I don’t want to make America a better place to live and I hate the Constitution and the Bill of Rights.
Sincerely,
Todd
PS: Does this mean you won’t audit me?
Author Archive
My old friend Matt Harrington now runs a Center for the Study of Common Law at the University of Montreal Law School and he blessed me with an invitation to speak a program last week on common law as a regulatory system and the interaction of common law with regulation. My job was to add a third dose to that, which was competition as a regulatory system, especially for consumer protection, and the interaction of markets, common law, and regulation. One of the observations I made was that auto safety was something that consumers seemed to place a value on, as evidenced by advertising, especially brands such as Volvo that built its name on safety (also the market losses Toyota suffered in recent years because of its safety issue). My argument was that the market itself provides powerful incentives to provide safe products. I also acknowledged that there can be market failures but that the first line of response should be common law (warranty, tort, fraud), and only as a last resort should we bring in regulation, which is costly, prone to capture and interest-group distortion, and unintended consequences.
During the discussion the question came up, essentially, “Well, if safety is produced by the market, why did Washington create the National Highway Traffic Safety Administration (NHTSA) in 1970?” And it was pointed out that since NHTSA was established, traffic fatalities per mile driven are about 20% as they were at the time. It was also noted that prior to Henningson v. Bloomfield Motors (1960) warranty terms on cars sucked. And grisly stories were told about automobile crashes in the 1960s and the heroism of Ralph Nader and “Unsafe at Any Speed.”
So I was curious what the data showed and I found this chart (
The chart pretty much speaks for itself, I think. Obviously by itself this doesn’t demonstrate that litigation and regulation didn’t or couldn’t have an impact. It does pretty clearly show to me, however, that cars were getting safer at a very rapid rate prior to the expansion of products liability and certainly prior to regulation. And it also seems likely that safety would have continued to improve from the forces of competition even without liability and regulation. Of course there are multiple confounding sources. The forced introduction of smaller cars through mileage regulations likely slowed the decline may have slowed the decline in highway fatalities over time, reversing some of the gains from whatever source. And it is difficult to determine the marginal effect of market forces versus liability and regulation–or whether the overall marginal effect of liability and regulation has been positive or negative, once the costs and unintended consequences are considered.
Update: I changed the point about the potential negative safety impact of smaller cars on safety to avoid distraction from the central point of the post. That’s a contested issue in the literature and I don’t need to get into that particular point here. Ditto for the unintended consequences of safety laws (such as mandatory seat belt laws) on pedestrian and cyclist deaths.
The Senate held a hearing today at which Richard Cordray testified in his supposed capacity as “Director” of the CFPB. Jeb Hensarling, Chairman of the House Financial Services Committee, on the other hand has refused to invite Cordray to testify in light of the DC Circuit’s Noel Canning decision invalidating the NLRB recess appointments:
President Obama installed Cordray in the position in early 2012 using a controversial recess appointment. A federal court has invalidated three other recess appointments Obama made on the same day, calling into question Cordray’s future.
“Absent contrary guidance from the United States Supreme Court, you do not meet the statutory requirements of a validly serving director of the CFPB, and cannot be recognized as such,” Hensarling wrote to Cordray on Monday.
Amazingly, CFPB spokesmen continue to insist that Noel Canning does not apply to Cordray’s improper recess appointment although they have provided no explanation as to why it does not.
In my opinion Hensarling is doing exactly the right thing here. Absent an injunction from Noel Canning taking effect it is abundantly clear that Richard Cordray is not the Director of the CFPB and I think it is appropriate for Congress to call the President on this.
I also hope that Hensarling’s action will embolden more private citizens to challenge the CFPB’s assertion of authority on the same basis until a Director is properly appointed.
Update: Chairman Hensarling’s press release and letter to the CFPB is available here.
Recent Bloomberg story on the CFPB’s database for credit card complaints:
When U.S. officials began collecting consumer complaints about credit cards, one goal was to identify patterns that could help them write rules protecting families with low and moderate incomes.
Nearly two years later, it’s the well-to-do neighborhoods of Florida and New York that are supplying the most grievances to the Consumer Financial Protection Bureau, an analysis of agency data shows.
Of the top four zip codes contributing to the 18,539 complaints published as of March 18, two are on Manhattan’s Upper West Side and two in south Florida — Boca Raton and Palm Beach Gardens. Almost 60 percent of complaints originated in zip codes where the median household income is higher than the national median of $52,762, according to the analysis....
