Singing my song
June 18, 2010 | alternatives, federal legislation, industry | Comments (0)That’s the song of “unintended consequences.” From a business column on the Associated Press wire:
Here’s the thing about financial reform: It sounds good, until you try to get a car loan or pay your dentist.
Those are the kind of unintended consequences that could emerge from the biggest financial regulatory overhaul the country has seen since the Great Depression
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Tony Federico of Federico Chrysler Dodge Jeep in Wood River, Illinois, says he’s a middleman in the lending process. He matches up car buyers with banks, credit unions and other auto lenders. He acknowledges that he makes money when arranging auto loans, but he argues customers get a better rate from him than if they went to the bank directly.
Federico says he can buy a loan from a bank with an interest rate of 2.5 percent and then can extend it to a borrower at 3.5 percent. If the same customer went to a local bank in his area about 20 minutes outside of St. Louis, the lowest rate would run around 3.99 percent, he says.
Just like the dentists, Federico says that more regulation will boost his costs. It could mean he does fewer loans, or is less generous in the deals he offers. Consumers then would have to seek out loans elsewhere, which could be less convenient and cost more.
Consumers will live with the unintended consequences of financial reform for many years.
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