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Data Mining At The Consumer Financial Protection Bureau

Why?

Officials at the Consumer Financial Protection Bureau are conducting a massive, NSA-esque data-mining project collecting account information on an estimated 991 million American credit card accounts.

It was also learned at a Congressional hearing Tuesday that CFPB officials are working with the Federal Housing Finance Agency on a second data-mining effort, this one focused on the 53 million residential mortgages taken out by Americans since 1998.¹

Once, the sole repository of massive amounts of sensitive data about the citizens of the US was the IRS. That agency, at least historically, accepted responsibility for probity and confidentiality with respect to the information in its computers. Indeed, employees of the IRS were and are subject to criminal penalties for the misuse of the data under their control. The standards to which they are held are much higher than those which are applied to other employees of the federal government. One can argue as to whether or not they might have lost their way a bit, become politicized and thus prone to misuse of the information they possess, but on the whole I think most Americans still view the agency with fear, yes, but also with a certain confidence that the data they yearly turn over to them remains out of reach of for the political class. Moreover, the IRS is subject to oversight by Congress as well as the executive branch and, though rare, breaches of trust when they occurred have tended to be viewed as truly beyond the pale.

The revelations of widespread NSA data mining of phone and internet communications produced an uproar which has led to at least token reforms, thanks to a light being shined on the NSA’s activities as well as Congressional oversight. Though Congress did not itself undertake any legislation limiting the activities of the NSA, their ability to do so forced the hand of the administration. No such pressure can exist to limit the reach of the CFPB. It is part of the Federal Reserve for which, properly neither the executive or legislative branches have oversight. Independence is essential for the functioning of a central bank but inimical to an agency which has the ability to affect the financial affairs of of the populace.

But let’s go back to the word I used to open this post – Why. Why does the CFPB need this information, what do they intend to do with it and perhaps most tellingly why do they need information on 85 – 90 percent of the active credit cards in the country when a smaller sample would suffice for modeling consumer behavior? It’s a simple question but nowhere have I seen an answer. It does seem to be important, really important since in the Congressional hearing CFPB Director Richard Cordray responded to this question in this manner.

“Would you object to getting permission from consumers, those people who you work for, before you collect and monitor their information?” Rep. Sean Duffy, R-Wis., asked Cordray.

“That would make it impossible to get the data,” Cordray replied.

Which is the sort of imperial response one would expect from someone secure in the knowledge that his interlocutors had no power to alter his plans.

This sort of data collection is troubling at any time, more so when it is undertaken by a government entity not subject to control. In a representative democracy an agency like the CFPB has no business existing outside the normal bounds of oversight and control. Frustrating as it may be at times, the US system of governance has served our needs admirably. No other ruling contrivance has guaranteed and delivered the sort of privacy and immunity from governmental intrusion into private affairs as has our system. The CFPB is an outlier born in a period of legislative frenzy. It’s mission may be worthy, but it needs to be conducted under the same sort of control which we demand of all other functions of government. Its overreach in this instance validates that need.

¹ Excerpted from the Washington Examiner.

 

 

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Ignore This Month’s Employment Report

Another month, another jobs report. According to economists the report is bleak, adversely impacted by weather, full of unseen positives and, of course, going to either cause the Fed to delay tapering or stay the course. Given the fact that the reliability of the data is tenuous at best (the payroll survey and household survey show contradictory trends) any conclusion about the import of the report has as good a chance as any other of being either right or wrong. Here’s the best advice I’ve seen today.

We suggest looking at 12-month average trends in the household survey because of the monthly volatility in the report and we note that the number of unemployed has dropped by 2.1 million since January 2013, while employment has risen by 1.8 million. This suggests the drop in the unemployment rate from 7.9% to 6.6% is not just a result of falling participation. –RDQ Economics Chief Economist John Ryding and Senior Economist Conrad DeQuadros

 

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Laszewski On The Recent ObamaCare Data

If this keeps up there won’t be a “death spiral.” Heck, so far the insurers are just re-enrolling their old customers at higher rates!   Robert Laszweski

That’s Laszweskis’s reading of the latest ObamaCare enrollment numbers. As usual, his most recent post is the best place to get informed, non-partisan data and analysis of this ongoing train wreck.

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Back To Blogging

Well, it’s been a rather nice extended Holiday hiatus from the keyboard. Don’t ask why I’ve neglected to communicate with my meager audience because I don’t have any sort of good answer. Just lost the itch for awhile, and let’s face it, things have been somewhat boring. Seriously, how much can you say about inequality, the minimum wage, NGDP, ObamaCare and the latest JP Morgan fine. Too much if you base it on my reading history. So, while I do have a couple of things to say about those subjects, I’ll spare you more boredom this evening.

I do want to point you to two really outstanding posts. Both should engender some introspection, so don’t just breeze through and not think about what they’re saying.

