Law on Rice

It’s my theory all the “cheap money sloshing around the world” (a quote from Hal Holbrook’s character in Wall Street) was one of the causes of the current skyrocketing bankruptcy rates. High unemployment rates combined with over-leveraged consumers surely bears some of the blame (with the caveat that there’s lots of blame to go around).

My big question is whether (and should) the new Consumer Financial Protection Agency do anything to prevent consumers from getting overleveraged in the future?

Part of the answer to that question might be found in the Financial Product Safety Commission Act of 2009 (S.566/H.R.1705). My understanding is that the new agency would be very similar to the structure proposed therein. So, in looking at the bill’s text, I see that the new agency shall, inter alia, do the following:

(1) promulgate consumer financial product safety rules that–(A) ban abusive, fraudulent, unfair, deceptive, predatory, anticompetitive, or otherwise anticonsumer practices, products, or product features; (B) place reasonable restrictions on consumer financial products, practices, or product features to reduce the likelihood that they may be provided in a manner that is inconsistent with the objectives specified in subsection (a); and (C) establish requirements for such clear and adequate warnings or other information, and the form and manner of delivery of such warnings or other information, as may be appropriate to advance the objectives specified in subsection (a);

Parsing through that, it appears that the operative terms are “abusive, fraudulent, unfair, deceptive, predatory, anticompetitive, or otherwise anticonsumer” under (1)(A). Read broadly, it seems like the new agency could, say, regulate the debt-to-income ratio of consumers under almost any of those terms, especially with the explicit power to “place reasonable restrictions” on such products under (1)(B). My big question, however, is should it?