Reason Writers Around Town: Katherine Mangu-Ward in WSJ on Why the Poor Are Big Business

In today's Wall Street Journal, Senior Editor Katherine Mangu-Ward writes about broken kneecaps, pawning grandma's earrings, banking on linoleum, and cavemen with clubs. In a review of Gary Rivlin's new book, Broke U.S.A.: From Pawnshops to Poverty Inc., How the Working Poor Became Big Business, she grapples with the question of whether the vast industry provides the working poor with fast cash and expensive credit is "predatory."

Read the whole thing here.

Comments

[Max]

Yes, Katerine, pawn borkers and fash cash joints are predatory. You can stop grapling.

[Max's Mom]

Max, are you drinking already?

[&]

Don't be Max's fluff boy.

[Tara Davis]

So open your own lending institution with more "fair" rates and chop them off at the knees, making millions!

What's that? You don't want to make high-risk loans on the cheap? Then shut the hell up about those who do serve the market being "predators."

[Tonio]

pawn borkers and fash cash joints are predatory

Why, yes, Max, they are. And before there were legal, semi-regulated payday loan companies there were loan sharks who were part of organized crime syndicates.

These services wouldn't exist absent a demand for them. So, do you really want to go back to loan sharks and push pawn brokering underground?

[Max has made his last post]

Max|6.24.10 @ 3:29PM|#

Go suck ron puals dick, morons. You peeple are fucking retarded. I`m done coming to this wingnut sight. this is my last post.

[Tonio]

And that's not the first time he's pulled the "this is my last post" thing, either. He's done more comebacks than an aging pop diva.

[Attorney]

Good review! Lede was a tad hackneyed, but the rest was top drawer.

[&]

Lede was a tad hackneyed

Not to mention the second paragraph, the third, the fourth...

[Paul Begala's Evil Twin]

Good luck getting readers to compare A (payday loans) and B (sharking) instead of just focusing on A.

You: "A isn't the best but hey better than B right?"

Average American Reader: "A suckkkkkks"

[My Post Was Marked as Spam]

Good luck trying to get the average american reader to use critical thinking to compare two things.

You: Payday lending isn't the best but better than sharking amirite?

Reader: Payday loans suckkkkkkkkk

[John 2 Electric Boogaloo]

Payday loans are better than sharking imo as well.

[John 2 Electric Boogaloo]

I think your spam filter doesn't like "payday"

[John 2 Electric Boogaloo]

Good luck trying to get your readers to use enough critical thinking skills to assess the comparative value of 2 not so great things (sharking and poverty inc) instead of just going THING 1 IS BAD OMG U GUYS

[James Ard]

I've been watching pickers lately, and those junkers are quite knowledgeable about the value of their stuff. They don't always take the deal.

[R C Dean]

I've been watching pickers lately,

Err, why? Where?

[J Mann]

I heard Rivlin on Fresh Aire and have been looking forward to reading his book. I definitely got the impression from the interview that he didn't give much thought to the argument that the alternatives (no microcredit or credit through alternative sources like pawn brokers and bounced checks) were worse, but I want to read the book to see.

[Tman]

Ms. Mangu-Ward once again details the stunning hypocrisy of those on the left who praise the microlenders and lavish them with nobel prizes, while the high-interest rate cash advance stores -who are doing essentially the same thing as the microlenders- get relegated to the fifth circle of hell.

from the article-

It is odd: high-interest, small-scale loans to the poor in developing countries are seen as a great thing. When a man like Muhammad Yunus argues that such "microcredit" loans can make the difference between participation in mainstream society and off-the-grid poverty, we give him a Nobel Prize. Here at home, condemnation is the reward.

[Whitney Lewis]

stunning hypocrisy? But she left out one key fact: Mr. Yunus doesn't charge rates that work out to 400% a year or more in interest. No one get trapped in a Yunnus loan and then ended up owing money to 3 or 4 or 5 non-profits the way they owe to 3 or 4 or 5 payday lenders. Seems to me Mangu-Ward the hypocrite, or at least the one making a dishonest argument.

[Alan Vanneman]

Nice piece, Katie M-W.

[kc]

want to see predation on the poor? what about the 25% + of wages in government-required employment/unemployment/workers compensation taxes (not including health care or other benefits which drive the cost to 100% of base wages) that I have to pay to someone other than the employee just to employ him or her. Cuz the poor are too stupid to take care of themselves, right, statists?

[gnut]

> want to see predation on the poor?

In recent years, homeowner associations (HOAs) in Harris County, Texas have filed thou- sands of lawsuits threatening foreclosure against residents who owed dues, late fees, or fines. An event count analysis of HOA foreclosures by neighborhood from 1985?2001 shows the bulk of these filings occur in neighborhoods with low median home values. Overall, homeowners in the bottom quartile of home value face more than ten times the risk of HOA foreclosure proceedings as those in the top quartile. Legal changes in 1987 and 1995 also seem to have encouraged HOAs to bring more foreclosures to court: across the spectrum of home values, the annual pace of filing after 1995 is roughly double the previous decade's rate. Although HOA foreclosures are ostensibly motivated by efforts to improve property values, neither foreclosure activity nor HOAs appear linked with above average home price growth.

{snip}

The findings presented here should help ordinary homeowners and housing scholars better understand the risks and rewards involved in belonging to homeowner associations. Harris County HOA foreclosure rates have risen dramatically in the wake of Inwood and the passage of Chapter 204. For the average homeowner, the annual risk of HOA foreclosure from 1995-2001 was almost double that of the previous decade. This increase in foreclosure threat does not seem to be balanced by higher property value growth; if anything, property values grew more slowly in HOAs that filed foreclosures than in other neighborhoods. Finally, less expensive neighborhoods had vastly higher foreclosure rates than more expensive subdivisions, suggesting that poorer homeowners bear the brunt of foreclosures. Understanding why should be a key question in future research.

source: Christopher Adloph. "Homeowner Association Foreclosures and Property Values in Harris County, 1985?2001" (draft copy, emphasis added)

Keep in mind that these are not foreclosures by the lender for failure to pay the mortgage, but by the homeowners association to collect assessments (HOA dues), fines, and fees -- usually attorneys fees.

Of course, there are exceptions, especially when somebody in the HOA corporation can make a $296,500 profit.

And before anyone says that HOAs are the result of a free market, please read this.

[Nike Dunk High]

thanks