Predatory lending and “market forces”

Daniel Akaka sits on the Senate Banking Committee and Tuesday he got to question Federal Reserve Board Chairman Ben Bernanke.

“My concern,” said Sen. Akaka, “is to educate the people… and empower them in our financial system. Given the recent failures, I’m concerned by the increasing lack of trust that individuals have in the banking system.”

Bernanke agreed that there is a problem with people, including many immigrants, whom economists call the “unbanked.”

Yes, Akaka persisted, but what about working families exploited by unscrupulous lenders through payday loans?

“I think that competition is the best solution,” Bernanke said.

The courtly Akaka would never say so, but that is one dumb response.

The whole idea of free markets is that companies go where the profit is, but because there would be certain complications if all companies went into the arms trade, drugs and prostitution, we have rules.

Business people like to expound on how you shouldn’t have an excess of rules, but a few sensible rules are good for everyone including ethical business people. Sensible regulation of payday services is a no-brainer.

Really, it has been alarming lately, and not just to “the unbanked,” how clueless are the people who are supposed to be regulating our financial systems. I know the systems are complicated, but there is nothing complicated about cracking down on predatory lending.

There’s always a paper trail, you see.