Bank Lawyer's Blog

Stubby, We Hardly Knew Ye

Luke Mullins of The Home Front tells the tragic tale of another victim of the foreclosure crisis that continues to plague this country like, well, a swarm of killer bees.

The national foreclosure crisis has slashed home values, put families on the street, and now, it seems, played a key role in a fatal bee attack on a helpless Chihuahua.

The 3-year old Chihuahua, named Stubby—which was born with only three legs—was killed Tuesday by an angry swarm of bees that had nested in a vacant property located near the dog owner's home, according to the Tucson Citizen.

The property has been empty for the past year or so, and two large beehives had since appeared inside, the newspaper reported.

The bees were apparently incited by a Tucson Country Crossing Homeowners Association official, who sprayed the nests with insecticides.

From the Tucson Citizen:

"I saw my dog being attacked through the sliding glass window," said [dog owner Brandi Comeau, 27]. "I tried to do what I could, threw water on him, without getting stung myself."

Her husband grabbed Stubby and ran down the street, trying to dislodge the bees. By the time the couple got Stubby to the vet, the dog was stung more than 250 times.

The owners will discuss the possibility of asking the homeowners' association to pick up a portion of the $800 veterinarian bill.

"I want people to be wary of empty houses for their own safety," Comeau told the Citizen. "I don't want this to happen to anybody else."

Neither do I, Ms. Comeau, except perhaps for one Chihuahua-loving miscreant. I'd pay real money to see Paris Hilton flying down the road in a pair of stiletto-heeled Manolo Blahniks, sunglasses-wearing Chihuahua in her arms, and chased by a swarm of angry bees, especially if right beside her, stride for stride, ran Nicole Richey cradling a Shih Tzu. There's something about spoiled rich kids and weiner dogs that brings out the best in me.

But back to a lawyer's take on this incident. Not only is the HOA potentially exposed for negligent bee extermination, but if the Comeaus are really out to sting someone for their tri-legged family pet's untimely demise (I wonder if being a tri-ped rather than a quadra-ped made Stubby's escape problematic), they ought to look at the vacant home's owner, which may very well be a foreclosing lender that can't find a buyer for the place. Letting it become a bee-infested public nuisance might provide grounds to seek some financial recompense for the loss of "The Stubster." What the heck, this is America, where there's a shyster behind every hedge, so finding someone to sue every possible defendant you can think of shouldn't prove difficult.  It's worth a shot.

When will these heartless lenders be brought to justice? How many more Stubbys will have to bite the dust before we put an end to this foreclosure madness?

A Pause For Quite Reflection

As I scramble to quench fires set by flamers engaged in tense negotiations over a technology outsourcing agreement and another situation that demands repeated redrafts and a cast iron gluteus maximus, I did want to pass along a couple of tidbits. When last week I drove a certain hysterical blogger to new depths of hot-flashing hormonal rage by suggesting that home renters don't take care of their homes as well as home owners (thereby earning the epithet "elitist," perish the thought), I should have included in my post a reference to an Indiana Supreme Court decision of a week earlier that overturned a lower court ruling that found that a restrictive covenant in a declaration of covenants, conditions and restrictions that banned owners of single family homes in a development from renting their homes violated the Fair Housing Act. As the higher court stated, the lower court disregarded "undisputed evidence and expert testimony in the record showing that owners maintain property better than renters." I assume that those experts and purveyors of the relevant evidence, as well as the Supreme Court justices who found such testimony and evidence convincing are also "elitists." Elitists love company, you know, as do those off their Prozac.

Speaking of elitists, I've been mulling over the candidacy of noted elitist Barack Obama. A guy who's that dismissive of entire groups of human beings commands my attention as a potential brother-in-snark. Plus, I like the fact that he manages to sometimes make gaffes of "Bushian" proportions in public, yet comes off smelling like a rose because he's such a smooth dog. I think that once Hill finally is carried kicking and screaming into a padded cell for some well-deserved R&R, he'll hold his own in toe-to-toe nuclear combat with Ulysses S. Grant John McCain.

