A Grace Period for people in need

Jesse James DeConto reports for The Christian Century on an alternative to the predatory credit of payday loans:

As former Pittsburgh cop Tony Wiles knows, people who need money fast are vulnerable.

“I grew up in the inner city, so I’ve seen it all,” he said. “Loan sharks, pawnshops and payday loan companies on every corner.”

Wiles hadn’t considered doing anything about the issue until Rock Dillaman, his pastor at Allegheny Center Alliance Church, preached a sermon on justice. The pastor planted a seed that led Wiles to develop a low-cost payday lender called Grace Period.

Great name. But how does this work? Is this just a slightly cheaper alternative to traditional payday lenders?

That, in itself, would be a commendable effort. Payday lenders are everywhere in America because poor households often need short-term access to credit to cover the kind of emergency expenses that might scarcely register for a wealthy family. Banks, S&Ls and credit unions could be providing that service, but they’re no longer interested in the modest profit margins of such modest loans. Why do all the hard work of handling thousands of tiny transactions for marginal profits when you can just invest in the latest Wall Street roulette scheme?

So payday lending has become the province of vampires. According to the Center for Responsible Lending, there are more than 22,000 storefront payday-lending operations in America doing $27 billion in annual loan volume. About three-fourths of that lending is from “churning” — rolling over existing short-term loans to keep borrowers on the hook. Such “churning” can result in astronomical effective interest rates, as the CRL explains:

If a typical payday loan of $325 is flipped eight times, the borrower will owe $468 in interest; to fully repay the loan and principal, the borrower will need to pay $793.

Payday lenders also collect $3.5 billion in fees every year. That’s a $3,500,000,000 redistribution of wealth from the poor to the greedy rich.

These predators thrive because their customers have no choice. They need this money — just these relatively small amounts, like that $325 loan — and they have nowhere else to turn.

So the idea of Grace Period is to give them somewhere else to turn — somewhere they can get the emergency credit they need without being sucked dry by fees and without falling down the hole of “churning” loans for which the interest exceeds the principle.

That’s why, as DeConto reports, “Grace Period offers free loans for clients who repay them within 13 days.” But it also “requires a long-term savings program so clients can meet their emergency needs in the future.”

This savings program gets a bit complicated, and I’m not sure what the program is measuring when it reports on the effectiveness of its attempts to “encourage personal financial reform,” but Grace Period counts some 3,000 borrowers who have begun to save.

And, in 2010, it provided $1.5 million in emergency lending to people who desperately needed it. As Grace Period’s CEO, Dan Krebs, says: “We’re keeping people from going to places that are really going to take advantage of them.”

The program doesn’t turn a profit, but it pays for itself — for the seven employees who process these loans and payments:

The founders of Grace Period aim to show that the model is sustainable. “Unless it’s self-supporting, nobody’s going to duplicate it,” said Krebs.

Grace Period presented its model at the past two conferences of the Christian Community Development Association, and the agency is encouraging alternative payday lending, which is taking root across the country. The founders of Just Money Advisors, a nonprofit financial planner with clients in 25 states, are working to open another Grace Period in Louisville, Kentucky.

So, yes, this can be self-supporting. And, yes, it can be duplicated. And, yes, other church groups and altruistic people are duplicating it.

But if it’s self-supporting and replicable, then it doesn’t just have to be church groups and altruists doing this sort of thing as charity. Cities, counties and states could duplicate this model as well. Keeping the needy from being preyed on by vampires isn’t just a matter of charity. It’s also, as Pastor Dillaman said, a matter of justice.

  • http://mistformsquirrel.deviantart.com/ mistformsquirrel

    I definitely like the idea ( . .)  I hope it spreads.

    Honestly this is the kind of thing that drives me slightly nuts – I see this and think “There are so many problems that wouldn’t BE problems if folks at the top didn’t get greedy.”

    I mean capitalism has issues at it’s bedrock, but it can suck substantially less – and without ‘big government’* – it’s just that in order for it to do so the people with the capital have to actually be reasonable, responsible people who aren’t just out to milk Joe and Jane Average for all they have.

    Of course that’s the thing isn’t it?  It’s not about responsibility and sustainability, it’s about getting as ridiculously rich as humanly possible.

    *Hate that term so much.

  • Erl

     Cities, counties and states could duplicate this model as well.

