Thursday, March 29, 2007

The Columbus House Delegation and Predatory Lenders

There's been some buzz about a couple of recent bits of output from Policy Matters. Well, more than a couple, they've had a tremendous flurry of visibility in the last six weeks, but I'm focusing on just two: Testimony before Congress on Payday Lending, and a report on the Foreclosure Crisis in Ohio. There's not much I'm going to say about these subjects that hasn't been said better elsewhere, but I tried to leave a comment at Plunderbund the other day that failed to actually post and I've decided to follow up here.

First - I've got plenty of bleeding-heart morality-based reasons to oppose predatory lending, and Modernesquire did a pretty good job of laying out the broader economic implications of the foreclosure crisis, but I keep coming back to the "innocent" victims of the neighborhood-level collapses. Even the people who can afford to pay their mortgages and taxes and handle their money responsibly lose tens of thousands of dollars as their property values disintegrate and they are left holding negative equity in their homes. If I were in that situation, I'd be livid.

Eric said we need a sherriff to clean up the Wild West of predatory mortgage lending, especially by the home builders who act as both seller and financer. The biggest part of my reply was about Central Ohio's Congressional Delegation. OpenSecrets.org publishes the top recipients of industry campaign contributions for all major industries. Here is the list of the top 10 U.S. House recipients of homebuilder money last cycle:

  1. Pryce, Deborah (R-OH)
    $72,650
  2. Pallone, Frank Jr (D-NJ)
    $63,500
  3. Pombo, Richard (R-CA)
    $58,728
  4. Kirk, Mark (R-IL)
    $55,300
  5. Shaw, E Clay Jr (R-FL)
    $46,024
  6. Bonilla, Henry (R-TX)
    $43,500
  7. Feeney, Tom (R-FL)
    $43,250
  8. Davis, Geoff (R-KY)
    $42,800
  9. Fitzpatrick, Michael G (R-PA)
    $42,424
  10. Tiberi, Patrick J (R-OH)
    $40,750
Of the 14 Political Action Committees that have the word "Mortgage" in their names and made contributions to at least one congressional candidate in 2006, 9 of them contributed money to Tiberi, Pryce, and/or Bob Ney. That's 64%.

Here are the top 10 U.S. House recipients of Finance/Credit companies in 2006:

  1. Pryce, Deborah (R-OH)
    $77,631
  2. Baker, Richard (R-LA)
    $72,750
  3. Boehner, John (R-OH)
    $69,500
  4. Kanjorski, Paul E (D-PA)
    $69,089
  5. Crowley, Joseph (D-NY)
    $62,000
  6. Castle, Michael N (R-DE)
    $61,766
  7. Bachus, Spencer (R-AL)
    $61,500
  8. Tiberi, Patrick J (R-OH)
    $60,050
  9. Matheson, Jim (D-UT)
    $59,250
  10. Hensarling, Jeb (R-TX)
    $57,183

The top 6 companies contributing to Tiberi in the 2006 cycle were:

1 Nationwide $23,600
2 American Electric Power $21,750
3 Altair Learning Management $21,500
4 Vorys, Sater et al $17,750
5 Buckeye Check Cashing $16,000
6 CheckSmart $14,000

Of course, CheckSmart and Buckeye Check Cashing represent the same set of executives, so really the combination of 5/6 is the single largest contributor ($30k last cycle) to Mr. Tiberi:

FRAUENBERG, JAMES H
DUBLIN,OH 43017
BUCKEYE CHECK CASHING INC./OWNER
6/27/2006
$2,000
Tiberi, Patrick J

FRAUENBERG, JAMIE MR
COLUMBUS,OH 43212
BUCKEYE CHECK CASHING INC./DISTRICT
6/30/2005
$2,000
Tiberi, Patrick J

FRAUENBERG, JAMIE MR
COLUMBUS,OH 43212
CHECK SMART/VP STORE OPERATIONS
6/9/2006
$2,000
Tiberi, Patrick J

LENHART, MICHAEL
DUBLIN,OH 43017
BUCKEYE CHECK CASHING/SEC'Y & TREAS
6/30/2005
$2,000
Tiberi, Patrick J

LENHART, MICHAEL MR JR
DUBLIN,OH 43017
CHECKSMART/EXECUTIVE
6/27/2006
$2,000
Tiberi, Patrick J

STREFF, CHAD
WESTERVILLE,OH 43082
BUCKEYE CHECK CASHING/EXECUTIVE
6/30/2005
$2,000
Tiberi, Patrick J

STREFF, CHAD
WESTERVILLE,OH 43082
CHECK SMART/EXECUTIVE
6/27/2006
$2,000
Tiberi, Patrick J

etc.
etc.
etc.

Franklin County has the largest number of Payday lenders in the state. Delaware County is the focus of recent news articles highlighting the increase in foreclosures. What are our congressional reps doing about it? They are taking dollar after dollar after dollar from the people responsible.

4 comments:

Paul said...

I'm mostly a 'caveat emptor' kind of person, believing that in general the government should stay out of the way of commerce. If you want to sell something, and I, after appropriate due diligence, decide I want to buy it, it’s no one else’s business.

The problem of course is that sellers can create things which have dangerous properties which are difficult to detect without the appropriate equipment and training. Or the product might have uses which are safe when controlled by an expert, but not when used by an amateur.

It’s easy to see the application of these principles when talking about something like nitroglycerine, morphine, or botox.

So as a nation, we have agreed that is reasonable to restrict the sale and use of certain products only to people who can demonstrate that they have the appropriate training. The evidence of that training is usually a license, issued by the government. An explosives license is required to buy nitroglycerine. A physician’s license is required to acquire (or prescribe) morphine or botox.

What about financial products? Well it turns out that while the sellers of most financial products need to be certified or licensed, buyers generally aren’t required to have any special knowledge. So even the ‘reputable’ financial institutions like banks can conjure up products which are so complex that even folks like me with a business degree and lots of experience have a hard time understanding them.

In a not so metaphorical way, these so-called subprime mortgages can, when used by unwitting buyers, blow up neighbors just like a dropped bottle of nitroglycerine. The mechanics of conventional mortgages are not understood by the majority of homebuyers – few have a chance with these exotic mortgages.

Maybe we should turn the paradigm around on this one: No one is allowed to take out a mortgage of any kind until they can demonstrate the ability to create the amortization table for the mortgage on their own.

Bev Campbell said...

Your proposal was made in jest wasn't it, Paul. I would venture to guess that less than 30% of the public can create an amortization table. Why don't we just go a bit backwards and require people to pass a written test in order to qualify for a mortgage, and maybe even to qualify to vote, too. When we're finished with that we could repeal the Women's Suffrage Act.

Forgive me for my sarcasm, but it is so easy to fall into a mindset that smacks of elitism when what we really need is to extend some grace to each other with the realization that "there but by the grace of God go I." Government being of and by the peole - ALL the people - certainly has an appropriate role to protect those with less bargaining power be it through less wealth, less education, less abililty or all of the above. Of course, that protection like everything else, should always be within reasonable limits.

Marcia said...

Interesting blog..I'll have to revisit as I ponder my political affiliation.

Bev Campbell said...

Glad to see you will revisit. We do get into some interesting discussions here. I checked out your blog and looks like we share some values - like dealing with poverty.

But, why are you pondering your political affiliation, if you don't mind me asking.