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The Federal Government is Here for You: CFPB Now Investigating Overdraft Fees

Ahh, the Dodd-Frank Act... the Dodd-Frank Act... what can we say about the Dodd-Frank Act? That it all too perfectly demonstrates the fatal conceit of big government? That it's a massive tactical maneuver misdirecting attention away from the actual root causes of the present financial crisis by instead attacking some of the symptoms? That it may be one of the stupidest, most damaging leviathans of legislation ever to poison our economy? Yep, I'd say those are all pretty fair assessments.


Clearly, I've made no secret of my utter disdain for the Dodd-Frank Act and all of its ill-advised accoutrement, but that's only because it so clearly reflects Team Obama's utter disdain for free enterprise (a.k.a., freedom). Today, the House Financial Services Committee brought to attention a great article from The Economist (known for its generally somewhat leftist leanings) that orchestrates an oh-so-carefully-moderate in tone but still absolutely beautiful takedown of Dodd-Frank. Here are some tidbits, though I highly recommend reading the whole thing (emphases mine):

The law that set up America’s banking system in 1864 ran to 29 pages; the Federal Reserve Act of 1913 went to 32 pages; the Banking Act that transformed American finance after the Wall Street Crash, commonly known as the Glass-Steagall act, spread out to 37 pages. Dodd-Frank is 848 pages long. Voracious Chinese officials, who pay close attention to regulatory developments elsewhere, have remarked that the mammoth law, let alone its appended rules, seems to have been fully read by no one outside Beijing... “Laws classically provide people with rules. Dodd-Frank is not directed at people. It is an outline directed at bureaucrats and it instructs them to make still more regulations and to create more bureaucracies.” Like the Hydra of Greek myth, Dodd-Frank can grow new heads as needed. ...

When Dodd-Frank was passed, its supporters suggested that tying up its loose ends would take 12-18 months. Eighteen months on, those predictions look hopelessly naive. Politicians and officials responsible for Dodd-Frank are upbeat about their progress and the system’s prospects, at least when speaking publicly. But one banker immersed in the issue speaks for many when he predicts a decade of grind, with constant disputes in courts and legislatures, finally producing a regime riddled with exceptions and nuances that may, because of its complexity, exacerbate systemic risks rather than mitigate them. ...

If the roles of many of these Dodd-Frank entities are overly familiar, their funding—which often skirts constitutional requirements for congressional approval—is more exotic. The new research bureau in the Treasury will be entitled to the proceeds of a new tax on banks. The new Consumer Financial Protection Bureau (CFPB) will be funded by the Fed.

But the really big issue that Dodd-Frank raises isn’t about the institutions it creates, how they operate, how much they cost or how they are funded. It is the risk that they and other parts of the Dodd-Frank apparatus will smother financial institutions in so much red tape that innovation is stifled and America’s economy suffers. Officials are being given the power to regulate more intrusively and to make arbitrary or capricious rulings. The lack of clarity which follows from the sheer complexity of the scheme will sometimes, perhaps often, provide cover for such capriciousness. ...

But most bankers are reluctant to discuss the law in public, and will do anything to avoid commenting on regulators. This is in part due to the risk that, given the industry’s low public esteem, complaining would be inflammatory and counterproductive, perhaps also bringing with it regulatory retribution. A few also see the possibility of gaining an edge: some well established banks consider themselves better able to handle the costs than smaller or newer ones, particularly those that don’t have cushy relationships with regulators. Others, according to the head of one large bank, are quiet only because they do not understand the scope of the changes. ...


Many-headed hydra, indeed. The Consumer Financial Protection Bureau, the newish and nefarious arm of all of this Dodd-Frankery, today announced a new probe into the overdraft fees charged by large banks. Oh, auspicious day!

The probe could result in new rules or even lawsuits if banks are accused of violating consumer laws.

"Overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it," CFPB Director Richard Cordray said in a statement. "We want to learn how consumers are affected, and how well they are able to anticipate and avoid paying penalty fees."

Banks impose overdraft fees when people spend more money than they have in their accounts. The fees didn't exist 15 years ago; by 2009, they were generating tens of billions of dollars for banks.

The fees function like extremely high-cost, short-term loans. The cost of pushing your checking account into the red averages $30 to $35 per transaction, the CFPB said.

Are you kidding me? Our taxdollars are paying for the salaries of numerous bureaucrats tasked with 'helping' consumers who 'don't understand' that there are costs to spending more money than you actually have? Of course, it's a given that the federal government obviously has zero knowledge of that glaring truth, but do I now have the constitutional right to opt out of balancing my own checkbook?  Hey, Richard Cordray, here's something that 'inflicts serious economic damage' on the entire country: your preposterous "protection" bureau that is excusing and encouraging individuals to engage in the type of reckless, finger-pointing behavior exhibited by the federal government throughout the financial crisis.



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