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Payday and Auto Title Lenders

October 21, 2012

“The committee should discuss whether TML should take a position on legislation that would preempt or prohibit the regulation of payday and auto title lenders by cities.”

There was quite a furor over this one. Several stood up to state what a blight these were on a city and how terrible they are for economic development, and how they abused those they claimed to serve.

I’m constantly amazed at how little elected officials understand the market. Some people pay more for credit because they are a greater credit risk. The debacle with government backed mortgages going down the tubes should have taught these kinds of people that government “wishing” more mortgages through policy and enforcement doesn’t change the underlying evaluations of credit-worthiness. In that case, the tax-payer was on the hook for the stupid, ill-informed policies of forcing banks to lend to people that couldn’t afford the loans.

Government should not be in the business of picking winners and losers. The market can be a brutal place. Yes, it’s terrible when someone gets chewed up and spit out by the system. However, it’s also a great motivation to that individual or business to not get into that position again.

Here’s yet another circumstance where “feel good” policy by liberal whack-jobs accomplishes the exact opposite of what they want to do. Want to help poor people? Cut taxes. Cut regulations. Cut fees to government. Make it easier to start a business. Let them keep more of the money they make.

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