The Wall Street Journal looks at how the new consumer-protection regulator is likely to make banks less profitable. I like how the paper all but says that’s because the banks won’t be able to screw their customers as blatantly anymore.

The paper says the new regulations would “take the industry back in time” and force it to offer “plain-vanilla” products. Or maybe not. The Journal calls them “plain-vanilla guidelines,” which I guess could just as easily mean that the guidelines are just boring. And “guidelines” doesn’t sound very promising. How about “hard and fast rules”? I think “guidelines” isn’t the right word because the Journal says this:

Card issuers wouldn’t be allowed to “change the rules of the game” on consumers, as in cases where a 0% rate is applied to only part of their balances.

But the bottom of the story confuses the issue all over again.

According to the administration’s “white paper” on the proposal, the agency “could impose a strong warning label on all alternative products; require providers to have applicants fill out financial experience questionnaires; or require providers to obtain the applicant’s written ‘opt-in’ to such products.”

The paper should have been more careful with its language and explained what will be rules and what will be guidelines, but it’s pretty good at not pussyfooting around the fact that banks have made lots of lucre in recent decades by snowing consumers.

The complex loans of recent years didn’t just confuse consumers. The bankers themselves ultimately misjudged whether customers would repay them.

So the Consumer Financial Protection Agency wouldn’t just be looking out for borrowers; it would be protecting bankers from themselves.

And here’s another forthright explanation of banks’ behavior:

Most people, for example, don’t understand the effects of compounding of interest — which leads them to undersave and to overborrow — a basic human failing that some financial institutions have an incentive to exploit.

All true, but usually not stated so boldly in the WSJ.

More like that, please.


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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.