One problem that exists with evaluating public policies is the general inability to do controlled experiments. If the government in a particular jurisdiction believes that a certain set of steps would be beneficial, it is morally difficult and usually politically impossible to apply them only to some segment of the population to see how they work out in practice. It is true that we do have something approximating experimentation with regard to policies that are adopted in some states and not others. But there are always great differences among the states in a number of ways other than the policies being assessed, which means that the situation is much less pure than scientists generally seek.

Unusually, because of a political decision of which I opposed, we have the opportunity to assess an experiment that has been conducted with regard to consumer protection since the enactment of the financial reform bill in 2010.

In that legislation we established the Consumer Financial Protection Bureau, whose main advocate was now-Sen. Elizabeth Warren. Until we adopted that law, protection of consumers against abuses by financial institutions was a secondary priority for the financial regulators, whose main job has been to protect the financial system in general.

The law we adopted was a comprehensive one, and crated a bureau that was not only independent but had sufficient power to carry out its mission. But there was one exception. The auto dealers in the country lobbied strongly to exempt their own lending practices from the bureau’s jurisdiction. They succeeded, despite the fact that auto loans for many families are the second biggest source of debt after home mortgages.

The fact that they won is an interesting example of the power of natural grassroots networks in American politics. Contrary to myth, the largest financial institutions had very little influence during our deliberations. They are concentrated geographically and also unpopular with the general public – especially at that time, in the immediate aftermath of the crash. But auto dealers are dispersed throughout the country. They have presence in every single congressional district, and they are on the whole popular in their communities. The business culture of selling cars is very different than that of making loans. Very few bankers are seen frequently in television ads that are at the same time mildly self-mocking and effective. An added factor in the success of the auto dealers is that the major auto manufacturers in America had done a better job than many other businesses in seeking out minority partners.

In general, when the Financial Services Committee voted on consumer protection matters, the black and Hispanic members supported tough consumer protection against arguments that these could be a cause of economic inefficiency. On the one issue when this did not hold true was the exemption for auto dealers from the consumer bureau, in substantial part because many of the committee members from these two groups heard from people in their own communities who are in the auto business.

While I regret the effect that had in this case, I do recommend to other business that they study the practices of the automobile manufacturers from the standpoint of better achieving economic diversity that can work to their benefit.

The result of the vote on this issue was victory for the auto dealers because a large minority of Democrats joined every single Republican in voting for it. As a result, the consumer bureau has jurisdiction over lending practices in many areas, but not in autos.

Politics in this case set up a controlled experiment in which an agency of the federal government with a nationwide mandate regulates a particular activity – consumer lending – in every area but one. This gives us a much better chance to look at the effect of this type of regulation, by comparing the results in consumer lending in general with those of the practice in the one exempted area.

The answer is that regulation works. For a variety of reasons, with the existence of the credit bureau being the most important one, there has been a substantial improvement in mortgage lending practices, with the kind of abuses that contributed to the economic crisis largely fanned.

Similarly, using authority from another statue that we passed, the bureau has helped consumers save a great deal in their credit card transactions, according to independent studies.

But in the area of auto finance, problems have appeared beyond what had existed before; that is, it appears that there has been some migration of irresponsible practices from those areas that are regulated by the bureau to the one area where its ability to impose pro consumer rules is nonexistent.

I emphasize that our ability to document the importance of responsible consumer protection by underlining the abuses that occur when it is absent is very much a small silver lining in a very dark cloud. I continue to regret that my colleagues voted to exempt the auto agency from consumer protection rules. In no way do I mean to suggest that auto dealers are any less honest or ethical than lenders in other areas; the point precisely is that they should not be singled out either for harsher treatment, or for more lenient rules. Noting that “credit growth was being driven by auto loans,” The New York Times last week quoted the chief economist at a major financial firm noting also, “The only thing we have to worry about is there is excessive risk-taking in the auto sector.”

Unfortunately, the analogy between the decision by Congress in establishing the consumer bureau and a controlled scientific experiment breaks down at this point. In the latter case, the clear evidence that regulating lending practices protects consumers without diminishing economic efficiency would lead to an ending of the exemption in question. I am not optimistic that those of my former colleagues who voted to accommodate auto dealers will now adopt the scientific model in responding to people who will continue to be very influential and popular constituents.

Given the rapid evolution of American policy in Iraq and Syria, I think it is best to wait one more week before comment. I will address this in next week’s column.

Barney Frank is a retired congressman and the author of landmark legislation. He divides his time between Maine and Massachusetts.

Twitter: BarneyFrank

— Special to the Telegram