    Honestly, right now, the logical candidate is the Federal government. It could use the extra space in Post Offices left by the shrinking service; since the USPS is nominally independent, it could rent the space to the government as a way to pay down its (zero interest, perpetually rolled-over) debt. The programs will pay for the employees, and the financial overhead can be borrowed using T-bills at negative interest rates. The program wouldn’t merely pay for itself. It would pay for itself at every step, and by lessening the financial trauma on the poor, would lessen the strain on existing government services.

    Agreed that this is a matter of charity; agreed that this is a matter of justice. But even if we were venal and amoral, it would still be a very good idea.  

  • http://mistformsquirrel.deviantart.com/ mistformsquirrel

     See but the problem here is, you’re wanting to LESSEN the pain of the poor… no no, the way we do things here in America is to turn the screws harder;  surely a little more pain will make them straighten up and fly right.  Or something.

    (I like your idea.)

  • http://lliira.dreamwidth.org/ Lliira

    “encourage personal financial reform”

    *karate headdesk*

  • Matthew Lafferty

    Having gone through the Dave Ramsey course pretty recently, this really resonates with me as a cool thing. The idea of not kicking people (with interest) when they’re already as down as they can get AND encouraging them to save money to avoid similar issues in the future are both very good things. We need way more stuff like this.

  • Erl

     ”encourage personal financial reform”
    *karate headdesk*
    See, I understand why “the poor don’t have good financial skills” is part of the bullshit, poor-hating ideological constellation. But it doesn’t need to be. I believe that poor people are likely to have poor saving skills, for a set of very good reasons:1. They’re people. “Saving skills,” in a modern bank economy, are basically a kabuki version of delaying gratification, and people in general are really bad at that. They’re especially bad at that when they’re under stress—which drains the psychic resources needed to delay gratification—and, surprise, poor people are under some of the greatest stresses of all.  2. They don’t have the practice, or the opportunity to do so. Poor people don’t have money (basically by definition), so they don’t have nearly as many opportunities to learn how to save, and how saving works best for them. If they grew up in poverty, they’re very very unlikely to have had a trial period with financial institutions like wealthier young adults may, when they go off to college and open a bank account before there are serious bills to pay. 3. Financial services directed at the poor are likely to be abusive, as Fred and others have amply documented. This means that poor people—quite reasonably—are likely to be suspicious of financial institutions, and thus reluctant to employ them. Now, all that said, it’s clear to me that, inasmuch as poverty and poor saving skills are correlated, it’s because poverty causes poor saving skills, and eliminates opportunities for good saving skills, rather than the poor being responsible for their own condition. However, (sadly) such skills are probably most vital for the poor (as opposed to other income groups), even as they are hardest to practice. So bringing financial institutions that mitigate 2 & 3 into poor communities, with some specific goals to educate about saving—so long as you avoid a “save yourself out of poverty” framework, or a condescending “the poor are just dumb/unthoughtful” framework, could be helpful. No guarantees this program does so, though. (Caveat: IANA social worker; my commentary above is based on what I’ve heard indirectly about some other financial services programs directed at the poor, and I am of course open to being corrected.)

  • Erl

    ugh, screw discus. Let me see if the line breaks are better this time:

    “encourage personal financial reform”*karate headdesk*

    See, I understand why “the poor don’t have good financial skills” is part of the bullshit, poor-hating ideological constellation. But it doesn’t need to be. I believe that poor people are likely to have poor saving skills, for a set of very good reasons:

    1. They’re people. “Saving skills,” in a modern bank economy, are basically a kabuki version of delaying gratification, and people in general are really bad at that. They’re especially bad at that when they’re under stress—which drains the psychic resources needed to delay gratification—and, surprise, poor people are under some of the greatest stresses of all.  

    2. They don’t have the practice, or the opportunity to do so. Poor people don’t have money (basically by definition), so they don’t have nearly as many opportunities to learn how to save, and how saving works best for them. If they grew up in poverty, they’re very very unlikely to have had a trial period with financial institutions like wealthier young adults may, when they go off to college and open a bank account before there are serious bills to pay. 

    3. Financial services directed at the poor are likely to be abusive, as Fred and others have amply documented. This means that poor people—quite reasonably—are likely to be suspicious of financial institutions, and thus reluctant to employ them. 

