Move Over, Payday Loans

Posted on by Sarah Brodsky

We periodically hear calls for the state to tighten its payday loan regulations and to keep interest rates down. Such restrictive caps on interest would result in fewer people getting access to payday loans at all — or they might have to pay even higher rates of interest on the black market. Fortunately, ineffectual regulations aren’t the only answer to the problem of high interest rates. Free-market competition can give borrowers other options and better deals. For example, see this Post-Dispatch article about credit unions that offer short-term loans on better terms than the payday lenders.

Why do the credit unions offer lower interest rates? Because they’re nicer? Not quite. Actually, the credit unions have found a way to lower the risk that borrowers will default. They require borrowers to deposit their paychecks with the credit union, and to place part of their loans in a savings account there. The benefits of the practice for the credit union and its borrowers are manifold: the credit union gets to hold on to some of the cash; it establishes a relationship with the borrower; and the borrower hopefully builds up savings and reduces his dependence on payday loans.

The payday lenders offer better rates on certain loan amounts, and there will still be a place for them in the market, serving customers who can’t or won’t abide by the credit unions’ policies. But there’s now an alternative.

Besides the credit unions’ model, another way to reduce the risk of default is to ask borrowers to pay back a loan in several installments, rather than as a lump sum. I hope more lenders will enter the market, using that or other ideas to offer lower interest rates.

The Best of Bad Alternatives

Posted on by Dave Roland

As many different Missouri outlets have been reporting (links via Combest), the state government is trying to sort out what it will do with $1 billion in stimulus funds allocated by the federal government. Show-Me Institute commentators have largely stayed away from this issue, in part because there really is no good answer. Even to the extent that the stimulus was well-intentioned, it was a poor decision on the part of the federal government to plunge the nation even deeper into debt. The borrowing and money-printing that are making the stimulus package possible are almost certain to hobble our future economic growth, because of the higher levels of taxation that will be necessary to pay for it, but also because of the government’s backward policy of propping up failing businesses rather than encouraging the growth or expansion of new and successful enterprises.

But, for now, the die has been cast and we must decide how to make the best of this bad situation. A number of politicians have suggested that the best course of action would be just to refuse part of the money, sending it back to Washington as a symbolic disapproval of the policy that led to the stimulus package. This definitely has a certain appeal, seeing as how spending the money might well be perceived as encouragement for similar federal action in the future, but there is another unpleasant truth to be considered: Missourians are going to be on the hook for the use of that money, regardless of how it is spent. And it will be spent, even if Washington has to send it to another state. So, Missouri’s free-market thinkers have to decide whether it is wiser to take a principled stance that will effectively donate our future tax dollars for other states’ benefits, or whether it is wiser to figure out the most effective way to use these dollars in our own state.

So, what might we do with this $1 billion in federal stimulus funds? While I can’t speak for my colleagues here, I’m intrigued by Gov. Jay Nixon’s plan to promote loans for small businesses. One of the great challenges we face in this recession is the contraction of available credit just at the time when many out-of-work people will be interested in starting their own businesses. I can’t speak to the details of the governor’s plan, because I haven’t reviewed it closely, but the central idea strikes me as a very, very good one in terms of jump-starting innovation and growth in our state. If private non-profit agencies are helping to ensure that small businesses have the funds they need to get off the ground, it just might spur the banks to start lending more freely, as well.

Of course, if the state government is really serious about spurring entrepreneurial growth in Missouri, the perfect compliment to this sort of a lending plan would be an effort to lower some of the regulatory barriers that make it difficult to start new businesses.

Airport Privatization in Kansas City Gets Shot Down

Posted on by David Stokes

That title might not be the best choice of words, but let’s move on to the topic. Yesterday, the Kansas City City Council defeated a proposal we have been following closely, to consider privatizing the two Kansas City airports. I commend the four officials who voted in favor of it for their willingness to think outside of the runway.

