Posted at RiskCenter.com by Donald R. van Deventer:
New details emerged today from staffers of the House Financial Services Committee of plans for the Obama Administration’s Consumer Financial Protection Agency (“CFPA”). While the June 24 outline by Harvard Professor Elizabeth Warren was focused on the relationship between borrowers and lenders, House staffers revealed today that the role of the agency will be much broader than originally envisioned. Administration sources revealed that the CFPA would be empowered to regulate the full range of financial transactions by U.S. citizens and green card holders. At the top of the Administration’s priorities is a complete prohibition on travel to the state of Nevada by U.S. citizens who are not college graduates. Among college graduates, those with non-quantitative courses of study would also be prevented from entering the state of Nevada. Those who would be affected include college graduates with majors in English, history, fine arts, sociology, communications and kinesiology. Exceptions are permitted for those college graduates in the “prohibited majors” who have passed the licensing exams to become a Fellow of the Society of Actuaries (see www.soa.org for details). Administration sources said the same restrictions on travel to Nevada would apply to Atlantic City and the island of Macao. The CFPA would work closely with the Department of Homeland Security to design “internal visas” which would be required to enter the state of Nevada and Atlantic City. Macao visits would be restricted in a government to government negotiation, according to House staffers.
“Las Vegas is for people who can’t do math,” argued one House Staffer. “Unless the CFPA steps in to prevent the full range of financial idiocy, potential borrowers who were the original focus of the proposed legislation will never get close enough to borrowing to get the benefit of CFPA supervision.” Another administration source added that the CFPA will also prohibit all sports betting by U.S. citizens and green card holders. Fines levied, according to Congressional staffers, would not be sufficient to deter serious sports bettors, so other penalties are being considered. At present, the CFPA seems likely to require violators of the sports betting prohibition to attend all home games of the Detroit Lions for a period of five years from the date of the violation.
Opposition to the proposed regulations was immediate. “These new rules would cripple the economy of the entire State of New Jersey, not just Atlantic City” argued Dominic Gotti of Jersey City. Bambi Darling, a spokeswoman for the Professional Woman’s Society of Nevada, said “Congress and the Administration, except for a few very special members of Congress, don’t have a complete understanding of the tight relationship there is between gambling and the rest of the Nevada economy.”
Further opposition to the administration’s proposals came from a financial expert known only as the Wizard. The Wizard, often consulted by Warren Buffett and others, said, "There is a big class of people that literally doesn’t understand the risks they are taking by taking on a floating rate loan or an adjustable rate mortgage on a fixed income. I would suggest that within this class, there are two subclasses, those who are responsible and those who are not responsible. What do those who are responsible do when faced with an important decision in a situation where they have little knowledge or expertise? They go to a doctor, hire a tax preparer, hire an independent expert. Why should financing a house be different? For those who are not responsible, ‘should we keep these people from learning economics in an unforgettable way?’ Again, the answer is obvious."
Strong opposition to the proposed expansion of the administration’s CFPA rules came from Mr. Gotti’s cousin Vincente Gambino. “The restrictions on sports betting and travel to Atlantic City and Nevada are unfair, if the States themselves continue to be permitted to sell lottery tickets. The odds they offer are much worse than, um, many of my associates have historically offered.”
The strongest opposition to the expanded mandate for the Consumer Financial Protection Agency comes from Republicans across the country. California governor Arnold Schwarzenegger was the most adamant: “100% of the financing needs for the great state of California is coming from the sale of state lottery tickets,” he argued. “Any implication that someone who pays $100 to win $30 is mentally deficient and needs to be protected by the government is ridiculous. After all, we ARE the government.”