On the other hand, this McCain is one hard guy. As this news report shows, he's not only a fearsome cost-cutter, he's the kind of guy who'd personally kick your ass and not even bother to take your name.

An Elephant Stampede

Two and one-half years ago, we were talking about an "elephant in the room" for the mortgage banking business: loan repurchase obligations. In November 2005, the problem was primarily with respect to subprime mortgage loans. Today, according to The Wall Street Journal, the elephant is stomping throughout the house, smashing furniture in every room, and leaving a memento of his presence on every loan originator's favorite sofa cushions.

Already burned by bad mortgages on their books, lenders now are feeling rising heat from loans they sold to investors.

Unhappy buyers of subprime mortgages, home-equity loans and other real-estate loans are trying to force banks and mortgage companies to repurchase a growing pile of troubled loans. The pressure is the result of provisions in many loan sales that require lenders to take back loans that default unusually fast or contained mistakes or fraud.

The potential liability from the growing number of disputed loans could reach billions of dollars, says Paul J. Miller Jr., an analyst with Friedman, Billings, Ramsey & Co. Some major lenders are setting aside large reserves to cover potential repurchases.

[...]

The fight over mortgages that lenders thought they had largely offloaded is another reminder of the deterioration of lending standards that helped contribute to the worst housing bust in decades.

Such disputes began to emerge publicly in 2006 as large numbers of subprime mortgages began going bad shortly after origination. In recent months, these skirmishes have expanded to include home-equity loans and mortgages made to borrowers with relatively good credit, as well as subprime loans that went bad after borrowers made several payments.

Many recent loan disputes involve allegations of bogus appraisals, inflated borrower incomes and other misrepresentations made at the time the loans were originated. Some of the disputes are spilling into the courtroom, and the potential liability is likely to hang over lenders for years.

The Wall Street Journal reports that Fannie Mae recently "said it is reviewing every loan that defaults -- and seeking to force lenders to buy back loans that failed to meet promised quality standards." Little bro' Freddie Mac is also increasing the number of repurchase claims. That's consistent with observations made two years ago. With those two GSE's being positioned as the linchpins of the federal government's "plan" (and we use that term loosely) to "save the mortgage market for the little guy," it will be hard for any loan originator who wants to continue to play the mortgage banking game to get in a cat fight with either of those big cats.  Expect "portfolio scrubbing" to be especially intense at both entities, given their history. As I've said previously, I represented clients on the wrong side of Fannie Mae during the last downturn, and it wasn't pretty.

The WSJ also reports that repurchase pressure is coming from bond insurers, such as Ambac and PMI, and REITs, like Redwood Trust Inc. While most claims are settled out of court, it appears that trial lawyers will not be left out in the cold.

Repurchase claims often are resolved by negotiation or through arbitration, but a growing number of disputes are ending up in court. Since the start of 2007, roughly 20 such lawsuits involving repurchase requests of $4 million or more have been filed in federal courts, according to Navigant Consulting, a management and litigation consulting firm. The figures don't include claims filed in state courts and smaller disputes involving a single loan or a handful of mortgages.

It's always comforting to know that some good will result from all this suffering.

It will certainly be bad for originators, but while some mentioned in the WSJ article, including everybody's favorite whipping boy, Countrywide, appear to have the financial wherewithal to fulfill their legitimate repurchase obligations (knock on wood), there are some who will not. Then, who gets stuck? I represented a lender that bought from the RTC a large block of servicing rights to loans originated by a failed savings bank. Unfortunately for the buyer, there were major problems with the loans, some dating from loan origination and some as the result of incompetent servicing prior to the purchase, which weren't discovered during due diligence (the consequence of either poor sampling or bad luck). FNMA started putting loans back like they were radioactive and there was no one to turn to, since the RTC gave limited warranties on the junk assets it sold. You just never know who's going to get stuck with the bill for loans that FNMA Mae buys, but it's rarely FNMA if there's any breathing body or inanimate object that Fannie can stick it to.

The WSJ also notes that many originators are increasing reserves to meet potential buyback liability.  Not increasing reserves by a conservative amount has its risks.

