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June 25, 2010

Consumer Consequences to Financial Regulatory Reform

Each time there’s a crisis, the government looks to build on top of broken regulations instead of creating a lean regulatory backbone.
The government never seems to focus on eliminating broken regulations, instead, it looks to create more regulation.  While some liberals may support this ideology, people do not realize what the government regulations are costing consumers.  Cost can come straight from taxes needed to fund the ever-growing size of government.  When the government pulls the funds from private enterprise, the consumers who interact with those institutions face increased costs to fund them.
In the case of financial regulatory reform, people who bank will have to pay the price.  As the Wall Street Journal recently reported, banks are preparing to place fees on consumers’ checking accounts.  The Journal added that low balance and low activity accounts will likely be charged a monthly service.  Does this help low income families?
This reminds me of tobacco taxes at the state level.  States tax cigarettes in order to raise money for social programs, however, most politicians don’t realize the most negative effects of cigarette taxes are on low income individuals.  Cigarette taxes and financial regulatory reform are two examples of where consumers lose when the government over-regulates.
Liberals may point to these price increases as greedy, but let’s be realistic.  Do we expect businesses to simply sit there and take the loss?  Think about this from the individual point of view.  If an individual’s taxes are raised (or any other cost for that matter), wouldn’t you expect that person to seek an increased income?
Instead of having government trust funds, fines, and costs, let’s think rationally when looking at financial regulatory reform.

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