    Now, all that said, it’s clear to me that, inasmuch as poverty and poor saving skills are correlated, it’s because poverty causes poor saving skills, and eliminates opportunities for good saving skills, rather than the poor being responsible for their own condition. However, (sadly) such skills are probably most vital for the poor (as opposed to other income groups), even as they are hardest to practice. 

    So bringing financial institutions that mitigate 2 & 3 into poor communities, with some specific goals to educate about saving—so long as you avoid a “save yourself out of poverty” framework, or a condescending “the poor are just dumb/unthoughtful” framework, could be helpful. No guarantees this program does so, though. 

    (Caveat: IANA social worker; my commentary above is based on what I’ve heard indirectly about some other financial services programs directed at the poor, and I am of course open to being corrected.)

  • http://mistformsquirrel.deviantart.com/ mistformsquirrel

     Indeed.  I’ve watched this with my own family’s climb out of poverty.  Financial skills are something that takes money, time, and practice to acquire… none of which are generally available to someone living in poverty.

    One other thing I’ll add:  Even if you can manage the task of getting out of poverty (in terms of money earned per year) – even if you can learn to manage your money beyond just (as my mom would say) “putting out the hottest fires first” – even if you can do that you can STILL have problems saving because it’s entirely probable that you’ll have bills leftover from when you were broke that need paying.

    Example:  My mom lost her job at one point just as we were getting financially stable – during the time she had to look for work, we nearly lost our house *3 times*, and all the settlements and stuff made along the way to keep our house meant that when she got back to work, there was a tremendous backlog of debt to pay off.  (There was also a substantial power bill)

    Or to put it all another way – being poor teaches you a very specific way of managing money – how to keep the lights from getting shut off for another week, or keeping your apartment or house another month… but you often rack up debt doing that and that debt will haunt you even after the payments are themselves not an issue;  and unless you’ve been taught in some fashion it’s probable you’re going to keep resorting to your original style of “throw money at the biggest problem first”; which creates issues.

    That of course is if you can ever climb out of poverty in the first place – if you can’t, you’re always stuck in “OH SHIT” mode; which is not conducive to any sort of long term… anything.

    At least that was my experience growing up.

  • http://thatbeerguy.blogspot.com Chris Doggett

    “the poor don’t have good financial skills” is part of the bullshit, poor-hating ideological constellation. But it doesn’t need to be. I believe that poor people are likely to have poor saving skills, for a set of very good reasons:

    “Saving skills” is a head-fake. It’s like a finger, pointing at the moon. Don’t focus on the finger!

    “Financial skills” go way beyond saving. They involve being able to estimate costs-over-time, being able to assess short-term costs versus long-term costs, building mid- and long-range budgets that include “unexpected” costs, and a whole host of other skills and behaviors.

     basically a kabuki version of delaying gratification, and people in general are really bad at that.

    It’s worse than you think. The behavioral pathology of financial insecurity (living paycheck to paycheck, not having enough money) is very similar to food insecurity, including the vicious “starve-binge” cycle of deprivation followed by over-compensated consumption that leads to further deprivation.

    Studies have shown that decision-making create a specific kind of mental fatigue, and that individuals only have so much capacity for that sort of critical thought. When so much time and energy goes towards making it to the end of the week with cash, there’s very little left over for comparing interest rates and payment plans and budgeting for car repairs. 

    “Broke” is a financial condition. “Poor” is a lifestyle. Poverty is the result of a whole host of systems that create higher costs for those with the least capacity to pay them. Yes, predatory lending is part of it, in it’s many forms (payday loans, pawn shops*, rent-to-own centers, “discount” insurance) but there are a whole host of factors that work against the poor. (the quality of public transit, food deserts, weak labor laws) 

    *A quick note about pawn shops: it’s actually very unfair to lump them in with payday lenders and rent-to-own bandits. Pawn shops offer secured loans, which means if you can’t repay the loan, you lose the collateral, but the deal is done. Pawn loans don’t necessarily go on your credit report; there are no “pawn broker collectors”. In a very real sense, pawn brokers act as bankers to the very low income, and yes, they do so at a profit. However, (and I can’t stress this enough) if you can’t repay the pawn shop, they take your collateral, and the deal is done. No credit reporting, no late fees, no collection agents calling you at work, no increased cost on future loans. 

