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Friday, June 22, 2007

Warren on the Credit Market

When Democracy announced its intention to start yet another "journal of ideas," I was skeptical.  But they sent it to me for free anyway and I got around to reading most of the issues.  In their first anniversary issue just now out, I think they are really hitting their stride.  William Galston on doubt; Rauch on gay marriage; Schuck on Rodriguez.

But the article I like best in this issue is Elizabeth Warren's Unsafe at Any Rate, an argument for why financial products should be regulated just like consumer products so that purchasers/borrowers don't come to ruin from using them.  As she argues, we don't let people buy toasters that burst into flames, so why should we allow so many predatory lending practices that ruin people's lives?  The essay is perfectly suited to a first-year contracts class: I plan to assign it around the time we do unconscionability next year.  Contracts teachers tend to focus on the rent-to-own market because that is the context for the famous Walker-Thomas case.  But our students are much more likely to be victims of predatory lending (through the credit card, student loan, and mortgage markets) than they are likely to be victims of the rent-to-own scene.  Accordingly, I think it would be nice to have a conversation about contract regulation than might hit closer to home and that raises substantially more complicated political economy problems.

Posted by Ethan Leib on June 22, 2007 at 11:30 AM in Article Spotlight | Permalink


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Sounds like a great article, will check that out. Warren has done great work not just on the fees affecting cardholders directly, but also merchants who pay the exorbitant interchange fee as well. I consult for the Merchant Payments Coalition (link behind my name) and her testimony and blogging at TPM Cafe are invaluable. To the extent that the banks have reformed their ways, and to the extent that they will have to do more, she must get a lot of credit for that.

Posted by: Interrobanger | Jun 22, 2007 2:27:17 PM

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