There were many contributors to the 2008 financial crisis—including unsound housing loans and mortgage-backed securities, Fannie Mae FNMA -0.12%and Freddie Mac, FMCC -0.85%excess leverage by major financial institutions, and regulatory failures. Car and truck loans were not among the problems, and their lenders in any event pose no “systemic” risk to the financial system.
And yet, amazingly, the Consumer Financial Protection Bureau—a creature of the Dodd-Frank Act, which was passed to correct and prevent the causes of, and problems that led to, the 2008 crisis—wants to change the way car loans are made. The CFPB’s proposal is a noxious attempt to solve a problem that doesn’t exist and is likely to make a mess of one part of the consumer-loan industry that works.
I’ll explain what is wrong here shortly.
Currently, if you apply for a car loan through a bank, credit union or one of the car manufacturers like Ford Motor Credit or Toyota Financial, you are judged on matters such as your credit score, income and debt. The financial institution won’t know your race or ethnicity or even necessarily your gender. It will approve or disapprove the application and offer you an interest rate based on the data. That’s just as it should be.
But it is not good enough for the CFPB. In a quest to make sure that all individuals falling within the “protected classes” under the Equal Credit Opportunity Act get the same interest rate as those who are not covered by it, the agency wants financial institutions to guess your race, ethnicity and gender based on your name and the address on your application. Put bluntly, they want lenders to profile you.
The CFPB should withdraw this outrageous and abusive guidance immediately and focus on helping consumers in those areas in which the need for reform truly exists.
Campbell is actually right about most of that without the vitriol (shocking, I know), but here is the problem. The “financial institution” may not have the demographic information on the person trying to purchase a vehicle, but the dealer sure does. And auto dealers have been known to engage in a practice called “dealer markup,” which the CFPB is trying to address, as noted here…
When consumers finance automobile purchases from an auto dealership, the dealer often facilitates indirect financing through a third party lender. The dealer plays a valuable role by originating the loan and finding financing sources. In this indirect auto financing process, the lender usually provides the dealer with an interest rate that the lender will accept for a given consumer.
Indirect auto lenders often allow the dealer to charge the consumer an interest rate that is costlier for the consumer than the rate the lender gave the dealer. This increase in rate is typically called “dealer markup.” The lender shares part of the revenue from that increased interest rate with the dealer. As a result, markups generate compensation for dealers while frequently giving them the discretion to charge consumers different rates regardless of consumer creditworthiness. Lender policies that provide dealers with this type of discretion increase the risk of pricing disparities among consumers based on race, national origin, and potentially other prohibited bases. Research indicates that markup practices may lead to African Americans and Hispanics being charged higher markups than other, similarly situated, white consumers.
Oh, and Campbell is a former auto dealership owner who apparently rents properties to dealerships, as noted here (um, want to try and find someone a little more objective to write a column like this? And Campbell is #40 on the list, by the way).
If auto dealers and the lenders weren’t engaging in this type of nonsense, then there would be no need for the CFPB to step in (more info is here). But since they do…
The Supreme Court may have ruled ObamaCare is constitutional, but implementing the controversial federal law would become a crime in South Carolina if a bill passed by the state House becomes law.
The bill, approved Wednesday by a vote of 65-39, declares President Obama’s signature legislation “null and void.” Whereas the law that Obama pushed and Congress passed is known as the Patient Protection and Affordable Care Act, South Carolina’s law would be known as the Freedom of Health Care Protection Act.
It would prohibit state officials and employees from “enforcing or attempting to enforce such unconstitutional laws” and “establish criminal penalties and civil liability” for those who engage in activities that aid the implementation of ObamaCare.
So it looks like “The Palmetto State” is going to try the whole tenther, “nullification” BS to get around that socialist, big gumint Kenyan Muslim Marxist pre-dee-dint of ours.
However, as noted here…
Steering South Carolina’s uninsured residents away from seeking primary treatment in emergency rooms and into free health clinics is a worthy idea. But it wouldn’t come close to matching the benefits of expanding Medicaid coverage to hundreds of thousands of low-income South Carolinians.
Last week, S.C. House Republicans launched a proposal designed to serve as an alternative to complying with the federal Affordable Care Act, commonly called Obamacare. The proposal would pay hospitals $35 million next year to guide the uninsured to the state’s 20 free federally qualified health clinics.
