Banking and finance roundup

  • Senator Elizabeth Warren and her Accountable Capitalism Act represent an attempt to revive a theory of the corporation that fell out of favor long ago, that corporate status is a grant of favor in exchange for which the state may demand services or cooperation [Abdurrahman Kayiklik, Columbia Law School Blue Sky Blog; earlier with links to Warren on corporate governance and other topics]
  • Bill in Congress would enlist banks in watching gun sales [Robert VerBruggen/NRO; Noah Shepardson, Reason] NRA, in litigation, contends it has evidence New York state officials negotiated with U.K.’s Lloyds to curtail insurance availability in a way specifically targeted at the association [Stephen Gutowski thread]
  • “The Misguided Quest to Limit Choice in Consumer Credit” [Diego Zuluaga]
  • “The CFPB and Payday Lending Regulations” [Peter Van Doren last February; earlier on payday lending; Federalist Society Regulatory Transparency Project video on regulation-through-investigation of payday lenders with Jamie Fulmer, Chris Peterson, and Brian Knight]
  • Federalist Society podcast on Community Reinvestment Act with Aaron Klein and Diego Zuluaga;
  • Learned a new word, lutulent, which means “muddy, turbid, thick” and is more or less the opposite of luculent (“lucid, clear, transparent”) [Keith Paul Bishop on unclarities in new California law requiring gender quotas on boards (“a lutulent mess”); earlier here, etc.]


  • A fundamental false belief in several of these items is that people are being exploited (being too stupid to take care of themselves). Payday lending is a great example. Why would you need a payday loan? Because you don’t have a line of credit anywhere due to your low income and bad credit history. Do poor people not understand the high cost of these loans? Of course they do. They take out such loans to fix their car, without which they can’t get to work, lose their job, and lose their apartment. They take out a loan to get their husband out of jail so he can pay the bills. These are rational reasons to take out a high interest loan. One of the reasons people turn to payday loans is because of Dodd-Frank which forced banks to pay the debit card fees instead of retailers–this caused free checking to go away for low-balance customers.

    The general canard of “exploitation” is always true in the sense that I exploit the company to give me a job and the company exploits me to work. I exploit Dominos to make pizza and they exploit me to give them money. It is called voluntary exchange and the Left only sees it as a negative instead of the amazing self-organizing system that it is.

    Warren’s view of corporations dates back to medieval times, where guilds paid a fee to the king in exchange for protection against competition. It was protection money. The urge to force companies to do your work for you is hard for pols to resist. In Calif in exchange for the bounty of permission to build housing you must contribute to the stock of low-income housing (in NYC also I believe). This is a hidden tax that raises housing prices. Pols want corporations to provide daycare, maternity leave, aid to the disabled, and still claim that companies need to “give back to the community” as if providing jobs were somehow a negative.

    • The “high interest” really isn’t–it’s a high interest rate when expressed per annum. These are short term loans and looking at APRs is like annualizing hotel room rates to per day cost of one’s abode.

  • “corporate status is a grant of favor in exchange for which the state may demand services or cooperation ”

    Is ordinary citizenship a grant of favor in exchange for which the state may demand services or cooperation?? Same Q for corporate citizenship.

    Oh Hell no.

    No one’s citizenship is a “grant of favor” from anyone, not even from governments.

    Citizens create government not the other way around. Governments derive their just powers from the consent of the governed and are always subject to their citizens – not the other way around.

  • Payday loans have their uses, but also reflect a failure of social policy (especially when the loan cannot be paid back quickly). Why do so many Americans have no savings for even the smallest emergency? Part of the problem is that commercial banks do not want their business unless they are able to pay monthly fees.

    We should follow the example of some foreign countries to encourage small savers, both by using ubiquitous post offices, and with small but visible tax incentives. A modest subsidy is presumably needed to make it work (a more productive welfare expenditure than some others). We should not embark on the moral hazard that has brought some foreign post-office schemes to grief– encouraging risky expansion that competes directly with private sector banks.