The Spectacle Blog

Ed Cone Responds

By on 12.28.05 | 10:17AM

In an update to the post mentioned below:

At the American Spectator blog, John Tabin defends high-interest lending as if it's the only way for people ignored by banks to get credit. Nonsense. Here in North Carolina, Martin Eakes has shown that "unbankable" people and businesses can participate in the credit market without the "help" of predatory lenders.
The funny thing about "predatory lenders" is that it's awfully hard to get a handle on just who they are. That's because "predatory lending" is an advocacy term, like "extremist judges," meant to evoke something bad without defining it. Get into the weeds, and it turns out that a predatory loan is a loan that seems expensive to the speaker -- take a look (.pdf) at the APR triggers for several bills floating around Capitol Hill to get an idea of how the definitions can vary. What all these bills have in common is that they amount to a price control on credit. Price controls lead to shortages -- and one gets the sense that that's sort of the point. For all the talk of predators, borrowing money is a voluntary transaction; the unspoken assumption behind the push for tougher regulations is that there exists a class of people so prone to falling hopelessly into debt that they need government to protect them from themselves. This form of paternalism isn't cost-free.

Eakes wants to extend North Carolina's regulatory regime to the nation. Like Michael Greve, I'd rather stick to the status quo of regulatory federalism, especially given the inconclusive verdict on the effects of the North Carolina regulations.

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