President Barack Obama appointed Richard Cordray to direct the new Consumer Financial Protection Bureau this morning in a ceremony at the Rose Garden.

The appointment is a very significant event for the unbanked marketplace (more…)

News that the Federal Reserve will buy more debt is good news for many American workers, but bad news for working people in the rest of the world.

During last week’s meeting, the Fed said that it would buy$600 billion in Treasuries. When coupled with existing, but as yet unrealized commitments to buy other debt (MBS), then the Fed is poised to double down on US debt.

One key distinction in the new policy is the means by which the Fed plans to implement the buy. The Fed (more…)

There is new political will to eliminate disparities in how different types of income are treated by our tax system.

Tucked away in the health care bill is language that establishes the “unearned income medicare contribution.” Unearned income includes dividends, interest, and rental income. The new policy increases the imposition on unearned income by 3.8 percentage points, and by earned income by 0.9 percentage points.  The new level of taxation on unearned income becomes 19.8 percent for individual filers that earn more than $200,000 per year, or on dual filers earning more than (more…)

Peter Wallison, an economist from the American Enterprise Institute, has taken to criticizing the proposed Consumer Financial Protection Agency in a new Washington Post editorial.  He argues that the new agency would hurt the poor.  Yes, that’s what he is saying.

The nut of his logic is that the CFPA, in limiting access to exotic financial instruments like option-ARM mortgages, reduces the choices available to consumers.  He suggests that the CFPA will intimidate the less-sophisticated.  Savvy experts with deeper understanding of (more…)

The new Consumer Protection bill for financial services will finally bring mortgages down to earth.

I’m talking about the idea of finally forcing the mortgage industry to offer a “plain vanilla mortgage.”  That’s a mortgage with a standard set of features.  The Obama administration imagines a plain vanilla 30-year fixed rate mortgage, and another one with a 5-year adjustable-rate product.  Neither would have prepayment penalties.

Imagine if, when you signed up for an update on your Windows Service Pack, if Microsoft only gave you a custom configuration option.  You know, the one that is for advanced users.  Hmmm….for most of us, that would be decidely not so great.  That’s why we just go for the “express” button.  We want the update, but we don’t want have to study information science.

Imagine if you wanted to drink some milk, but there was no “homogenized and pasteurized” version.  The only version available was “raw milk.” Not only would you have to take special care in handling your milk, but you would also experience high “search costs.”  You would have to find a reliable farmer, and then you would have to learn about how to maintain your cow juice.

About the milk, I suppose it could be better.  If you know what you are doing.  Hey, an individual is entitled to have their own (more…)