliment.
Rather, it is wielded as the ultimate criticism of government overreach. The pejorative use of this phrase, after all, dates back more than 60 years to George Orwell's dystopian novel 1984, in which "Big Brother" was the symbol of a totalitarian collectivist dictatorship.
Whenever a government agency is called "Big Brother" -- whether by liberals regarding the NSA, by conservatives regarding the EPA, and regarding the TSA by just about everyone who doesn't work there -- most defenders of the entity push back against the use of the phrase. They angrily deny that the entity's action can be described as anything close to that of "Big Brother."
Yet amazingly, Michelle Singletary, the Washington Post's nationally syndicated personal finance columnist and panelist on the much-hyped new ABC lifestyle show The Revolution, has embraced the phrase in describing her desires for the new Consumer Financial Protection Bureau. "Watchdog Should Act Like a Big Brother," reads the headline of her latest column in the Post.
After interviewing Richard Cordray, whom President Obama installed as director of the bureau in an unprecedented "recess" appointment when the Senate was not actually in recess, Singletary argues that the bureau has a mandate to be a "big brother" to American consumers. "The agency, under his lead, is supposed to be the big brother (or sister) consumers need to enforce federal consumer financial protection laws and, if necessary, create rules that will head off unfair, deceptive or abusive financial practices and products," she writes.
Singletary's column, it should be noted, has traditionally contained more folksy financial advice than politics. I've taken to heart, for instance, her promotion of regifting as a way of saving money and giving people the presents they more likely want. But she has of late been embracing the nannyist politics of the Left to "nudge" -- or more often shove -- ordinary folks into making what she thinks are the right financial decisions.
Singletary no doubt would say that she is using the term "big brother" in a benign way, and she gives a touching example of when she protected her younger brother from a school bully. Yet regardless of motivation, any call for a government agency to act like a "big brother" or "big sister" is also a call for the government to treat its subjects as if they were small children. Singletary confirms her preference for paternalism when she admonishes the bureau to "beat back the many bullies who for too long have taken advantage of consumers," adding "even those [consumers] who should know better."
This paternalism is enshrined in the Dodd-Frank financial "reform" law that created the bureau and many other "big brother" bureaucracies and mandates. As Singletary notes, Dodd-Frank gives the bureau the power to ban not just financial practices and products that are "unfair" or "deceptive," but also those that the bureau simply deems "abusive." As George Mason University law professor Todd Zywicki has written, "abusive" is a vague and subjective legal term that allows the bureau's director to "effectively ban many nontraditional lending products… if he thinks, for example, that consumers using that form of lending are too dumb to appreciate the full cost and risk of those products."
This turns Singletary's justification of a "big brother" agency -- to "beat back the many bullies" -- on its head. As many younger siblings know all too well, big brothers and big sisters can sometimes be bullies themselves. And when the government is denying adults the right to engage in a consensual activity in which no fraud or deception is alleged, it is the government itself that is acting as the bully.
We've seen examples of this government bullying in the Obama administration and predating it. "Big Brother" bullies you by forbidding you from buying an incandescent light bulb, gambling online, or building a house on a suburban lot that the EPA suddenly and arbitrarily declares to be a "wetland."
As Ohio Attorney General, Cordray gave some indication that he will continue in this Big Brother/Big Bully tradition. First, as I have reported previously in TAS, Cordray endorsed and funded the bullies at Ohio's East Side Organizing Project who storm the offices and throw plastic sharks on the lawns of officials of financial firms they disagree with.
But he also showed his desire to be the "big brother" of ordinary consumers, most of whom this former Jeopardy! champion appears to deem as too dumb to make decisions for themselves. Take payday loans, which President Obama has also condemned and presented as a justification for the bureau.
In a press conference posted on YouTube, Cordray tellingly admitted, that if paid back on time, the loans are more than manageable. "391 percent interest doesn't sound quite so bad when it's $15 ever two weeks for a one-time loan," he said. "But we know and we've seen that what happens is many people fall into a debt cycle trap. It's just not sustainable for many families in our community."
So there you have it. "Many people" (and he didn't specify how many) fall into debt with certain products, and Cordray's answer is not more disclosure, not more financial education, but having Big Brother deem the products as "not sustainable" and banning them for everyone, including the "many people" who are satisfied with the product. Indeed, a slew of academic studies, most recently from Kelly Edmiston of the Federal Reserve Bank of Kansas City, have found that payday loans can be much less expensive than the other alternatives for short-term emergency credit -- namely overdraft and late payment fees.
And should this "big brother" bureau choose to engage in paternalistic and bullying behavior, Dodd-Frank is written so that no one can discipline it. Congress lacks oversight through the appropriations process, since the bureau automatically can get more than $500 million each year from the Federal Reserve. And as C. Boyden Gray, White House counsel under George H.W. Bush, notes, even the courts can't "fully review the CFPB's actions," because "Dodd-Frank requires the courts to defer to CFPB's legal interpretations."
But in this country, the Founding Fathers did give us the ultimate remedy for Big Brother: the U.S. Constitution. Both the non-recess "recess" appointment and the bureau's very structure are an affront to the checks and balances the Framers envisioned and very likely violate specific constitutional provisions. Look for lawsuits to be filed against the bureau, similar to the motions that were filed on Friday challenging the three "recess" appointments to the National Labor Relations Board that Obama made the same day as Cordray's.
In the meantime, we "little siblings" should express loudly and clearly to Cordray, Singletary, and all others who think they "know better" about our financial decisions that they need to take a permanent "time out."