Cheese and the CFPA
The new Consumer Financial Protection Agency might not seem to have a lot in common with cheddar and brie, but Marketplace Senior Editor Paddy Hirsch sees a connection.
Parmesan cheese (iStockPhoto)
More on The Economy, Spending, America's Financial Crisis
Paddy Hirsch: Hey Tess.
Vigeland: Paddy.
Hirsch: Something occurred to me. I was just listening to your interview there with Elizabeth Warren.
Vigeland: Oh yeah.
Hirsch: Well you know, I like to think in sort of lateral ways about these things.
Vigeland: I don't have a white board in here, I'm sorry.
HOST: No, no it's cool, it's cool. I can do it sort of in a literative fashion by talking about cheese.
Vigeland: OK, Paddy Hirsch, Marketplace senior editor, commenting on my Elizabeth Warren interview.
Hirsch: Yeah, it's about cheese.
Vigeland: Cheese.
Hirsch: Yeah, cheese. You like cheese, right?
Vigeland: I love cheese.
Hirsch: OK, yeah, Portland, it's a big cheese producer these days.
Vigeland: Yes, Tillamook cheddar, one of my favorites
Hirsch: So, she's talking about loan products and the control of the kind of loan products that come onto the market. And I was thinking about the ideal supermarket, stacked with cheese of all different varieties, from all around the world. And no control on what type of cheese, any type of cheese you want, you can put it in that supermarket and you can pick any old cheese that you want. Except though, this agency that they're talking about is going to step in and say, "There are certain types of cheese that you can't have."
Vigeland: So this would be the FDA equivalent for the financial industry?
Hirsch: Exactly. It's the financial products scientists in white coats that are going to be looking at all the cheese that come in, they're going to have to have certain types of disclosure on these cheese, everybody knows what types of cheese there is or what the calories are, the calorie count.
And some of the cases with these cheeses -- and this is a big concern of people on Wall Street in particular -- they are worried that this agency is going to say there are certain types of cheeses -- like the stinky cheese from France, you know the really young, unpasteurized one -- that we are not going to allow on this supermarket shelf.
Vigeland: Well in the case of cheese, that's a bummer. But in the case of an option arm mortgage, I'm not sure that would be a bummer.
Hirsch: Well, it may be if you're the kind of person who doesn't know one cheese from another or can't tell the different between a Tillamook and Le Chevalier. But if you are a cheese connoisseur or a loan connoisseur, you might be pretty upset that you can't have your full range of choice of cheese or loans.
Vigeland: Cheese and loans. Well thanks for coming in Paddy. Next time, please don't do that before lunch.
Hirsch: I'm a bit peckish now. I haven't got any crackers.
Comments
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From Cincinnati, OH, 06/24/2009
Hi Paddy - No offense intended by calling your analogy bogus, just trying to get a quick and pithy shot off commenting on the segment. When it comes right down to it, there are plenty of ways we can, being misled or ignorant of consequences, do great harm to ourselves and others with all sorts of thing, food stuffs being just one of many. What riled me to comment was that it seemed as if you were describing the cheese selections as if they were all benign blacmange. As you correctly point out, bad cheese can kill you just as dead as anything. I still think the mushroom analogy is better. There is edible Amanita, but the genus is renown for species with names like "death cap" and "destroying angel" for good reason. When hunting the wild mushroom, an expert and trustworthy mycologist should be your friend and guide. When hunting the wild financial product, a trusted friend and expert in finance should be your guide. When all is said and done, it is not the product itself that is at fault so much as those who led the innocent and ignorant to their doom for the quick buck they could make off them. In that regard, it is not the cheese that is at fault, but those who proffered the poison. Unethical and even criminal, IMHO, but we, as a society, allowed it to happen, for which we all now pay the price.
06/22/2009
Hi, Rob.
Actually, we thought about using fugu as an analogy, but here's the problem -- the FDA actually allows companies to import the blowfish used in the potentially deadly fugu dish into the US! As opposed to unpasteurized cheese younger than 60 days, which it does not allow. Both can kill you, but the cheese is a lot cheaper.
