feoNotes

disaster

on january 28 1986, around noon, i was walking through the cafeteria at my high school in fall river massachusetts. it was lunchtime. i can remember the smell of french fries wafting from the kitchen. it was a tuesday, so that evening locals would fill the cafeteria for bingo. i was near the double doors leading to the classroom halls. on the right was dean of students, brother moran’s office. there was tv in the corner, rarely on, it was now showing live coverage of the space shuttle challenger exploding 73 second after take-off. i can still see the v shaped smoke billowing out against the dark azure sky. the image is burned in memory.

this event is like many other generational disasters; hiroshima, jfk’s assassination, 911, even covid lockdown. people remember them, remember the image on tv or the news or video on their phone. they know who they were with and what they were doing at that exact time, like me in the cafeteria that winter day.

the iconic images and videos associated with these disasters do more than evoke emotion or allow us to remember the smells and feelings. these images are evidence in identifying exactly how that event began. we can measure the width of the fire ball, the volume of destruction; we can see (or argue over) the trajectory from the book depository; we can identify how to increase plane travel safety. we can piece together evidence of where patient 0 originated.

there are other events that are more disastrous, but occur over weeks, months or years and therefore they do not have the same feeling, the same memory; they are blurred. these events we tend to forget more easily. there isn’t a pulitzer prize winning photo of the event. these are slow moving, some might say tiny changes, leading to the disaster that we only see in hindsight. these events are more dangerous, more impactful.

i would argue that the single largest disaster of our generation (perhaps of the last 50 or 75 years) is the 2008 housing crisis. people lost jobs, homes, lives. people saw their property worth nothing. people saw their retirement accounts shrink to tiny values of what they were only a short time before. scarcely a person on the planet was left untouched. this event is so large and so impactful, and moved at such an odd pace, that it is a struggle to know exactly when the event began. there is no photo evidence. did it begin when countrywide bank (in california) collapsed? was it when lehman brothers collapsed? or did it begin a full 2 years earlier when most variable rate loans were beginning to adjust? in that event, over $13 trillion in wealth was lost. economically we would take 10 years to recover. but there isn’t a picture from the beginning.

in the wake of the crisis, congress in its wisdom, enacted the Dodd-Frank Act. the Dodd-Frank Act implemented numerous things, including the establishment of the Consumer Financial Protection Bureau; a federal independent agency established to help prevent a future disaster like the 2008 housing crisis. it is an action taken to help prevent future disasters. creating the CFPB is a good idea.

many probably think, given boiled down tweets and one-liners, that CFPB thwarts capitalism and progress. that it is an evil regulator, and perpetrates fraud. it is not. the CFPB is a critical agency monitoring the pulse of large financial banks in the united states. it has a research unit filled with dedicated economists who understand what trend analysis for billions of transactions can show about bank soundness, health and leverage. it has technology division whose job it is to stand-up cutting-edge data systems supporting these economists. it has a legal division who keep the public interest first in mind and ensures that research and tech do no harm to consumers. and yes, it has a bank examination division to do investigations. its a weather forecaster for a financial meltdown. imagine not having the national weather service prior last fall’s hurricanes, or this winter’s santa ana winds in southern california. CFPB is the financial equivalent.

i am an alum of CFPB. i worked there for 4 years with perhaps the most talented, smart, dedicated group of people i will ever have the pleasure of working with. i worked there leading a team who implemented an information system about every home mortgage application annually. this data can be instrumental in ascertaining if banks are discriminating against anyone or trying to keep some people down. this data is so steeped in history, that too many volumes of books and articles and fair practice research and indeed laws have been written to mention here; safe for it to say that this data, home mortgage disclosure act data, is as important as the us census.

this data has a separate intrinsic value outside the use case of discrimination. this data can be shown to be an early warning signal for financial collapse. i spoke about this potential at GovSummit 19 and wrote about it briefly here. this data can differentiate across years, decades, epochs, rather than the single pulitzer photo. this data is one piece of CFPB’s financial national weather service. it could sound the evacuation route.

having the CFPB is a good idea like it is a good idea to sign the nuclear nonproliferation treaty. it is a good idea like not letting the president ride in an open air-car, at 11 miles an hour. it is a good idea like preventing the space shuttle from taking off in freezing temperatures. it is a good idea like not allowing airplane passengers to carry box cutters and knives. CFPB was established to help ensure that large banks are profitable, provide financial service and do it in a way as to not harm consumers. CFPB is a good idea.

there isn’t a picture from 2008 of our suburban sacramento home when my wife and i realized that more than half of the houses on our street were for sale, because they were underwater. there isn’t a video of when, in 2009 we realized that our house was worth about half of what we bought it for in 2004. there is no selfie coincidentally capturing the tragic explosion in the background when we maxed out credit cards to move across county leaving our house to barely sell for what we bought it 6 years earlier.

the recent events to attempt to shut down the CFPB, scares the living hell out of me. i am not scared for me, personally. my wife and children are healthy. i am not likely to face any discrimination. i am financially secure. i am frightened for the worldwide financial meltdown that will potentially come in 4-6 years if the attempts to remove the CFPB are successful. i am scared there will be no evidence leading to patient 0. i am worried there will be no way to identify that the future event happened b/c these banks were over leveraged on a faulty jenga-esque tower of debt. i am frightened no one will be able to see that the storm is coming, and people should evacuate low lying areas.

without the CFPB, there will not be an iconic disastrous picture. it will be far worse. you will not see it coming, and no one else will either. there will be no early warning. there will be no iconic photo; there will be no grainy video. there will be no way to piece together how to prevent it from happening again. much later in the aftermath there won’t be a v shaped image of billowing smoke burned into memory. in fact, most people will blame either the new president, or worse poor people or immigrants.

i encourage all to take some action. to write your senators. to call your congressional representatives. to inform your governors, your state districts attorneys. to use your voice, to demonstrate how important this institution is. CFPB is a good idea. closing it is a disaster waiting to happen.