By George Washington of Washington’s Blog.
Congressmen Grayson, Clay and Miller are introducing an amendment to the Consumer Financial Protection Agency bill:
Today we will offer the “Financial Autopsy” amendment. The Grayson/Clay/Miller amendment is essential to attacking the root problem of consumer bankruptcy and foreclosure because it requires the CFPA to do a financial audit of products that have caused the highest rates of bankruptcy and foreclosure annually. Not later than March 31st of each calendar year, the CFPA will list these anti-consumer products, submit their conclusions on why these products “fail” consumers, the companies and employees that underwrote these products, and authorizes the CFPA to take action to restrict these products.
Financial Autopsy Amendment:
– Requires the CFPA conduct a “Financial Autopsy” of each state’s bankruptcies and foreclosures (a scientific sampling), and identify financial products that systematically led to a large number of bankruptcies and foreclosures.
– Requires the CFPA report to Congress annually on the top financial products (the companies and individuals that originated the products) that caused consumer bankruptcies and foreclosures.
– Requires the CFPA take corrective action to eliminate or restrict those deceptive products to prevent future bankruptcies and corrections
– The bottom line is to highlight destructive products based on if they are making people “broke”. Thank you for your consideration, we hope you will join us in supporting this amendment.
Alan Grayson Wm. Lacy Clay Brad Miller
Is this a good amendment or a bad amendment?
It is a great amendment.
Instead of trying to pass a one-size-fits-all bill prohibiting certain specified conduct, it will force an annual analysis of what financial products are sticking it to the consumer.
Remember, credit default swaps didn’t bring down the economy because they are toxic while all other financial vehicles are pure as the driven snow. CDS brought down the economy because they were the choice du jour of the looters.
If we outlaw CDS (which I have argued for in the past), then the looters would create some other instrument for looting.
The Grayson/Clay/Miller amendment would help to force an annual review of the tool-of-trade of the rip-off artists.
Note: Given the huge incentives for financial “innovation”, the armies of lawyers, mathematicians and other footsoldiers employed by the financial giants, the pressure that the “too big to fails” to earn their way out of the hole, and the rapidity with which imbalances in the modern financial system can build up when alot of people are making the same kind of trade, an annual review is probably not enough.
So my only suggestion for Congressmen Grayson, Clay and Miller is that the amendment require:
(1) Annual reviews generating formal written reports
(2) Monthly informal reviews. If a review reveals a large number of bankruptcies or foreclosures caused by a specific type of financial product, this would trigger a formal report
Trust me . . . the boys can still cause the economy to thoroughly crash if their actions are not examined for a year at a time.
Call your congressional representatives and demand that they support the Grayson/Clay/ Miller amendment.
Update: Karl Denninger has some additional suggestions here.