So, we don't want to give homeless people jobs because that's uncompassionate. Everyone knows they are charity cases and the only kind thing to do is give them charity, not opportunity.
And we don't want to give loans to poor people because that's clearly predatory lending. They would be better off without the option to decide for themselves because everyone knows how stupid they are and how incapable they are if making any kind of decent decision.
That's a recipe for a permanent underclass.
Opinion of a formerly homeless person who took out a Payday loan to go stay at a dive of a hotel for three nights to escape a deadly storm. My logic: three nights in a hotel was cheaper than replacing my laptop, which I needed to keep earning money.
I had no idea how I would eat for the rest of the month and didn't care after walking past a river about six times wider than I had ever seen it and my "safe" campsite for weathering the storm that was currently under probably six to ten feet of water -- before the worst part of the storm rolled in. I just knew I would be in a hotel that night if there was any means whatsoever to arrange it so I wouldn't die that weekend.
I think the author of the story aptly addressed this as an all to common justification. The tricky ethical bit isn't whether or not cases like your own do exist, but rather really how many of them are there on the whole?
The fact of the matter is that things like payday loans exist to exploit the poor and homeless in a way that ensures that they live perpetually in debt.
To take your argument to its rational extreme, it would be a bad idea to disallow poor people literally selling themselves to a corporation because that's taking away their basic rights.
And this is literally something that happens when you don't put regulations to stop it [1]. The fact that the poor predominately are people who take payday loans which often end up exploitative of their situation should tell you that payday loans might be a bad thing! The norm is that people are not escaping payday loans. Payday loans need to go and we need an actual safety net in place.
to disallow poor people literally selling themselves to a corporation
This isn't a right we grant other people, so, no, it is not the logical conclusion.
The antidote to a Payday loan habit is more earned income or other access to resources that aren't borrowed. So if you want to solve this, give cash gifts to poor people you know, help vulnerable people access earned income or other resources, work on solving the housing supply issue in the US and/or work on addressing the healthcare issue in the US.
I do what I can to provide useful information to homeless and at-risk Americans as my contribution, for example:
Simply cutting people off from the shitty resources they currently have access to without giving them something better only makes their problems worse. It's easier to cut people off than provide additional (superior) support and most people arguing vociferously for cutting them off are not actually actively working on better solutions, so it ends up being a big fat "fuck you" to the poor with a self-righteous justification to make it sound better.
> This isn't a right we grant other people, so, no, it is not the logical conclusion.
It isn't something people are allowed to do now because we've decided that it was too societally abused in the past. Look up the history of voluntary indentured servitude, for example.
We developed other instruments. Indentured servitude was a way to pay a debt when money per se and financial instruments were relatively primitive. It was kind of the debt version of barter.
Develop better instruments and solutions, and then Payday loans can join indentured servitude and dinosaurs in museums.
From the article it sounds like the author's analysis identified people who would end up in default with high probability, but were still profitable to loan to because revenue from payments + collections exceeded the loan.
And if the author had had more clout / underlings she could have done a more thorough analysis of spending patterns to identify who would buy ephemerals like entertainment vs necessities like food or shelter.
And if there was buy-in from the government then they could add government assistance to the program, like negative interest rates for essential purchases or something.
But C1 and every other business is focused on making a profit next quarter, while the government is focused on getting re-elected, so there's nobody around to do any development like that.
so there's nobody around to do any development like that.
I'm doing what I can and can't even get adequate Patreon support.
Everyone always has an excuse. If you want a better world, roll up your sleeves or pull out your checkbook and actively support something better rather than telling me why it can't and won't change.
For other HNers out there that may have the time this weekend, here are some good resources that should get you started on helping out those in your community:
Yapping about the nuances of helping others on here means jack-squat to those people in your community that need help now.
Any amount of help is 'good enough', any amount of volunteering is 'the best way to do things', any amount of canned food for a hungry child is 'spending money wisely'.
The bigger problem is that the powers that be want to constantly take away the shitty solutions the poor currently have access to without actually providing them better solutions. Then, after continuously shrinking the opportunities available to the poor while not really helping them, they blame the poor for failing to escape poverty.
Offer better solutions and watch payday loans et al wither on the vine instead of trying to justify taking yet more away from the already underprivileged.
> And we don't want to give loans to poor people because that's clearly predatory lending.
Loans are not inherently predatory. Giving loans without interest is a noble thing to do. Of course, many people don't like that, and want to take advantage of the poor, which makes loans with interest predatory.
I spent too much time homeless and listening to well-heeled people spout their hypocritical BS to buy that.
I was actively trying to figure out how to establish an earned income from the street. I was being told I was "panhandling the internet" for trying to monetize my websites. I was not being taken seriously. I was not having scads of charity thrown my way. Etc.
Nearly six years of that has convinced me that when people set these ridiculous high-minded standards it's really code for "Fuck poor people" while sounding virtuous.
If you want to proactively offer interest-free loans to poor people through your church, more power to you. If you want to argue with me on the internet about why making loans available to poor people via the marketplace is bad and mean, sorry, not buying it. If all the good people who spouted nonsense at me while mistreating me while I was homeless had actually done anything at all genuinely helpful, my problems would have been resolved substantially faster.
I feel like the person who wrote this has never experienced being poor.
I used to be poor, I'd much rather have a credit card than need to rely on payday loans, car title loans, or have no access to emergency money at all.
Out of all the issues the poor have, this is a relatively minor one, and frankly articles like this are just another form of virtue signaling. "Oh yes, even though I've never been poor, I obviously know best how poor people should be living their lives, and those expensive credit cards have just got to go..." is how it reads.
Yes, borrowers need more protections (rolling back the changes to bankruptcy law from 2002-4 is a good starting point), but that mythical person who couldn't get to work without using their card for car repairs? That was me at one point.
I'm disappointed that this is the top rated comment.
"than need to rely on payday loans, car title loans, or have no access to emergency money at all"
You'll get no argument from anyone but the purveyors of such predatory products.
But it's a false dichotomy argument along the lines of "you have to overlook all of the evil things Uber does because they're the only option for people going to poor neighborhoods."
