Obama’s proposed agency would make loan contracts clearer-and simplify regulation.
By Elizabeth Warren
A century ago anyone with a bathtub and some chemicals could mix and sell drugs– and claim fantastic cures. These “innovators” raked in profits by skillfully marketing lousy products because customers were poorly equipped to tell the difference between effective and ineffective treatments. In the decades following, that changed with the advent of the Food & Drug Administration and some basic rules about safety and disclosure. Companies then had greater incentives to invest in research and develop a safer, more effective drugs. Eliminating bad remedies made room for creating good ones.
Applying this basic economic principle to the marketing of financial products, President Obama recently proposed the creation of a Consumer Financial Protection Agency (CFPA), and agency that will promote financial safety while supporting market competition and economic growth.
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