THE PLANK MARCH 12, 2009
Sens. Chuck Schumer and Dick Durbin have just introduced a bill to create a Financial Products Safety Commission, modeled on the Consumer Products Safety Commission. The plan was conceived by Harvard Law prof and bankruptcy expert Elizabeth Warren. I think it's a great idea, not in the least because, well, she first pitched the idea in Democracy, where I hang my hat as managing editor. In fact, Durbin's introductory remarks--he talked of toasters versus mortgages--drew directly from Warren's opening paragraph:
It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house. But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street–and the mortgage won't even carry a disclosure of that fact to the homeowner. Similarly, it's impossible to change the price on a toaster once it has been purchased. But long after the papers have been signed, it is possible to triple the price of the credit used to finance the purchase of that appliance, even if the customer meets all the credit terms, in full and on time. Why are consumers safe when they purchase tangible consumer products with cash, but when they sign up for routine financial products like mortgages and credit cards they are left at the mercy of their creditors?
Given the strength of the idea and the Congressional firepower behind it (Ted Kennedy is also a co-sponsor), it has a good chance of passing and a great chance of spurring a debate over how to protect financial consumers. You can read the bill here, and Warren's original article here.