The reality is that both of these things are true - credit cards are the best option for emergencies, AND that consumers (not just the poor ones) are encouraged to outspend their means, often finding themselves falling into catastrophic debt spirals.
I didn't bother reading the article, so I can't say whether or not its guilty of virtue signalling. But if it does in fact explain how they "Justified Piling Debt on Poor Customers", it's eminently reasonable to overlook any virtue signalling.
My suggestion was to change bankruptcy law so these products are less predatory - the fact that its very very hard for the poor to discharge excessive debt via bankruptcy is a huge issue and traps people in a cycle of poverty.
Access to credit, real revolving credit, is a boon to the poor, if you can teach yourself the skills to use it wisely, it can provide that cushion that you otherwise wouldn't have. I literally started over again at 27, with my slate clean by waiting 7 years, then I started fresh with a secured card from C1, and built my credit from there - but at some point about a decade ago, I used one of my cards to put tires on my car, which ensured that I had a functional vehicle to continue to use to work - even though I was not of traditional credit worthiness, that purchase allowed me to keep that job, and gave me the skills to find a far better one later.
Yes, some do fall into a perpetuity trap, but we need to fix the system to allow for an escape for that, not just change the system so you cant take any risk at all.
"... over the long run, a publicly traded company wasn’t going to sacrifice a meaningful amount of income to avoid destroying lives—unless the law required it."
Emphasis mine; I believe that's the true point of the article. I also believe that banks, and lending institutions generally, as experts in that field (rather than average consumers which should not be expected to be experts in that field) should have a legal duty to the customer to act in the customer's best interests first.
We used to define this using heuristics like limiting loans to amounts that can be serviced on ⅓ of the primary household income.
We could go back to using those rules, the catch is that people desperate for finance will shop around to find a less principled lender, so FOMO leads to acquiring customers who are one bad week away from defaulting.
That's a zero sum game. Let's consider two possibilities that aren't zero sum.
Late payments:
A credit card company might make slightly more money when people pay late than it costs them in servicing and default costs while the cost of the fees alone may exceed that benefit even ignoring the cost of a diminished credit score
Increasing spending and borrowing:
A company does marketing that convinces people to spend an amount (either through marketing a new card, a line increase or straight up marketing spend), that nets the issuer $100 in value and creates $30 a month in interest for the customer for six years.
The argument is the same as any other case of information asymmetries that create negative externalities. How should we regulate marketing cigarettes? How should we regulate marketing cotton candy? A purist would argue we ought to tax those activities.
That is just the cost of doing business. And they have the statistics figured out well enough to know what rate they need to make money and cover the similar customers that default on their loans.
But we've heard countless of stories where banks "rearrange" the order of transactions such that there is multiple overdrafts and thus fees. That is an example of something not in the customers best interest, but designed to suck out as much money as possible.
For example: To prohibit lenders to provide credit if the credit receiver is already so much in debt, that she's never able to service an additional loan?
Or how about capping annual interest rates at 15%? Making everything above that ursury and thus a criminal offense?
Now you may imply that this is the case in some socialist hellhole that hates business and you would be very wrong.
That's the law of the land in Switzerland, which, last I looked isn't exactly hating business.
Recently quit working at C1 as well, and share the author's sentiments exactly.
Whenever I brought up whether the work we were doing might actually be harmful (even as a general question), coworkers would reflexively quip about what they're doing giving back to the community through outreach, or some other vague response that obfuscated the people behind the problems they were solving.
And of course, executives would just spam you with "Change Banking for Good".
Sounds like cognitive dissonance. Your coworkers felt like they are nice people, but nice people don’t steel from the poor, so their brain didn’t know what to do.
Interest compounds geometrically and wages grow linearly. It’s not advanced math to realize the end state of usury is a rent-seeking class that owns basically everything, at least until the political unrest gets to the hot stage.
Historically, intelligent elites have permitted safety valves like bankruptcy and even jubilees. While this does reduce the nominal wealth of the owner class, it has no actual effect on their real wealth since they still own plenty of real assets that can be used to start the next round of interest based rent-seeking. Unfortunately our present day elites present us with evidence that they plan to run the system into the ground and then escape to five star bunkers in a New Zealand. I guess we’ll see how that works out.
Inflation is not a net change in pay. If real wages grew at say 1% compounded annually, over the last 2,000 years salaries would have increased by over 400,000,000x.
In the end, wage increases are far from geometric growth.
> I believe (although I can't find it now) that it was Nassim Taleb who said something like, "Every truly long-lived civilization has banned interest."
Sumer? Babylon? (Pre-Islamic) Persia? (Pre-establishment of Christianity) Rome?
Examples? Islam is not as old as Christianity. Nor Judaism. This seems wrong on the face of it.
Oh sure, there might be some lost tribe in the Amazon but I don't accept it, even if it is technically long-lived.
Interest is how we pay people to save and share their savings with others. Growth and reinvestment is much easier with it. This is why the Muslim world has come up with financial gymnastics to reward savers without technically paying some interest.
You do realize that the Islamic prohibition on interest comes directly from the Christian New Testament, right? That early Christians forbade interest for centuries? That some Christian groups still forbid collecting interest?
As other posters have mentioned, but to put a little more emphasis on how this worked: the Christian world of early to middle Europe banned Christians collecting interest on loans (which, effectively, banned Christians from operating loan-based financial service businesses). They didn't ban interest on loans in general, and in fact depended on loans with interest. They outsourced their financial services to their minority Jewish populations, and then every hundred years or so when the interest payments piled up too high, they evicted and/or massacred all their Jews, and seized their property.
Not a great deal for the Jews! Although they were also legally barred from doing almost any other work (they could also be tax-collectors, which was hardly a better job)[1]. But it's definitely not the case that the civilizations of Christian Europe didn't have loans with interest.
This was also largely true in Islamic societies: they did rely on loans with interest, by once again relying on their minority Jewish population to provide financial services. [2] Unlike the Christians, though, the Muslims generally paid back their loans instead of murdering their creditors.
It's actually much, much more devious than that in the Christian world.
