The Washington Post today offered those few of us unwilling to read the 2,300-page Dodd-Frank financial regulation bill a cartoon summary of what it all means: “Reinventing Financial Regulation,” by Brady Dennis and Alberto Cuadra. It is not entirely clear to me who did the text and who did the graphics.
But the essence of the Consumer Protection provision is clearly stated (and illustrated): “In the lead up to the financial crisis, seven regulators shared responsibility for looking out for consumers of mortgages, credit cards, and other such loans, but none treated consumers as a top priority.”
What the authors mean, of course, is that previous to the passage of this act the government had innumerable regulators looking after different financial industries, such as savings, investment, mortgages, credit cards, and so on. What they do not say, though it is true, is that this division of labor arose naturally from the historical justification of American regulation. For example, the Interstate Commerce Commission, arguably the federal government’s first regulatory body, kept an eye on the railroads, because they were believed to wield powers and to engage in practices that violated the rights of people operating in the free market, at least as people at the time understood the market. A similar justification lay behind the antitrust division of the Justice Department and later the Federal Trade Commission. Those agencies kept an eye on industries and companies whose powers and practices were thought to violate the rights of people operating in the competitive free market. 
But the Dodd-Frank bill, if we are to believe the Washington Post’s description of it, finally alters that ideological foundation of the American government’s regulatory complex. The new financial consumer protection agency will not focus on industries and strive to “perfect” their behavior according to some ideal conception of how the free market operates, leaving American citizens to deal with the result. No, this new agency will, quite blatantly, be our government nanny. It will look first at us, its pathetic charges, and ask: “What are these children capable of doing?” And it will then insist that the commercial world accommodate our incapacities—individual rights and free market be damned. 
It is an interesting shift, and I wonder if anyone predicted it. For decades, the rhetoric remained that a free market—a truly free market, free of monopoly and deception—if only we could achieve it—would be a safe haven for the adult American consumer exercising his rights. But eventually the catalogue of practices that were said to vitiate the rights of free-market participants grew so large and varied and frankly implausible that it became easier to say people simply could not deal with the free market and should not be expected to. They needed a nanny to watch over them. Now they have one.


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