Major banks slow to issue home or small business loans are instead financing payday loan centers

[brentspeak]

You see? Forking over hundreds of billions from the American people's dwindling paychecks to the banks via TARP really has spurred lending.

:banghead:

http://www.miamiherald.com/2010/09/15/1825108/major-banks-boost-payday-loan.html

Some of the largest banks, reluctant to issue mortgages, are financing payday loan centers that charge high interests to cash-strapped borrowers.

BY NIRVI SHAH
[e-mail]

As big banks were being bailed out by the federal government, they were lending money to payday loan companies and making huge profits, according to report issued Tuesday by a network of community organizations.

And while these same banks have become slow to issue home loans and lend to small businesses, they have provided the financing for companies that are known for charging formidable interest rates to cash-strapped borrowers who may have little or no access to traditional banks, said the report by National People's Action and the Public Accountability Initiative.

``We're having trouble getting loans out to small businesses and families trying to get mortgages,'' said George Goehl, executive director of National People's Action, which is based in Chicago. Meanwhile, he said, big banks are ``aiding the bottom feeders of the lending industry.''

The report titled The Predators' Creditors, and states that lenders, including Wells Fargo, Bank of America, JPMorgan Chase and others should end their loan arrangements with payday lending companies. Wells Fargo has the No. 1 market share in Miami-Dade and second-place ranking in Broward, in terms of deposits -- and is the leading creditor of large payday lenders, the report said.

[dkf]

1. Why didn't we shut down payday lending?

Isn't this something that congress needs to do?

[Roland99]

8. Oh, I'm sure plenty of DLC Dandies got nice big campaign donations

[brentspeak]

2. Incredibly, someone actually unrecced this

Not incredibly, they were too cowardly to step forward.

There are fans of 400%APR payday loaners lurking on DU.

[COLGATE4]

3. One of Obama's greatest mistakes (if not THE greatest)

was not tying TARP funds to some obligatory amount of lending to the type creditors (mortgages, small business loans) that we new desperately needed help. Instead the funds were disbursed without any quid pro quo, and now we're seeing what happened.

[theothersnippywshrub]

4. TARP was a Bush program. n/t

[brentspeak]

5. A program which Obama was 100% behind

[theothersnippywshrub]

6. There probably were others behind it too.

[GreenPartyVoter]

7. I'm in the process of trying to get a construction loan for a house right now. :^(

[dkf]

9. 30% down and higher rates. Ugh.

[GreenPartyVoter]

10. Well, that process ended quickly. It was a big fat NO. :^(

[dkf]

12. Sorry :(

[GreenPartyVoter]

14. Thanks. We're looking at other options now.

[QC]

11. Thank God It Passed! n/t

[Joe Fields]

13. fucking figures...

[Dulcinea]

15. I'm not surprised.

Payday loan centers make money hand over fist.

Many small businesses fail. Many people aren't good credit risks. The bank wants their money, no matter what.

This is a business issue to them, nothing else.

[kenny blankenship]

16. Unsurprising. The onetime head of Citi and major player in finance dereg in the 90s

a banker by the name of Sandy Weil, made his bones in payday lending. Legalized loansharking.

America take a look at yourself. There's scarcely anything about you that isn't a fraud.

[KansDem]

17. As in the (urban-legend) words of Willie Sutton: "That's where the money is."

Why charge single- or double-digit interest rates when you can charge triple- or quadruple-digit?

Some jurisdictions impose strict usury limits, limiting the nominal annual percentage rate (APR) that any lender, including payday lenders, can charge; some outlaw payday lending entirely; and some have very few restrictions on payday lenders. Due to the extremely short-term nature of payday loans, the difference between APR and effective annual rate (EAR) can be substantial, because EAR takes compounding into account. For a $15 charge on a $100 2-week payday loan, the APR is 26 × 15% = 390% but the EAR is (1.1526 − 1) × 100% = 3,685%. Careful reporting of whether EAR or APR is quoted is necessary to make meaningful comparisons.

http://en.wikipedia.org/wiki/Payday_loan