Shiller’s Subprime Solution

In his 2005 book Irrational Exuberance, Yale economist Robert Shiller predicted the once unthinkable, and now unfortunate present: the boom and bust in real estate that would have grave consequences both in the U.S. and globally. In his newest book The Subprime Solution, Shiller calls for sweeping reform to address the current crisis. Part of his answer is greater transparency through financial databases and disclosures. He also argues for a Financial Product Safety Commission to protect consumers of financial products and services, much in the same way that the Consumer Products Safety Commission sheds light on, and removes, unsafe consumer products. This transparency-enhancing argument recalls the important proposal for a Federal Search Commission made by Frank Pasquale and Oren Bracha in the most recent issue of the Cornell Law Review. Whatever the merits of Shiller’s numerous suggestions, one thing is certain: heightened transparency of financial products and services would provide significant benefits to consumer confidence and the industry itself.

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