« Fearful Nation | Main | More Pelley »
September 24, 2007
Interviewing Ahmadinejad
It's sort of a shame that CBS's Scott Pelley declined to interview Mahmoud Ahmadinejad, and instead popped off aggressive statements as if he were a White House press release with a cardiovascular system. I'm for the hostile interview here, but go stupidly overboard and you lose your credibility. And Pelley went so hostile that he let Ahmadinejad easily dance away. Plus: Did we really need to have this exchange?
PELLEY: What trait do you admire in President Bush?
AHMADINEJAD: Again, I have a very frank tone. I think that President Bush needs to correct his ways.
PELLEY: What do you admire about him?
AHMADEINEJAD: He should respect the American people.
PELLEY: Is there anything? Any trait?
AHMADINEJAD: As an American citizen, tell me what trait do you admire?
PELLEY: Well, Mr. Bush is, without question, a very religious man, for example, as you are. I wonder if there's anything that you've seen in President Bush that you admire.
AHMADEINEJAD: Well, is Mr. Bush a religious man?
PELLEY: Very much so. As you are.
AHMADEINEJAD: What religion, please tell me, tells you as a follower of that religion to occupy another country and kill its people? Please tell me. Does Christianity tell its followers to do that? Judaism, for that matter? Islam, for that matter? What prophet tells you to send 160,000 troops to another country, kill men, women, and children? You just can't wear your religion on your sleeve or just go to church. You should be truthfully religious. Religion tells us all that you should respect the property, the life of different people. Respect human rights. Love your fellow man. And once you hear that a person has been killed, you should be saddened. You shouldn't sit in a room, a dark room, and hatch plots. And because of your plots, many thousands of people are killed. Having said that, we respect the American people. And because of our respect for the American people, we respectfully talk with President Bush. We have a respectful tone. But having said that, I don't think that that is a good definition of religion. Religion is love for your fellow man, brotherhood, telling the truth.
PELLEY: I take it you can't think of anything you like about President Bush.
AHMADEINEJAD: Well, I'm not familiar with the gentleman's private life. Maybe in his private life he is very kind or a determined man. I'm not aware of that. I base my judgment on what I see in his public life. Having said that, I think that President Bush can behave much better. There were golden opportunities for President Bush. He should have used them better.
What the hell sort of question is that? And Pelley's answer is that Bush believes in God? This is the best we can do?
Sheesh.
September 24, 2007 | Permalink
Comments
Does merely giving lip service to one's religious beliefs really make a person a religious man? I don't think so. It's about how one lives their life, and in the case of a president, the policies they pursue.
By that standard, Bush is not religious at all in any meaningful sense.
Posted by: Rich | Sep 24, 2007 9:46:17 AM
Tough Question
Waldmannijad: hmmmm uhhhhh hmmmmmm I GOT it ! Stamina. I admire his stamina. I mean plain physical stamina. I read that Lance Armstrong was impressed after the went bike riding. Wow. Too bad Mr Bush is in the wrong line of work.
Damn Ahmedinejad managed much better than I could. That hurts. Can't call him Ahmed dim and bad until I think of a equally unfair nickname for his inteviewer CBS's own Scott Pelley [pot smelly isn't close].
I guess Pelley was deliberatel making Ahmendinejad look good and claiming that the onl good thing he can sa about Bush is that he is religious [like sure he didn't imagine that his question could be turned on him riiight]. What a traitor.
Doble Damn that Pelley bastard is making me think like a Freeper.
Snark aside Ahmed-dim-and-bad is a menace to Iran. Sure he scored a lot of debating points but at what cost
Bush: that bastard said I'm not a good Christian ?!? That islamofascist jerk said I'm not a good Christian ?!? Nuke Teheran !!!
I mean I love snark but let it chill for 16 months. Got to be careful, when you share a planet with a superpower run by an insane immature idiot you know.
Posted by: Robert Waldmann | Sep 24, 2007 10:04:41 AM
If you interview Ahmadenejad and he comes across as the sane one, you know you have problems.
Trying to turn the issue into a pissing match about Bush's religiosity was really a dumb move. It's something that only someone so completely isolated from reality and so convinced that outward lip service to religion can never be questioned would make.
Ironically, I'd venture to guess that the secularism of the Beltway media makes this possible-- if everyone is completely disconnected from any kind of religious faith, then a person who, despite everything around him, sticks with it, is somehow considered honorable in and of itself. Ahmadinejad, no stranger to religious people he opposes politically or regards as religiously hypocritical, is having none of it.
Posted by: Tyro | Sep 24, 2007 10:06:40 AM
I don't know which one comes off more creepy. Ahmadinejad is being cavalier and impolitic.
Posted by: barg | Sep 24, 2007 10:35:42 AM
Here is the problem: the people on TV are idiots. Next issue.
Posted by: Ahmadinebenihenipenijad | Sep 24, 2007 10:43:57 AM
The real story is how unhinged the interviewer is. Since when is "why don't you love our President who is trying to start a war against you?" considered a legitimate question?
I'm a patriotic American citizen and I cannot think of a single trait of Bush's that I admire, and I agree completely with Ahmadinejad that Bush treats religion with contempt.
(And no, potential trolls, that doesn't mean I agree with how Ahmadinejad does his job. At some point you'll have to realize that the world is not a 1-dimensional thing. Agreeing with person X about topic Y does not mean I agree with person X about topic Z.)
