Make no mistake about it, a new era of consumer financial regulation is upon us. Whether the Federal Reserve Board or a new consumer agency writes the rule book, tougher consumer rules and enforcement will come to be.

The fact is that mortgage brokers were at the center of many Americans' buying homes they could not afford and are now having to vacate, and many in government and among the public are convinced that additional consumer protections in the financial sector are needed.

The question is not whether but how the next round of consumer regulation will proceed.

It is unfortunate that in the debate thus far there has been too little recognition that, by and large, consumer problems began with un- or underregulated enterprises — the mortgage brokers for sure but also check cashers and payday lenders, just to name a few.

The direct influence of these and other shadowy players on poor practices is clear; what is appreciated less but perhaps of even more importance is how practices initiated by the underregulated can drive all players in the wrong direction.

Thus, some regulated institutions, banks and others, let their standards decline in the face of intense competition from less-regulated entities.

As a result, however unfair this is, the banking industry in its entirety is being called to account.

Furthermore, the policy debate thus far has not recognized the high standards and already heavy compliance burden baked into banking and other regulated industries.

Nor has the debate grappled with the fact that additional and redundant burdens in an already regulated sector would place a drag on credit and/or raise prices of services to consumers.

Striking the right balance is important for the banking industry, the consuming public and the economy more generally.

I believe three principles could help our policymakers frame the vital but delicate task of balancing consumer interests with the healthy operation of a free market that is already partially regulated.

• Focus first on un- and underregulated financial companies.

"The unlevel playing field" is a shopworn but painfully accurate description of the banking regulatory landscape.

The recent crisis has demonstrated beyond all doubt that it simply does not work to have a large portion of our financial services system heavily regulated with specific capital charges and limits on product innovation, while we let the remainder of the system play by lesser rules, or none at all.

The first and most important step to be taken in the consumer area is to apply rules, examination and enforcement measures with respect to the underregulated players.

• Maximize regulatory effectiveness and minimize regulatory burden.

The detrimental nature of regulations that are excessive or misdirected has not been fully studied or appreciated.

For example, the financial crisis of 2007-2009 may not have occurred, or at least would have been muted, if there had been a proper focus on abuses in mortgage origination.

Though existing rules required lenders to deliver truckloads of mortgage disclosure documents, these proved all but meaningless to consumers, giving them a false sense of security.

Business executives, like government officials, have only so many hours in the day, and time wasted on needless burdens is time that cannot be used to run the business safely and thus protect consumers effectively.

In regulation, more is not better. Better is better.

Thus, in fashioning any new consumer rules, as in fashioning safety and soundness rules, primary consideration must be given to minimizing burdens, consistent with genuine effectiveness.

• Establish uniform national standards.

We are one nation. One of our key competitive advantages as a nation is our large market. We take a big step toward ruining that market for retail finance when we let every state set its own standards, with its own enforcement mechanisms, irrespective of whether a financial institution is nationally chartered and focused.

If we are to have a regulatory agency at the federal level that focuses on consumer issues, that agency should set uniform national standards, however high.

I do not think many of the detractors of the current independent consumer agency proposal would continue to oppose the legislation — regardless how high the standards are — if the standards were to be uniform nationally, and uniformly examined and enforced.

Here again, I think there is an underappreciation of the burdens created when financial institutions must comply with 50 different sets of rules.

Further consumer regulation is coming.

It will be most effective if standards are not only sufficiently lofty but also properly targeted, sensitive to excessive burdens and uniform nationally, especially for enterprises with national charters.

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