Congress pushes the poor into the arms of loansharks

Posted by Marc Hodak on January 3, 2011 under Unintended consequences | Be the First to Comment

Todd Zywicki scores a great example of how the one law that will always accompany Congressional action is the law of unintended consequences.  In this case, the Dodd-Frank restrictions on bank intended to help poorer users of credit resulted in:

As the chief financial officer of a national payday-lending chain, Advance America, put it: “We believe that we’re starting to see a benefit of a general reduction in consumer credit, particularly . . . subprime credit cards.”

Which is happening because:

In his letter to shareholders last spring, Jamie Dimon of J.P. Morgan Chase reported that, “In the future, we no longer will be offering credit cards to approximately 15% of the customers to whom we currently offer them. This is mostly because we deem them too risky in light of new regulations restricting our ability to make adjustments over time as the client’s risk profile changes.”

Which is happening because the liberals in Congress care so much about the welfare of poorer users of credit that they figured they could compel the banks to provide it cheaper with a mere show of hands, as if the market for credit acted as arbitrarily as non-market institutions–like Congress.

By the way, unintended consequences doesn’t mean unforeseen consequences.  And if the consequences could be foreseen, but Congressmen disregard them anyway, could they really be called unintended?