Lenders may feel pressure to boost reserves for such claims because of the fear they could be sued for not properly accounting for potential repurchases, says Laurence Platt, an attorney in Washington. At least three lawsuits have been filed by investors who allege that New Century Financial Corp. and other mortgage lenders understated their repurchase reserves, according to Navigant.

So, who wants to start a mortgage bank?

We're All Doomed

Last November we asked, "Will The Be A Bank Implode-O-Meter?" In January, we received our answer and it was "Yes."

If you haven't checked it out, you should do so. Although commercial and investment bank failures haven't exactly skyrocketed and approached the lofty heights of failure scaled by the independent mortgage company industry segment, we're still working our way through the liquidity and credit mess, so there's time to add names to the list. As that happens (if it happens), all those liquidators and troubled bank workout specialists that the FDIC brought out of retirement and stuck in Dallas will have a lot more to do.

The banks listed aren't merely those who've gone out of business, however. As the site explains, the term "imploded" is used more expansively.

The "imploded" list contains banks which have gone through some sort of permanent adverse change. This of course includes regulator-declared "faiures" and conservatorships/receiverships, as well as private sector events such as "firesale" buyouts. While the financial entity may continue to operate, we post them here if they would not otherwise continue without some sort of "rescue". We focus on "implosions" since 2006.

The site also is a font of gloom-and-doom news about banking gleaned from news services around the globe. Any non-banker perusing the site would be tempted to stock up on rails, tar and feathers in case any unsuspecting bankers lope by, while any banker spending more than five minutes reading articles linked on the site will be tempted to stick a plastic bag over his head, borrow a dog collar from his faithful Fido, and pull it tight. Someone must be reading this site, because the traffic counter says that nearly 150,000 folks (and perhaps robots, spiders and other assorted non-humans) have visited since January 30, 2008. While that's a mere 1% of BLB's hourly traffic, it ain't bad if your goal is to attract potential ad-clickers.

For those who like to share their own thoughts on how bad or gloomy all things bank-related might be (and we've certainly run into a plethora of those people lately), there are forums where individuals can trade comments and, perhaps, insults, about the bad, bad banking biz. One of our favorites is "No Beating Around The Bush - Banks Are All Bankrupt."

So, for that little ray of sunshine that brightens your banking day, don't forget to stop by "Bank Implode-O-Meter" and bask in the warmth of the power of positive thinking.

LendingTree Sued Over Security Breach

The security breach at LendingTree that allowed former employees to help other mortgage lenders gain access to mortgage application information, which we discussed last month, has given rise to what may become a class action lawsuit against LendingTree.

One month after suing three lending firms, LendingTree has now been sued by a Bronx man who claims a security breach with the mortgage site has harmed his credit score, led to higher credit card interest rates, and resulted in him getting rejected for at least one loan.

The lawsuit against LendingTree, filed late last week in U.S. District Court in Manhattan, seeks class action status. Filed on behalf of Marvin Garcia, it alleges that LendingTree was negligent in failing to keep customer personal information secure and failing to notify customers of the security breach in a timely manner.

The breaches--which involved names and Social Security numbers among other personal information--are believed to have begun in October 2006, but LendingTree did not notify customers until last month.

The plaintiff, taking to heart LendingTree's suggestion that he obtain a copy of his credit report, did so. Unfortunately for LendingTree, he didn't like what he found: "that nearly a dozen lenders had pulled his personal information for review without his permission, which affected his credit score, interest rates, and mortgage loan application, according to the lawsuit, which was filed by lawyers at the firm of Meiselman, Denlea, Packman, Carton & Eberz." Inasmuch as the unauthorized access to the loan applications was motivated by a desire of the perpetrators to steal LendingTree's mortgage customers, it's no surprise that they also ordered credit reports without the applicants' authorization.

  LendingTree sued the mortgage lenders involved last month. I'm sure it will try to pass along to those  defendants any liability to people like Mr. Garcia, although the odds are good that those mortgage companies won't be loaded with assets to satisfy any judgments. I think that it's safe to assume that LendingTree will assert coverage under its fidelity bond and it may have other insurance coverage that covers security breaches of its network (insurance companies have been touting such coverage for a number of years). Nevertheless, Mr. Garcia (and a class of his fellow loan applicants, if one is certified) very well may be able to support claims that LendingTree was negligent in failing to cut off network access to the former employees, so someone may eventually pay the plaintiffs. In the interim, defense counsel will stay gainfully employed.