Posted by: RickD | Sep 24, 2007 10:56:03 AM
Pot Sucky, how's that for "60 Minute's" Bush administration shill? Pot Sucky got played like a cheap deck of cards. Instead of asking intelligent questions of Ahmedinejad, who, despite the caricatures of him, is no idiot (nut though he may be), Sucky decided he'd channel Karl Rove, Rich Lowry, Jonah Goldberg, and the rest of the Fascistariat, including the 4th estate. And he was batted down like a tattered shuttlecock. Does anyone think that maybe, just maybe, Sucky, "60 Minutes" and the rest of that crew will look at this interview and realize how idiotic they are, or do you think they'll view it as some kind of media triumph over a overhyped "force of evil"? Because Ahmedinejad, like every other Muslim leader in the Middle East, including the U.S.'s good friends in the House of Saud, doesn't like Israel, don't forget.
Posted by: Belding | Sep 24, 2007 10:58:27 AM
Let's see - a trait of Bush's that I admire.
...
You know, I can't think of one. I mean, I've heard he's nice to his dog, but that's not something I admire - I have contempt for people who are cruel to animals but I don't admire someone just because they're nice to their pets. That's like one of the minimal standards you need to achieve to be a human being.
Wow. I'm kind of stunned. I figure there would be SOMETHING admirable about the man somewhere, but I can't think of it. I can't think of another president in my lifetime that I could say that about - Reagan was an impressive public speaker, and Bush the Elder was actually a fairly good manager - but there it is.
Of course, from what I've seen I don't see anything to admire in Ahmadinijad either. The one place he gets a leg up on Bush is that he was apparently born to a working class family and rose up through his own ambition to power, rather than being born into one of his country's aristocracies, but that's not really an admirable trait if you use that power for contemptible ends.
Posted by: NonyNony | Sep 24, 2007 11:06:21 AM
I Can't believe the american media has singlehandedly in a matter of 5 short days managed to make AHMADEINEJAD look good, statesmenlike even. Useless twits.
Posted by: Northern Observer | Sep 24, 2007 11:18:49 AM
I was startled--as was Ahmadeinejad--when Pelley said he had spoken to Bush about the interview and implied he was "officially" asking questions.
Posted by: anon | Sep 24, 2007 11:18:51 AM
That exchange depresses me. A supposedly independent journalist once again advancing the notion that George Bush personifies the USA, that accepting him is accepting all of us, criticizing him attacks all of us. Once again the absurdity of Bush as a religious man is not only accepted but reinforced.
So sad.
Posted by: Stephen | Sep 24, 2007 11:19:43 AM
The whole thing was bizarre. Pelley then accused him of isolating his nation and making them a world-wide pariah.
I couldn't figure out if was talking about Iran or the United States.
Posted by: Culture of Truth | Sep 24, 2007 11:28:49 AM
I am sorry to have to say this, but Ahmedinejad, the source of a string of impolitic and inflammatory statements in the past, managed to speak here with a candor and truthfulness, and with an appreciation of the real meaning of religion, far beyond whatever we could expect from our own leaders.
What a way to start the week.
Posted by: Carl from L.A, | Sep 24, 2007 11:34:36 AM
Maybe we should switch presidents and then we'll see if you clowns are happy!
Ahmadinejad is the leader of a terrorist government! Remember that? Or does Bush Derangement syndrome neuter you of any sense at all?
All of you are great examples of hatred paralyzing the senses - one would think that beyond all of the political disagreement we could all at least agree that Ahmadinejad isn't worth a polite interview - but no! I expect to see one of you at the White House fence shooting rounds into the Oval office soon!
Ingrates...
Posted by: Evrviglnt | Sep 24, 2007 11:36:23 AM
Evr -
Lay off the meth.
For all our sakes, dude.
Posted by: Dan | Sep 24, 2007 11:48:15 AM
Nobody, and I mean NOBODY, can clear brush like Bush can. The man is driven, and if he hdan't become president, western Texas would be brush free by now.
And everyone thinks thta Lady Bird Johnson had some great idea about making highways beautiful. She obviously missed the brush problem.
Posted by: Spud1 | Sep 24, 2007 11:54:16 AM
Evr -
Lay off the meth.
For all our sakes, dude.
Posted by: Dan
Maybe I spend too much time at Balloon Juice, but I thought he was a spoof. Although after following the link. I guess not. Whoops.
Posted by: Cyrus | Sep 24, 2007 12:06:39 PM
The more I see about Ahmadinejad, the more convinced I am that the propaganda machine in this country has been slandering him for years.
That doesn't mean that he doesn't have some real flaws too, but it *does* mean that every bad part of his reputation needs strong scrutiny (and if possible, an unbiased translator - e.g. the infamous misquote about Israel disappearing from history).
Posted by: Chris | Sep 24, 2007 12:09:31 PM
Ahmedinejad nailed the "Christianity" of Bush maore clearly than any other person I've heard.
Posted by: Neal | Sep 24, 2007 12:14:47 PM
Makes you wonder about the extent to which conservative idealogues have now infiltrated the corporate media. Since when is the president of a sovereign nation required to express admiration for George W. Bush? The question is ludicrous; that Pelley would persist in asking it is evidence that he's unhinged. Still, it's an interesting exchange, though not in the way Pelley had hoped it would be, I'm pretty sure.
