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What Financial Freedom?

Instead of fighting about consumer protections verses consumer demand, we should collectively aspire to create world-class financial freedom in America. It is good for people, it is good for business, and it's darn patriotic.

The White House and many others are fighting to create consumer protections against credit default swaps, Foreclosure Gate, shifting credit card terms and many other "financial innovations" with grim consequences on many responsible people. Important protections for millions of mainstream Americans. Problem is that some of these rules have unintended consequences that aren't good for the people meant to be protected and which stifle "good" financial innovation, an essential force for a better future.

Wall Street, in turn, predictably claims their hands are being tied, and that increased regulation won't eliminate demand: If you eliminate payday lending, there will still be millions who need access to short-term credit, $40 billion worth. "No one is making anyone take out a payday loan," they rightly claim. Problem is that a lot of the consumer financial products being bought and sold today are, in fact, hard to understand, and can have an adverse impact on individuals, communities and even the GDP, in the case of subprime mortgage.

This is a futile battle of wills: consumer protection vs choice. Both camps grudgingly concede there is a need for the other, but both camps over-reach.

In a country which values freedom above all else, we need a paradigm shift from either-or to both-and built around the premise of financial freedom. Personal financial freedom is the ability to use our money to realize our goals. This starts with food and shelter and ends with personal fulfillment. The consumer finance industry—and its regulators—should focus on its ability to create financial freedom. This freedom must include the right to innovate, but also the obligation to raise the tide.

More practically this means maximizing long-term consumer value in payments, in credit, in savings and investment tools. Repeated use of a financial product should not just generate greater profits, but be additive to a users' station in life.