In England, Jews aren't consider the subject of the local lords. They're subjects of the king directly so they paid their taxes to him directly. Thus by raising taxes on the Jews, the kings of Englands were able to indirectly tax his nobles (because the cost would be passed on to their creditors) while throwing the Jews under the bus. This is why you see at various times in English history that the nobles call for the eviction of the Jews.
True, but "ok we will have interest but periodically massacre the people interest is owed to", is much like not having interest, except nastier. You are, in a sense, avoiding the problem of an interest load spiraling up out of control.
But, it's true, it was not a perfect ban, but it certainly did have the practical impact of not allowing those to whom interest is owed, from hijacking control of the state. Again, not in a good way, but I think it shows that long-lived civilizations eventually find that the Mathew Effect is particularly strong with interest, and must be reined in somehow.
Hopefully in a better way than the medieval Christian one.
It is no coincidence that many jews used to be in the money lending business in those times. They could not charge interest on loans made to other jews, but christians (and other non-jews) were fair game. Sadly this did not improve their popularity...
Lots of other reasons too, like fears of being driven out of town and having to abandon any physical goods and stores, not being allowed to own land (so no farmers), not being allowed to join many craft guilds....
Minor point: the prohibition actually goes back to the Old Testament (Leviticus 25:36), whereas the New Testament seems strangely OK with it (in the parable of the talents [1]). Also Leviticus explicitly permits you to charge interest to an outsider, which is why Christians outsourced it to Jews.
Right, I forgot it was Leviticus with the most clear passage on the subject. Though, I suppose I've heard more of the anti-usury interpretation of the Parable of Talents than the straight reading. I also know that the Parable of the Moneylender is brought up sometimes as anti-usury by the way it conflates usury with sin directly in its analogy. Also, the tale of kicking the moneylenders out of the temple is often mentioned alongside these examples.
You might find that the tale is about money changers who changed various things into shekels so that the client could then pay the temple tax [1]. I don't think that line of business is connected with usury, unless you look at making a market in an item using a bid-ask spread as selling a cake and charging separately for its consumption [2].
It's actually more nuanced than that. Interest isn't banned outright. Interests on things that carried risk was fine so interest on foreign exchange was fine. This was how the banking families of Italy like the Medici made so much money. The ban on usury is only on non-secured loans or loans secured by the person. For example, mortgage is actually OK because the debtor can default and walk away. However, loans that are secured by the person who must pay cannot collect interest. This, IIRC, comes from St. Thomas Aquinas.
If you're looking for examples of "long-lived civilizations" on Earth, you might be interested in the longest-living cultural institutions. Islam, Christianity and Judaism are such millennia-old institutions. And, a bit contrary to GP's point, all of them have, or had, limited bans on interest.
I think this is because of the context at the time. Your borrower should be aware of what they're signing up for. Debtor's prisons also existed. There is a lot different then than now and I think lending is a much safer activity today if is regulated properly.
I like to think of religion as early law. Pork was also probably not a very healthy meat to eat at the time. Now it is probably an outdated thing.
Perhaps. I'm not saying there was any divine knowledge involved, whether about interest or pork. It's just that if you're looking for evidence in favor of the quote at the beginning of this thread, these three organized religions - one of the longest-living cultural institutions on the planet - are good examples.
Both Christianity and Judaism have, at various points in the past, had bans on interest (amongst themselves, anyway), even if in more recent (and secular) times those have been ignored.
My natural tendencies are definitely in the libertarian/capitalist direction. I think that people should be able to whatever they damn well please with their money. I think that they will get it right more often than not and that when the government steps in to make laws restricting the free exchange of goods/services/money it's almost always a bad idea.
And then I read different versions of the same story over and over and over again. People with far more credit card debt than they could ever pay off. More than a year's salary worth of debt. People that we just stupid about money, and bought way more stuff than they could afford encouraged all the way by the credit card companies and advertising and keeping up with the Joneses.
So now, from time to time, I sometimes find myself wondering if credit cards should just be illegal. Such thoughts are heresy in my own mind, and I don't know how to deal with them really especially because I know that credit cards have been great for me with my 2% cash back and airline points. And I know that they can be great for people who get into a temporary cash crunch and know how to be wise about such things.
But then I read another couple of pages of /r/personalfinance and I wonder again. Maybe people do need protecting from themselves. It certainly looks like some of the people posting there do.
I find myself very sympathetic to the author's views.
There’s a simple solution here that doesn’t require banning credit cards: requiring borrowers to demonstrate ability to pay before signing off on a loan. Most creditors do this, it’s usually only the ethically challenged lenders that ignore this.
The previous administration passed regulations requiring payday lenders to verify ability to pay before handing out loans, which was promptly crushed by the current admin at the request of the payday loan lobby.
Another solution is to cap the max interest rate far below current thresholds. The problem with these loans is that lenders are hoping you’ll get into debt, they’re in no way trying to create a mutually beneficial relationship with their borrowers.
I'm partial to an even simpler solution: Make it easier to go into bankruptcy, and discharge the loan in bankruptcy.
If your debt load is unsustainable, such that your interest payments are more than XX% of your income, then you effectively already are bankrupt. We can either try to get people back on their feet, or let their debtors grind them into the dirt for a while longer.
In reality, credit card companies will already settle for a fraction of owed principal if they believe you're seriously considering bankruptcy --- I've personally watched them come down to less than 20%, and my understanding is that people who are good at these negotiations can get them much lower still.
Can confirm. Remember, a) if they sell it to a debt collector, they're probably selling at 3 to 5 cents on the dollar [+] and b) they can't sell it, at all, if your bankruptcy notification gets to them before the Big Ponderous Corporate Process pulls your account into their package being sold to a debt collector.
[+] More if they haven't worked it a lot internally or if it is sold while fresh or if you look like someone who is extremely collectible but let's say "Typical case for people who are on verge of bankruptcy" pushes you waaaaay down the stack on all possible ways to price debt.
People should be able to do whatever they dann well please with their money, including spending it on frivolous and stupid things and painting themselves into a corner. It’s not freedom unless it’s freedom to make bad decisions as well as good ones.
