blame the legislators, not the lenders or lions


sharkS Robert H. Frank made a very good point yesterday, in a New York Times column, “Payday Loans Are a Scourge, but Should Wrath Be Aimed at the Lenders?”  (January 18, 2007; via CL&P Blog).  Using outrage at payday loan lenders as an example (see our prior post), Rich correctly notes (emphases added):

“[T]he supply of moral outrage is limited. To maximize its usefulness, it must be employed sparingly. The essential first step is to identify those who are responsible for bad outcomes. This is often harder than it appears. Failure at this stage steers anger toward people or groups whose behavior is, like the alpha lion’s, an unavoidable consequence of environmental forces. In such instances, moral outrage would be better directed at those who enact the rules under which ostensibly bad actors operate.”

Frank is right that the growing culture of consumer debt, with all of its negative consequences, “stems far less from the greed of lenders than from recent liberalizations of lending laws.”  He sees the deregulation that has removed traditional limits on lending abuses as the result of campaign contributions to politicians from the banking industry.  Frank’s conclusion:

SlicingThePie “Those who feel that payday lending is a bad thing are inclined to vent their anger about the hardships it has created. But outrage directed at payday lenders cannot prevent those hardships, just as outrage directed at alpha male lions cannot prevent them from killing cubs. A more deserving target would be legislators who supported lax credit laws in exchange for campaign contributions from lenders — or, better still, those who have steadfastly resisted campaign finance reform. “

Similar analysis can be made in many other areas of our economy and our legal system.  You can use our Comment section to help us make a list.


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