Gary Rivlin’s new book Broke U.S.A. does a rather thorough job of chronicling the rise of the subprime lending industry in this country.  The positive attributes of his tome include excellent detail and insight into how subprime lending operates in this country, very concise and descriptive prose, and some intriguing profiles of the lenders and activists involved.  To the book’s credit, Mr. Rivlin describes blatantly deceptive and corrupt lending practices in the early days of consumer finance.  He rightly singles out both employees and management of Household Finance and Fleet Financial for such behavior, as well as Associates Bank and NationsBank.

On the down side, however, Mr. Rivlin’s bias against subprime lenders is apparent.  His profiles of activists are more comprehensive than the lenders, and they are portrayed as crusaders against an industry designed to “make money off the poor”.  He fails to mention the more unflattering angles on certain activists.  Further, while his research delves deeper than just about any other media story, he either deliberately omits damaging truths about the activist community, or failed to research thoroughly enough.  Nor does he ever once mention the litany of non-industry-funded studies that support the cash advance industry.

There are several glaring omissions or distortions in Mr. Rivlin’s book that speak to his unfortunate bias.  The first, and most significant, is lionizing the founder of the Center for Responsible Lending, Martin Eakes.  Mr. Rivlin came up short in his research about Mr. Eakes.  In addition, he largely gives Mr. Eakes a pass for his role in the subprime mortgage meltdown.  Mr. Eakes pioneered the product and created a secondary market for these mortgages.  There’s no getting around that, try as Mr. Rivlin will.

Second, Mr. Rivlin gives borrowers a complete pass on their responsibility in every transaction.  While some of the people who were cheated admit to their own mistakes, nowhere in the book does Mr. Rivlin ever lay out a very simple argument: that borrowers constitute half the transaction, and are therefore half of any problems that exist within the industry.  To that end, Mr. Rivlin plays the typical card of a mainstream media journalist — harping on the sob stories of subprime borrowers, but not providing any compelling stories of how borrowers were helped by subprime lenders.  Anyone reading his book would come away believing that every lender mentioned was only out to cheat customers.

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The Virginia State Credit Union is mining for gold and it’s finding it.  Thanks to former Virginia Governor Tim Kaine, state employees are being duped into a credit product designed to take more money from their paychecks than the payday loans it was designed to replace.  Not only that, this spider catches its flies via unfair competition.

Welcome to The c, or “Virginia PDL Public Option”.  It’s as bad an idea as has ever come into the credit space, short of the credit default swap.  Naturally, it is the invention of Government.

I’ll jump over all the usual falsehoods that Mr. Kaine presents and cut to the chase.

What’s so bad about this program?  Let’s take the unfair competition part first.   I don’t have any problem with the government entering the consumer credit business, just as I have no problem with a fair public option for health care, as long as the playing field is level. Therein lies the rub.

The PDL Public Option provides loans up to $500, at a 24.99% APR, with a six-month term, and a limit of  2 loans annually.  It requires membership in the Virginia Credit Union (VACU), which administers the program.   The VACU also requires direct deposit of the borrower’s paycheck.

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