These rogue employees, every lender's nightmare and the ultimate bad actors in this particular play, however negligent LendingTree might be proved to have been, certainly opened up a can of worms when they opened up access to LendingTree's network. Here's hoping they get smacked right along with the mortgage companies they assisted. We'll be watching Luke Wilson's Mullin's "The Collar" to see if criminal charges are pursued against any of the miscreants.

Own To Rent

When the going gets weird, the weird turn pro.
---Hunter S. Thompson

Whenever pressure is applied to fragile minds, those minds tend to bend. The latest example of an idea that demands a reply of "get bent" is "Own To Rent." As discussed today by Paul Jackson at Housing Wire, this wonderful concept was first concocted in a place full of the usual suspects: a think tank. Of course, a loon in Congress has seized upon it and is now trying to make it a reality through ill-conceived federal legislation.

We’ve all heard of rent-to-own, but a new idea from House Rep. Raúl M. Grijalva (D-AZ) would turn troubled former homeowners into renters, sort of an own-to-rent housing proposal. On Thursday, Grijalva unveiled the proposal — H.R. 6116, the Saving Family Homes Act of 2008 — ahead of a House Committee on Oversight and Government Reform subcommitee meeting. The Subcommittee on Domestic Policy, headed up by Dennis Kucinich (D-OH), had scheduled a hearing for Thursday afternoon to discuss how to target federal funds towards managing vacant and abandoned properties.

Grijalva’s proposal would grant homeowners whose mortgages have been foreclosed the right to petition a judge to allow them to remain in the home as renters, and pay a fair market rent. The rent would be set by a court-appointed appraiser and adjusted annually for inflation, the Congressman’s office said in a press statement.

The proposal would limit eligibility to mortgages on single-family, principal residences, occupied for at least 2 years, which sold for less than the median home value in the metropolitan statistical area in which the home resides, or the median value in the state, if MSA-level pricing information is not available.

Why does it not surprise me that the hearing at which this idea is likely to be one of many playing out in left field is chaired by the tin foil hat-wearing Dennis Kucinich and the always-immoderate Maxine Waters? I suspect that one of the other ideas for saving neighborhoods  from the scourge of abandoned homes that will be floated at the hearing will be to populate them with aliens from the planet Zardoz.

This singular form of government infringement on private property ownership rights is the "brain" child of  think-tanker Dean Baker.

The bill incorporates many of the ideas put forth by housing policy wonk Dean Baker, co-director of the Center for Economic and Policy Research, an economic think-tank. Baker first proposed his “Own to Rent” strategy for subprime borrowers in an op-ed last year.

As those Guinness guys exclaim: "Brilliant!" Only someone who sits in a room thinking abstractly for a living would assume that this idea has a snowball's chance in a hot place of making it through Congress. Then again, we're looking at some legislation working its way through the bowels of Congress that is almost as whacky, so it's got a shot.

Let's leave aside, for the moment, the political objections to this scheme. From a practical standpoint, it's not been my personal experience that "home renters" save a single family neighborhood; it's "home owners" who do that. The value of emotional pride of "ownership" should not be underestimated, nor should the fact that ensuring that upkeep, maintenance and repairs are performed promptly as needed protects the owner's monetary investment in the home. The worst neighbors I've had have been renters of single family homes situated in neighborhoods consisting primarily of owner-occupied houses. I foresee problems with a plan that proposes to force foreclosing lenders to accept as tenants the owners that the lender is foreclosing upon. I would think that many of those renters, bitter over the cruel twist of fate (after all, no one is ever responsible for their own bad decisions and if "stuff happens," it must be someone else's fault), might not treat that house with the same respect that they did when they owned it. I think that they might be worse occupants than a new home owner, and that waiting for the lender to sell it to an owner-occupant might be better for the neighborhood, even if the house sits vacant for a period of time. Obviously, there's no way to prevent lenders from selling to landlords, but why ensure that the house becomes a rental? At any rate, it's a debatable point.

