Financial Product Regulation
Since financial product regulation has been recently featured in public debates, Herb Rotfeld proposes we revisit a 2008 article by Elizabeth Warren in JCA that has been made freely available
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Since recent Congressional actions place financial product regulations in the news and public debates, it should be interesting to revisit a 2008 article by Elizabeth Warren in Journal of Consumer Affairs. Before she managed the TARP funds, before there were TARP funds and before the election of Obama as U.S. President, she wrote "Product Safety Regulation as a Model for Financial Services Regulation" in the Fall 2008 issue of the journal.
Because of product safety regulations, exploding toasters and other dangerous products are rare in the American marketplace. Despite the fact that financial products can also be dangerous, with terms as incomprehensible as an electrical wiring diagram, regulation is far less comprehensive. Most financial regulation turns on the identity of the issuer—federal bank, state thrift, and private issuer—rather than on the product itself. Instead of using safety experts, financial products are regulated mainly by agencies whose principal responsibility is to protect the profitability of the financial institutions that issue the products. A Financial Product Safety Commission would provide coherent regulation of financial products, eliminating their most dangerous features.
To read the full article, go to:
Herbert Jack Rotfeld
Professor of Marketing, Auburn University
Editor, Journal of Consumer Affairs
President-elect, American Academy of Advertising