  • Mary Kaye

    There’s also the point that some life circumstances make it actively unsafe to save money.  If you cannot put it somewhere safe–because you are living with an abuser, or living on the streets, or your available financial institutions are untrustworthy–you are better off spending it on things you need right now.

    There’s also the problem that in sufficiently bad economic times saving can be harmful.  I grew up during a hyper-inflationary period where if I put money in my piggybank 10% of it vanished each year.  Not exactly an incentive.  And my investments and retirement funds, as an adult, have been prone to sudden vanishment due to stock market crashes.  I struggle with a gut feeling that long-term savings are a fool’s game and it is better to, say, replace the roof now–at least then I will have a non-leaking roof.

    A member of my workgroup lost most of his savings to a spectacular instance of financial institution fraud.  He *might* eventually get the money back, but right now it looks like he would have been better off spending it.

  • http://thatbeerguy.blogspot.com Chris Doggett

    There’s also the point that some life circumstances make it actively unsafe to save money… 
    There’s also the problem that in sufficiently bad economic times saving can be harmful.

    These are both good examples of why the “saving” issue is a head-fake. 
    If a $20 pair of shoes will probably last you six months, and a $60 pair of shoes will last you three years, you’re better off buying the more expensive shoes, even though you’re not “saving” money until two years from now. 

    If you have an extra $150, “saving it” with a bank account/under a mattress/in a piggy bank is a bad choice if you have a credit card debt that’s charging interest every month, because no investment you make will have an after-tax rate-of-return that’s higher than the credit card’s interest charges. Even if you wind up having to pay $150 with the credit card for a doctor’s bill/car repair/whatever, you still wind up paying less interest. 
    ***
    There’s also a strange psychology to cash. Being paid in cash, having a handful of bills, has a strong emotional effect. (as anyone who has ever been paid in tips will tell you!) 

    There’s a lot of factors involved in poverty, a lot of hidden costs and “barrier-to-entry” costs, a lot of time-value-of-money problems. But getting rid of pay-day lenders? That’s a great start.

  • http://twitter.com/lesterhalfjr Chris Hadrick

    I like this idea because it doesn’t involve passing laws.  go for it

  • Andrew Galley

    It does ring a lot of alarm bells, but given the context I’d probably want to hear more before head-desking. 

  • Dan Audy

    These are both good examples of why the “saving” issue is a head-fake. 

    If a $20 pair of shoes will probably last you six months, and a $60 pair of shoes will last you three years, you’re better off buying the more expensive shoes, even though you’re not “saving” money until two years from now.

    The Sam Vimes theory of social inequity.

    The reason the rich were so rich, Vimes reasoned, was because they managed to spend less money.Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in the city on a foggy night by the feel of the cobbles.But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while a poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.This was the Captain Samuel Vimes “Boots” theory of socioeconomic unfairness. 

  • Sgt. Pepper’s Bleeding Heart

    We have a government program that provides low-interest emergency loans to low-income people, and also matches the savings they accumulate dollar-for-dollar up to about $500. It’s good stuff.

  • http://thatbeerguy.blogspot.com Chris Doggett

    Now imagine ten-dollar boots being advertised on billboards with celebrities but only in the poorest neighborhoods. And $50 leather boots only being sold in suburban malls where the buses only run once an hour and security guards follow poorly dressed people around. 

    It’s not just a matter of accurately gauging long-term benefits against short-term costs; it’s a matter of merchandisers aggressively promoting bad choices to the poor. 

    Sam Vimes would have been aghast at Rent-A-Center. 

  • http://twitter.com/FearlessSon FearlessSon

    Honestly, right now, the logical candidate is the Federal government. It could use the extra space in Post Offices left by the shrinking service; since the USPS is nominally independent, it could rent the space to the government as a way to pay down its (zero interest, perpetually rolled-over) debt. The programs will pay for the employees, and the financial overhead can be borrowed using T-bills at negative interest rates. The program wouldn’t merely pay for itself. It would pay for itself at every step, and by lessening the financial trauma on the poor, would lessen the strain on existing government services. 

    This is a good idea, and would be quite effective.  Unfortunately, it would also never make it through the political process.  Watch as the lending industry lobbies against such measures, some politicians will level charges of “Socialism!” at those proposing it, and other politicians will claim that such a thing is doomed to failure because nothing the government manages could ever work well and this will just screw the poor (in contrast to rational free market actors, I am sure.)  And let us not forget those megachurch pastors who will argue that mitigating poverty limits their religious expression by “usurping” their role as charity givers.  