06/22/2009
Hi Darla, Eilene, I'm not sure where the confusion is. We state fairly emphatically in the piece that the FDA regulates cheese, just as the CFPA will regulate financial products. Sorry if that wasn't clear.
Kutlay, forgive me, but I don't think your statement that "the proposed consumer protection agency has nothing to do with restricting choice" is correct. The plain fact is, we're not sure what the agency will do yet. Certainly the administration hasn't been 100% clear (and won't be until the legislation passes -- watered down, I'm sure) and Elizabeth Warren hedged around the issue in our interview. But the point is that banks are concerned not just about having to disclose details of products, but that certain products will not be permitted. Their concerns may be unfounded, but that doesnt mean they don't exist. And you can bet they'll be lobbying to avoid any kind of infringement of their freedom to sell any product they like into the market.
06/22/2009
When was the last time that buying cheese from a shady dealer leds someone to bankrupcy and financial ruin? If that happened often enough, then I would recommend regulating cheese.
From Duluth, MN, 06/21/2009
The cheese analogy is a poor one because the federal government DOES restrict our "right" to buy any cheese we want. According to the Raw Cheesemakers Association website, the FDA prohibits the importation and production of cheese made from raw milk that has not been aged a minimum of 60 days. This, like the proposed financial regulations, serves to protect consumers from unsavory business practices.
From Lake Forest, CA, 06/21/2009
RE: Cheese analogy - Don't you think that if we got all those cheeses, that the FDA says you must state if the milk has been pasteurized or there are additives or there is a recall. How about a case of lysteriosis (sp?) instead? Stupid man!! By the way, that's just what the FDA does!
From Arlington, VA, 06/20/2009
Mr. Hirsch's cheese analogy is misguided, if not misleading. If he wants to stick to his analogy, he should perhaps consider a cheese store that actually allows you to "taste the cheese", i.e. obliging the banks to make full disclosure in plain English, universal font and to provide a few real-life scenarios of might may happen under certain circumstances (similar to stress tests). If the drug companies are obliged to highlight the counter-indications of their products in their advertisements, why not the banks? The proposed consumer protection agency has nothing to do with restricting choice, it is all about giving people enough information so that they can make an intelligent choice...
From Austin, TX, 06/20/2009
Almost everyone believes in freedom of choice.
But the issue Warren raised was deceptive contracts -- that if you can read for hours or days you might understand...or not. But...you are given an impression, carefully calculated, that makes you believe the contract is simpler or other than it really is.
To use the cheese metaphor, it's like someone says this is "Swiss" cheese, but in the several pages of fine print it says in hard to decipher language that some slices might have any amount of filler (wheat) that the company chooses to use, which can be adjusted without further notice...
But the main label suggests it's just "Money-saver Swiss", and at such a good price too!
The way regulation responded to this was not to outlaw filler-cheese, but rather to require clear labeling that is hard to use to mislead.
So the idea of free choice is simply an entirely unconnected issue. The question is whether a contract is deceptive or uses carefully calculated misdirection (aka deception).
More about Warren:
http://findingourdream.blogspot.com/2009/05/elizabeth-warren-on-charlie-rose.html
..
From Cincinnati, OH, 06/20/2009
The comparison to cheese is bogus. You want to make a food comparison? Try mushrooms or maybe fugu fish. We've had some VERY unethical players marketing a form of poisonous food. It's not OK to, at worst, kill your customers, or at least, ruin their lives selling something that is obviously dangerous. We expect our regulators to prevent psychopaths from selling Amanita to an uneducated public. The Japanese strictly license the sushi chefs that serve fugu. We should expect regulation of similarly toxic financial products.
From Copenhagen, 06/20/2009
Can this agency keep out the SupaCreamy Goat cheese with the 2% Draino content that's not listed in the ingredients because it's been classified as a "Natural Flavor"?
All of this crying about limiting choices sounds like lament that we can't have cheap baby formula with melamine Here. Some things are good for NO ONE execpt those making the profit.
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