Posted by: smoogatz | Sep 24, 2007 12:40:47 PM
smoogatz wrote, Since when is the president of a sovereign nation required to express admiration for George W. Bush? The question is ludicrous; that Pelley would persist in asking it is evidence that he's unhinged.
Not really. This line of questioning is, I assume, pretty standard for Stalinists.
Posted by: liberal | Sep 24, 2007 1:08:35 PM
Bush cuts some good brush. Even if he uses a girly man chainsaw.
Posted by: An Outhouse | Sep 24, 2007 1:11:53 PM
Dan -
Dude - pull your bruised lips off of that bong you've been hugging - there's nothing funny about listening to you guys feeling sorry for Ahmadinejad.
Bush may be a clown, but the left keeps saying "I don't agree with everything Ahmadinejad says, but he does hate Bush, too." You guys have ugly friends.
It seems you don't want us to face down tyrants either militarily or journalistically - how predictable...
Posted by: Evrviglnt | Sep 24, 2007 1:40:52 PM
Bush may be a clown, but the left keeps saying "I don't agree with everything Ahmadinejad says, but he does hate Bush, too."
You're the only one saying this. The left is actually pointing out how sad it is that Bush can't even look good compared to Ahmadinejad.
It seems you don't want us to face down tyrants either militarily or journalistically
That's just really dumb. Asking "How awesome is George Bush? Super awesome or mega awesome?" isn't a way to face down a tyrant. It's just a big waste of time that makes Americans look stupid. If you were more worried about this country and less about unfounded assumptions about your political opponents, this would concern you too.
Posted by: Stephen | Sep 24, 2007 1:45:25 PM
Dear Evrviglt,
Pelley wasn't facing him down journalistically, he was asking him absurd questions that gave Ahmadinejad a chance to look reasonable and statemanlike. And "clown" is way too nice a verdict on Bush
Posted by: anan | Sep 24, 2007 1:45:57 PM
Evrviglnt, my time is better spend doing other things rather than wasting my energy screaming about how much I hate some foreign leader and how much we need to kill him. But, props to you by "facing down tyrants" from your keyboard. Good job!
Posted by: Tyro | Sep 24, 2007 1:46:09 PM
A trait of George Bush's that I really and truly do admire: he knows the importance of a nap.
Posted by: feh | Sep 24, 2007 2:20:40 PM
I hear 60 Minutes just hired John Bolton and Glenn Beck to work as a team interviewing ... er - interrogating ... furriners with funny-sounding names. Some waterboarding may be featured.
Posted by: cynic | Sep 24, 2007 2:37:50 PM
PELLEY: President Ahmadinejad, before you go, I have one last question for you. George W. Bush: great president, or the greatest president?
Posted by: KCinDC | Sep 24, 2007 4:08:15 PM
Pelley: President Ahmadinejad, is George Bush a great President or the greatest President?
Thanks Colbert, now look what you've done to our national media.
Posted by: Col Bat Guano | Sep 24, 2007 4:09:02 PM
Well KCinDC you beat me to the punchline.
Posted by: Col Bat Guano | Sep 24, 2007 4:09:42 PM
"He's religious" is still considered to be a major good thing?
Honestly- it's like saying "he's drawn similar conclusions to me about the nature of the universe"-- that's not a virtue. It's something that could lead to virtues, certainly-- but I'm not really sure it should be classed as noble for its own sake. As is pointed out, one can fervently believe in the existence of God and then take that belief to justify all manner of horrible things. It's a pretty open insult to atheists.
Posted by: Anthony Damiani | Sep 24, 2007 4:21:52 PM
Darn liberal media....
Posted by: Thlayli | Sep 24, 2007 4:39:21 PM
Let's see, by all accounts he has been a terible parent. Scratch good father.
Lost money at every enterprise he tried. Scratch off CEO President
And pardon me but "I got a "B" in Economics, but I got an "A" in fiscal stuff." is a flat out lie. So scratch both honest and smart.
Desperate Housewife Laura might argue about the "stamina" thing.I do not believe this bastard is a good Christian either.
So, basically, I hate to say it but Ahmadinejad has Bush pegged. He has no admirable qualities.
Posted by: APISHAPA | Sep 24, 2007 5:38:03 PM
Let's see, by all accounts he has been a terible parent. Scratch good father.
Lost money at every enterprise he tried. Scratch off CEO President
And pardon me but "I got a "B" in Economics, but I got an "A" in fiscal stuff." is a flat out lie. So scratch both honest and smart.
Desperate Housewife Laura might argue about the "stamina" thing.I do not believe this bastard is a good Christian either.
So, basically, I hate to say it but Ahmadinejad has Bush pegged. He has no admirable qualities.
