Economics

Taking Money from Girl Scouts

Sweeping new regulations could strangle nonprofit financial literacy programs.

|

On Friday, the House rewrote the rules governing banks, investment advisers, lenders, and other major players in the financial markets. But along the way, they may have managed to screw a bunch of Girl Scouts out of some merit badges.

The primary purpose of the bill, which has yet to be taken up by the Senate, is to spawn a new bureaucracy: the Consumer Financial Protection Agency (CFPA). That agency, part of President Barack Obama's proposal for reform in the wake of the financial crisis, snags powers from the Securities and Exchange Commission, the Federal Reserve, and other existing agencies, and supercharges them. Charged with regulating "financial advice" of all kinds, the massive mandate of the CFPA includes "educational courses," such as the financial literacy program offered by the Girl Scouts, where girls earn badges for learning how money works.

Assuming you think 1,279 pages [PDF] of new regulations on financial institutions are a good idea, Rep. Barney Frank (D-Mass), chairman of the House Financial Services Committee, and his coauthors had no choice but to include nonprofits in the mix. A loophole for all nonprofits begs today's for-profit financial advisers to become tomorrow's nonprofit financial advisers—who just happen to have close ties to a bank. Money has a way of flowing around rules (remember campaign finance reform?) so the bill's authors couldn't let nonprofits off the hook.

But there's another dynamic at work as well. In addition to going soft on drugs, crime, and their wives, congressmen now have to worry about appearing to go soft on nonprofits, thanks to the political and financial mess created by the nonprofit ACORN earlier this year.

The first public version of the Wall Street Financial Reform and Consumer Protection Act was sloppily written and even more sweeping. The language suggested that even incidental financial advice, discussion, or suggestions from nonprofits would be regulated by the new all-powerful agency. As the bill struggled through the House process, exceptions for small banks, accountants, real estate brokers, car dealers, and pawn shops were inserted.

Sandra Swirski, the executive director of the Alliance for Charitable Reform, fought for another exception as well: charities. "We became concerned because financial activity is defined broadly," she says. "It could capture a small solicitation at the bottom of a college brochure to alumni, foundation advice to grantees, and other day-to-day garden variety financial information." Her group helped move an amendment to protect "any activities related to the solicitation or making of voluntary contributions to or through a tax-exempt organization." This means it's still safe to beg for money and then advise people about the best way to give.

But charities that give financial advice and counsel as part of their mission—like the Girl Scouts—remain exposed to the new regulatory agency under the "educational courses" language.

In a classic congressional round of kick-the-can, the newly created regulatory body will have a significant amount of discretion in how to interpret that language. "There is sufficient authority given to the regulators to allow them to discern about whether they want to include all nonprofits," says Swirski. And it's quite likely that they'll leave the Girl Scouts and others like them alone. And after all, the last thing this country needs is more financially illiterate Girl Scouts roaming the streets, right? That system will work out just fine, of course, until someone who got bullied by a Brownie in a beanie becomes the head of the new agency. And then it's goodbye to the Business-Wise badge, the Dollars and Sense award, and the Money Sense badge. Incidentally, the Girl Scouts Money Smarts program is co-sponsored by Morgan Stanley. That arrangement, and many others like it, may not be long for this world once the bill passes either.

Another goal of the bill is to regulate payday lenders (much more on that here). But the bill may actually wind up being harder on their competitors, the kind of nonprofit alternatives that President Obama and the authors of the bill have long favored over the "predatory" lenders. That's because Goodwill, tax-exempt credit unions, and others elbowing in on the payday lending game often pair their lower-interest loans with mandatory financial literacy education. None of those activities are currently exempted from the raft of regulations, reporting requirements, and other rules in the bill.

The Senate version of the bill will probably make it onto the very crowded docket of the World's Greatest Deliberative body early in the New Year. Swirski said she was optimistic that the protection for solicitation of charitable donations would make it into the final version of the bill, but that "we're much farther behind" on protecting financial literacy education and other mission-related financial advice given by nonprofits. The CPFA itself remains extremely controversial, with House Democrats narrowly defeating an amendment that would have killed it in their version of the bill, so passage in the Senate will be tough.

As such laws often do, the proposed rules and regulations would may a double purpose: While increasing regulation, it also adds another layer of protection for established players in the financial services industry. The language of the bill includes a ban on giving investment advice, "excluding an investment adviser that is a person regulated by the Commodity Futures Trading Commission, the Securities and Exchange Commission, or any securities commission (or any agency or office performing like functions) of any State." Investments banks, payday lenders, and other established financial firms have been fighting the bill hard. But once the bill gets to a certain point, the agenda moves from "kill it!" to "at least make it worse for our competitors." Perhaps the banking industry's lobbyists have been talking with Nabisco. No one wants to compete with the Girl Scouts. Far better to get those knee-socked sharks out of the game.

Katherine Mangu-Ward is a senior editor at Reason magazine.

NEXT: Ron Paul on Ben Bernanke as Time's Man of The Year: Not Evil Per Se, But Head of an Evil System

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Classic.

    Par for the course, given CPSIA and the food bill as well.

    Those dirty little b@@@@@s in their little outfits just might hoodwink me into buying some over priced cookies. They DESERVE to be slapped down by our all knowing, all seeing, all powerful Lords and Ladies in the Congress.

  2. would may

    Cut-o.

