DURHAM, N.C. (Legal Newsline) - President Barack Obama's fight to regulate automobile dealers like banks could lead to broken knees, a Duke University professor joked Wednesday.
Obama is railing against an amendment in the proposed financial industry reform package that excludes auto dealerships, as lenders, from new regulations on banks. He called it a loophole achieved through lobbying efforts.
Michael Munger, a Duke political science professor and former gubernatorial candidate in North Carolina, said any "loopholes" will improve the bill, which he says will increase costs for lenders and, in turn, those who need loans.
"The problem is that many people can't find credit, or secure loans, at the traditional credit service organizations," Munger said. "Their only choices are to seek illegal sources, which means loan sharks.
"These restrictions on the ability of the poor and disadvantaged to find nontraditional, higher interest rate loans are harming the very people that the Obama administration is claiming it wants to help.
"If you make it unprofitable for legal banks and auto companies to make loans, the only remaining sources of loans for the poor are Tony Sackodonuts, down on the corner, and his knee-breaking pals."
Obama said Wednesday that because auto dealers make nearly 80 percent of the automobile loans in the country they should not be out of the reach of the regulations the bill would create. A Senate amendment created the exemption.
"This amendment would carve out a special exemption for these lenders that would allow them to inflate rates, insert hidden fees into the fine print of paperwork, and include expensive add-ons that catch purchasers by surprise," Obama said.
Sen. Sam Brownback, R-Kan., introduced the amendment.
In addition to broken knees, the bill could lead to another bailout, Munger says.
"If the President gets his way, then only the rich will be able to buy cars," he said.
"And we will end up bailing out Detroit again, because of this foolish anti-capitalist bias that the administration is revealing over and over again."
Munger earned his PhD in economics at Washington University in St. Louis and worked as a staff economist at the Federal Trade Commission.
A Libertarian who received 3 percent of the 2008 vote for governor, Munger, who also has a PhD in political science, is the head of the political science department at Duke.
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