If you believe the first, like you say you do, people do not need to be protected from themselves, as self-inflicted harm is the correct outcome of letting people do as they please.
I think it’s ok for people who make bad decisions to go deep into debt. There’s no debtors prison in the USA, recourse against default on the extreme low end is pretty minimal. It may stress them out (as unpaid debt should, to some extent) but they likely won’t die over it.
Just as it's hard to stay healthy when everybody around you is sick, it's hard to stay wealthy when everybody around you is poor. Locking yourself away in gated communities to keep out the hoards isn't really freedom.
If your ideology requires violent coercion to work right, your ideology is fundamentally flawed.
There are tons of better ways of getting people to make better financial decisions than sticking guns in the face of lending institutions that choose to do business with them.
There’s no explicit mechanism, but our politicians read this and study it. Academics know, and consider the Constitution an aristocratic document, protecting elite power.
See it’s bailouts and tax cuts for the rich, and inequality, wage stagnation for the masses. The emotional programming for that comes from somewhere.
The laws of physics only dictate who is economically advantaged in that they dictate how our brains work. And our brains are then easily emotionally manipulated into believing bullshit.
Forgive my ignorance on the subject of matter, but aren't these credits so expensive precisely because they're handed to unreliable debtors?
There is obviously a need for such a product since it's so popular, but it can't be cheap to manage and collect them especially since they're so small.
How amoral has your socioeconomic policy become when a credit card with a 27 percent interest rate and a $39 late fee marketed to people whose credit is so bad they can’t get a credit limit without putting down a security deposit is even legal?
You know, some people's destiny is to teach yoga and make pictures with cute African-looking kids. Other people are destined to optimize financial services so there are cute African-looking kids willing to take pictures with mediocre yoga teachers in the first place. All is balanced in a perfect world.
> But the morality of the credit card executive is a morality of autonomy: If I’m giving people choices, that’s a good thing. “How could I be making this customer worse off,” a credit card executive asks herself, “if nobody is forced to use this product?”
I guess I'm an evil executive, because I do think that the default assumption is that people are better with more choices. There are obviously exceptions, but I'd want some evidence to the contrary before I started blaming others for offering them choices. And I'd want especially strong evidence if banning those choices is damn near impossible (since loan sharks will just appear), so that unilaterally deciding to not offer choices makes people even worse off (because they go to the loan shark instead).
I went searching in this article for evidence, but couldn't find much. This seems to be the extent of it (am I missing something substantive?):
> As Scott Schuh and Scott Fulford have shown in a paper for the Federal Reserve of Boston, people who get credit limit increases tend to keep their “utilization” constant. In other words: If a person is carrying a $1,500 balance when they have a $3,000 credit limit, you’d expect them to start carrying a $4,000 balance if the limit is raised to $8,000. If most people use the full credit-limit increases they are offered, the thinking goes, that must mean that most people want to borrow more money.
Isn't this consistent with poor people needing loans, and yet them also wanting to make keep some of their credit limit in case things get even worse?
The author's main argument seems to be that Capital One has a lot of research resources, and if they were making their subprime customers better off they would be able to prove it with data, but they can't so they must not be.
> If [CEO] Fairbank cared to know the answer to any question—such as, “How many of the loans that we give out actually make the borrower’s life better?” or “What are the consequences of raising our credit card interest from the prime rate plus 19 percent to the prime rate plus 23 percent on child hunger in America?”—he could have gotten thoroughly researched answers. But those are the kinds of questions that the entire Capital One workplace was designed to drive out of view.
The author concludes
> When I was at Capital One, I wanted to understand if it was possible to keep loans as an option for the people who have exhausted all their better alternatives—without also causing suffering for those who would be better off forgoing purchases or borrowing money from friends and family. After five years, I concluded it was more or less possible to achieve that goal—to do the good loans without doing the bad loans.
> I do think that the default assumption is that people are better with more choices
The problem is that the default assumption is not a universal truth. It's a rule of thumb.
If someone is in bad financial shape and I offer a loan to them, they'll probably take it because they have immediate pain that they want to fix. They are not likely to consider that the loan may ease their immediate problem, but will cause the problem to come back, but worse, later on. This is basic human behavior -- we care more about what is real right now than what will become real later on.
Lenders, however, know this (or should), and to give such people the "choice" of making their situation worse later on in exchange for temporary relief right now is simply inhumane. I don't think it's unfair to characterize that lending behavior as "predatory".
1. There is no lower-bound on wealth at which people stop needing loans. Arbitrarily poor people can benefit (a lot) from loans. The main issue is that people who are poor in rich countries are more likely to be people who make poor choices.
2. You did not address my point that if there is no way to stop people from getting illegal loans (loan sharks), it's better to give them loans at the market rate rather than the even higher rate loan sharks must charge because they operate outside the law. This consideration is very similar to legalizing drugs.
> You did not address my point that if there is no way to stop people from getting illegal loans (loan sharks), it's better to give them loans at the market rate
I don't think this is a good argument at all. In both instances, vulnerable people are being hurt. Arguing that it's OK for you to hurt them because you'll hurt them less than the other guy seems dubious to me.
OK, but lots of people would disagree with you, e.g., in the context of supervised injection sites.
Suppose it were unambiguously clear from data that (1) society as a whole and each individual were better off when marijuana was legal and tightly regulated; and (2) individuals would be better off not using marijuana. Would you then vilify marijuana providers? (I generally would not, although I would hold them to a stricter moral standard than I would for sellers of products that are generally beneficial to the user.) What if we replaced assumption (2) with assumption (2')?: 80% of individuals who use marijuana are better off (say, because they use it only socially and the negative motivational effects turn out to be small), and 20% are worse off (because they abuse it).
Exactly. Hardline capitalism assumes that everyone is a rational actor, and that therefore nobody offering a product or service can be at fault for harm coming to their customers. The problem is that people are often not able to be rational actors:
- People can have bad or incomplete information: misleading advertising, lack of expertise in every subject area that affects their decisions, etc.
- People can lack freedom to act: monopolies, lock-in, etc.
