There’s been some buzz this week about a new poll that, according to its creators, shows overwhelming support for Dodd-Frank and the Consumer Financial Protection Bureau (CFPB). A stunning 74 percent of respondents, the creators claim, support Dodd-Frank while 77 percent support the CFPB.
But what has not been as widely reported is how skewed the questions were. Given the questions, it’s surprising there was not more support for Dodd-Frank and the CFPB.
Consider the question that resulted in the 74 percent support Dodd-Frank figure:
Now please listen to this description of the Wall Street Reform law that was passed after the financial crisis. In addition to requiring federal oversight of a larger range of financial companies, this law also prohibits banks from certain risky practices, and created the Consumer Financial Protection Bureau to fight against abusive financial practices that hurt consumers. It also bans taxpayer-funded bailouts of large banks and financial companies and, instead, sets up a system where investors rather than taxpayers bear the losses of bank failures. Please tell me whether, overall, you favor or oppose this law.
No more taxpayer-funded bailouts? No more socialized losses and privatized gains? Sign me up! I would love a law that does this. Except the very reason that many people, including me, oppose Dodd-Frank is because of the belief that it does just the opposite, that it entrenches the too big to fail concept and makes bailouts more likely down the road. The debate over Dodd-Frank is not pro-bailouts versus anti-bailouts, or pro-accountability for bad business choices versus anti-accountability. No one is advocating for bailouts or taxpayer-funded losses. The debate is over whether the particular provisions in Dodd-Frank are likely to lead to more bailouts or fewer, whether the law increases the chances of another crisis or decreases it.
This question also lobs a number of very nuanced and deeply controversial terms at the respondent – words like “risky” and “abusive” – with almost no context. What is the optimal level of “risk” for financial institutions, who should assess “riskiness” and how risk can be adequately hedged are questions at the core of ongoing debates over the cause of the 2009 financial crisis and future policy considerations. Labeling a set of practices as “risky” is conclusory and deliberately ignores any existing controversy.