Joseph Otting, the new head of the little-known but very powerful Office of the Comptroller of the Currency (OCC) is an independent financial regulator within the Treasury Department. Recently, he expressed his desire to allow banks back into the micro/payday lending space of which regulators had forced them out of in 2013. And some, including US Bank[1], have followed his lead.
Opening markets
For a number of reasons, including the fact that 63% of Americans don’t have savings to cover a $500 emergency[2], this is the right move. Want to lower interest rates on a product? Want to provide access to more people? You do it by creating a competitive environment and wrapping it in respectability. That is, don’t create more regulation, but rather allow regulated entities that have a certain brand and consumer sensitivities into the marketplace and let the market forces themselves play out. Suddenly you have more customers benefiting from a market, rather than being taken advantage of by it.
It is understood that there are some that are terrified by the idea of a market, any market managing itself. But let us be reminded of two things:
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That’s what a true market is and does.
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That the mortgage crisis culminating in the 2008 financial collapse (which precipitated the 2013 action) was not created by under-regulation, but rather over-regulation – mandates creating classes of loan products to serve certain sectors of consumers and mandating the quota placement of mortgage dollars going into high-risk borrowers.
When entities that don’t live by market forces dictate scale for actual