- People can have their rationality itself undermined through desperation, emotion, or addiction
Some of these problems have been patched over with laws. False-advertising law, nutrition labels, terms/agreements. Many have not. The third, and to a lesser degree the first, are the most relevant to the OP.
Hardline capitalism assumes rational actors act with the information they have and assumes information asymmetry. The only way a price is agreed upon is with information asymmetry and rational actors: the buyer values obtaining an item in a certain way and the seller values getting rid of the same item a certain way. It matters not what those reasons are, nor that each side know the details of what leads to a narrow spread, only that the desired price itself be made public, shared with the other party. Hardline capitalism assumes the only important piece of shared information is the price.
Rational actors and own-self-best-interest isn't about common, specific, long-term positions that an entire population might share (like increasing debt load is bad, or that having the most cash saved is good), only that the choice of price is set based on a number of variables, both internal and external to the actor. A desperate buyer might set their offer price high in order to attract sellers when there are none, despite not being able to pay (which is handled, positively or negatively, in other ways). A desperate seller might set their ask price really low because they have to get rid of inventory. Getting something "for a good price" is about the utility that comes about from having the exchange takes place vs not having the exchange takes place and each party being worse of. An addict might not be making the best decision for themselves and their livelihood but is making a rational decision if their goal is to get high.
But hardline capitalism isn't necessarily the thing we want, because of the chance for abuse of the information asymmetry and that, while everything is encoded in the price, extracting and understanding those details and position of the other side is impossible.
I don't have an ethical problem with the concept of charging interest for loans, and I don't think they're automatically predatory.
I think the problem comes when you are giving loans (and particularly high interest loans) to people who have little to no hope of being able to repay them.
>> When I was at Capital One, I wanted to understand if it was possible to keep loans as an option for the people who have exhausted all their better alternatives—without also causing suffering for those who would be better off forgoing purchases or borrowing money from friends and family. After five years, I concluded it was more or less possible to achieve that goal—to do the good loans without doing the bad loans.
>But I can't see why she thinks that.
The answer, which is this clearly the author's position, is self-evident if one moves from assessing the situation from the profit-motive lens: a stop to the practice of predatory lending.
Earlier, the argument was "Isn't this consistent with poor people needing loans": they don't need loans, they need a livable wage (which I know is a whole different story so won't go into that), but since they can't don't have a livable wage, they need financial support to tide them from non-livable paycheck to non-livable paycheck, that does not cost an arm or a leg, as they make sacrificial decisions as to what to make do with/without.
The argument that people are being given more choice is a lie - there is literally no choice here.
The lending is literary predatory as it is i) from a lender of last resort and ii) comes with interest and fees that would be intolerable to anyone with options.
Non-predatory lending is just one part of what the writer describes as ".. do the good loans without doing the bad loans."
... on the one hand, I want to yell "Strawman!" "Strawman!" "Come out and see the Strawman!" from the hills but I do not want to come off as aggressive or preaching ...
The point you make here is certainly true but it is neither the point of my argument or the point of the author's piece.
I guess there is no way to receive satisfaction here.
The other bit of evidence she cites but doesn't quantify is that marketing new cards causes incremental debt.
That said, I largely agree with your sentiment that the article doesn't provide sufficient quantification. You also might want to consider that the author might have experience seeing that quantification and making decisions based on it that can't be shared in The New Republic without violating confidentiality agreements.
One lens through which to view this: Is a culture that tends to view its customers as mathematical entities likely to make the best decisions either for their customers or themselves? That's the real tragedy and is half of the explanation for the paradox that such genuinely intelligent and kind people do things that hurt others (and in some cases themselves).
Disclosure: I also worked at Capital One and briefly encountered Elena there
It's fine to give people the choice to borrow money, if you also give them the choice to not pay it back. But, bankers have lobbied government to remove that choice for poor people, but not for rich capitalists.
The Mortgage Bankers Association defaulted on its own mortgage while trying to ban personal defaulting.
I have a great credit rating and my interest rate is 25% and late fee is $25. Doesn’t sound like the poor are being offered something that drastically different.
I'm not from the US (Canada), so it sometimes confuses me when people talk about the cost of college. Doesn't the US have public universities? Are they super expensive too?
> It was common to hear analysts say things like, “I just love to solve problems.” But what they were really doing was solving something closer to puzzles. It’s clear to me, for example, that the janitor at my middle school solved problems when she cleaned up trash. It’s far less clear whether analysts at Capital One are solving problems or creating them.
> The rise of data science, machine learning, and artificial intelligence means that you don’t need venal corporate tycoons wearing Monopoly Man hats to grind the faces of the poor into the dirt. Under the data-driven directives of Capitalism 2.0, you can have a bunch of friendly data scientists who don’t think too deeply about the models they’re building, while tutoring low-income kids on the side. As far as they’re concerned, they’re refining a bunch of computer algorithms.
Let us all remain vigilant that the puzzles we solve in code are actually solving problems, and not creating them.
I heard a story on the radio the other day about the debate of whether or not we should allow robots to kill people.
I wonder if ever in history there was a time when we needed to kill people faster and set our engineering minds to solve that problem. Would there be any lessons to learn we could apply to our current problem of automated human life destruction.
I just can't believe there are human beings who would actually write that code!
Edit: Clarification, Yes, robots that kill automatically with no human intervention. Programmed to seek and kill the enemy.
> Yes, robots that kill automatically with no human intervention. Programmed to seek and kill the enemy.
You know what those robots can't do? They can't rape the enemy. They can't kill their superior officers, traffic in or get addicted to drugs, and ideally, they won't be killing anyone but their target. They can't be made prisoners of war and tortured, and they can't really be hostages, either captured or because of proximity to the combat theater. If the robot is destroyed, you don't need to tell someone's mother their son isn't coming home. It may even stop wars because the other side is only destroying materiel that can be replaced instead of lives. A deterrent.
I know the negative arguments against them very well, and I also agree with them; you can't do this because it can and will spread and it makes killing much "cheaper" for the same reasons. But why is it so hard to imagine why people would write that code? It's really the same reaasons why people here love self-driving cars; to remove human error that causes waste and death.
