This is the Cato Daily Podcast for Monday, July 18th, 2011. I'm Caleb Brown.

One big problem with the new Federal Consumer Protection Agency is that the agency doesn't have to balance its consumer

protection role with anything else.

That, says Mark Calabria, Director of Financial Regulation Studies at the Cato Institute, could go a long way toward harming

consumer interests. One of the primary rationales for pushing it back

against the agency is you do see this separation of essentially credential

regulation that is safety and soundness regulation from quote-unquote

consumer protection and there is a concern that without that trade-off you

all essentially safety and soundness will suffer in concern that

without that trade-off you all essentially safety and soundness will suffer.

And we did a career quite often from consumer advocates that one of the reasons for

this agency is that regulators, bank regulators focus too much on safety and

soundness.

Now my own view was looking at 300 plus bank failures,

maybe they didn't put enough emphasis on safety and soundness.

But perhaps the best example of this

is seen in the context of Fannie Mae and Freddie Mac.

You had HUD, quote unquote mission regulator that pushed Freddie and Fannie to do ever more lending

to ever more people who could not afford to sustain those mortgages versus their

safety and soundness regulator and because you had that you didn't have that balancing

that going on you ended up with pushing these institutions in the massive losses.

So there's a very real concern that this agency will end up creating bank failures rather than stopping them.

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