We at CFIF have consistently highlighted the peril of federal, state and local government efforts targeting…
CFIF on Twitter CFIF on YouTube
New Study Shows How Overregulating Short-Term Lenders Harms Consumers

We at CFIF have consistently highlighted the peril of federal, state and local government efforts targeting the short-term consumer lending sector.

Less than two years ago, we specifically sounded the alarm on a New Mexico law artificially restricting interest rates on short-term consumer loans.

Well, a new study entitled "A New Mexico Consumer Survey:  Understanding the Impact of the 2023 Rate Cap on Consumers" that surveyed actual borrowers confirms our earlier warnings:

Key findings include:

•Short-term,small-dollar loans help borrowers manage their financial situations, irrespective of the borrower’s income.

•The rate cap has failed to improve the financial wellbeing of New Mexicans, specifically those who had previously relied on short-term, small-dollar loans.

•…[more]

November 27, 2023 • 03:57 PM

Liberty Update

CFIFs latest news, commentary and alerts delivered to your inbox.
Democrats Deserve Plenty of Blame for the Bank Crisis Print
By David Harsanyi
Monday, March 20 2023
[O]ne of the biggest reasons we find ourselves here is clear: a lack of basic governing competence.

The United States recently suffered the second largest bank failure in the country's history. The consensus view is that Silicon Valley Bank made a huge mistake by borrowing short term and then parking money in long-term bonds. When interest rates rose, assets lost value, and SVB was put in a perilous position.

President Joe Biden promises there will be a "full accounting" of the situation and that everyone will be held "accountable." But that would mean the president taking responsibility for the reckless governance that helped create the environment that made this possible. The Fed wouldn't have been compelled to aggressively raise interest rates if Biden had acted more like a responsible statesman rather than a cynical partisan.  

Let's recall that virtually the entire left-wing political infrastructure  media, politicians and expert class  was activated to dismiss the concerns of those who warned that inflation was a threat. The reason was obvious: Democrats wanted to cram through as many long-term spending proposals as possible while they held both houses. That had to be done in two years' time. And it had to be done with the support of Joe Manchin, a senator who would occasionally feign concern about spending.

In 2021, Biden signed the $2 trillion so-called American Rescue Plan, indiscriminately sending checks to millions even as COVID lockdowns were winding down. This, after issuing a number of presidential edicts limiting affordable fossil fuels. (With some Republican help, Democrats would later pass a $715 billion green "infrastructure" bill.) The Fed, meanwhile, kept rates at zero, pumping an already hot post-lockdown with billions. Inflation began spiking.

That's when the word "transitory" began making an appearance. The president argued in the summer of 2021 that "there's nobody suggesting there's unchecked inflation on the way  no serious economist." Former White House press secretary Jen Psaki claimed that "no economist," serious or otherwise, was projecting higher inflation due to more government spending. (And the politicization of economic departments is a disaster, but that's another story.) Treasury Secretary Janet Yellen promised there was "small risk" of inflation, but that it would be "manageable."

When prices started creeping up, Biden's then-Chief of Staff Ron Klain called inflation a "high-class problem" before Democrats inevitably pivoted to blaming corporate greed and arguing that conglomerates had suddenly conspired, after 40 years of keeping prices relatively in check, to screw over consumers. Piece after piece dismissed the "weird" and hawkish ideas of people who were warning that spending would spur inflation.

Rather than slowing down, Biden argued we should pass another $5 trillion in spending to alleviate price spikes: "If your primary concern is about inflation, you should be even more enthusiastic about this plan. We can't afford not to make these investments." Then, Democrats simply renamed the Build Back Better spending bill the Inflation Reduction Act  though the new iteration had as much to do with inflation as the Patriot Act had to do with patriotism. It was just another long-desired leftist wish list and some tax hikes. Among the "investments" in the bill was another $369 billion dumped into green boondoggles, a slush fund for Democrats and donors, the kind of market distortion that fueled SVB.

Americans were soon dealing with 40-year high inflation. The Fed was forced to raise interest rates because retarding economic growth is the prescription. In the '80s, years of persistent inflation were only shaken off when Paul Volcker raised rates to 20%  and the country experienced a deep recession. The 30-year fixed rate mortgage hit 18.63% in 1981. You think houses are unaffordable now?

Democrats and other populists are going to blame greed and deregulation. They never let a crisis go to waste. It is true SVB and Signature Bank  another failed bank  were heavy investors in crypto, green energy, tech startups, and IPOs with unrealized profits. Comfort with risk is a vital part of the American finance system. It separates us from other nations as top innovators and entrepreneurs. But is it really "risk" if certain types of investors can never lose? If SVB's 40,000 accounts aren't made whole, will it lead to contagion? And if big banks come in and white knight regional ones, aren't we only making too-big-to-fail bigger, and injecting even more moral hazard into our system?

Those are complex questions. But one of the biggest reasons we find ourselves here is clear: a lack of basic governing competence.


David Harsanyi is a senior editor at The Federalist. Harsanyi is a nationally syndicated columnist and author of five books  the most recent, "Eurotrash: Why America Must Reject the Failed Ideas of a Dying Continent." 

COPYRIGHT 2023 CREATORS.COM

Notable Quote   
 
"The best-case scenario for one of the most common COVID-19 interventions may be that it has no measurable effect on infection, recent studies suggest.A systematic review of studies of mask mandates for children, published Saturday in the British Medical Journal's Archives of Disease in Childhood, found "no association" with infection or transmission in 16 of the 22 observational studies and 'critical…[more]
 
 
— Greg Piper, Just the News
 
Liberty Poll   

What grade would you give the Biden administration thus far regarding all aspects of its approach to the Hamas/Israel conflict?