Sure, Just What We Need: Yet Another Regulatory Government Agency

YOUR Oct. 15 editorial “To fix financial system, protect consumers first’’ claims that a Consumer Financial Protection Agency would prevent a “recurrence’’ of the “financial pathology’’ that caused the banking crisis. But the source of that financial pathology was bad government policy, and your editorial calls for more of it.

The government subsidized toxic mortgages through entities such as Fannie Mae and encouraged many of them through laws such as the Community Reinvestment Act. Government imposes entry barriers to the market for new banks. As a result, existing banks claimed a greater market share than would have been possible in a free market, becoming too big to fail.

In addition, contrary to the Globe’s claims, Barney Frank’s bill would give the new agency power over many nonfinancial businesses that can be said to extend credit, probably including merchants with layaway plans. It would also give state attorneys general unique power to interpret federal law and hire private plaintiff lawyers to harass Main Street businesses.

Given that it was banks subsidized, regulated, and protected by the government that caused the crisis, why regulate Main Street businesses that had nothing to do with the crisis?