The CFPA’s Effect on Consumer Credit and A Wager Proposal for Professor Levitin

Professor Adam Levitin is not impressed by our prediction of the effect on consumer credit of the CFPA.  Readers might recall that, using estimates from the literature on the effect of regulatory shocks on interest rates and of the long-term debt elasticity, we offered a (in our words) “rough calculation” of the “lower bound” of the effect of the CFPA Act on consumer credit at 2.1%.  Professor Levitin says that we just “make up the numbers” and that they do not pass the “straight-faced test.”  In his paper (and second blog post) Professor Levitin offers more of the same formula: a combination of assertions unsupported by evidence, ad hominem attacks, and insistence to his prior assumption that the CFPA will reduce the cost of credit without imposing serious regulatory costs (again, without substantiation).  He writes that his real problem with our analysis is that “The key point here, however, is the impact of the legislation is speculative and certainly not susceptible to precise statistical predictions.”

Read the full piece here