    Sometimes what depresses me most is not that bad things happen, but that good things will not.  

  • Peter Seebach

    Interesting! I’d sort of speculated that a financial services place which didn’t try to make money, but provided basic services (check-cashing, etcetera) would not lose money very quickly, but would be of immense value.

    I have more than once found that giving a person who is desperately poor and unable to start saving $100, once, can result in them being financially stable within a couple of months, as all the bank fees and predatory loan pricing evaporate.

  • Erl

    And the Upton Sinclair response, from The Jungle:

     All the clothing that was to be had in the stores [in the poor area of town—ed.] was made of cotton and shoddy, which is made by tearing old clothes to pieces and weaving the fiber again. If they paid higher prices, they might get frills and fanciness, or be cheated; but genuine quality they could not obtain for love nor money.

  • http://loosviews.livejournal.com BringTheNoise

     What’s wrong with laws, conceptually speaking?

    —-
    Another point about the poor and “saving skills” – it relies on having enough income to actually be able to save. That’s hardly guaranteed nowadays.

  • Balaur

    I’ve tried the more expensive shoes a few times and they never seem to last me any longer than the cheap ones do. I suppose one of the skills that I still don’t have is knowing which fifty-dollar boots are the good ones and which are just ten-dollar boots plus forty dollars.

  • BrokenBell

    I’m not Chris Hadrick, and I’m not really talking conceptually, but I could see why someone might encourage plans and actions that could be implemented without having to codify them in law beforehand. Even if it’s just for the fact that passing a poverty-relieving law through this Congress would be like passing a kidney stone through your eyeball, and you wouldn’t even have an interesting story to tell afterwards.

  • http://loveiswhatyoudo.wordpress.com/ J.R. Goudeau

    I love this idea because it comes between several alternatives: payday loan sharks (EVIL), churches giving handouts or charity that doesn’t enable people to get on their feet, and homelessness as part of a downward cycle of poverty it’s almost impossible to escape from. Churches or other groups working with the poor to help them in a responsible way sounds like a good plan to me. Like everyone else, I’d have to see it in action, but it sounds like the same principles that have made microfinance such a good fit in some cultures and economic systems. Interesting idea–I wish someone would start this where we live! One of our refugee families just lost $10,000 when it was stolen out of the backpack they keep it in (wrong on so many levels) and there are very few good options once they start going down that path of serious poverty.

  • http://loosviews.livejournal.com BringTheNoise

     Those are all good, practical reasons to support a program that can be enacted without passing a new law, but based on the poster’s history, I believe his problem was with the idea of a law doing good in this area, even hypothetically. I might be wrong though.

  • http://twitter.com/lesterhalfjr Chris Hadrick

    bringthenoise-  once it got into the political sphere it would be ruined in many different ways, inevitably. 

    “The program doesn’t turn a profit, but it pays for itself — for the seven employees who process these loans and payments”

    if it ain’t broke..

  • http://loosviews.livejournal.com BringTheNoise

    Why “inevitably”? This attitude that the government can never doing anything righs is so common (especially on the right) – but it’s so obviously WRONG as well. Just look around you – when did you last eat poisoned food due to a botched inspection? When did a road bridge last collapse under the weight of traffic?

  • Sgt. Pepper’s Bleeding Heart

    Replace ‘political’ with ‘commercial’ in Chris’ claim.

  • PJ Evans

    Once upon a time banks would actually sponsor savings programs for kids in elementary school. You could put in a nickel or a dime or whatever, and they’d record it and pay interest on it. Even a little bit, every week or two, will add up that way. They didn’t charge fees on the kids’ accounts, either. (I think that stopped when the banks discovered credit cards….)

  • PJ Evans

    If a $20 pair of shoes will probably last you six months, and a $60 pair of shoes will last you three years

    That’s one of the ways I make decisions. It works pretty well.

  • Lori

    OT: Fred’s Father’s Day post got a mention at No, Seriously, What About The Menz? (which is now hosted at The Good Men Project).

    http://goodmenproject.com/noseriouslywhatabouttehmenz/links/?utm_source=rss&utm_medium=rss&utm_campaign=links

    Fred is getting all internet famous and stuff. May it lead to good things and interesting opportunities.

