If one phrase encapsulated the Vietnam War, it was this: “We had to destroy the village in order to save it.” Those in the political class in Washington have learned nothing, but perhaps more accurately, many don’t care if their policy proposals and actions cause more misery than benefit.
On Sept. 29, Congress held a hearing on the rules proposed by the Consumer Financial Protection Bureau (CFPB) that would likely destroy much of the small-dollar loan industry and drive many low-income and poor credit-risk people into the arms of loan sharks. The CFPB rules are so costly that most lenders will likely go out of business — by government intent. The small-dollar loan industry has been criticized for charging high fees and engaging in aggressive collection practices.

The problem is that it is expensive to lend money to poor credit-risk people, and if legitimate businesses are not allowed to make a reasonable profit because of government regulation, the black marketeers will be the only ones serving the poor. As Rep. Jeb Henslaring, chairman of the House Financial Services Committee, noted to CFPB Director Richard Cordray: “These are the very loans many need to keep their utilities from being cut off suddenly or keep their car on the road so they can, in turn, keep their jobs.” Mr. Cordray had no answer as to how the poor will obtain necessary low-dollar loans once he has destroyed the legitimate lenders.