Will Street fretting, too
April 27, 2010 | federal legislation, industry, regulation | Comments (0)Indeed, the future shape and profitability of the banking industry hangs in the balance on the most sweeping overhaul of U.S. banking rules since the Great Depression, which is making its way through Congress now.
Mohamed El-Erian, co-chief investment officer of Pimco, which manages the world’s largest bond fund, said the banking system “is on a journey toward being much more utility-like because the benefits of stability today are being viewed to exceed the benefit of efficiency.”
“No society can accept a system that privatizes massive gains and socializes massive losses,” El-Erian said. “And therefore there will be a reaction, and history tells you that’s likely to be an overreaction.”
Not just us who are worried
April 27, 2010 | federal legislation, industry, regulation | Comments (0)From a column in the Gainesville Sun:
Harley-Davidson is worried that its dealer-financed loans to bikers will fall victim to new federal financing regulations. And eBay is concerned about possible restrictions on PayPal, a subsidiary, in moving money in the Internet marketplace.
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It also illustrates what some critics say is legislation so loosely drawn that it may inadvertently cover a variety of companies that are involved in lending or moving money, even if they operate far from Wall Street and had little to do with the financial crisis. Some industries, like payday lenders, fear that the financial overhaul may be a backdoor way for Congress to regulate them, something they have successfully fought for years.
Steve Adamske, communications director of the House Financial Services Committee, acknowledges that some House legislation would regulate payday lenders, which make short-term, high-interest loans to people who promise to pay in full with their next check.
“There is a fair amount of caution any time the federal government proposes new oversight,” said Christopher Colwell, a lobbyist for Check ’n Go, a payday lender. “We are trying to determine what impacts these proposals will have on business, intentionally or unintentionally.”
While the legislation’s backers in Congress insist that most nonfinancial companies have little to worry about, many of these businesses say they are deeply concerned that the sweeping provisions in the 1,400-page Senate bill, particularly the regulation of the derivatives market, the creation of a consumer protection board and rules on corporate government, could draw them in and affect their bottom lines.
For instance, auto dealers from 35 states are converging on their senators’ offices this week to seek an exemption from legislation that would treat them as financial lending institutions subject to new federal regulations.
Everyone’s got an opinion
April 27, 2010 | Ohio, industry, regulation | Comments (0)Including the Morning Journal in Northern Ohio.
Good letter
April 26, 2010 | Colorado, industry, regulation | Comments (0)In yesterday’s Denver Post:
Critics want to falsely use annualized interest rates to unfairly target the short-term loans we provide. This bill will eliminate the payday loan industry and kill jobs. Our customers understand the cost of short-term credit, which is why the industry has few regulatory complaints and good standing with consumer reporting agencies.
Throwing darts
April 26, 2010 | Ohio, industry, regulation | Comments (2)Weird analogy in yet another Cleveland Plain Dealer editorial about the industry:
Ohio House members have recrafted a plan to do what Ohio voters in 2008 said loudly, unmistakably, they wanted done — curbing “payday” lenders.
You’d think that question was settled a year ago last November. That’s when 64 percent of those Ohioans voting capped annual percentage rates (APRs) on payday-loans at 28 percent. But you’d be wrong.
That’s because payday lenders reincarnated under Ohio loan laws that let them charge interest and fees that can produce APRs of 391 percent, plus — the very APRs the 2008 law was supposed to prevent.
An Elyria Democrat, Rep. Matt Lundy, aimed to close those loopholes with an Ohio House bill introduced June 4. But a lobbying army hired by lenders, and the betrayal of Ohio consumers by some legislators, seemingly put the kibosh on Lundy’s proposal.
The Cleveland Plain Dealer won’t be happy until Ohio becomes a wasteland.
Colorado action on Tuesday
April 26, 2010 | Colorado, industry, regulation | Comments (0)We’re watching this carefully. From the Durango Herald News:
A bill to rein in the most egregious practices of so-called payday lenders has passed the state House and the state Senate’s Finance Committee. It is expected to be heard Tuesday by the full Senate.
Votes in doubt
April 23, 2010 | federal legislation, industry, regulation | Comments (0)From today The Hill newspaper:
The Senate has scheduled a showdown early next week on Wall Street reform, and lawmakers familiar with negotiations say a deal is unlikely by then.
Democrats have set a 5 p.m. vote for Monday to begin consideration of the bill, giving negotiators only four more days to reach a deal on a document exceeding 1,400 pages.
Payday loan bans hurt consumers
April 23, 2010 | Colorado, industry, regulation | Comments (0)From a guest op-ed in the Denver Post:
Economists agree: Eliminating payday loans as an option for consumers has disastrous consequences for those who utilize them. We’ve already seen what happens when other states outlaw these short-term infusions of cash. It remains to be seen whether Colorado will fall into the same trap.
Comparing Oregon, which has placed a rate cap on payday loan that drove three-quarters of the lenders out of business, to Washington, which has no cap, Zinman measured both subjective assessments (i.e., how people felt) and more objective measures like employment status. He found that people fared worse in both regards.
Over in Wisconsin
April 23, 2010 | Wisconsin, industry, regulation | Comments (0)From the story:
The measures won final approval in the Assembly late Thursday and were headed to Gov. Jim Doyle as lawmakers wrapped up the legislative session that began in January 2009. Not winning approval were measures to promote the use of renewable energy, to deregulate the landline telephone industry or to overhaul Wisconsin voting laws.
The regulations on stores that offer payday and auto title loans came after years of debate and intense lobbying by the industry. Wisconsin had been the only state not to regulate the industry, which consumer advocates said allowed its rapid growth and trapped too many borrowers who take out short-term loans with high interest rates in a cycle of debt.
“This will be the most significant consumer protection bill this body has taken action on this session,” said Assembly Majority Leader Thomas Nelson, D-Kaukauna.
This is true reform. Not a ban, not a rate cap.
Wisconsin update:
April 22, 2010 | Wisconsin, regulation | Comments (0)Bill heading to final approval. This is reform, not a rate cap.
