American Elephants

How Bureaucracy Simplifies Our Lives: by The Elephant's Child

Diane Katz has the enviable job of wading through Washington’s massive webs of red tape to discover new and excruciatingly silly regulations that are strangling the economy. Barack Obama has insisted that regulation is NOT a problem, and besides the great mass of American people must be regulated to make them safe.

— The new Consumer Financial Protection Bureau (the one with the illegal head, appointed during a Congressional recess when Congress was in session ) is busily issuing regulations. It has devised a 1,099-page proposal to streamline the mortgage process. The creation of this blueprint for a more “consumer-friendly ” mortgage is described in a 533-page report titled “Evolution of the integrated TILA-RESPA disclosures.” (TILA stands for Truth in Lending Act, and RESPA is Real Estate Settlement Procedures Act).

They found the most effective way to reduce confusion surrounding the APR (annual percentage  rate) was to add the simple statement “This is not your interest rate.”

In only two years the CFPB has grown from zero to 900 employees.  However, to redesign the mortgage documents they required the assistance  of Kleimann Communication Group, a self-described “small, agile, woman-owned business: at a cost to taxpayers of nearly $900,000. Naturally next year they need a 32 percent budget increase to $448 million. As Diane Katz explains:

So let’s recap: We have a 2,300-page statute giving rise to a 1,099-page regulation to simplify mortgages, which is spelled out in a 533-page report that chronicles consumer testing from one end of the country to the other. All of which indicates that home loans would likely be a lot simpler if government was a lot less involved.

So what could the mindset of Christopher Dodd and Barney Frank have been that they thought this was a good idea?

— Here’s another: In its ceaseless quest to protect us from ourselves, Congress in 2009 compelled credit card companies to confirm an applicant’s “ability to pay” before approving an account. Lawmakers apparently decide that Visa, MasterCard, Discover and the like somehow lacked the incentive to manage their own credit risk, (As opposed to, say, the elected officials who have racked up $1.2 trillion in national debt this year).

The new regulation is widely interpreted as prohibiting millions of stay-at-home moms ( and a fed dads) from obtaining credit cards of their own altogether. That’s because the “ability to pay” regulation requires credit card applicants to have an independent source of income to open an account or else to find a so-signer.

— One of Ms. Katz’s more entertaining discoveries has been that the notorious diet dictator, “Nanny” Bloomberg, Mayor of New York City, the man who’s trying to ban the sale of soda in cups larger than 16 oz. (The Big Gulp)— is a big fan of hot dogs: (Beef, Water, Salt, Sorbitol, Sodium Lactate, Hydrolyzed Soy, Corn Gluten Protein and Wheat Gluten Protein, Paprika, Natural Flavorings, Sodium Diacetate, Sodium Phosphate, Sodium Erythorbate, Sodium Nitrate). Makes you want to run right out and get one with mustard and relish.

The first of these regulations is Number 35 on Diane Katz’s list. While it must be fun to seek out this nonsense, it is a flashing warning sign for the economy. Silly, unnecessary regulations impose tremendous costs in time and funds for struggling businesses. Imagine: a brand new agency to issue regulations— grown to 900 employees in just two years


3 Comments so far
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Make mine with onions and sauerkraut.

On a more serious note, at the international level non-governmental organizations have, for example, come up with simple checklists and guidelines aimed at personnel in developing countries to help them understand bilateral agreements on investments. These guidelines are on the order of tens of pages, not hundreds, and they have proved to be very popular.

The difference here is that NGOs are many and in competition with one another. If the advice they give is not useful, they will quickly become irrelevant. When the government, a monopoly gets it in its mind to do something like simplify mortgage agreements, they have little in the way of competition.

In short, the counterfactual if the government does not get involved is NOT that nothing will happen, but that civil society will probably step in and do something.


Comment by Subsidy Eye

[…] ObamaCare, in its original configuration had overlapping hundreds of new agencies. The new Consumer Financial Protection Bureau instantly acquired 900 employees, and began writing thousand-page proposals on streamlining the […]


Pingback by Negotiating With People From Another Planet « American Elephants

[…] Recess” when Congress was in session, so the agency had to have a do-over by court order. In only two years the CFPB grew from zero to 900 employees. They devised a 1,099 page proposal to streamline the […]


Pingback by The Consumer Financial Protection Bureau Mishandled Their Budget —And Lost the Documentation! | American Elephants

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