Posted by: APISHAPA | Sep 24, 2007 5:38:20 PM
Things like stock market prices, miniature golf scores, post-drugged semen levels, and chronic back pain and flatulence can fluctuate naturally and may regress towards the mean and uncalled for. The logical flaw is to make predictions that expect exceptional results to continue as if they were the average, a representativeness heuristic if I ever saw one! People are most likely to take action when dissent, like morning wood, is at its peak. Then after results become more normal or less turgid, they believe that their action was the cause of the change when in fact it was not causal, wherein cohesion between objects of similar silly appearance is assumed. While often very useful in everyday life, it can also result in neglect of relevant base rates and volumes, an inability to play funk, and other errors. Another snag you may encounter involves describing some occurrence in vivid detail, even if it is an exceptional occurrence, to convince someone that it is a problem, when, throughout my garbled history, it’s been commonly identified again and again that, if the nuns of the order of Sisters of Saint Joseph are to be believed, I am the one with the “problem”. Though misleading vividness does nothing to support an argument logically, it can have a very strong psychological effect because of a cognitive forceful brainwashing called the availability heuristic. Another area that needs to be dealt with in a timely and thorough manner is several references in my late Elementary/Junior-high phase of mutational development, otherwise known as the "Parade of horribles", originally referred to as a literal parade of people wearing comic and grotesque costumes, rather like the Philadelphia Mummers Parade or my yearly family reunion. It was a traditional feature of Fourth-of-July parades in dismal parts of the U. S. in the nineteenth century without indoor plumbing. A 1926 newspaper article about July Fourth celebrations in the White Mountains of New Hampshire notes “Old-time celebrations are to be held tomorrow at Littleton, Lancaster, Colebrook, and Conway, with all the usual features of street parades of horribles and grotesques, brass balls bands, decorated automobiles and vehicles, dance exhibitions by fire departments, basket picnics in convenient small groves, finger-sniffing contest sponsored by the local Catholic diocese, and the regional dwarf tossing semi-finals...”. And to further enlighten and confuse, in Hesse’s “Steppenwolf”, the protagonist affirms that the men of the Dark Ages (see “Living at Virginia’s house”) did not suffer more than those of the Classical Antiquity (see “Attending Catholic school in the 60’s”), and vice-versa. It is rather those who live between two times, those who do not know what to follow, that suffer the most. In this token, a man from Virginia’s house attending Catholic school, or the opposite, would undergo a gulping sadness and agony.
Posted by: Carl Gordon | Sep 24, 2007 8:15:36 PM
Ahmadinejad pwned Scott Pelley. It would almost be funny were it not so pathetic.
Posted by: Pocket Rocket | Sep 24, 2007 10:21:11 PM
That wasn't an interview it was an interrogation. Pelley was ridiculous a caricature of Colbert doing an O'Riley interview. I loved Ahmadinejad's response about Bush being religious. But the best lines were when he told Pelly that he was in Abu Ghraid or Quantanamo.
Bush's religiosity is just one of the frauds perpetrated by this bunch on criminals.
Posted by: Anne | Sep 25, 2007 12:04:49 PM
Does merely giving lip service to one's religious beliefs really make a person a religious man?
Yes, in fact, nothing else has ever sufficed, here in the land of Aimee Semple MacPherson, Jimmy Swaggart, Sam Brownback and Joe Lieberman. Sanctimony is piety.
Duh.
Posted by: Gee | Sep 26, 2007 7:39:41 AM
Let's see - a trait of Bush's that I admire.
When he doesn't let it grow too long, he has pretty good executive hair. It's too curly to be very good, but it's still pretty good. Not John Edwards good, mind you, but still, it's good enough to be admirable.
Posted by: jenniebee | Sep 27, 2007 2:04:51 PM
Normally, you have to pay back a payday loan on or before your next payday (usually in two weeks or less). The amount you can borrow is usually limited to 30 percent of the net amount of your pay cheque. The net amount of your pay cheque is your total pay, after any deductions such as income taxes. For example, if your pay cheque is $1,000 net every two weeks, your payday loan could be for a maximum of $300 ($1,000 x 30%).
Before giving you a payday loan, lenders will ask for proof that you have a regular income, a permanent address and an active bank account. Some payday lenders also require that you be over the age of 18.
To make sure you pay back the loan, all payday lenders will ask you to provide a postdated cheque or to authorize a direct withdrawal from your bank account for the amount of the loan, plus all the different fees and interest charges that will be added to the original amount of the loan. The combination of multiple fees and interest charges are what make payday loans so expensive (Click here for an explanation of the various fees associated with these types of loans.
The lender should also ask you to sign a loan agreement. If the lender does not offer to give you a copy of the loan agreement, ask for one. Read this document carefully before signing it, and keep a copy for your records
How and when do I pay back the loan?
A payday loan agreement usually says that you must pay the total amount you owe for the loan on or before the date stated in your loan agreement. This includes the amount you borrowed, plus interest and any additional fees and charges.
Some lenders will cash your postdated cheque or process your direct withdrawal on the day the loan is due. However, some lenders may require that you pay the loan in cash, on or before the due date.
If you have not paid the loan in cash by the due date, some lenders may cash your cheque or process the direct withdrawal you signed on the day after your loan's due date, and charge you another fee. Ask the lender what the most inexpensive way is for you to repay your loan.
How does a payday loan affect my credit report?
Credit-reporting agencies collect information on whether or not you make your payments on time. This information, also called your "credit history", is part of your credit report and is used to calculate your credit score.
Making payments on time can help improve your credit score by demonstrating that you are able to manage your debt. Even if you have poor credit, you can rebuild it by using a credit card or other type of credit and paying back the money you owe on time.