Zip codes with median annual household incomes higher than the national median generated 11,045 complaints, or 59.6 percent of the total, the data show. Boca Raton zip code 33496 produced 94 complaints, the most in the country, while 54 complaints came from Manhattan’s Upper West Side zip codes 10023 and 10024 combined.
Tonight at 7:15 at the GMU Arlington Campus I will be giving a GMU Vision Series Lectures on “The Not-So-Good-Old-Days of Consumer Credit: How to Think About Consumer Credit and Its Regulation.” Thank you to Provost Peter Stearns for the invitation and the honor of providing this lecture. The lecture will be in the new Founders Hall auditorium. All interested non-alumni of Louisville and Michigan Universities are welcome to attend.
House Financial Services Chairman Jeb Hensarling has sent a letter to Ben Bernanke asking for an explanation for the legal basis for the Fed’s funding of CFPB. The argument is straightforward in light of Noel Canning: “ASs you know, the Dodd-Frank Wall Street Reform and Consumer Protection Act... authorizes the Board to transfer funds to carry out the authorities of the CFPB only at the request of its director. Because it appears there is not presently a validly-appointed director of the CFPB, I question the circumstances under which the Board may lawfully fund the CFPB’s operations.”
Michael McCann of UNH Law School (and a regular on legal issues for SI) has snagged an interview with Lance Armstrong.
Update:
I should’ve added that I think that Michael has a piece in the print version of SI and this is an online accompaniment to the print story. He also has an online interview with CNN International World Sport.
Sitting FTC Commissioner Edith Ramirez has been named the Chair of the FTC.
For those who are not aware of the FTC’s operating structure, one must be Senate confirmed to a seat as a Commissioner but the President simply designates the Chair with no Senate confirmation. So for a sitting Commissioner no further confirmation vote is necessary, unlike, say, the Supreme Court where confirmation of the Chief Justice requires a separate confirmation hearing if a sitting Justice is elevated.
Yep, Josh Blackman has created a FantasyPope game. Make your predictions. To the winner goes... eternal salvation?
Jody Bottum has a particularly interesting essay assessing Pope Benedict’s term. I have little to add as a formal or institutional to much of the chatter assessing Benedict’s record, the various scandals that occurred or emerged on his watch, or why or if he should have resigned.
I just want to add two very simple thoughts.
The first is that however history assesses Pope Benedict’s record, from a personal perspective Spe Salvi is one of the handful of most influential books I have ever read. I first read it at an especially appropriate time of my life and it spoke to me powerfully then and ever since. In fact, I just read it again this year over Christmas Break. I was going to say “coincidentally” but then I realized that I have re-read it about once a year every year since it appeared and I always gain intellectual and spiritual nourishment from it. A truly profound and moving piece of work to me.
Second, I’ve always taken great pride that under Benedict’s leadership we had a true intellectual heavyweight at the helm of the Church, a man of incredible learning and sheer intellectual firepower. Reading Spe Salvi or his writings on Jesus, for example, you recognize that you are in the presence of a truly first-class mind and a powerful writer and thinker. With Benedict, Catholics (especially Catholic intellectuals, I suspect) could know that the church was led by someone who not only certainly could measure up to any other religious leader in the world today, but one who could measure up to any thinker in the world today.
Benedict also seemed like an eminently holy and gentle man. But he is a Pope that I experienced through his words and intellect. And for that I’ll personally miss him and what he meant to the Church. As I understand it, he will continue to write. But I can say with certainty that had he never been Pope I would never have come across his writings. And that has made all the difference.
The Federalist Society has converted the teleforum on Noel Canning in which I participated last week into a podcast. With respect to CFPB one other option I didn’t fully contemplate at that time was that the now-”headless” agency might revert back to its initial status of the Secretary of Treasury providing oversight of the agency, as was the case before Cordray was illegally appointed. If this is the case, it seemingly would preserve CFPB’s jurisdiction over the entities initially transferred to the agency but not to the new entities (such as debt collectors, etc.), which transferred only upon the appointment of a confirmed Director (of course, there was some question even before this whether Cordray met the statutory definition of “confirmed Director”). There is also some question about how limited the Treasury Secretary’s powers would be in that case–my reading of the statute is that the Secretary of the Treasury’s powers were limited to taking ministerial actions to set-up the agency and its operations but could not issue substantive rulings. That interpretation also is consistent with how the Bureau actually acted during the interim period when Elizabeth Warren was setting up the agency from the White House and Secretary of Treasury.