  • http://twitter.com/lesterhalfjr Chris Hadrick

    bringthenoise-  Well, people get food posioning all the time even though restaurants are inspected and the roads are awful. 

    That’s not the point though. The church will do this better than the state and, dare I say it, bettter than the market, which will of course affix a higher price to the loans to counter the higher bad credit risk.

    Walter Block talks about this issue in Defending the Undefendable

    http://mises.org/media/3527/21-The-Ghetto-Merchant

  • Lori

     

    The church will do this better than the state 

    You talk as though this is a given. It isn’t.

  • http://twitter.com/FearlessSon FearlessSon

    This sounds a lot like some of the micro-lending charities I have seen, such as Unitus.  They function by doing small loans to people in poverty stricken areas to give them a chance to build their own assets enough to be self-sufficient.  It is not an end-all solution, but it does help destitute people get on their feet a little so they do not have to sacrifice a modest quality of life just to keep eating.  The nice thing about the charity is that it is funded by its own (very low) interest income, so all the donations that go to them go into their pool of lend-able money so they can expand the operation to more people.  

    As for the money-managing thing, they do that too, but mostly that consists of consulting with applicants for weeks before approving a loan, assessing their situation and making sure that they have a viable plan to pay it back in a generous matter of time after getting what they need.  Not sure if that works for emergency loans, but it does help build an applicant’s ability to support themselves a little at a time.  

    One of the things that I find attractive about the idea is that it is self-sustaining.  The difficulty with strictly giving forms of charity is that the problem always seems bigger than people’s ability to cope with it, and people just give up on it.  Things like this on the other hand, give some hope that the problem of poverty actually can be solved, at least eventually.

  • reynard61

    “What’s wrong with laws, conceptually speaking?”

    I suppose it depends on who’s doing the conceptualizing. If those who are writing the laws are writing laws that are fair and just and apply to the gazillionaires as well as to the poor (i.e. no sleeping under bridges*), then I suppose that laws can be a reasonably good thing. However, if those who are writing the laws are writing (and passing) laws that are unfair, unjust, and designed to benefit the rich while being used against the poor — and/or “The Other”, such as voter-suppression laws, pro-usury laws, etc. — then The Law becomes nothing more than a cudgel with which to beat down those who can’t afford to buy the necessary influence to get those laws changed in their favor.

    So, yeah; when concept (write good laws to be followed by all) meets reality (write unfair, unjust — in other words, *BAD* — laws to be enforced only when it’s convenient to those who passed those laws in the first place), reality is usually going to come out the winner no matter how good the concept sounded in your head or on paper.

    *”The law, in its majestic equality, forbids the rich and the poor alike to sleep under bridges, to beg in the streets, and to steal bread.” – Anatole France (Le lys rouge, 1894)

  • Lunch Meat

    The church will do this better than the state

    Why isn’t it then? Are we supposed to expect all of the poor people in the nation to go to this one lender with its seven employees?

  • JustoneK

    There are roughly 600 churches in my homecity.  Some of them are in fact directly across the street from each other.  Most of them are full every single Sunday, and frequently Wednesdays.  (it’s a thing in the South, I dunno if the Weds night service is as regular elsewhere.)  Some 65% (pulled out of my ass, honestly) do more regular programs for the poor, including clothing drives, food, and homing.
    We still have poverty.  If having a church program nearby fixed poverty, it’d damned well be more fixed than it is by now.

  • http://www.seebs.net/log/ Seebs

    What’s wrong with laws? Many things.
    1. Enforcing them costs. Even having them there costs time and money, as it increases the number of things you have to be aware of to run a business.
    2. People may break them anyway; even if a law would solve a problem if everyone followed it, that doesn’t mean the problem is solved. A solution which does not rely on people following laws is usually more robust.
    3. Laws cannot adapt to circumstances, and have no judgement.

    What’s wrong with laws? The same thing that made salvation through following all the rules unworkable, ultimately.

  • Lori

    I really hope someone has time to talk about the many things that are wrong with this list. I have to leave for work soon, but I’ll start it off.

    3. Laws cannot adapt to circumstances,

    Of course they can. Laws can be amended or repealed.

    and have no judgement.

