George McGovern’s column in the WSJ advocating for freedom of choice on everything from healthcare to payday loans has prompted a lively debate in the blogosphere.  

Check out  http://tailrank.com/5344099/Freedom-Means-Responsibility for all of the latest discussions from all sides of the aisle.  

“Since leaving office I’ve written about public policy from a new perspective: outside looking in. I’ve come to realize that protecting freedom of choice in our everyday lives is essential to maintaining a healthy civil society.

Why do we think we are helping adult consumers by taking away their options? We don’t take away cars because we don’t like some people speeding. We allow state lotteries despite knowing some people are betting their grocery money. Everyone is exposed to economic risks of some kind. But we don’t operate mindlessly in trying to smooth out every theoretical wrinkle in life.”

Ankle Biting Pundits, a well-known conservative blog, has highlighted today’s McGovern piece in the Wall Street Journal.   Another respected blog, EconLog also posted comments on this insightful op-ed.

 

Another interesting comment made by Yunus in the Journal article was his belief that charity is not the best alternative to microloans. Yunus believes that charity cannot ever match a profit making industry for efficiency and service.

Around the country, as lawmakers and payday lending critics call for a ban on payday lending, maybe they should rethink their attitude that charity is an acceptable alternative to letting people help themselves?

Here is what Yunus said: 

• Mr. Yunus argues that it’s extremely difficult to bring efficiency to charity. But “the moment you bring in a business model, immediately you become concerned about the cost, about the revenue, the sustainability, the surplus generation, how to bring more efficiency, how to bring new technology, how to redesign, each year you review the whole thing . . . charity doesn’t have that package.”

Saturday’s Wall Street Journal had a very interesting article on Muhammad Yunus, who won the Nobel Peace Prize last year, for his company which offers small loans (known as microcredit) to women in third world countries.  Without Yunus, these women would not have been able to get a loan from the traditional third world lenders who discriminate against women.  Yunus’ loans have helped thousands of women start small businesses allowing them to raise their families free from poverty, hunger and destituteness.

Yunus’ company, Grameen is now operating in the United States in the inner-city of New York.

What caught our attention was some comments made by Yunus about the importance of accessibility to short-term credit.  His points are strikingly similar to what payday lenders also believe. 

• “There is no need for collateral, credit-history checks, legalities or complicated paperwork. Just credit, plain and simple.”
• “Mr. Yunus would argue that in making credit more easily accessible, he is helping guarantee a fundamental human right.”

Former Democratic presidential candidate and South Dakota Senator George McGovern has an outstanding piece in Friday’s Wall Street Journal on the problems with “economic paternalism,” in the effort to ban payday advances.  Here are a few choice quotes:

“Payday lending bans simply push low-income borrowers into less pleasant options, including increased rates of bankruptcy. Net result: After a lending ban, the consumer has the same amount of debt but fewer ways to manage it.”

But McGovern goes beyond the mere mechanics of how banning or restricting payday advances hurts consumers.  He offers insight into the very foundations of individual liberty and how it’s engrained in American society and culture:

 

“Since leaving office I’ve written about public policy from a new perspective: outside looking in. I’ve come to realize that protecting freedom of choice in our everyday lives is essential to maintaining a healthy civil society.”

At the risk of getting too classical, your Payday Pundit is reminded of this gem from Italian statesman and poet Dante Alighieri which well parallels the sentiments in McGovern’s WSJ piece:

 

“Mankind is at its best when it is most free.  This will be clear if we grasp the principle of liberty.  We must recall that the basic principle is freedom of choice, which saying many have on their lips but few in their minds.”

Seems we could use a little more 14th Century wisdom in the 21st Century.

The February 12th front-page Wall Street Journal story by Ellen E. Schultz and Theo Francis, “Social Insecurity:  High-Interest Lenders Tap Elderly & Disabled” confuses payday lenders with other types of small loan services: primarily installment and catalog lenders. 

The article describes loan practices that are NOT conducted by payday lenders.

Major errors in the WSJ article:

1. The article says payday lenders are “…forging relationships with banks and arranging for prospective borrowers to have their benefits checks deposited directly into bank accounts.”  This is patently false.  State laws only authorize payday lenders to hold a personal check, deposited on the borrower’s payday.
2. The story says:  “One-fifth of those without conventional bank accounts are receiving government benefit checks through nonbanks, including payday lenders.” This, too, is blatantly false. Payday lenders do not receive checks on behalf of recipients (state law prohibits this practice) and 100 percent of payday lending customers have a checking account at a bank or credit union.
3. The two key anecdotes detailed in the article involve companies that are not payday lenders: Miracle Loans and Money Tree of Georgia 
4. The article says that the payday lending industry is “clustered” around government-subsidized housing in Washington, D.C.  “There are at least four payday lenders within a mile-and-a-half of Fort Lincoln,” the piece says. Washington, D.C., is an urban environment.  A mile-and-a-half away from a location in an urban environment does not constitute “clustering” by any known standard.