There are basically two dimensions to the financial crisis. One is the way finance has evolved into a gambling operation that's fundamentally risky and fails to contribute to the real economy. The other is plain, old-fashioned greed - the kind that exploits the weak and vulnerable in a shameful manner, the kind that depends on political patronage to survive, the kind that used to be called pure, Old School, straight-up Biblical-style evil.
Well, evil came to Washington last week, in the form of executives from the "payday loan" industry - and from all reports it was very politely received.
There's a taboo against using the word "evil" in political discussions. It hinders compromise and makes polite conversation difficult. But the practice of payday loans isn't just excessive, or greedy, or socially inadvisable. It also violates four thousand years of moral law and tradition by charging usurious rates to those who are struggling economically. The reluctance to use words like "evil" is understandable, but when payday lenders offer loans to low-income people at 15% to 30% for a two-week period until next payday - that's nearly 400% to nearly 800% per year - what other words suffice? Payday executives like W. Allan Jones, who is a major backer of Tennessee Senator Bob Corker, know that these high rates often trap their "clients" into an endless cycle of debt - and they don't care. "Some people borrow $500 and end up owing $3,000," as a Colorado deputy attorney general observed.
Sure, we all want to be judicious in our use of words. But at what point does a moral society make the reasoned assessment that Jones and others in his business are objectively bad human beings? And that therefore, by extension, Senators who help them continue their work are also tainted? Consumer regulation didn't fail because the system broke down. As with other forms of financial regulation, it failed by intent. Our leaders sought to pursue their ideological goals, serve an economic vision, or simply please their contributors. As a result, millions of Americans are subject to behavior that has been described as "immoral" since the dawn of history.
Many things in life are complicated. The morality of payday lending isn't complicated. 400% and 800% interest rates are usurious by any definition of the word. The prophet Ezekiel put usury on his lif of "abominable things," along with rape, murder, robbery and the worship of idols. And Aristotle had this to say on the topic: "The most hated sort (of business), and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it." But forget Aristotle if you like. Nobody reads those old guys anyway, right? And Greeks aren't getting such great economic press these days.
Then how about Christianity? We're a nation that prides itself on asking, especially among politicians, "what would Jesus do?" Unlike some other political questions, the New Testament offers a clear answer when it comes to usurious lenders. John 2:13-16 is pretty specific: He overturns their tables and drives them (along with sellers of ritual doves) from the Temple. And he uses a whip to do it.
According to the Washington Post, payday loan executives got a considerably more courteous reception than that when they descended on Capitol Hill in an attempt to win an exemption from Federal regulation. Reports the Post: "During the "Hill Blitz" organized by the Financial Service Centers of America, a trade group, about 40 industry executives pushed to exempt check cashing from the purview of a proposed bureau that would oversee consumer financial products."
Apparently they left the doves at home.
Eric Norrington, government relations exec for one of the firms, said "We're sort of asking the question: Why are we even a part of this?" Sure -- it's not as if thirty centuries of ethical teaching hasn't condemned your business model or anything.
Another payday lender, Aggie Clark, said that without their lobbying effort "you can get some pretty bad sound bites" - a concern that her Biblical predecessors never had to face. But lenders should think positive: they haven't had to worry about that "whip of cords" in John 2:15, either.
The payday lending industry will continue to push for an exemption from the new financial reform bill. In addition, they'll be lobbying hard to overthrow an amendment introduced by Sen. Kay Hagan that would place payday lenders under the Fed's jurisdiction, limit the number of loans they can give, and mandate that they allow more time to repay loans. Payday lenders' victims would also be helped by an amendment restoring states' ability to limit interest rates. Currently lenders have been able to thwart state limits using a variety of strategies, as they've done in Ohio, so a strong Consumer Financial Protection Agency is also vital.
Speaking of payday loan victims - in a particularly ironic twist, payday lenders were encouraging their customers to call their Senators to protest regulators those who are preying on them. One borrower interviewed said she was afraid the lender would retaliate against her by calling in her loan if she didn't "play ball" by calling her representatives.
To promote this "grass-roots" effort, borrowers were handed a piece of paper prepared by an industry lobbying group, the Community Financial Services Association. It included contact information for Sens.Boxer and Feinstein and read in part:
'If we don't act today, Congress will create a new agency and a government takeover of your personal finances. This new agency would have the power to regulate and restrict your personal credit options. 'Tell them to stop the Community Financial Protection Agency. ... Tell them you've had enough and that the senator should stand firm against the administration's attempt to interfere in your financial decisions.''
We're still awaiting word on what the Community Financial Services Association has to say about Aristotle and Jesus.
Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light.
He can be reached at "firstname.lastname@example.org."
Website: Eskow and Associates