The plan also calls for giving the clinics $10 million next year to treat those patients. The money would come from $62 million the state Department of Health and Human Services received last year but did not spend.
The plan also includes $20 million – $6 million in state money and $14 million from the federal government – to pay rural hospitals for the entire cost of uncompensated care they provide for low-income patients. Smaller amounts would go to other efforts to expand and improve care, such as $3 million for a program to repay the student loans of doctors who agree to work in underserved areas of the state.
But not a single new person would be insured under the plan. By contrast, expanding Medicaid under the Affordable Care Act would result in about 500,000 more uninsured residents being covered.
Also, here is some background on Bill Clinton’s 2012 Democratic National Convention speech in which he outlined the threat to Medicaid expansion from South Carolina Governor Nikki Haley and her pals in charges of states across this country (oh, and has noted here, South Carolina ranks 44th out of 50 states in median income).
Truly a miracle of Republican Party “governance,” my fellow prisoners…
Of all the arguments for the Obama administration’s green-energy loan program, one of the worst is that federal aid leverages private capital.
Consider Fisker Automotive. In August 2009, this wannabe plug-in electric hybrid car company was hard up for cash to pay suppliers and faced potential layoffs.
A green-energy loan was the only hope, Fisker executive Bernhard Koehler explained in an e-mail to the Department of Energy — because it would help bring in private money. “We are oversubscribed in this equity round with the DOE support — and nowhere without it,” Koehler pleaded.
A month later, in September 2009, the Energy Department approved a $529 million low-interest loan. Vice President Biden stood before the proposed site of a Fisker plant in Delaware and described the department’s program as “seed money that will return back to the American consumer in billions and billions and billions of dollars of good new jobs.”
Alas, government loans could not overcome Fisker’s fundamental problem: no experience mass-producing automobiles, let alone the complex battery-powered luxury cars that it proposed to sell for more than $100,000. Today, the company is nearly bankrupt; taxpayers are on the hook for $171 million, and private investors are probably nearly wiped out. (The story is well told, with documents, at PrivCo.com.)
In response, I give you the following from here…
First, Fisker originally requested the federal funds it received in 2008, before President Obama took office. Why? Because the Bush/Cheney administration urged the company to participate in the federal loan program, seeing it as a worthwhile investment. If Republicans are convinced Fisker should never have received aid in the first place, they’re lashing out at the wrong president.
Second, to condemn the federal loan program because one company struggled after receiving assistance is silly — some of the companies in the Department of Energy’s program fared well, some didn’t. It happens. As Michael Grunwald explained a while back, “That’s capitalism. That’s lending. That’s life. As one Obama aide told me: Some students who get Pell grants are going to end up drunks on the street.” It’s not as if those failures discredit the entire Pell grant program.
And third, (House Oversight and Government Reform Committee Chairman Darrell) Issa may want to get off his high horse — in 2009, he urged the Department of Energy to extend federal support to an electronic car manufacturer named Aptera, which declared bankruptcy soon after.
In the case of this one company, it didn’t work out well, but others have fared far better. There’s no reason for Republicans to throw a fit.
Silly Steve Benen – what else are the Repugs going to do besides throw a fit? Engage in the tedious, difficult work of actual governance? What a quaint notion (removing my tongue from my cheek).
The Florida legislature passed a bill this week to impose new obstacles on challenging the death penalty in a state with the greatest number of exonerations. The bill’s intent was to shorten the time inmates wait for execution by imposing time limits for appeals and post-conviction motions, but DNA and other evidence often emerges years after a crime is committed – a concern that didn’t seem to faze Republican proponents of the bill who said swift justice is “not about guilt or innocence”:
“Is swift justice fair justice?” asked Democratic party Senator Arthenia Joyner, a Tampa attorney who voted against the bill. “We have seen cases where, years later, convicted people were exonerated,” she said. […]
But Republican Senator Rob Bradley said, “this is not about guilt or innocence, it’s about timely justice.” Frivolous appeals designed only for delay are not fair to victims and their families, he said. […]
“Only God can judge,” Matt Gaetz, a Republican who sponsored the bill in the House of Representatives, said last week during House debate. “But we sure can set up the meeting.”