Turning back to the political aspects, Paul notes that Baker's idea is supported by some "conservative"  economists. I assume that they're "conservative" in the same manner that Rudy Giuliani is "Catholic." Like Humpty told Alice, "When I use a word, it means just what I choose it to mean—neither more nor less." I can't think of a less "conservative" idea than a judge forcing a foreclosing lender to rent the home to the defaulting borrower and determining what a fair rent will be. As Paul observes, I'm not alone.

Of course, more than a few in the industry see the bill as a form of rent control; which is a pretty bad word for anyone that has spent time in the mortgage servicing industry, to say the least.

"Sure, let’s just let the government manage rents and set allowable charges," said one servicing manager sarcastically, who asked not to be named. "That’s worked out really well for places like Oakland [California]."

It's bad enough when state and local governments, our "laboratories" of "progressive" social experimentation, start screwing around with the free market and end up screwing the pooch by reason of the operation of the laws of unintended consequences and of human nature. At least there, if the law is too far over the line, national banks and federal thrifts can always look at federal preemption principles to reign in the wing nuts. However, when the federal government attempts to implement this "moonbattery" on a national basis, you start to get not just irritated, but alarmed.

Then again, ideas like this are why men invented alcohol and started cultivating the poppy.

Staying "Bought"

It's amusing to watch Senators Dodd and Shelby tout their special interest bailout plan as a clever means to get maybe half a million borrowers (and perhaps their lenders, even after the required "haircut") some relief from having to suffer the consequences of their poor decision-making capabilities, without putting the US taxpayers at risk, by palming off the risk on Freddie Mac and Fannie Mae. As if the "implicit" guaranty of the full faith and credit of the United States wouldn't come into play if either Freddie or Fannie were to suffer a serious setback because subprime borrowers turn out to be as subprime in new loans as they were in their existing loans.

Fannie and Freddie aren't doing cartwheels about this variation on a theme by Barney, either.

Freddie Mac is nervous about the direction the bill might take. Company spokesperson David Palombi said if the bill is "not applied carefully" it could make the troubled U.S. mortgage market even worse.

Palombi said it is "essential" to that the legislature doesn't raise capital requirements to where Freddie can't fulfill its mission to help stabilize the U.S. mortgage market and be good to its shareholders. Both Freddie and fellow government-backed lender Fannie Mae have had their required lending capital cushions slashed to 15.0% of assets, over statuatory minimums, from 30.0%, in the last eight weeks...

Brian Faith, a Fannie Mae spokesperson, said Friday that Fannie is all for the part in the legislation on deck that creates a "stronger, independently funded, bank-like regulator" to ensure that that the two companies behave themselves. Faith added that the legislature needs to "take into account the financial condition of the companies over time."

In other words, by raising capital requirements, the bill would reduce both Fannie's and Freddie's ability to leverage capital, and this, in turn, might impede their ability to borrow to the extent necessary to both fund the bailout and fulfill their stated purpose: provide liquidity to the mortgage market that serves most borrowers, the responsible kind, the "prime kind." You can see why the GSEs are starting to perspire a little bit, but I can't imagine that Dodd, Shelby or any other senator or congressman is worried about the long term risk or impact. They're worried solely about November 2008, and what happens in the voting booths around the nation on the first Tuesday of that month.

Politicians. Well, they may be bozos, and they may be failing the voters, but there's some cold comfort in the fact that they're failing their real constituency, as well, and that that constituency might decide to eliminate "the middle man" and go straight to you and me. That eventuality would be worthy of the name "campaign finance reform."

Everything Old Is New Again

FDIC Chairman Sheila Bair may have inadvertently displayed her lack of experience in the area in which she's supposed to be an expert by making a big deal last Friday about the use of brokered deposits to fuel rapid growth through real estate lending. According to last Saturday's The Wall Street Journal, "[t]he federal agency that insures U.S. bank deposits is growing increasingly wary of banks that aggressively sought brokered deposits in order to fund rapid real-estate lending."