I’ll be doing a Federalist Society teleforum today on my recent essay “Policy-Based Evidence-Making at the Consumer Financial Protection Bureau” today at 2 p.m. If you are interested in participating the number is 888-752-3232.
The essay is here.
I have a new paper at SSRN on “The Economics and Regulation of Network Branded Prepaid Cards,” a fascinating and rapidly-emerging area of the consumer payments economy. One interesting factor is that, by pushing people out of bank accounts, the Durbin Amending is one of the leading causes of the growth of this market while also being one of the leading barriers to consumer welfare and competition in this market. Quite an achievement for a special-interest provision smuggled in at the end of the legislative process. Here’s the abstract:
Abstract:
General-purpose reloadable prepaid cards have been one of the fastest-growing sectors of the consumer payments marketplace in recent years. Their importance has accelerated as a consequence of new regulations enacted in the wake of the 2008 financial crisis. This increased use of prepaid cards has also increased angst among regulators, especially regarding the number and size of fees on prepaid cards. State and federal regulators as well as Congress are interested in imposing new regulations on prepaid cards. These calls for regulation, however, have proceeded in a largely fact-free environment. This paper describes the current economic and regulatory landscape for prepaid cards. The market appears to be robustly competitive, as recent years have seen declining costs and increasing functionality as well as entry of major players such as American Express and several large banks. Nor is there any evidence that consumers systematically err in the cards that they choose. Absent a demonstrable competitive market failure or systematic consumer abuse, prescriptive regulation of the terms and substance of prepaid cards would likely have unintended consequences that would exceed the benefits to consumers. On the other hand, there are some regulations that might be enacted that could promote competition and consumer welfare in this rapidly evolving market.
I have a new post over at the Law and Liberty Blog, “Policy-Based Evidence-Making at the Consumer Financial Protection Bureau” where I examine the CFPB’s use of economic studies in its new ability to pay and “qualified mortgages” rules. One cornerstone of the CFPB’s claim that it should be exempt from standard oversight controls by the President and Congress is that it is an evidence-based policy-making body and thus is essentially above politics. As I show, however, the mortgage rule illustrates the opposite–the inherent judgment calls and politics inherent in the regulatory process. Thus, while I express no opinion on the wisdom of the rules in the post, I explore whether the Bureau’s performance in practice supports its purported ambitions. I conclude that based on this massive rulemaking, CFPB has established precisely why it should be treated like any other bureaucratic agency, subject to the standard Presidential and Congressional checks.
The WSJ reports today that many colleges and universities are dialing back the maximum hours that adjunct professors can teach to drop them under the 30 hours per week trigger of Obamacare, above which the employer would be required to provide health insurance or pay a penalty.
The federal health-care overhaul is prompting some colleges and universities to cut the hours of adjunct professors, renewing a debate about the pay and benefits of these freelance instructors who handle a significant share of teaching at U.S. higher-education institutions.
The Affordable Care Act requires large employers to offer a minimum level of health insurance to employees who work 30 hours a week or more starting in 2014, or face a penalty. The mandate is a particular challenge for colleges and universities, which increasingly rely on adjuncts to help keep costs down as states have scaled back funding for higher education.
A handful of schools, including Community College of Allegheny County in Pennsylvania and Youngstown State University in Ohio, have curbed the number of classes that adjuncts can teach in the current spring semester to limit the schools’ exposure to the health-insurance requirement. Others are assessing whether to do so, or to begin offering health care to some adjuncts.
In Ohio, instructor Robert Balla faces a new cap on the number of hours he can teach at Stark State College. In a Dec. 6 letter, the North Canton school told him that “in order to avoid penalties under the Affordable Care Act…employees with part-time or adjunct status will not be assigned more than an average of 29 hours per week.”
Mr. Balla, a 41-year-old father of two, had taught seven English composition classes last semester, split between Stark State and two other area schools. This semester, his course load at Stark State is down to one instead of two as a result of the school’s new limit on hours, cutting his salary by about a total of $2,000.
Stark State’s move came as a blow to Mr. Balla, who said he earns about $40,000 a year and cannot afford health insurance.
“I think it goes against the spirit of the [health-care] law,” Mr. Balla said. “In education, we’re working for the public good, we are public employees at a public institution; we should be the first ones to uphold the law, to set the example.”
The article doesn’t report for whom Professor Balla cast his vote this fall.