Regulations To Prevent A Financial Crisis

by Stuart Shapiro

“Regulations are stifling the economy”.  “The Consumer Financial Protection Bureau (CFPB) will hurt business”.  Blah blah blah. Yesterday the CFPB,  headed by Richard Cordray, proposed new regulations for the mortgage market.

Banks and other lenders will be prohibited from making home loans that offer deceptive teaser rates or require no documentation from borrowers, and will be required to take more steps to ensure that borrowers can repay, under new consumer protections to be announced on Thursday. . .

Mortgage bankers generally applauded the new regulations, saying that they clear up uncertainty that has hung over the home lending business since the financial crisis.

Much like the food safety regulations proposed last week, these are policies that are supported by all constituencies.  Their benefits far outweigh their costs.  So let’s stop with the heated rhetoric about all regulations and evaluate each regulation on it’s own.

By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.