Wednesday, July 25, 2012

Penn State and the NCAA

The National Collegiate Athletic Association (NCAA) has hammered Penn State and hammered hard. A $60,000,000 fine (money to be used in child abuse programs NOT affiliated with Penn State) and the vacating of the 112 Penn State victories that occurred after Joe Paterno learned of Sandusky's actions led the list. The sanctions generating the most controversy are a four year ban on participating in post-season bowl games or appearing on TV and a reduction in scholarships.

In his column in yesterday's Richmond Times-Dispatch, Paul Woody argues that those latter two punishments are too heavy. In a nutshell, Woody argues that the combination will consign Penn State's football program to second class status for much longer than the ban. As he noted, it is clear recruiting quality athletes will be, at best, a challenge. The best high school players will have pro football aspirations and those young men are not likely to give serious consideration to a program with zero post-season play or TV exposure. Even good players who aren't particularly hopeful of a professional football career will prefer programs with post-season hopes and TV coverage. Add to that the NCAA's concurrent ruling that current Penn State players can transfer to another school and play this fall (instead of waiting a year as is the norm) and the future looks very bleak for the Nittany Lions.

I almost always agree with Paul Woody who makes a good case on this issue. This time, however, I disagree with him.

The sanctions imposed by the NCAA have two purposes. One is to punish the wrong doers. Among the wrong doers are the Penn State board of trustees. They need a long lasting reminder of the costs incurred when they fail to meet their responsibilities. (The new president, vice-president, athletic director and football coach need that reminder, too, although the violations of human decency were not theirs.)

The other is to set an example for other colleges and universities that currently impose no meaningful limits on or oversight of their football or basketball programs. Many of the colleges and universities that allow too much power to athletics will ignore the example. But perhaps the academic leaders of one or two or three will see themselves when they look at Graham Spanier (former Penn State president) and decide to make changes. Heck, maybe even an AD will look at Tim Curley (former athletic director) and decide changes need to be made. Miracles happen.

To his credit, Paul Woody didn't offer a general whine lamenting the suffering of innocent people brought about by the NCAA decision. He offered a cogent argument that a specific likely outcome was not an appropriate punishment given the negative long term impact on the Penn State football program that will result and the limited impact on the specific five individual wrong doers. Others, however, have complained  mostly (sometimes only) about the innocent students, the innocent players, the innocent faculty, even the innocent alumni who will suffer because their beloved Penn State football program will suffer. That alone isn't a valid reason for not doing justice.

The only question is whether the NCAA decision meted out justice. Paul Woody thinks is did not. I think it did.

Thursday, July 19, 2012

"Alternative" Financial Institutions

"Alternative Financial Institution" is an unfortunate choice of terms because in some contexts it means useful organizations such as Community Development Financial Institutions.  In the context of this post, however, the term is better viewed as a synonym for vulture. In an editorial on July 17th, the Virginian-Pilot said this:  “If predatory lenders had a trade publication – say, “Usury Today” – they’d undoubtedly rank Virginia near the top in annual roundups of the best places in the nation to do business.”

These institutions (vultures, predatory lenders, or whatever other pejorative you wish to use) include pay day lenders and short-term car title lenders both of which, in my opinion, exist to take advantage of people who are down and out. In Virginia, a car title lender is restricted, if you can call it a restriction, to charging not more than 22% per MONTH. That’s right, these people (for want of a better family rated term) can charge 22% per month.  The law, in its infinite mercy (recognize the sarcasm?), does not allow compounding so 22% per month is  264% per year. Virginia law allows that highest rate on the first $700 borrowed. Interest on the next $700 is “only” 18% per month. Above $1,400, a real bargain rate kicks in, 15% per month.  Another crumb offered by the law -- up front fees are limited actual costs of  recording a lien on the motor vehicle.
Tuesday afternoon (July 17) the Chesterfield County Planning Commission, of which I am a member, heard a staff presentation of a proposed ordinance to regulate where in the county alternative financial institutions might be located along with other restrictions.  In a private conversation with me, one attorney noted the proposal would allow these operations in only 3 locations in the county. My unspoken thought was, “that many?” I let staff, including the assistant county attorney assigned to advise the Planning Commission, know that I want an ordinance as restrictive as possible, given limits placed on the county by state law and judicial precedence.  I clearly expressed my opinion of these operations during the work session when I said, “They take people who are in a hole (and) instead of handing them a ladder, they hand them a shovel.” The Richmond Times-Dispatch has as article today reporting on this part of the Commission’s meeting.
For more information, see this earlier Pilot Online article headlined, “New data shows car title loans big business in Va.”

The above article reports that repossession rates are about 6.5% of loans made resulted in repossession of the motor vehicle (8,378 repos out of 128,500 loans). However, the article also reports 105,542 different individuals took out those 128,500 loans making the repo rate per individual borrower be over 7.9%. Repossession rates on auto loans financed by traditional means (banks, credit unions, new car dealers) don't seem to be readily available although using rough numbers and reasonable assumptions, that rate appears to be not more than the 3% to 4% range.

As always, comments are welcome. 

Edited on July 24 to provide a working link to the news article, “New data shows car title loans big business in Va.”