For the record, Matt Gaetz is the son of Don Gaetz, who is in charge of the Florida State Senate. And this tells us that Gaetz the Younger worked in 2010 to defeat amendments that would prevent voting districts from being gerrymandered (which the Repugs have elevated to an art form…the surprisingly forthright excuse – though still a morally bankrupt one – is that the amendments would blunt a “conservative comeback”).
Florida’s junior state representative also favored repealing Florida’s “Cap and Trade” law here (and get a load of his full-on wingnut language attacking former governor Charlie Crist…some BS about California romance, or something). And based on this, Gaetz the Elder is no prize either.
However, I don’t believe that M. Gaetz has a right to involve himself on legal matters, at least not for a good while anyway, based on this.
We estimate that since 2011 the rise in overall policy uncertainty has created a $261 billion cumulative drag on the economy (the equivalent of more than $800 per person in the country). Without this uncertainty tax, real U.S. GDP could have grown an average 3% per year since 2011, instead of the recorded 2% average in fiscal years 2011-12. In addition, the U.S. labor market would have added roughly 45,000 more jobs per month over the past two years. That adds up to more than one million jobs that we could have had by now, but don’t.
At Vanguard we estimate that the spike in policy uncertainty surrounding the debt-ceiling debate alone has resulted in a cumulative economic loss of $112 billion over the past two years. To put that figure in perspective, the Congressional Budget Office estimates that sequestration may reduce total funding by $85 billion in 2013. Clearly, the U.S. debt situation is the economic issue of our generation.
Spoken as a charter member of the “pay no price, bear no burden” investor class that continues to skate while the “99 percent rabble” lives paycheck to paycheck…
Fortunately, Ezra Klein responded as follows here, citing the work of fellow “Wonk Blog” contributor Mike Konczal…
How do (the authors of the “uncertainty” studies McNabb based his column on) construct the search of newspaper articles for their index, which generates a lot of the movement?
Their news search index is constructed with four steps. They first isolate their search to a set of articles from 10 major newspapers (USA Today, the Miami Herald, the Chicago Tribune, the Washington Post, the Los Angeles Times, the Boston Globe, the San Francisco Chronicle, the Dallas Morning News, the New York Times, and the Wall Street Journal). They then search articles for the term “uncertainty” or “uncertain.” They then filter again for the word “economic” or “economy.” With economic uncertainty flagged, they then filter again for one of the following words to identify government policy: “policy,” “‘tax,” “spending,” “regulation,” “federal reserve,” “budget,” or “deficit.”
See the problem? We don’t know what specific stories are in their index; however, we can use their search terms listed above to find which articles would have likely qualified. Let’s take a story from their first listed paper, USA Today, “Obama taking aim at GOP pledge on campaign trail,” from August 28, 2010 (for the rest of this post, I’m going to underline the words in quotes that would trigger inclusion in their policy uncertainty index):Brendan Buck, a spokesman for the House GOP lawmakers who crafted the pledge, said “it’s laughable that the president would try to lecture anyone on.” [….] Buck said the pledge was developed to address voter worries about high unemployment and record levels of government and debt.
“While the president has exploded federal spending and ignored Americans who are asking, ‘Where are the jobs?’, the pledge offers a plan to end the economic uncertainty and create jobs, as well as a concrete plan to rein in Washington’s runaway spending spree,” Buck said.
Spokespeople for the conservative movement tell reporters that President Obama’s policies are causing economic uncertainty. Reporters write it down and publish it. Economic researchers search newspapers for stories about economic uncertainty and policy, and create a policy uncertainty index out of those talking points.
It’s about jobs. It’s about generating demand. It’s about the utter failure of austerity not just in this country, but all over the world.
I understand that McNabb and those in his orbit won’t admit the complete and total collapse of their wrongheaded ideology, but it’s despicable to watch them try and craft a narrative justifying their mistakes to the utter ruination of working men, women and families all over the world.
On a bit of a happier note, though, this tells us that, while our supposed geniuses of finance have a collective freak out over pending “Too Big To Fail” legislation co-sponsored in the Senate by Sherrod Brown (no surprise) and David Vitter (WHAAA????), local community banks appear to have no problem with it.
And those are the folks (and the credit unions also, let’s not forget) that are gradually digging us out of the financial mess created by the corporate Wall Street criminals. Those are the institutions releasing the loans and making the credit available to return the key sectors of our economy to life, thereby increasing demand and leading to better hiring numbers such as these (a long way to go I know, but improvement).