Payday lending — in which a customer is given a cash advance on his/her next paycheck — has traditionally been confined to largely unregulated non-bank lenders. However, the Minneapolis-St. Paul Star Tribune reported yesterday that payday lenders “have a powerful new ally in their quest for respectability: big banks”:

A few of the nation’s largest banks — including Minneapolis-based U.S. Bancorp, Wells Fargo & Co. of San Francisco, and Fifth Third Bancorp of Cincinnati — are now marketing payday loan-type products, with triple-digit interest rates, to their checking account customers.

These banks are making a strong case for creating a Consumer Financial Protection Agency (CFPA) in a couple of ways. The first is that loans of this sort should come under some sort of regulation, even if they remain largely in the non-bank sector. Typical payday loans have interest rates of 400 percent or more. While not quite that high, the big banks are charging $10 per $100 borrowed, which translates into a 120 percent annual interest rate.

These exorbitant rates are what makes payday lending profitable — and ensures that the borrowers who use them have to keep coming back for more. As the Center for Responsible Lending found, 76 percent of payday loan volume (and $3.5 billion in annual fees) is due to “churning,” which is repeat borrowing by customers who paid off their loan, but because of the interest, require another loan before their next paycheck. Sky-high interest rates and the way in which loans of this sort are marketed and sold would come under the purview of the CFPA.

Second, as the Consumer Federation of America pointed out, the banks in question are “using their national bank charters to avoid state usury laws,” which in many states cap the amount of interest that can be charged for a payday loan. But as envisioned by the Obama administration, the CFPA would set a floor for regulation that would not preempt state law. The CFPA would ensure a minimum level of protection, but wouldn’t prevent states from rightly applying their own usury laws to national banks.

Legislation creating the CFPA, along with the rest of the administration’s regulatory reform agenda, is currently sitting in Congress, waiting to be acted upon. But while it sits, the banks are getting right bank to business, taking on record amounts of risk and finding creative ways to subvert interest rate restrictions. Incidentally, all three of the banks using these payday-type loans received TARP money, though U.S. Bancorp has since repaid the government. Wells Fargo still has $25 billion in TARP funds outstanding.

Our guest blogger is Daniel J. Weiss, a Senior Fellow and Director of Climate Strategy at the Center for American Progress Action Fund.

A new analysis of clean energy legislation finds that it will produce likely economic benefits of $1.5 trillion. The finding by the New York University School of Law’s Institute for Policy Integrity explains that the Waxman-Markey American Clean Energy and Security Act (H.R. 2454) is “cost‐benefit justified under most reasonable assumptions about the likely ‘social cost of carbon.’” In “The Other Side of the Coin: The Economic Benefits of Climate Legislation,” the Institute for Policy Integrity finds that the “benefits of H.R. 2454 could likely exceed the costs by as much as nine-to-one”:

Using conservative assumptions, the benefits of H.R. 2454 could likely exceed the costs by as much as nine-to-one, or more. The estimated benefits do not include a significant number of ancillary and un‐quantified benefits, such as the reduction of co‐pollutants (particularly sulfur dioxide and nitrogen dioxide), the prevention of species extinction, and lower maintenance costs for energy infrastructure. Due to those limitations, the benefits estimates should be considered to be very conservative.

The cost-benefit analyses of environmental safeguards generally favor the costs since they are relatively easy to measure. The economic benefits, however, of reduced pollution are much harder to calculate. The price of a scrubber to reduce sulfur and particulate pollution from a coal fired power plant is easy to calculate, but it is much harder to account for the value of a protected stream or restored vista.

Even the federal government often projects costs while ignoring benefits of clean energy proposals. For instance, the Congressional Budget Office’s assessment of the American Clean Energy and Security Act notes that its analysis “does not include the economic benefits and other benefits of the reduction in GHG emissions and the associated slowing of climate change.”

The “social cost of carbon” is the “the monetary valuation of incremental damage from each ton of greenhouse gas emissions.” The new IPI analysis employs a recent Department of Energy estimate that the “monetary values of the benefits of carbon dioxide emission reductions, otherwise known as the Social Cost of Carbon (SCC) [are] …$19 per metric ton of carbon dioxide.” This estimate was developed by an interagency task force, and was employed in a Department of Energy rule for more energy efficient vending machines issued on August 31st.

Using the value of $19 per ton of carbon pollution avoided, the authors determined that the total midrange projection of Waxman-Markey’s benefits is $1.5 trillion total between 2012-2050. Projections estimate that the legislation would require $660 billion in investment during this time, which means that benefits are at least two times greater than costs:

At the SCC values preferred by the Department of Energy, the direct benefits of H.R. 2454 are more than double the costs. Using SCC values that have a more appropriately low discount rate built in (EPA’s 2% figures), direct benefits are nearly eight to nine times greater than costs.

Even these projections are very low because the estimated SCC employed in the analysis excludes the value of a number of important benefits. It excludes the reduction of other harmful pollutants released along with greenhouse gases from coal fired power plants, such as soot and mercury. It does not estimate the cost of fewer tropical diseases or respiratory ailments from smog, or less political unrest in volatile regions.

Special interests that defend the status quo and oppose clean energy programs are quick to trot out their studies predicting economic Armageddon due to enormously inflated costs. Never mind that most of these industry studies are riddled with false assumptions and ideologically driven guess work, and are often proven wrong over time.

Until now, advocates of progress have had few estimates of economic benefits of action. This is a credible estimate of the benefits of action, and it far outweighs the investment cost of building a clean energy economy. The Environmental Protection Agency must take the next step by conducting a more thorough, rigorous analysis of benefits to conclusively demonstrate that Americans will have a net economic benefit from clean energy and global warming legislation.

The Census Bureau released its annual report on incomes and poverty today, which is the first comprehensive look at the effects of the first full year of the current recession. The Bureau found that the poverty rate has risen to an eleven-year high of 13.2 percent, with 39.8 million people in poverty (including 14 million children).

This is up from 37.3 million in 2007, and constitutes the highest number of people living below the poverty line since 1960. This new data also gives the full measure of poverty under the Bush administration, which was at 11.3 percent (31.5 million people) when he came into office in 2001. So the Bush years saw an additional 8.3 million people fall below the poverty line.

This report does not take into account the hemorrhaging of jobs that occurred in early 2009, when more than 700,000 jobs were disappearing each month, so these numbers are likely to rise even higher. And they would be headed higher still if it were not for the economic stimulus package that was passed in February.

The Center on Budget and Policy Priorities looked at seven of the stimulus package’s provisions and found that they alone will keep more than 6 million people out of poverty in 2009:

This analysis…examines seven of the recovery act’s provisions — two improvements in unemployment insurance, three tax credits for working families, an increase in food stamps, and a one-time payment for retirees, veterans, and people with disabilities — and finds that they alone are preventing more than 6 million Americans from falling below the poverty line and are reducing the severity of poverty for 33 million more. Those 6 million people include more than 2 million children and over 500,000 seniors.

These estimates also don’t include direct assistance provisions “such as increases in funding for medical services, Pell grants, child support collection, Temporary Assistance to Needy Families, and assistance to homeless individuals,” which will help ameliorate the poverty impact of the recession. These numbers should provide some food for thought for those conservatives advocating canceling the stimulus or redirecting it towards debt reduction.