Predatory lending

Marginal Revolution: Loan Sharks:

Loan Sharks

Old definition:

A loan shark is a scumbag who charges the poor obscenely high rates of interest.

New definition:

A loan shark is a scumbag who charges the poor obscenely low rates of interest.

The post above doesn’t allow commenting, but I’m compelled to say this somewhere: No.

Real New definition:

A loan shark is a scumbag who charges the poor obscenely high rates of interest, or charges deceptively low rates at first and raises them unexpectedly.

This discussion is sparked by a Robert Reich post in his new blog. Alex Tabarrok of Marginal Revolution called the argument illogical and Reich a credit snob.

I see Tabarrok’s point… it’s fair to say that Reich doesn’t trust the poor entirely with their money. But that’s good policy. The poor can’t afford to take the same risks as the rich because when they lose out, they’re not eating. It’s even worse since the last reduction of bankruptcy protections.

It’s in the interests of society that people are well-informed when making their financial decisions. That’s why you get all those little pamphlets with your bank and investment accounts. Why shouldn’t the poor also be informed in ways relevant to their decisions?

This entry was posted in Whatever. Bookmark the permalink. Both comments and trackbacks are currently closed.
  • Subscribe

    Subscribe to all posts by feed.