Final Blow for CWIP Legislation

Posted on by Clovis Ouangraoua

CWIP has been the subject of several previous articles and blog entries, both here at the Show-Me Institute and elsewhere, so I won’t use this entry to rehash the issue.

KMOX reports that controversy over proposed CWIP legislation, which would have supported the construction of an AmerenUE nuclear power plant expansion, has reached its final episode today. State lawmakers did not round up enough support to pass the constitutional amendment that would have been needed to move the new plant construction forward. Altogether, this was a not-so-surprising conclusion for a bill surrounded by a stream of publicity that, many people felt, raised more questions than answers.

Walking on … Overcast Skies?

Posted on by Ryan Davisson

Two significant amendments to an expansion of the Sunshine Law have recently come under debate. The first, sponsored by Rep. Jake Zimmerman (D-Olivette), required that the open records law would apply to all public officials. This failed to pass, by a small margin. The second seeks to close internal investigation records for police officers. Arguments about the latter revolve around the the tradeoffs between protecting bad officers on one hand, versus the potential for tarnishing the names of those wrongly accused.

The bill itself is a positive step in transparency, implementing harsher fines for those who fail to comply with sunshine laws and increasing the required delay between announcements of important public meetings and the actual commencement of those meetings.

Two Moves Forward on Privatization and Consolidation

Posted on by David Stokes

Larry Williams, treasurer of St. Louis city, is moving ahead with outsourcing of parking meter maintenance and collections. Thanks to the St. Louis Business Journal for its story about this. As I understand it, this is different from the fiasco in Chicago, because the city is maintaining all the police powers that come with enforcement, etc. This new St. Louis plan is really more “outsourcing” than “privatization,” which I think is good. Regular readers might remember that I usually don’t support full privatization when it comes to areas involving the police powers of the state.

In Kansas City, the Star reports that the city is going forward with its support of a regional jail. Cities and counties sharing services to get the best value for taxpayers is always good government. I’ll remind readers once again that the idea of a regional jail has worked very well in St. Louis County. It is interesting that a private jail placed a bid on housing the prisoners, but I think the city council has a valid point that it’s important to keep the detainees — many of whom are likely serving short sentences — near their families. It’s great that the private operators were allowed to make a bid, though. That in and of itself is important. However, the city is still going to save a large amount of money by using the Jackson County facility:

City officials say they also support the move to save $1 million in the upcoming city budget and avoid millions more in capital expenses to upgrade the aging MCI.

Good news for taxpayers on both sides of the state.

Less Evil, But Still Evil

Posted on by Ryan Davisson

Another update on the red light camera discussion comes to light by means of a compromise (link via Combest). The House Transportation Committee rescinded requirements for municipalities to install red light cameras, and eliminated detailed provisions regarding photographic verification. Contrary to an earlier proposition, the bill no longer specifies that a driver caught by a red light camera would not have points added to his/her license. Fees for offenders would be capped at $75, except for violators in Springfield, who will pay $100.

The provisions to the unpopular bill make an attempt to reclaim some of the personal privacy that is lost when officials operate red light cameras — which inherently infringe upon personal rights. It is inefficient to create dense legislative provisions to limit the scope of operation of these red light cameras, rather than just getting rid of them altogether. I suppose it can be considered a battle won in the ongoing red light camera war.

Chinese Language in Public Schools

Posted on by Sarah Brodsky

It’s unusual for traditional public schools to teach languages through full-time immersion, but some are trying to jazz up their language departments with a wider variety of language courses. Today, Valerie Schremp Hahn of The Grade blogs about Chinese language teaching in Bowling Green and Clayton. I’m curious where the Chinese teacher got this number:

Wu Williams, who is the type of person to bubble with enthusiasm over most anything she does, was especially excited about today’s visit.  She told the students that by the year 2015, about 750,000 high school students will be taking Chinese language courses.

Whatever the exact statistics, interest in teaching Asian languages is definitely increasing. For more on schools and languages, see my op-ed about languages in charter schools.

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