“Pretty much every bill up here is a restraint of trade some kind of way.”
That’s an assessment from a friend of mine who plies his trade as a lobbyist at the Louisiana Capitol, and it’s not meant as a compliment.
It’s also a rather appropriate assessment of HB 766, a bill by Rep. Erich Ponti which seeks to address Together Louisiana’s attacks on the payday loan industry, which we’ve talked about a couple of times here at the Hayride in the past week or so, with a “compromise” of sorts.
Basically, the bill would do a few things which on the surface seem reasonable. First, it seeks to regulate online lenders doing business in Louisiana, who right now aren’t subject to the same regulations by the Office of Financial Institutions that brick-and-mortar lenders in the state (who are the ones with all the lobbyists) are. Second, it sets up a legal requirement that payday lenders offer an extended payment plan to borrowers who can’t pay them back. And third, it mandates a fee decrease which would prevent lenders from imposing punitive fees on borrowers who don’t pay their loans back on time.
Certainly, that bill is a lot more reasonable than the attempt by Sen. Ben Nevers earlier in this session that would have essentially put the payday lending industry out of business. The idea of legislating a business model out of existence ought to be toxic to anyone who believes in a free society operating with open marketplaces, but there’s another way to injure the free market.
Ponti’s bill is a good illustration of that way.
I don’t care about the payday loan industry one way or another. I don’t use payday loan places, I don’t think 20 cents on the dollar is a good rental rate for money and I don’t have any friends in that business. My interest in this issue has to do with a lot of what Oscar turned up when he wrote his piece about who the national players working to kill that industry are (they’re gangsters and left-wing wannabe tyrants), the fact that Together Louisiana is carrying the water for those national players and my general revulsion to the impulse politicians seem to have about heaping more and more restrictions on economic activity. People who need money will find a way to get it, and when the government steps in to try to force business into a box it will inevitably fail to cover circumstances in which that box doesn’t serve the market. For people like Together Louisiana that’s unimportant and contrary to their agenda, but this country wasn’t founded on the idea that government inspired by Alinskyite Marxist pressure groups would dictate how we live our lives.
So because I’m applying philosophy here rather than picking winners, I can say that Ponti’s bill stinks and while I’d be shocked if it doesn’t pass (it sailed through the House on a 91-5 vote yesterday, with the “no” votes all being lefties who don’t think it goes far enough), I wish it would get killed in the Senate.
Here’s a story. A couple of decades ago, a strip club opened on Bennington Avenue in Baton Rouge, off College Drive. That was something of a new occurrence, as strip clubs have typically been confined to Airline Highway just across the parish line in Ascension. And because it was something new, a big political and legal fight ensued.
As a result of that fight, a compromise was made – namely, that strip clubs were effectively banned in Baton Rouge EXCEPT FOR the one on Bennington Avenue. The zoning ordinances are such that you could theoretically open one, but you won’t have any luck finding a location that would both qualify for a permit and be economically viable.
The owners of the strip club on Bennington were perfectly happy to agree to those restrictions, and their lawyers bragged about writing them into the code. Not only did they manage to stay in business but they got an effective monopoly in town. And since there was nobody else in position to open a competing strip club, there was nobody to complain about the crony capitalism and the assault on economic freedom that corrupt bargain represented.
The same dynamic is playing out on a different issue here in Baton Rouge – namely, that there’s a move being made to restrict the number of billboards available in town and there is an ordinance which has been floating around on the Metro Council’s agenda for weeks that would cap the number of commercial signs people could put up. If you want to put up a new one, you’ve got to take down another.
At some point, that will pass – and the politicians will crow about how they’ve struck a blow for beautification of Baton Rouge. Except Lamar Advertising, the publicly-traded billboard giant based in Baton Rouge, has a near-monopoly on billboards – and how hard do you think Lamar is fighting that cap? If your answer is “not too hard,” you’ve got that right. When that piece of legislation passes in Baton Rouge Lamar will have effectively killed its competition – or at least wiped out the competition’s ability to grow – and preserved indefinitely its dominant market share regardless of whether it does a good job servicing its customers at a fair price.
We see this everywhere, in every legislative body. It’s the oldest scam in the government book. Some demagogue will come along and attack the business community for some evil or another they’re supposedly visiting upon the public, and conduct a PR campaign aimed at putting the perpetrators of said purported evil on the defensive, and then a deal is cut which preserves the incumbents in the industry in question but bars entry into the marketplace by others who might do things differently.
If you like, you can say “Yes, but these are industry best practices and they protect the public.” Maybe that’s so, but when you establish a rigid code and a narrow channel for companies in an industry to operate within, you stifle innovation – and you protect lousy companies from the creative destruction of the free market.
A perfect example: the federal CAFE fuel-efficiency standards in the auto industry. Those are sold as an attempt to protect the environment and to keep us as little dependent on foreign oil as possible. But that’s not what CAFE standards do; what CAFE standards are really for is to protect the Big Three automakers from getting new competitors in the marketplace. If somebody were to come along and try to build fancy newfangled pickup trucks or SUV’s, for example, which are the safest things on the road and are loaded with high-tech innovations and lavish comforts but aren’t intended for people who care about fuel efficiency, the feds would never allow them into the marketplace. Because the CAFE standards are fleet standards, you see – you’d have to also build rice-burners which would get 40 miles to the gallon and offset the SUV’s people want to buy. And that means specialty carmakers are screwed out of the market unless they’re going to build electric cars or hybrids or soon-to-be-tipped-over-by-drunks “fuel-efficient” clown cars nobody has ever figured out how to make a profit off of. The Dodd-Frank financial restrictions which cripple community banks to the benefit of the Chases and Bank of Americas are another good example.
And that’s what Ponti’s bill is. It’s a way for the payday loan industry to fend off the Left’s attempts to put it out of business by ensconcing its best practices into state law and ensuring that only the big, established players in the industry are able to continue. Somebody else who might come along and offer a different way of doing things which might even be more customer-friendly than the best practices are? That guy’s not welcome.
And what happens after this bill passes is everybody gets a campaign check from the payday lending lobby. And maybe Together Louisiana – or the shady national left-wing groups pushing this assault on the payday loan industry across the country – start getting contributions from the payday loan business by way of insurance that no further push to put the industry out of business will happen. In other words, protection money.
That’s called crony capitalism, and restraint of trade. It’s everywhere. And it’s a reason why our economy stinks, why business startups are down and why people have no faith in government anymore.