The subprime credit card issuer charging interest rates of 25 percent or more.  All those subprime auto lenders charging 20 or 22 or 25 percent a year in interest for a car loan.  Others in the poverty industry.  All are saying the same thing:

We didn’t cause the Great Recession of 2008 so why is Congress including us in its financial reform package?

Or, more specifically: Why is the federal government proposing a new consumer financial protection agency that would monitor our activities when we were blameless for the global calamity that has caused so much pain?

I took on this question earlier in the week in a piece for The Huffington Post.  Here in a nutshell, though: sure, the immediate cause of the subprime meltdown were all those sketchy home loans that mortgage brokers wrote that ended up in toxic packages, stamped with Triple-A ratings by the credit rating agencies and cavalierly and irresponsibly sold by Wall Street’s biggest banks.

But the bigger culprit: the flood of easy credit that helped the country collectively live beyond its means for decades, whether the trillion or so in credit card debt that Americans owed in 2008, the billions in home equity loans they took out to keep themselves financially afloat, or the $40 billion-plus in payday loans the working poor take out each year.

Besides: While we're thinking about financial reform, shouldn't one goal be a safer, more sensible financial marketplace than in the past, whether someone is shopping for a $200,000 home loan or a $200 cash advance.

Me, I'd argue -- and do, after a fashion, in BROKE, simply by telling the story of the industry's rise and spread  -- that the payday industry is exhibit A in the argument in favor of a new financial consumer protection agency.

For an interesting take on payday:  "Morning Edition" aired this piece the other morning featuring Chris Browning, a character from my book.

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  • This is a good point, but I think going too far the other way is just as big of a mistake. In reacting to these types of problems, usually the reaction is to overreact in the other direction. This ends up causing as many problems as the original one.