Jumping on the Sub-Prime Bandwagon

The General Assembly is out to "protect" consumers once again, this time from unscrupulous mortgage brokers.

I’ve written before about why usury laws are a bad idea. While I sympathize with what legislators are trying to do (I like to believe that most of them are well-intentioned), regulating mortgage brokers is not going to help sub-prime borrowers or protect home ownership rates.

The Post-Dispatch’s coverage of the bill has one particularly revealing quote about the motivations behind such legislative "protection":

Rep. David Pearce, R-Warrensburg, a banker and the bill’s co-sponsor, said most subprime loans are not offered by local banks or credit unions.

"It’s from out-of-state firms that are coming into Missouri and preying on our consumers," he said.

Wow, talk about playing up the "us and them" fallacy. Now, from my cynical point of view, here’s how I interpret that sentence (emphasis obviously added):

"It’s from out-of-state firms that are coming into Missouri and preying on our consumers. And because they offer more competitive rates, I have been unable to compete and am losing business. Therefore, we need to pass legislation that will ensure Missourians face stricter lending limits that will insulate me from competition, at the expense of consumers."

Good, I feel safer.