This is not the case with payday loans. Since payday lenders are not currently members of the main credit-reporting agencies, getting a payday loan and paying it off on time will not improve your credit score. However, if you do not pay your loan back on time and it is sent to a collection agency, this will likely be reported to a credit-reporting agency and could have a negative impact on your credit report.
How much will a payday loan cost?
A payday loan is much more expensive than most other types of loans offered by financial institutions such as banks or credit unions. Before you apply for a payday loan, find out about all the fees and charges you will have to pay — including the fees you will be charged if you cannot repay the loan on time. The fees may not be easy to see right away, so read the agreement carefully before signing it. If you do not receive an explanation of all of the fees, charges and interest that will apply to the loan, or if you are not satisfied with the explanation you receive, do not sign the loan agreement.
How does the cost of a payday loan compare with other credit products?
Payday loans are much more expensive than other types of loans, including credit cards. But how much are you really paying? How does the cost of a payday loan compare with taking a cash advance on a credit card, using overdraft protection on your bank account or borrowing on a line of credit?
Let's compare the cost of using different types of loans. We'll assume that you borrow $300, for 14 days. Note the considerable difference in the cost of each type of loan.
Things to consider before you apply for a payday loan
Even if you think you may be turned down, ask your bank or credit union for overdraft protection on your bank account, or a line of credit. These are relatively inexpensive ways of obtaining access to extra funds, for short-term use.
If you are turned down for any of these credit options, ask why. If the reason is that you have a poor credit history, contact the three credit-reporting agencies to get a copy of your credit report. Read the reports carefully to make sure that all of the information in it is correct. If you find any errors, contact the credit-reporting agency to find out how you can have the information corrected. The three major credit-reporting agencies in Canada are Equifax Canada, TransUnion Canada and Northern Credit Bureaus. All three of these agencies will give you a copy of your credit report for free if you request that it be sent to you by regular mail.
Ask yourself if you really need to take out a loan, or whether you can get by until your next pay cheque. If you need the money immediately, try to make other arrangements. For example, you may be able to cash in vacation days. Or you might consider getting a short-term loan from a family member or a friend.
If you find that you need to apply for a payday loan because you have no alternative, only borrow an amount that you are 100 percent sure you can repay on the due date of the loan.
Don't borrow more than you need.
Things to consider if you take out a payday loan
Don't be afraid to ask a lot of questions. Read carefully — and take home with you — a copy of the loan agreement that you are being asked to sign. Don't feel pressured to sign the loan agreement right away if you have questions and want more time to read through the agreement on your own. If the lender does not want to give you a copy of the agreement, look for another lender.
Be sure to ask about all the fees, charges and interest that apply when you first get the loan, and what other charges you will owe if you can't pay the loan back on time.
If you are taking out a payday loan at another location to pay back the first payday loan, or you are extending or "rolling over" the loan that you had with the same lender, you could find yourself in serious financial difficulty. The fees, charges and interest will add up quickly on these types of loans, which can put you into serious debt.
How can I figure out the cost of each type of loan?
To estimate the total cost of a loan, including the annual cost of the loan expressed as a percentage of the amount borrowed, follow the steps below.
Step 1:
Determine how much interest you will pay. First, find out the annual interest rate that applies to the loan (if there is one). Figure out the daily interest rate by dividing the annual interest rate of the loan by 365 days. Then, multiply that rate by the length of time you are taking the loan. Finally, multiply the result by the amount you will borrow, in dollars:
Amount of interest
= Annual interest rate
--------------------------------------------------------------------------------
365 days × Length of the loan
(number of days) × Amount of the loan
Step 2:
Determine the total cost of the loan by adding any fees that may apply to the interest you will have to pay. Find out what fees apply to the loan and add them to the cost of the interest, found in Step 1:
Total cost of the loan = Amount of interest + Total fees
Step 3:
Estimate the annual cost of the loan, expressed as a percentage of the amount borrowed. First, divide the total cost of the loan, found in Step 2, by the amount of the loan. Then, divide this rate by the length of time you are taking the loan (in days) and multiply it by 365 (the number of days in the year):
Annual cost of the loan (%)
= Cost of the loan
--------------------------------------------------------------------------------
Amount of the loan ÷ Length of the loan
(number of days) × 365 days
Let's find out the cost of a $300 payday loan, taken for 14 days.
We'll assume that the lender charges you a one-time set-up fee of $10 and a service fee of $40, which includes interest on the loan.
Step 1:
Determine how much interest you will pay. In this case, there is no interest fee. The interest is therefore $0.
Step 2:
Figure out the cost of the loan by adding together any fees that apply and the interest you will have to pay. In this case, you would add the $10 set-up fee and the $40 service fee together:
$10 + $40 = $50
Step 3:
Estimate the total annual cost of the loan, expressed as a percentage of the amount borrowed:
Annual cost of the loan (%)
= Cost of the loan
--------------------------------------------------------------------------------
Amount of the loan ÷ Length of the loan
(number of days) × 365 days
= $50
———— ÷ 14 days × 365 days
$300
= 4.35 or approximately 435%
The total cost of the payday loan would be $50 with an annual cost of 435 percent of the amount borrowed.
Information asymmetries are common in credit market models, but the usual assumption,
at least in commercial lending, is that borrowers are the better informed party and that
lenders have to screen and monitor to assess whether
firms are creditworthy. The opposite
asymmetry, as we assume here, does not seem implausible in the context of consumer lending.
