THE FOLLY OF USURY LAWS. (I was tempted to title this D.C. Subsidizes Bin Laden ... keep reading...) Last month I had some fun with The Two Income Trap (details or compare prices) for suggesting that interest rate ceilings would save the squeezed middle class. This Glen Tenney article at Mises Blog has some related fun with the idea that interest rate ceilings at pawnshops make it easier for people to make collateralized loans.

But what do interest ceilings do for this perceived "monopoly" problem? As noted previously, interest rate ceilings further diminish borrowers’ choices by effectively shrinking the number of competing pawnshops. This is especially disconcerting for the poor who live in rural areas where traveling to another town to get a pawn loan further increases the overall cost to an extent that may indeed (by a long shot) more than offset any possible benefit of a lower interest rate on a small loan. Thus interest rate ceilings are not an effective means of controlling any threat of "monopoly" power by pawnbrokers. This "monopoly" argument is apparently one that plays well on people’s emotions, but carries little logical weight in this situation.

Per corollary, if credit card companies no longer make high-risk loans to high-risk borrowers those high-risk borrowers have no access to bank credit ... or, apparently, to pawnbroker credit. Beneficiary: the neighborhood loanshark. Source of capital for the loanshark: the neighborhood jihadi?