    The laws themselves obviously have no judgement but the people enforcing them do, so this is a rather silly statement. Also, the lack of “judgement” in the law is often actually a good thing. What is and is not punishable should not change from day to day, or based on who you are or who you know. We have enough problems with that with laws. Not having them would not make that problem better.

  • Erl

    What’s wrong with laws?

    This is a highly silly way to formulate this discussion. Of course laws have benefits that other social forms don’t; of course they also have weaknesses.

    By framing the discussion as above, the question becomes  ”can we form arbitrary sides based on our sense of our allegiances in the discussion, and then rattle off these benefits and weaknesses/the relative benefits and weaknesses of other social forms?” And yup, we can. I can even guess what team I’m on (team law). But we won’t get anywhere interesting, because everyone has some taste for the law, (even Chris, whose carelessly absolutist anti-law statement brought us here) and each of us recognizes it has some limits.

    By my lights, the far more interesting question is whether the law—or, more accurately and less evocatively, state programs—are an appropriate way to implement and expand the beautiful privately charitable program Fred outlines above.

    I think it is. The program is clearly in the public interest, and for reasons I believe I’ve successfully outlined above it would be of pretty much strict benefit to the state. 

    Furthermore, in response the questions about injustice capture (i.e., the co-option of pro-justice programs by selfish interests), it’s hard for me to imagine how a program making zero-interest loans in very small denominations would be captured by the forces of wealth and avarice. It’s, by definition, too small potatoes. 

    With regard to whether a government program of this type would be effective, the program seems to rely on a consistent framework, technical skills and reliability of service, which are the virtues of the government—rather than more nebulous NGO assets like highly passionate staff, or specific community awareness. 

    I’d be interested to hear from anyone who has specific thoughts about why this program wouldn’t serve as a good model for a government one, of course. But it seems a sensible candidate.

    (And sorry for going on and on! I’m just recently getting my talk-about-politics mojo back, and it seems to be coming out all at once.)

  • http://twitter.com/lesterhalfjr Chris Hadrick

    lori- of the three entities, the market, the state and the church the church will do it the best BECAUSE the market as I noted affixes a high price to doing business with people who are credit risks. Much as greeces bonds have interest the risks involved in loaning people who have bad credit are high.

    This is not a capitalist enterprise being discussed it is a charitable one. It has elements of capitalism but the people doing it for humanistic purposes not returns.

    This is the proper role of the church in society. Theres nothing in the Constitution about the government providing low interest loans to people through the apparatus of, what, the treasury? No one in congress is suggesting it either that I know of.

    again, if it ain’t broke why fix it?  It sounds like a good program. 

    Remember the sub prime mortgage fiasco? who wants to be some sub prime lending debt? rated AAA? no thanks. leave the big shots out of it.

    prediction: if this idea spreads, which I hope it does, the primary opponents of it will not be from payday lenders but the state. the Payday guys will lose money, but the state will lose POWER. When people see how  good the church is at running something they will want it to run other things. The government won’t like that.

  • EllieMurasaki

    prediction: if this idea spreads, which I hope it does, the primary
    opponents of it will not be from payday lenders but the state. the
    Payday guys will lose money, but the state will lose POWER. When people
    see how  good the church is at running something they will want it to
    run other things. The government won’t like that.

    If churches want to do good things such as low-interest microloans, far be it from me to stop them. But churches should absolutely not be the only or even the primary source of good things such as low-interest microloans. If only because one in five people in the US is nonreligious and most of the rest don’t belong to whatever denomination church we’re talking about.

  • reynard61

    You seem to think that “the church” would be willing to lend to anyone who came to their door and asked to borrow money. What makes you think this? There are churches that are fighting, or have successfully fought, to get laws passed so that QUILTBAG people cannot legally marry. What makes you think that they won’t fight equally as hard to get laws passed so that they won’t have to lend money to people whose sexual orientation (or religion, or lifestyle, or whatever…) they don’t like? As I noted in my earlier post, when concept (the idea that churches will do a better job of short-term interest-free lending simply because they’re *not* the government) meets reality (the probability that churches will refuse to lend to people whom they don’t like for whatever reason), reality tends to win no matter how good the concept may have sounded. I see no reason why this would be an exception.

  • Sgt. Pepper’s Bleeding Heart

    bringthenoise- Well, people get food posioning all the time even though restaurants are inspected and the roads are awful.

