Finreg: Another Frankenstein Bill

by Benjamin Domenech on 4:09 pm April 28, 2010


There’s an interesting provision in this messy and nearly incomprehensible financial services reform bill (the “Restoring American Financial Stability Act of 2010,” an odd name for something being considered at a time when the key problem with our financial services industry may very well be that it is too stable and not taking enough risks), which could potentially lead to all sorts of Law-of-Unintended-Consequences mischief. Here’s one such passage in question (emphasis added):

In conducting research on the offering and provision of consumer financial products or services the Bureau shall have the authority to gather information from time to time regarding the organization, business conduct, markets, and activities of persons operating in consumer financial services markets. …In order to gather such information, the Bureau may … make public such information obtained by the Bureau under this section, as is in the public interest in reports or otherwise in the manner best suited for public information and use.”

That’s in the section creating the “Bureau of Consumer Protection” (presumably from getting credit), but the bolded language is important.

Here’s something I don’t know, but would like to: what, exactly, is a person “operating in consumer financial services markets”? I’m not the only one asking. Senator Mitch McConnell has asked that question, using the example of “What if you sell something on eBay and someone pays you with their credit card through Paypal? Does that make you someone operating in consumer financial service market?”

The answer there is probably not, but there’s a detail problem here. The first place you look in a bill to understand what its terms mean is the definitions section, which in this case, is noticeably lacking such important terms like “consumer financial services markets,” and “persons working in” them.

Now, someone selling a tangible thing to another person and being paid through a credit transaction routed through PayPal is likely not working in the consumer financial services markets, in no small part because he’s not selling any financial services (Americans for Tax Reform says otherwise, but I’m unconvinced).

But here’s a different question: what about an insurance agent? Are they “operating in consumer financial services markets”? What about someone who sells life insurance policies, many of which have accrued values? He’s selling a financial product — in the latter case, he’s selling a financial product with an investment vehicle built in. Is the guy who sells a couple dozen companies’ products out of his home office to folks 55-75 subject to this part of the bill? I don’t see a reason he’d be exempt.

As more of the health care bill comes to light, it looks like what it is: a cobbled-together mishmash with badly interlocking parts that, among other things, makes Congress subject to fines for providing members and staff health insurance today. Not only is the financial services monstrosity off the mark, it appears to be just as much a Frankenstein’s Monster as its predecessor.

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