    Text inserted to make this comment “English”:

    I’m against strangling Girl Scouts, because it’s so easy, it’s like not even practice.

  3. The language of the bill includes a ban on giving investment advice, “excluding an investment adviser that is a person regulated by the Commodity Futures Trading Commission, the Securities and Exchange Commission, or any securities commission (or any agency or office performing like functions) of any State.”

    If this gets that idiot Cramer off the air, it might be worth it.

    1. What, you don’t like an idiot screaming bad advice at you with sound effects? What’s wrong with you?

    2. Girl Scouts can provide financial advice as soon as they earn their Series 7 merit badge.

  4. Sorry P Brooks–there are protections for financial press in the bill, too.

    1. Of course there are. Because that would run afoul of the First, wouldn’t it?

    2. ** KMW votes against threaded comments with her feet **

  5. Well, (regular) literacy and numerical literacy have already been clobbered, so why not financial literacy?

    1. financial literacy has been gone for a LONG time. Note all the idiots that bought homes they couldn’t afford, or took out home equity loans to get that new SUV or take that dream vacation.

  6. They put some kind of super addicting drug into thin mints and it induces their parents to push their evil wares. They have to be stopped.

  7. OBAMA STEALS MONEY FROM GIRL SCOUTS!
    HE TRULY IS HISTORY’S GREATEST MONSTER!

    Seriously, have you Liberturdians stopped pretending that you’re not really Republicans now?

    Well, good for you.

    1. HURRR DURR DURRR!

    2. You are possibly one of the least interesting trolls on the prowl here. At least MNG, Tony, and Chad make an attempt at making reasoned arguments.

  8. What will that do to the companies selling gold as an investment?

    1. Glenn Beck will talk his crowd of waterbrains into buying more gold.

      Seriously, oil is a better investment if you’re looking for fungible commodities.

      And Parliament’s greatest hits is a great investment if you’re looking for funkible commodities.

      1. Even the non-serious shit is lame.

      2. By endorsing gold, Beck is betting against the dollar.

        Why does Beck hate the dollar?

        He’ll look foolish if gold tanks before his endorsement deal runs out.

        1. Hey brainiac. As the dollar collapses there will be a currency war. This is why other nations are buying gold so they will be able to make the case for their own currency. They don’t want to be tied to gold but in a reserve currency vacuum they will need gold to support their currency as the potential new world reserve.

          Oil doesn’t serve this purpose.

          So bet against gold, by all means my collectivist friend.

  9. Sorry P Brooks–there are protections for financial press in the bill, too.

    I think I detect the grubby fingerprints of one “Jeffrey Immelt: rent-seeker extraordinaire“.

  10. they may have managed to screw a bunch of Girl Scouts

    Every Boy Scout’s dream.

  11. In addition to going soft on […] their wives, congressmen now […]

    ::chortle::

    Harsh, Katherine.

    But you know that those guys have a gold-plated health plan and can get all the little blue pills they need.

  12. Jesus, people take financial advice from Girl Scouts? Maybe I oughta rethink this whole free market thing…

  13. Reason took money from Girl Scouts and wrote this pro-Girl Scouts article! I’m gonna write to my Senator about this!

  14. Credit card companies, banks, the financial system, the health care system, carbon-emitting industry – who’s left to regulate besides the Girl Scouts?

    See “The regulated citizen”:

    http://vulgarmorality.wordpres…..d-citizen/

  15. I fully support increased consumer education on short term and paydayloans. Just like the credit card act a few months ago was great for the consumers – It did not do much to curb bad credit card practices.

    I worry that the bill in congress now will either be so bastardized that it has no teeth or pushes for the wrong behavior from lenders.

    The way the bill is currently written would only require payday lenders to make a fee based product vs. an interest based product. Effectively leaving the price the same with no impact or education to the consumers.

  16. I fully support increased consumer education on short term and paydayloans. Just like the credit card act a few months ago was great for the consumers – It did not do much to curb bad credit card practices.

    I worry that the bill in congress now will either be so bastardized that it has no teeth or pushes for the wrong behavior from lenders.

    The way the bill is currently written would only require payday lenders to make a fee based product vs. an interest based product. Effectively leaving the price the same with no impact or education to the consumers.

  17. I fully support increased consumer education on short term and payday loans. Just like the credit card act a few months ago was great for the consumers – It did not do much to curb bad credit card practices.

    I worry that the bill in congress now will either be so bastardized that it has no teeth or pushes for the wrong behavior from lenders.

    The way the bill is currently written would only require payday lenders to make a fee based product vs. an interest based product. Effectively leaving the price the same with no impact or education to the consumers.

    -jim
    paydayloans

  18. I worry that this legislation will do nothing to help the end consumer deal with payday loans.

    Taking money from girl scouts aside. We need more education on paydayloans

    Let’s hope the legislation has teeth and impacts us better than the credit card legislation did.

  19. The CFPA will have such little teeth and no real impact to consumer credit behavior. It’s frustrating that this over-regulation will have no more impact than credit card reform did a few months ago.

    paydayloans providers will just change their products from interest to fee based products to avoid the law. Also, do not forget federal pre-emption will not be removed, allowing FDIC banks to lend at very high rates.

  20. It’s funny, the big guys cut themselves billions in annual bonuses. But the government wants to make it practically impossible for the man on the street to have access to affordable paydayloans.

    Go figure.

  21. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on

  22. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books.

Please to post comments

Comments are closed.