    All the time? In my city food poisoning from a restaurant makes the news (cos it’s not that common). The vast majority of food poisoning is from food people prepare themselves, at home.

    Maybe you need to put the chicken in the fridge, Chris.

  • Sgt. Pepper’s Bleeding Heart

    This is not a capitalist enterprise being discussed it is a charitable one. It has elements of capitalism but the people doing it for humanistic purposes not returns.  This is the proper role of the church in society.

    1. Achieving “humanistic purposes” rather than capitalist returns is one of the roles of government.

    2. The primary role of churches in society is not to provide the welfare function that you believe the government should not. It’s very good that they provide those services because they’re needed, but doing so is not the definition of a church.

  • http://twitter.com/lesterhalfjr Chris Hadrick

    “But churches should absolutely not be the only or even the primary source of good things such as low-interest microloans. ”

    They are the ones stepping up though.

    “What makes you think that they won’t fight equally as hard to get laws passed so that they won’t have to lend money to people whose sexual orientation (or religion, or lifestyle, or whatever…) they don’t like?”

    the blowback is already starting!

     everyone liked the idea at first, now it’s become an insidious fundamentalist plot.

    atheists could do this too. or pro gay rights churches.

    sgt peppers’ – “1. Achieving “humanistic purposes” rather than capitalist returns is one of the roles of government.”  where is that in the Constitution?  

  • Lori

     

    the blowback is already starting!

     everyone liked the idea at first, now it’s become an insidious fundamentalist plot.
     

    Are you trying to make a funny or are you really this thick? No one dislikes the idea. They’re just pointing out that your belef that a scaled up version of this idea is all that’s needed is ridiculous.

  • EllieMurasaki

    “1. Achieving “humanistic purposes” rather than capitalist returns is
    one of the roles of government.”  where is that in the Constitution?

    We the people of the United States, in order to form a more perfect union, establish justice, ensure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty for ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

  • Dragoness Eclectic

    Great idea! They’ve just reinvented microfinance, which has been used as a tool to help the desperately poor for the last several decades in places like Bangladesh. Google Professor Muhammed Yunus and the Grameen Bank. Or Kiva.org.

    About time someone brought that to the “First World”…  we also have our desperate and poor.

  • http://twitter.com/lesterhalfjr Chris Hadrick

    Ellie- ” general welfare” means to provide for general as opposed to specific welfare. the laws are to benefit everyone not just one group.

    Lori- I don’t  want a scaled up version. I don’t want big business or the govt involved.  I like the program as is.  it doesn’t need ANYTHING.

  • EllieMurasaki

    “ general welfare” means to provide for general as opposed to specific
    welfare. the laws are to benefit everyone not just one group.

     Okay, let’s look at this reasonably.

    Say I have car trouble. To fix it, I need $500. I do not have $500. I
    can’t put it on a credit card. I go to the bank and the
    bank laughs at me.

    I go to a payday lender. They lend me $500 and we agree that I’ll pay them back at the rate of $50 a month. They do not tell me that the APR is 75%. Or they do tell me, but because I cannot get the money any other way, it doesn’t matter.

    This loan will take me eighteen months to pay off, and I will pay the payday lender about nine hundred dollars. Probably they’ll relend five hundred, a hundred will go towards operating expenses, and three hundred will sit in a bank account doing no good to anyone.

    Alternate scenario. Same car trouble, same $500, same everything except there’s a microlender in town that’s charging 10% APR. I borrow $500 from them and we agree that I’ll pay them back at the rate of $50 a month.

    This loan will take me twelve months to pay off, and I will pay the microlender about six hundred dollars. Probably they’ll relend five hundred and a hundred will go towards operating expenses.

    And over the next six months I have three hundred dollars. I can spend this three hundred dollars on whatever parts of my budget I was skimping on to come up with the $50 a month. Let’s say those areas were food and entertainment.

    People who benefit in the second scenario who wouldn’t benefit in the first include the grocery store and its employees, the movie theater and its employees, a restaurant or three and their employees, the high school theater program and its students, and me.

    People who benefit in the first scenario who wouldn’t benefit in the second include the payday lender’s owner. Nobody else.

    How, exactly, is promoting microlending and prohibiting payday lending benefiting the few and not the many?

    (And do note that when I say a payday lender does 75% APR, I am probably dramatically underestimating.)


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