"Fringe" borrowers are less educated than mainstream borrowers (Caskey 2003), and many
are
first-time borrowers (or are rebounding from a failed first foray into credit). Lenders
know from experience with large numbers of borrowers, whereas the borrower may only have
their own experience to guide them. Credit can also be confusing; after marriage, mortgages
are probably the most complicated contract most people ever enter. Given the subtleties
involved with credit, and the supposed lack of sophistication of sub-prime borrowers, our
assumption that lenders know better seems plausible.
While lenders might deceive households about several variables that in
fluence household
loan demand, we focus on income. We suppose that lenders exaggerate household's future
income in order boost loan demand. Our borrowers are gullible, in the sense that they can
be fooled about their future income, but they borrow rationally given their beliefs. Fooling
borrowers is costly to lenders, where the costs could represent conscience, technological costs
(of learning the pitch), or risk of prosecution. The upside to exaggerating borrowers' income
prospects is obvious—they borrow more. As long as the extra borrowing does not increase
default risk too much, and as long as deceiving borrowers is easy enough, income deception
and predatory—welfare reducing—lending may occur.
After de
fining predatory lending, we test whether payday lending fi ts our definition. Payday
lenders make small, short-term loans to mostly lower-middle income households. The
business is booming, but critics condemn payday lending, especially the high fees and frequent
loan rollovers, as predatory. Many states prohibit payday loans outright, or
indirectly,
via
usury limits.
To test whether payday lending quali
fies as predatory, we compared debt and delinquency
rates for households in states that allow payday lending to those in states that do not. We
focus especially on di
fferences across states households that, according to our model, seem
more vulnerable to predation: households with more income uncertainly or less education.
We use smoking as a third, more ambiguous, proxy for households with high, or perhaps
hyperbolic, discount rates. In general, high discounters will pay higher future costs for a
given, immediate, gain in welfare. Smokers' seem to
fit that description. What makes the
smoking proxy ambiguous is that smokers may have hyperbolic, not just high, discount rates.
Hyperbolic discount rates decline over time in a way that leads to procrastination and selfcontrol
problems (Laibson 1997). The hyperbolic discounter postpones quitting smoking,
or repaying credit. Without knowing whether smokers discount rates are merely high, or
hyperbolic, we will not be able to say whether any extra debt for smokers in payday states
is welfare reducing.
2
Given those proxies, we use a di
fference-in-difference approach to test whether payday
lending
fits our definition of predatory. First we look for diff erences in household debt
and delinquency across payday states and non-payday states, then we test whether those
di
fference are higher for potential prey. To ensure that any such differences are not merely
state e
ffects, we difference a third time across time by comparing whether those di fferences
changed after the advent of payday lending circa 1995. That triple di
fference identifies any
di
fference in debt and delinquency for potential prey in payday states after payday lending
was introduced.
Our
findings seem mostly inconsistent with the hypothesis that payday lenders prey on,
i.e., lower the welfare of, households with uncertain income or households with less education.
Those types of households who happen to live in states that allow unlimited payday loans
are less likely to report being turned down for credit, but are
not more likely, by and large,
to report higher debt levels, contrary to the overborrowing prediction of our model. Nor are
such households more likely to have missed a debt payment in the previous year. On the
contrary, households with uncertain income who live in states with unlimited payday loans
are
less likely to have missed a debt payment over the previous year. The latter result is
consistent with claims by defenders of payday lending that some households borrow from
2
Consistent with a high discount rate, Munasinghe and Sicherman (2000) discover that smokers have
fl
atter wage profiles and they are willing to trade more future earnings for a given increase in current earnings.
Gruber and Mulainathan (2002)
find that high cigarette taxes make smokers "happier," consistent with
hypberbolic discount rates (because taxes help smokers commit to quitting). DellaVigna and Malmendier
(2004) show how credit card lenders can manipulate hyperbolic discounters by front-loading bene
fits and
back-loading costs.
payday lenders to avoid missing payments on other debt. On the whole, our results seem
consistent with the hypothesis that payday lending represents a legitimate increase in the
supply of credit, not a contrived increase in credit demand.
We
find some interesting differences for smokers, but those diff erences are harder to
interpret in relation to the predatory hypothesis without knowing
apriori whether smokers
are hyperbolic, or merely high, discounters.
We also
find, using a small set of data from different sources, that payday loan rates
and fees decline signi
ficantly as the number of payday lenders and pawnshops increase.
Reformers often advocate usury limits to lower payday loan fees but our evidence suggests
that competition among payday lenders (and pawnshops) works to lower payday loan prices.
Our paper has several cousins in the academic literature. Ausubel (1991) argues that
credit card lenders exploit their superior information about household credit demand in their
marketing and pricing of credit cards. The predators in our model pro
fit from their information
advantage as well. Our concept of income delusion or deception also has a behavioral
fl
avor, as well, hence our use of smoking as a proxy for self-control problems. Brunnermeier
and Parker (2004), for example, imagine that households
choose what to expect about future
income (or other outcomes). High hopes give households' current "felicity," even if it
distorts borrowing and other income-dependent decisions. Our households have high hopes
for income, and they make bad borrowing decisions, but we do not count the current felicity
from high hopes as an o
ffset to the welfare loss from overborrowing.