> They can't be made prisoners of war and tortured, and they can't really be hostages, either captured or because of proximity to the combat theater.
That sounds like a feature, but it has a very important downside.
One of the biggest reasons that politicians hesitate to send in the troops is for the very reason you mention. Killing from afar with no accountability or political downside is a recipe for permanent warfare. In fact, there is a significant upside to them from the defense contractors.
You could argue (and many have) that we have already seen the start of this with the US drone program.
I mean, you have people who design weapons. They're explicitly intended to kill people. Is programing a robot to kill people any different from programming a weapon targeting system?
I'm not endorsing this, mind you, but it's not really any different that what we've been doing to each other for millenia.
But the responsibility of “pulling the trigger” makes these engineers sheltered from any guilt. However, engineering the cases for triggering the robots to kill and the resulting bugs can be directly attributed to the team that designs it. Whether they care or not, or ever have a hard time falling asleep at night is a different story..
There are plenty of engineers who build systems where bugs can lead directly to death.
In the case of killer robots, the engineers are not (outside of a test gone wrong) going to be realeasing the robots themselves. They are going to be giving them to the military, where officers create and load particular configurations then release the robots with that. These are the same people who current create orders release frontline soldiers to execute said orders.
That's my point. There's been a steady trend toward global annihilation and as a species we are running toward it.
I was out with a bunch of friends who worked for Northrup Grumman and I was like, "Why do you guys work there building things designed to kill people?"
Oppenheimer and Einstein were very nice people who in general weren't in agreement with most of the policies of the governments that they helped develop killing machines for. Those governments knew this, and distrusted them for it.
Only some of us are sociopaths (a lot of people in tech, sadly), but most of us just compartmentalize and rationalize, with a special pitfall for the math-oriented is the truism that technology doesn't have moral implications in and of itself, just the uses to which it is put. The last is one of those things that people never bother to justify, they just think of it as an obvious implication of a impenetrable division between abstraction and the material world that is nevertheless marked by humans shuttling information between the two. To me, thinking of people this way is just warmed-over dualism.
If you introduce a technology into the world, you have to consider the possibilities every type of person with every possible aim having control of that technology. Not doing this is simply not scientific.
> If you introduce a technology into the world, you have to consider the possibilities every type of person
You can't.. the human mind simply can't understand every type of person or even 90% of every type of person. If this is a requirement for advancement nothing would ever get done due to the complexity of this part of the problem alone.
> with every possible aim
Again, we are limited beings this is not possible.
> having control of that technology. Not doing this is simply not scientific.
I'm going to disagree with your use of the term 'scientific in this case. The creation and use cases are entirely different steps in development.
The onus is not on the creator but the user. This is basis for modern law in the society we live in, we collectively choose to put this on the ' scientific community ' development will happen elsewhere and the moral civilization while nicer will remain in the stone age where it belongs.
> People have a series of rationalizations. People say for example that science and technology have their own logic, that they are in fact autonomous. This particular rationalization is profoundly false. It is not true that science marches on in defiance of human will, independent of human will, that just is not the case. But it is comfortable, as I said: it leads to the position that "if I don't do it, someone else will."
> Of course if one takes that as an ethical principle then obviously it can serve as a license to do anything at all. "People will be murdered; if I don't do it, someone else will." "Women will be raped; if I don't do it, someone else will." That is just a license for violence.
> Other people say, and I think this is a widely used rationalization, that fundamentally the tools we work on are "mere" tools; This means that whether they get use for good or evil depends on the person who ultimately buys them and so on.
> There's nothing bad about working in computer vision, for example. Computer vision may very well some day be used to heal people who would otherwise die. Of course, it could also be used to guide missiles, cruise missiles for example, to their destination, and all that. You see, the technology itself is neutral and value-free and it just depends how one uses it. And besides -- consistent with that -- we can't know, we scientists cannot know how it is going to be used. So therefore we have no responsibility.
> Well, that is false. It is true that a computer, for example, can be used for good or evil. It is true that a helicopter can be used as a gunship and it can also be used to rescue people from a mountain pass. And if the question arises of how a specific device is going to be used, in what I call an abstract ideal society, then one might very well say one cannot know.
> But we live in a concrete society, [and] with concrete social and historical circumstances and political realities in this society, it is perfectly obvious that when something like a computer is invented, then it is going to be adopted will be for military purposes. It follows from the concrete realities in which we live, it does not follow from pure logic. But we're not living in an abstract society, we're living in the society in which we in fact live.
> If you look at the enormous fruits of human genius that mankind has developed in the last 50 years, atomic energy and rocketry and flying to the moon and coherent light, and it goes on and on and on -- and then it turns out that every one of these triumphs is used primarily in military terms. So it is not reasonable for a scientist or technologist to insist that he or she does not know -- or cannot know -- how it is going to be used.
Um, kind of weird edit. All I mean is that both made the point that the "good" parts of technology cannot be separated from the "bad", and that people will rationalize their participation in the system.
I'd write that code. I don't believe that violence is wrong. I don't believe that defense work is wrong. I don't have to lean on my ported ignorance of a technology's applications because I don't buy into the moral framework that says that this use or that use is wrong.
Every technology not forbidden by physics is inevitable. If somebody else is going to get a powerful tool to use against me, I'll damn well make sure I have that tool too. And if I can, I'll get it first.
You want safety from killer robots? Make more and better killer robots than the other guy.
[beaming smile] "Zat could be eezily done with a compjutah!"
One person writes calculate_attitudes(person)
Another writes calculate_abilities(person)
Another writes calculate_desirability(person, calculated_attitudes, calculated_abilities)
Another writes determine_spatial_location(person)
Another writes parse_list_of_protected_persons(whitelist)
Another writes move_to_safe_vantage_point(drone, picked_target, whitelist)
Another writes aim_cannon(cannon, spatial_location)
Another writes fire_cannon(cannon)
Another writes determine_witnesses(spatial_location, timestamp)
Then you just feed witness_person, witness_attitudes, witness_abilities into calculate_desirability, and loop it forever, killing the least obedient n%. No involved person really did much, or even anything, as far as they are aware.
