The folly of interest rate caps, cont’d

“A new proposal would likely sharply curtail the issuance of credit cards and the extension of unsubsidized credit to lower-income people.” Diego Zuluaga comments for the Cato Daily Podcast with Caleb Brown.

More: David Henderson, Peter Suderman, Todd Zywicki and Federalist Society podcast with Zywicki and Wayne Abernathy, and Alex Tabarrok and Tyler Cowen with pointers to papers. As we noted in February, a recent study of Arkansas’s constitutional 17% cap found it hurt borrowers of modest means, who now drive to other states to take out small loans.

A second podcast with Cato’s Todd Zywicki, this one noting that earlier rounds of regulation precipitated the withdrawal of banking services from many less well-off communities to which postal banking is now being touted as a solution:

4 Comments

  • When a borrower stiffs a payday lender, the payday lender basically has to eat it. The borrower cannot be prosecuted for writing a bad check, and the nationwide credit bureaus don’t accept information from payday lenders.

    With the postal banking, some poor guy is going to stiff the postal bank, and the postal bank, being an arm of the government will chase him and chase him. Just watch.

    • “With the postal banking, some poor guy is going to stiff the postal bank, and the postal bank, being an arm of the government will chase him and chase him”

      With guns, Don’t leave that part out.

  • I have supported post office banking, but *only* for savings, to encourage the poor to build up rainy-day funds in preference to payday loans.

  • @SPO and MattS–

    I suspect a Federal credit facility run by Bernie Sanders would be a welfare program like housing loans before the 2008 meltdown. The only enforcement question would be whether to deny further credit to those who were still in default from previous loans.