Our costly falsi
fication (of household income prospects) and costly verification (by counselors)
resemble Townsend's (1979) costly state veri
fication and Lacker andWeinbergs' (1989)
costly state falsi
fication. The main difference here is that the falsifying and verifying comes
before income is realized, not after.
More importantly, we hope our
findings inform the current, very real-world debate,
around predatory lending. The stakes in that debate are high: millions of lower income
households borrow regularly from thousands of payday loan o
ffices around the country. If
payday lenders raise household welfare by relaxing credit constraints, anti-predatory legislation
may lower it.
Payday lenders make small, short-term loans to households. The typical loan is about $300
for two weeks. The typical fee is $15 per $100 borrowed. Lenders require two recent pay
stubs (as proof of employment), and a recent bank account statement. Borrowers secure
the loan with a post-dated personal check for the loan amount plus fees. When the loan
matures, lenders deposit the check.
Payday lending evolved from check cashing much like bank lending evolved from deposit
taking. For a fee, check cashiers turn personal paychecks into cash. After cashing several
paychecks for the same customer, lending against
f uture paychecks was a natural next step.
High
finance charges is the main criticism against payday lenders. The typical fee of $15
per $100 per two weeks implies an annual interest rate of 15
x365/14, or 390 percent. Payday
lenders are also criticize for overlending, in the sense that borrowers often re
finance their
loans repeatedly, and for "targeting" women making the transition from welfare-to-work
(Fox and Mierzewski 2001) and soldiers (Graves and Peterson 2004).
Despite their critics, payday lending has boomed. The number of payday advance o
ffices
grew from 0 in 1990 to 14
, 000 in 2003 (Stegman and Harris 2003). The industry originated
$8 to $14 billion in loans in 2000, implying 26-47 million individual loans. Rapid entry
suggests the industry is pro
fitable.
Payday lenders present sti
ff competition for pawnshops, even though the internet, namely
E-bay, signi
ficantly foreclosure costs for pawnshops (Caskey 2003). The number of pawn
shops in the U.S. grew about six percent per year between 1986 and 1996, but growth
essentially stalled from 1997 to 2003. Prices of shares in EZCorp, the largest, publicly
traded pawn shop holder, were essentially
flat or declining between 1994 and 2004, while
Ace Cash Express share prices, a retail
financial firm selling check cashing and payday loans,
rose substantially over that period (Figure 4). EZCorp CEO, Joseph Rotunday, blamed
payday lenders for pawnshops' dismal performance:
The company had been progressing very nicely until the late 1990s.... (when)
a new product called payroll advance/payday loans came along and provided our
customer base an alternative choice. Many of them elected the payday loan over
the traditional pawn loan. (Quoted by Caskey (2003) p.14).
Payday lending is heavily regulated (Table 1). As of 2001, eighteen states e
ffectively
prohibited payday loans
via usury limits, and most other states prices, loan size, and loan
frequency per customer (Fox and Mierzwinski 2001). Note that the payday loan limit ranges
from 0 (where payday loans are illegal) to 1250. Nine states allow unlimited payday loans.
Payday lenders have circumvented usury limits by a
ffiliating with national or state
chartered banks, but the Comptroller of the Currency—the overseer of nationally chartered
banks–recently banned such a
ffiliations. The Federal Deposit Insurance Corporation still
permits payday lenders to a
ffiliate with state banks, but recently restricted those partnerships
(Graves and Peterson 2005).
Regulatory risk—the threat of costly or disabling legislation in the future—looms large for
Payday lenders. The Utah legislature is reconsidering its permissive laws governing payday
lending. North Carolina recently drove payday lenders from the state by expressly outlawing
the practice.
Heavy regulation increases the cost of payday lending. High regulatory risk increases limits
entry into the industry and increases the expected return required by industry investors.
Driving up costs and driving away investors may be exactly what regulators intended if they
view payday lending as predatory.
We de
fine predatory lending as a welfare reducing provision of credit. Households can be
made worse o
ff by borrowing if lenders can deceive households into borrowing more than is
optimal. Excess borrowing reduces household welfare, and may increase default risk.
We illustrate our concept of predatory lending in a standard model of household borrowing.
Before we get to predatory lending, we review basic principles about welfare
improving
lending, the type that lets households maintain their consumption despite
fluctuations in
their income.
The model has two periods: today (period zero) and payday (period one. Household income
goes up and down periodically, but not randomly (for now): income equals zero today
and
y on payday. If households consume Ct in period t, their utility is U (Ct) .Household welfare
is the sum of utility over both periods:
U (C0)+ δU (C1), where δ equals the household's
time rate of discount. Households with high
δ value current consumption highly relative to
future consumption. In other words, high discounters are impatient.
A digression here on discount rates serves later discussion. In classical economics
δ is
constant. If
δ changes over time, so does household behavior, even if nothing else changes.
If
δ(t) is hyperbolic, households will postpone unpleasant tasks until current consumption
does not seem so precious relative to future consumption (Laibson 1997). With hyperbolic
discounting, that day never arrives, so hyperbolic discounters have behavioral problems: they
procrastinate. They may never repay debt, much less begin saving. Hyperbolic discounters
who start smoking may never quit.