The first is by the Felix Salmon. He does what he does best, take a complicated subject and explain it simply. In” Why Quants Don’t Know Everything” he analyzes the rise of the quants and explains the potential, limitations and perils of Big Data. If you haven’t already read it, I  recommend you start with his earlier essay, “The Formula That Killed Wall Street.” They’re both masterpieces.

The other is Tim Carney’s tribute to Tom Coburn. I’m not sure it was meant as a tribute but that’s the way it read to me. Coburn’s departure from the Senate represents a loss for both sides of the aisle, but be sure to read to the end in order to appreciate the man’s integrity as opposed to the craven behavior of his contemporaries.

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A Very Merry Christmas To All

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A&E Not Giving Up On Their Money Machine

Phil-Duck-Dynasty.jpg

I suppose you can put this in the inevitable column.

Regardless of the current controversy and behind-the-scenes tension, A&E has every intention of keeping Phil Robertson on the air.

A source close to the situation confirmed that when the network resumes airing new episodes of Duck Dynastystarting Jan. 15, footage featuring the Robertson patriarch will indeed remain intact. The network also hopes the media and fan furor will cool down over the holidays and that tensions over shooting future episodes can then be resolved.

“There’s no negotiation to have; we’re doing the show,” said an insider close to the situation. “We’ll figure out a solution. It’s just not going to happen overnight. Everybody will take a break for the holidays and regroup afterward. That’s probably the smartest thing for everyone to do. Time heals a lot of wounds.”

It would seem the negative here is that we all get subjected to more bloviating about this.

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Sic Transit The Individual Mandate

Doing a rare Thursday night dump, the Obama administration announced that the individual mandate for some is no longer operative and catastrophic plans, heretofore referred to as “junk insurance”, should be made available to those who choose that course. The lucky few, at least for now, are those whose insurance has been cancelled. Ezra Klein, no less, explains the Kafkaesque logic applied here.

1. The individual mandate includes a “hardship exemption.” People who qualify can either ignore the individual mandate altogether or purchase a cheap, bare-bones catastrophic insurance plan that’s typically only available to people under age 30.

2. According to HHS, the exemption covers people who “experienced financial or domestic circumstances, including an unexpected natural or human-caused event, such that he or she had a significant, unexpected increase in essential expenses that prevented him or her from obtaining coverage under a qualified health plan.”

3. Today, the administration agreed with a group of senators, led by Mark Warner of Virginia, who argued that having your insurance plan canceled counted as “an unexpected natural or human-caused event.” For these people, in other words, Obamacare itself is the hardship. You can read Sebelius’s full letter here. HHS’s formal guidance is here.

Klein offers some further perspective on the illogic of the new regulations. For instance:

6. But this puts the administration on some very difficult-to-defend ground. Normally, the individual mandate applies to anyone who can purchase qualifying insurance for less than 8% of their income. The Obama administration is erasing that threshold for people whose insurance has been canceled. If they decide insurance costing 5% of their income is too expensive, then they can simply opt out. But if someone who’s currently uninsured decides 5% of their income is more than they can pay, then they have to pay the individual mandate’s penalty. What’s the logic in that?

7. The same goes for the cheap catastrophic plans sold to customers under age 30 in the exchanges. A 45-year-old whose plan just got canceled can now purchase catastrophic coverage. A 45-year-old who didn’t have insurance at all can’t. The Obama administration argues that they’re just giving a bit of extra help to people who lost what they already had. But why don’t people who couldn’t afford a plan in the first place deserve the same kind of help?

I recommend his entire post.

I think that we’ll probably find out in short order that the panic inherent in this latest move merely reflects an attempt to do anything to avoid the catastrophe they can’t abide. Specifically, more uninsured after January 1st than existed before the advent of this disaster. They know the real enrollment numbers they’re not turning over to anyone else and they have to be awful to inspire this Rube Goldberg fix. Panic, however, rarely results in intelligent action, rather it simply delays an imminent reckoning.

If you like, shed a tear for the insurance companies who opted for nationalization in exchange for dreams of millions of captive customers. Tonight they’re faced with the disintegration of their carefully (imaginary?) risk pools, not to mention the unenviable task of offering, possibly creating, insurance products which will afford unanticipated coverage for an untold number of people within two weeks. Just how good does this administration imagine the private sector is?

It’s not hard to imagine this as the beginning of the end for the individual mandate. Since the Supreme Court defined the mandate as a tax, and since taxes can’t be constitutionally levied in a discriminatory manner, the exemption is certain to be subject to legal challenge. More to the point, politically anointing winners and losers in this manner is a non-starter. The fate of the mandate and perhaps even the law itself rests with the resolve of Congressional Democrats. The resolve to preserve the mandate under these new circumstances will certainly be tested and most likely found lacking. The resolve to preserve the rest of the law is going to be sorely tested. With this latest move, the President has put them in a precarious position and placed his entire project in real jeopardy.

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