Josh Marshall despairs: Broken Windows, Broken States
Category Archives: Econ & Money
ProPublica’s The Payday Playbook: How High Cost Lenders Fight to Stay Legal is a little different from what they teach in high school civics classes.
As the Rev. Susan McCann stood outside a public library in Springfield, Mo., last year, she did her best to persuade passers-by to sign an initiative to ban high-cost payday loans. But it was difficult to keep her composure, she remembers. A man was shouting in her face.
He and several others had been paid to try to prevent people from signing. “Every time I tried to speak to somebody,” she recalls, “they would scream, ‘Liar! Liar! Liar! Don’t listen to her!’”
Such confrontations, repeated across the state, exposed something that rarely comes into view so vividly: the high-cost lending industry’s ferocious effort to stay legal and stay in business.
The problem was the legislature. During the 2010 election cycle alone, payday lenders contributed $371,000 to lawmakers and political committees, according to a report by the nonpartisan and nonprofit Public Campaign, which focuses on campaign reform. The lenders hired high-profile lobbyists, and Still became accustomed to their visits. But they hardly needed to worry about the House Financial Institutions Committee, through which a reform bill would need to pass. One of the lawmakers leading the committee, Don Wells, owned a payday loan store, Kwik Kash. He could not be reached for comment.
Eventually, after two years of frustration, Still and others were ready to try another route. “Absolutely, it was going to have to take a vote of the people,” she said. “The legislature had been bought and paid for.”
A coalition of faith groups, community organizations and labor unions decided to put forward the ballot initiative to cap rates at 36 percent. The main hurdle was collecting the required total of a little more than 95,000 signatures.
Someone raised $2.8 million to fight the initiative. We don’t get know exactly who:
Missourians for Equal Credit Opportunity (MECO), appeared. Although it was devoted to defeating the payday measure, the group kept its backers secret. The sole donor was another organization, Missourians for Responsible Government, headed by a conservative consultant, Patrick Tuohey. Because Missourians for Responsible Government is organized under the 501(c)(4) section of the tax code, it does not have to report its donors.
They sent deceptive threatening lawyers letters to the pastors and others running the petition drive.
And as if that wasn’t enough, they created fake initiatives to confuse people:
A Republican lobbyist submitted what appears to have been a decoy initiative to the Missouri Secretary of State that, to the casual reader, closely resembled the original measure to cap loans at 36 percent. It proposed to cap loans at 14 percent, but stated that the limit would be void if the borrower signed a contract to pay a higher rate — in other words, it wouldn’t change anything. A second initiative submitted by the same lobbyist, Jewell Patek, would have made any measure to cap loan interest rates unlawful. Patek declined to comment.
MECO spent at least $800,000 pushing the rival initiatives with its own crew of signature gatherers, according to the group’s state filings. It was an effective tactic, said Gerth, of the St. Louis congregations group. People became confused about which was the “real” petition or assumed they had signed the 36 percent cap petition when they had not, he and others who worked on the effort said.
They hired people to physically block access to petition gatherers.
Here’s the really sad part: it worked. The petition’s supporters gathered
118,000 valid signatures, about 23,000 more than needed.
But the state’s rules required that they collect signatures from at least 5 percent of voters in six of the state’s nine congressional districts. They had met that threshold in five districts — but in the First District, which includes North St. Louis, they were 270 signatures short.
Democracy in action.
They’re going to try again next year.
I am a new member of a new group of poor people: the college-educated, middle-aged working poor. When you make what I now make, about $1,500 take home, forget about saving any money, every cent will be spent. It’s not a lifestyle choice or lack of discipline, it’s just math. Take out $600 for rent, $400 for bills and what’s left over has to cover co-pays for my heart meds and cardiologist, food and sundries, and any unplanned expenses. That means you’re always running out of things you previously took for granted, from toilet paper to shaving cream.
Read more at Being Poor in America.
The ubiquity of rental cars are one of the great advances of human civilization. Think about it for a moment: you sign your name (and if you’re a member of a rental car company’s membership program, not even that) and you are given the keys to a vehicle that costs usually $20,000 or more. No questions asked. That’s a real hallmark of trust in markets and highly developed institutions.
I’ve wondered sometimes how we should treat the costs of locks.
On the one hand, you buy a lock, that is counted as part of GDP. Well-used locks genuinely make you safer; they add to your welfare function. A world in which you are allowed to have a lock, and can afford locks when you need them, is for you a better world than one in which you are not allowed locks, or they are priced out of your reach.
On the other hand, a world in which you need a lock is not as good a world in which, all other things being equal, you do not need a lock. If you could rely on something free — magic, social conditioning, hardwired biological morality — to secure your places and possessions, then you could save all that lock money and spend it on something else, raising your utility even further. So in this view, each expenditure on a deadbolt is a deadweight loss, a sign of a social and economic failure, a waste of resources that could more profitably be employed for something else.
One key difference from past practice: EFF will liquidate any Bitcoins it receives as soon as it gets them.
EFF’s announcement pointed me to this recent (March 18, 2013) Fincen guidance document, Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies which I had missed. Key graph:
A user who obtains convertible virtual currency and uses it to purchase real or virtual goods or services is not an MSB [Money Services Businesses] under FinCEN’s regulations. Such activity, in and of itself, does not fit within the definition of “money transmission services” and therefore is not subject to FinCEN’s registration, reporting, and recordkeeping regulations for MSBs.