Especially since you can, as Joseph Weizenbaum -- the one person HN really should know, but really doesn't -- pointed out, design/build/train those algorithms and machines with all sorts of rather benign stuff. E.g. you train for finding missing persons, but then you can also just feed it names and photos of dissidents instead of missing persons. The people "refitting" may know about the people who build them in the first place, but not the other way around.
Yes, that's correct. That's the idea. That is the goal. People are working on this right now. Writing basically, exactly those functions.
The survival of humanity has escaped ALL tribal boundaries. The human beings with the most power are the ones contributing the most to our assured destruction.
It's basically inevitable. I am not a religious person, but ... has this happened before? Have we destroyed ourselves before?
On another planet? Millions of years ago, before the dinosaurs? How could revelations have predicted it so well thousands of years ago, hundreds maybe, before there was any evidence all of this would be happening right now.
Lots of religions have these stories about ourselves destroying ourselves and our planet. Indian religions describe it too I know for sure. Battles of the gods in ships with laser like weapons.
It's like we are uncontrollably, knowingly, ... desiring of self-destruction as a species.
To give credit where it's due, I kind of took this and ran with it:
> It should be noted that no ethically-trained software engineer would ever consent to write a DestroyBaghdad procedure. Basic professional ethics would instead require him to write a DestroyCity procedure, to which Baghdad could be given as a parameter.
-- Nathaniel Borenstein
> Why are we like this and how do we change us?
Don't take this the wrong way, because I totally "feel you", to put it briefly, but my first thought is, there is no "us":
> When all are guilty, no one is; confessions of collective guilt are the best possible safeguard against the discovery of culprits, and the very magnitude of the crime the best excuse for doing nothing.
-- Hannah Arendt
For me it's important to not forget that sociopaths are weak rather than strong, and bluffing rather than laughing. Outside of forms of communications they can dictate and manipulate, that is, without some form of violence or dishonesty, on their own and as themselves, they have nothing, and can be made to implode rather easily. A murdering SS officer is not what sums up this phenomenon, Hitler, in his bunker, blowing his brains out, after blaming everyone with words that are obviously garbage once the claqueurs are gone, is.
No, I'm not saying I'm innocent and others are the sole source of evil. But we're still not all the same, it's a spectrum and we're not all in the same spot, and I reject that it's some "average human" doing everything. That's an abstraction, only the actually existing individuals are real, and the worst thing that can happen is not resisting and realizing it was "in vain" (and it never is when it comes to what it makes you as a person), the worst thing that can happen is that we realize we fell for rather mediocre people who faked it until they made it, and that we could have resisted easily (in comparison to the titanium steel gravity well humanity would be in then).
There is no difference between a machine gun and a robot.
A person designs a machine gun but does not pull the actual trigger. There is an army officer that orders the weapon be deployed and the rules of engagement for when it can be used.
A person designs a killer robot but does not activate it. There is an army officer that orders the weapon be deployed and the rules of engagement for when it can be used.
There is always a person that is responsible for the use of a munition. Maybe that person is higher up the chain with a killer robot than a machine gun. If you want to launch a nuclear bomb then it goes all the way to the top of the chain. But there is always a person that is responsible for the death caused by the munition.
How does one acquire the necessary funds for larger projects when one does not personally have the funds to do so?
Debt always needs to be measured against the value of brings. Does the interest make up for the value you were able to generate today and throughout the lifetime of the debt repayment?
IMO, there is good debt and bad debt (and a gray area in between). My personal rule of thumb is, does that debt render me revenue above the monthly repayment and will it do so through the lifetime I hold it? That is good debt. The rest is bad.
Now, you can argue that other debts provide more than monetary benefit. That is where the gray area is. That is a personal decision.
You are essentially doing the same thing with a bank, but with less risky. There are no debtor's prisons. If you default, you can claim bankruptcy and walk away. There are other risks inherit to have a business partner. The biggest one being the risk that your business partner engages in illegal activity under your shared entity. Suddenly you are liable as well. The tamer issues revolve around not wanting to do business with someone anymore... And it can end as bad or worse than a divorce.
Capital costs blow out everything when you are in tangible industries.
Try buying a piece of heavy equipment that costs a quarter to half a million dollars. Every logging contractor or construction outfit I know is mortgaged to the hilt, one or two steps ahead of their payments
As it applies to new real estate specifically, you have a lot of materials, labor taxes etc to deal with. These are the most common sorts of business debts that I've been exposed to.
For existing real estate, I see value of things going up in value largely due to population increase in a certain area combined with the fed printing money (which it claims to do so constantly because the population will always be increasing?). I also see values wildly inflated due to foreign investment. A big issue in general is also due to the banking sector. I think the US government allows banks to go a little crazy with lending to everyone on anything without recourse. That being said, I personally benefit from the system allowing me to borrow money so cheaply.
Sorry if this post was a bit disorganized. I have a lot of thoughts on it and it is a great thought experiment. :)
Good answer! Now imagine if there was a society where money supply did not increase because of more loans, but by something more of a function of labor.
What do you think would happen to the prices of materials, labor etc? Do you think tying money supply as a function of labor would make cost of necessities close to the median?
I think you may be referring to the Labor Theory of Value (LTV)? Certainly, early versions of currencies were created to streamline the bartering process between different kinds of labor and store that value for future purposes. I'm not sure what attempting to remove debt from a market would look like in the modem world as I only have the current context to compare to (for better or worse). What do you propose as an alternative?
I don't have any alternatives without rough edges. THat's for overpaid economists to figure out ;)
However, I'm thinking more along the lines of production. So if an individual/company produces more units of something, the FED could print that much money and put it into their accounts directly.
With expanding society, more money will be brought into circulation.
With lesser production, lesser money will be matched and produced by the FED.
The consequence of this would be that there is incentive to produce more with less. There will be more value for physical labor and that the rich would suffer as much as the poor. Hoarding money at the top will just result in lesser and lesser money being produced for the rich to earn.
Now you could go and take a loan if you wanted to. But not from a bank. Take it from any other party. It's between the two of you and you both go bust if the loan fails.