"Growing increasingly wary"? That's been a "full-grown" concern of all federal and state bank regulators since the meltdown of  the savings and loans in the 1980s. What changed in the last twenty years? Something must have, because Ms. Bair says the FDIC is seeing the same dysfunctional strategy showing up in business plans submitted with applications for deposit insurance for new charters.

Ms. Bair said the FDIC has a number of pending applications for deposit insurance from financial institutions that rely heavily on brokered deposits. Those firms are receiving increased scrutiny, she said.

"Some level of broker deposits are OK, but if they're going to rely on a lot of broker deposits, I think it needs to be coupled with limits on growth and strong risk management," Ms. Bair said.

I wonder who prepared those applications and what they were paid to prepare them? Knowing none of the facts, we can only speculate, but having been involved in a number of those types of applications over the past several decades, I'd love to sit in on the pre-application meeting with the primary federal regulators and get a load of the facial expressions and body language when they are presented with a rapid-growth-through-brokered-deposits proposal. They'll look like the applicant just sprouted an additional appendage before dissolving into hysterical laughter.

Since Ms. Bair was criticizing the growth-through-brokered-deposits strategy of the recently failed ANB Financial, as well as other unsafe practices of the bank, perhaps her remarks were designed to throw a vicious, ample hip into ANB's primary federal regulator, the OCC.

"They relied heavily on broker deposits for very rapid growth, [and] they were doing a lot of out-of-area lending," Ms. Bair said. "This bank did a lot of things it probably shouldn't have been doing."

Gosh, who let them get away with that, Sheila? Hmmmm, let me think.

Nice body check, Sheila. It's nice to know that inter-agency sniping is still camouflaged with a purported warning to applicants and bankers that they should not try this at home, when most bankers (and experienced advisors to applicants for new bank charters) who've been around the block a couple of times wouldn't believe that they could get away with that plan even if they were inclined to pursue it, which most sane bankers are not.

Everyone knows that you present the initial business plan as one in which planned growth is modest, funded by core deposits, and invested in a diverse portfolio of vanilla loans made to borrowers located in your primary service area. After operating the bank or thrift conservatively for three years or so, and getting out from under the FDIC-imposed 8% core capital requirement for a new charter, the president of the bank then uses the 15-to-1 leverage of the bank (assuming 6% core capital) to borrow a barrel of cash, fly to Las Vegas with a couple of Eliot Spitzer's nubile former "associates," get stoned, and lay it all on "red 34." In the unlikely event that you hit, you "man up" and tell the croupier "Let it ride."

Now THAT's a business plan!

An insane one, sure, but a fun one. And one that avoids all those nasty  initial roadblocks thrown up by the overly concerned Ms. Bair and the other "experienced players" who watch over the public's money these days and who are always on the lookout for the next obvious danger.

Ohio (Effectively) Bans Payday Lending

Why are these men celebrating? We'll explain.

Notwithstanding heavy-handed opposition from some corners of the payday lending industry, the Ohio legislature passed a bill that will, for all practical purposes, put payday lenders out of business in Ohio. The governor's expected to sign the bill this summer and it will become effective shortly thereafter.

The new Ohio law would limit borrowers to four short-term loans a year and cap annual interest rates at 28 percent. The bill also would limit loan amounts to $500 per loan, or 25 percent of a consumer's base monthly pay, whichever is less.

Fort Worth, Texas-based Cash America said that those restrictions make Ohio a land of no opportunity as far as payday lending is concerned.

Pawn shop operator and short-term lender Cash America International Inc. plans to close as many as 139 locations in Ohio because of a new state law that it says would no longer make its cash advance services economically viable there.

[...]

"Because the new legislation significantly reduces the cash advance revenue available under current Ohio law, the new law will essentially eliminate the company's ability to viably offer this important alternative form of short-term credit to customers in Ohio," Cash America said.

[...]

Cash America said it will continue to offer short-term loans until the law becomes effective.

"In the meantime, we will also be evaluating the viability of offering alternative financial services in Ohio in an effort to mitigate the impact we currently expect this new law will have on our customers, coworkers and lending locations," President and Chief Executive Daniel R. Feehan in a statement.

