With everyone focused on the “health care” bill and Afghanistan is anyone paying attention to the push for another government agency? The Consumer Financial Protection Agency is on the way.

“* Dodd Backs Obama proposal to create agency to regulate credit cards, mortgages, other financial products

* Strips consumer protection duties from existing agencies, including Federal Reserve, Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corp, National Credit Union Administration, Federal Trade Commission.

* Lets states pass tougher consumer protections, preventing federal regulations from preempting stronger state laws.”

Dodd and Obama want a Consumer Financial Protection Agency to protect you from fraudulent and deceptive lending practices that they claim created our financial crisis. Fraud and deception are already illegal. This is really to protect you from being stupid. See, if you were smart enough to understand the terms, you would never have bought that huge house with 0% down and a five year adjustable, interest only loan. Yeah, right.

A few people were duped into bad loans. Most knew what they were doing. They wanted in on the real estate gold rush.

The lenders were incentivized to make bad loans by government regulations requiring the banks to hold more capital for the safer individual mortgages than for the riskier securitized mortgages and credit default swaps. Now we’re told that new regulations will solve our problems.

The CFPA would result in tighter credit, higher costs and fees and fewer options. We are already seeing credit card companies raising rates on good customers while they still can (a very easily forseen unintended consequence of upcoming government regulations limiting future rate hikes). The CFPA would also hold great power to regulate without any responsibility for safety and soundness of the banks.

We should improve disclosure, crack down on criminal actions by lenders and quit rewarding dangerous behavior with taxpayer dollars. We don’t need a new bureaucracy…

…Unless the CFPA regulated how Congress writes bills.

The CFPA is supposed to protect you from contracts that are unintelligible, fraudulent or loaded with hidden fees.

The health care bills are unintelligible. Senator Thomas Carper (D- Del.) said, “I don’t expect to actually read the legislative language because reading the legislative language is among the more confusing things I’ve ever read in my life.” Congressman John Conyers (D-MI) was equally dismissive of reading the House version of the bill. “What good is reading the bill if it’s a thousand pages and you don’t have two days and two lawyers to find out what it means after you read the bill?”

The bills’ tax increases and cuts to Medicare take effect immediately. Most of the benefits don’t kick in until 2013. That trick makes it “deficit neutral.” How long would the CFPA allow a company to sell a mortgage that requires you to pay for three years before you get to move into your new home?

The costs and taxes triple in the second ten years and “savings” come from cuts to Medicare no one believes will happen. It still leaves 25 million Americans uninsured.

Let’s see, unintelligible language, fraud, and hidden costs. Looks like a job for the CFPA.

There’s a lot more to worry about in Dodd’s Regulationpoloosa that will be very bad for our recovery, but that’s for another post.