There are caveats here but what it removes is the creation of money by debt. Thus, to be richer as a civilization, we don't need more debt as a society. We need to produce more goods and services that are actually desired by others.
No. More like a FED sponsored 401k match for wages. If a company thinks it can earn more by producing more goods, it will hire more people and give them wages. The FED will match it, effectively bringing money into circulation.
As company gets more and more efficient, they wouldn't need employees. But this would cause lesser money to be brought into circulation, thus eating up the companies earnings itself.
If the company wants more debt, they can go borrow from others (rich institutions, individuals etc) but this activity will not create new money. Thus, total money in circulation remains the same.
If an individual wants to buy a house, the house price will effectively be closer to the median affordable income of population. Thus, it will incentivize individual to produce more goods and services to reach median income at least. The only way to become richer is to produce more.The rich can try to buy more houses but it wouldn't be possible as much since leverage and speculation is much harder.
So a world with lesser speculation? Economies that move steady in the first place so that recessions aren't these massive downturns causing so much grief?
An economy where new business formation is radically more difficult so the economy is far slower to adapt so there is mass unemployment and human misery.
Go talk to someone who actually runs a real business. Especially a business with capital costs. Ask them if they could run it without access to credit. The answer is no.
Why would business formation be so difficult if the cost of production will be so low (because there is close to zero speculation?)
Why would capital requirements for capital intensive businesses be so high when the equipment they are trying to buy will be cheap?
If they need to buy lots and lots of equipment right now, they could issue a bond, investors looking to make a dime will lend. Since inflation is low because of no speculation, interest rates would be low as well.
The one big caveat I see is slow growth but that's exactly what I'm looking for. Slow sustainable growth directly proportional to labor.
Because the amount of goods and labor required to build a house (that can be lived in for decades) is typically a lot more than what an individual can save up for in any reasonable amount of time.
You're missing the forrest for the trees with all your handwaving about the money supply.
Houses are big and expensive and sit on land that is in finite supply (especially in high demand areas). People are generally a lot better off if they can pay this purchase off over time while living in it rather than saving up to pay for the whole thing all at once while also paying to live somewhere else.
>Because the amount of goods and labor required to build a house (that can be lived in for decades) is typically a lot more than what an individual can save up for in any reasonable amount of time
That works both ways though, the reason housing is so expensive is because borrowing is so cheap and easy. The cost of land, materials and regulation has expanded to match the available funds.
The available funds is irrelevant to my point because costs increase in proportion everywhere. If we 2x the amount of money in the system a house will cost twice as much...but so will the cost of a person's labor.
But the ratio of the cost of a house to a person's labor will stay constant.
One person borrows to afford something, which drives the price of that thing up creating further incentive for the person who wants to compete with that person to go into more debt to obtain said thing repeat ad infinitum.
> There is a place for debt in society. And that is: emergencies.
Emergencies (if defined as unexpected events that have a high enough cost that a person requires debt) are things that people with fewer resources have exponentially more often than people with more resources. Emergencies, especially incompletely serviced, also tend to lead to further emergencies, and very quickly servicing the debt becomes the emergency.
Also, I'm not sure debt should be reserved for emergencies. Sebt is much better for growth related activities. What can I do now with money that I know will increase in value over the interest? You're essentially buying the future.
Insurance or collective money pools are much better for emergency issues if they are not incentivized to profit off of its members.
This is a nice sounding well intentioned pile of crap.
This guy doesn't like the concept of credit cards. That's all this boils down to.
Instead of making a detailed structured argument about what he feels the problem is, he tells a couple anecdotes about times credit cards didn't work about for people and about his personal feeling that credit cards aren't that great.
Ok fine. But then what's the takeaway? Not that there is any structural problem here or that something needs to change but that credit cards make this guy feel bad.
This kind of personal therapy masquerading as systemic or policy critique does nothing but rile people up with vague sentiments and directionless anger. It's a net loss for everybody involved.
For the record I'm not some kind of bank apologist, but the fact that there are serious structural problems with the way banks operate in the US makes this sort of infectual critique all the more frustrating
When it comes down to it, pretty much every service takes advantage of someone's need. Someone needs to borrow money? Sure, lending the money at an interest rate takes advantage of them. But so does billing for emergency room services or, heck, charging for a bottle of water on a hot day.
Get over yourself-- and good luck finding a job where you're not pandering to someone's needs and then exploiting it to make a living.
honest question: do you think $23B interest is just "making a living"?
because if not, then you acknowledge there's an opportunity to charge a teeny bit less, and maybe not move in to an uber chic building, to completely maximize potential profit according to the altar of profit-seeking.
hell, according to this whole "efficient allocation of resources" "hypothesis" we should have long ago arrived at a point where the only way for these poor, poor banks to make a nickel is to massively innovate on risk models, technology, etc. because there's so much money (=> competition) that hundreds of firms are competing by lowering interest rate and there's barely any revenue to be made to pay for things like employees and computers.
It's a fair point, but this $28b is not for one person. There are probably hundreds of thousands of people working at Capital One. All of the profit is spread out amoungst them. (Not evenly, of course). Many of them are making a pretty average salary. So yes, for them it's just making a living.
But in those transactions both parties end up better-off than they were before. Predatory loans are more akin to gambling or heroine: they intentionally undermine a person's rational decision-making in order to leech value from them, without any reciprocity. This undermines capitalism itself, in a way.
And we don't want to give loans to poor people because that's clearly predatory lending. They would be better off without the option to decide for themselves because everyone knows how stupid they are and how incapable they are if making any kind of decent decision.
That's a recipe for a permanent underclass.
Opinion of a formerly homeless person who took out a Payday loan to go stay at a dive of a hotel for three nights to escape a deadly storm. My logic: three nights in a hotel was cheaper than replacing my laptop, which I needed to keep earning money.
I had no idea how I would eat for the rest of the month and didn't care after walking past a river about six times wider than I had ever seen it and my "safe" campsite for weathering the storm that was currently under probably six to ten feet of water -- before the worst part of the storm rolled in. I just knew I would be in a hotel that night if there was any means whatsoever to arrange it so I wouldn't die that weekend.