Returning to the model, if the marginal utility of consumption (
U 0) is diminishing, households
will demand credit to reduce
fluctuations in their standard of living. Households
without credit, however, must fend for themselves (autarky). Welfare under autarky equals
U
(0)+δU (y). The fluctuations in consumption for households without credit make autarky
a possible worst case, and hence, a good benchmark for comparing cases
with credit.
If households borrow
B at interest rate r, welfare equals U (B) + δU (y − (1 + r)B).
Borrowing increases utility in period zero, when the proceeds are consumed, but lowers utility
in period one, when households pay for their borrowing. Rational, informed households trade
o
ff the good and bad side of borrowing; they borrow until the marginal utility of consuming
another unit today just equals the marginal, discounted
disutility of repaying the extra debt
on payday:
U
0(B) = δ(1 + r)U 0(y − (1 + r)B). (1)
Equation (1) determines household loan demand as a function of their income, their
discount rate, and the market interest rate:
B(y, δ, r). For standard utility functions,
household loan demand is increasing in income and decreasing in the discount factor and
interest rate:
By > 0; B δ < 0; Br < 0. Household welfare with optimal borrowing equals
U
(B(y, r, d))+δU (y − (1+r)B( y, r, δ)). As long as households follow (1), their welfare with
positive borrowing must be higher than without (autarky).
The welfare gain from borrowing depends on the cost of credit production. Suppose the
cost of lending $
B to a particular household equals (1 + ρ)B + f, where ρ represents the
opportunity cost per unit loaned and
f is the fixed cost per loan. Think of f as the cost
of record-keeping and credit check required for each loan, however large or small the loan
may be. If the going price for loans is (1+
r) per unit borrowed, the lenders' profits equal
(
r − ρ)B − f.
With perfect competition among lenders, the loan interest rate is competed down until
it just covers the costs of the loan:
r = ρ + f /B. Equilibrium r and B are determined
where that credit supply curve equals demand (1).
Equilibrium in the payday credit market is illustrated in Figure (3). If
fixed costs per loan
are prohibitively high, the market may not exist. Perhaps the payday lending technology
lowered the
fixed cost per loan enough to make the business viable.3 Before the advent of
payday lending, households who applied to banks for a very small, short-term loan may have
been denied.
Fixed costs per loan imply that smaller loans will cost more per dollar borrowed than
larger loans. That means households with low credit demand will pay higher rates than
households with high loan demand. Loan demand is increasing in income, so high income
households who demand larger quantities of credit will enjoy a "quantity" discount, while
lower income households will pay a "small lot" premium, or penalty. That price "discrimination"
is not invidious, however; the higher cost of smaller loans re
flects the fixed costs of
lending. The high price of payday loans may partly re
flect the combination of fixed costs
and small loan amounts (Flannery and Samolyk 2005).
A usury limit lowers household welfare. Suppose the maximum legal interest rate is
r.
At that maximum rate, the minimum loan that lenders' cost is
f /(r− ρ) = B. Low income
households with loan demand less than
B face a beggar's choice: borrow B at r or do not
borrow at all. Such households would be willing to pay more to to avoid going without
credit, so raising the usury limit would raise welfare for those households.
Competition is another key determinant of how much households gains from borrowing.
3
Alternatively, or additionaly, the demand for small, short term loans may have increased in the mid
1990s. The welfare reform then almost certainly increased demand for such credit as households who once
"worked" at home for the government were forced to go to work in the market.
Even with no competition — monopoly—households cannot be worse o
ff than under autarky.
The monopolist raises interest rates until the marginal revenue from higher rates equals the
marginal cost from lower loan demand:
B
(y, r) = −(r − ρ)Br(y, r) . (2)
At that monopoly interest rate,
rm, household loan demand equals B(y, rm).Household welfare
under monopoly equals
U (Br(y, r m))+δU (y −(1+ rm)Br(y, r m)). Welfare is lower under
monopoly because credit costs more and their standard of living
fluctuates more (because
costly credit reduces their demand for credit) If households borrow from the monopolist,
however, they must better o
ff than without credit.
In sum, welfare for rational households is highest if credit is available at competitive
prices. If households choose to borrow, they must be at least as well o
ff as they were
without credit. Limiting loan rates cannot raise household welfare and may reduce it.
Monopoly lenders lower household welfare, but even with a monopolist, households cannot
be worse o
ff than without credit.
The high cost of payday lending may partly re
flect fixed costs per loan. Before payday
lending, those
fixed costs may have been prohibitive; very small, short-term loans may not
have been worthwhile for banks. The payday lending technology may have lowered those
fi
xed costs, thus increasing the supply of credit to low income households demanding small
loans. That version of the genesis of payday lending suggests the innovation was welfare
improving, not predatory.
In the textbook model household welfare cannot be lower than under autarky because households
are fully informed and rational. Here we show households how can be made worse o
ff
than without credit if predatory lenders can delude households about their (households')
future income.
Suppose that by spending
C(τ ), lenders can convince a prospective borrower that her
income on payday will be
y +τ. The cost C can be interpreted variously as the cost of a guilty
Posted by: jeff | Oct 22, 2007 3:32:45 PM
Basically, a payday loan is a small, unsecured, short term cash advance loan for you to meet your financial needs until your next payday. Payday loan is only applicable for short term cash management but not intended for larger financial dilemmas.
Posted by: No Faxing Payday Loans | Nov 3, 2007 1:16:22 PM