If it does not find an alternative product, Cash America said it expects to begin ceasing operations in virtually all its locations in Ohio sometime between now and when the new law becomes effective, which could be as early as mid-August. The company plans to continue to operate its six Ohio pawnshops.

My problem with payday lenders has more to do with the clueless, thug-like tactics employed by some of them (and a few of their equally clueless shills) in defending their turf than it does with the actual service they're providing, or with the fees they charge or the other loan terms they impose. It's just that I can't resist sticking my finger in a bully's eye. It's a tragic character flaw.

On the other hand, I'm all for treating adults like adults, and as long as the fees and other terms are disclosed prior to signing, I think people ought to be free to make what I might consider to be a bad loan deal. That's especially true when there are worse alternatives available. I also have a problem with legislators deciding that 28 percent is an appropriate APR for a payday loan when a pawn shop owner can charge ten times that or more, and when the federal limit for armed services personnel is 36 percent (although payday lenders contend even that's not enough). Also, why are only four loans a year allowed? Why not five? Six? Where do they get these figures, other than out of the gaping nether regions of some consumer advocate? I have an even bigger problem with the Ohio legislature micro-managing the debt-to-income ratios. Nothing coming out of Ohio politicians lately gives me much confidence that specific legislature is competent to determine any such matter. About the only sensible thing they've done lately is to turn quickly on an Attorney General and force him to resign for being a lying, womanizing, overgrown frat boy.

I'm going to be interested to see if other payday lenders follow Cash America's lead and what will be the experience of the borrowers who were using payday lenders in Ohio after their ready, willing, and able (if expensive) source of credit dries up. Ohio's not alone. A number of states are enacting similar legislation, so we'll be watching those venues, as well. I'll bet bankruptcy filings go up among this group. Do supporters of the legislation think that all of these borrowers will simply stop borrowing? Those who have to borrow to buy necessities aren't going to stop doing so, and neither are many of those who use the money to buy non-essentials, not where every influence that permeates this advertising-saturated popular culture indoctrinates the populace to gratify all of its urges, immediately, because, after all, we all have an inalienable right to "happiness" right here and right now. Those folks are going to other sources for their payday lending needs, Cash America or no Cash America.

How about Sheila Bair's pilot program to coax FDIC-insured banks into the business? Stop laughing. I seriously doubt that program's going anywhere over the long run (nor does does any experienced banker I've talk to about it), and it certainly won't fill an gaps in Ohio as soon as this summer.  After the borrowers run out of items worthy of pawning (since pawn shops will still be legal), where will they turn?

If you guessed "extra-legal bankers," you get a gold star. In this land of opportunity, there's an entrepreneur on every corner. Some of them come strapped (not this kind of "strapped," THIS kind of "strapped"), and none of them give a hoot about usury laws, collection laws, or, frankly, any laws (although RICO threats can make them wince). Stiff those lenders and the only "roll over" will not be of the loan, but of the borrower's body as it reacts to a sever beating (or worse).

The law of unintended consequences often bites someone, but, unfortunately, very seldom Nanny State legislators.

The Perfect Fit

An excellent example of the proof of The Peter Principle:

Former Ohio Attorney General Marc Dann spent his first day after resigning helping his wife with her business selling dishes online.

Dann's attorney Mike Harshman says Dann helped his wife, Alyssa Lenhoff Dann, with her side job selling Fiestaware on the Internet.

Dann walked two miles from his suburban Youngstown home Thursday to the office where he took orders and packed dishes.

He "took orders" from his wife, too, I imagine. Since he's admitted to boffing his scheduler, I'll bet the better half will have him packing a lot of Fiestaware to work off his karmic debt. Walking four miles a day also might help Dann work off that baby fat.

It appears that the world is full of employment opportunities for the former AG.

Harshman says Dann is weighing career options that could include the law, teaching or another run for political office.

Teaching what? How to lie badly?

I think he ought to seriously consider becoming a Passion Parties "consultant." That sounds like a line of work that would be right up his alley, so to speak, although in Texas, it presents an occasional bump in the night.

Then again, Obama and McCain are both looking for quality vice-presidential candidates, so he shouldn't be counted out of an imminent return to the political arena.