What the Health Care Law Provides

With all the hubbub over the Supreme Court's decision -- and the legal arguments it resolved -- it seems worth reiterating what the law provides. Today's Washington Post has a good bit of coverage on that topic, including a timeline on the various provisions of the Act, discussing which ones are already in effect and when the others kick in, and an interactive tool that tells readers how the law affects them based on whether they have insurance, their income, marital status, etc.

 

President Obama's Reaction to Supreme Court's ACA Ruling

Click here or view the embedded video below:

 

Paper on Predatory Lending and the Subprime Crisis

 

Sumit Agarwal

 of the National University of Singapore and the Federal Reserve Bank of Chicago,

Itzhak Ben-David

 of Ohio State's Fisher College of Business,

Gene Amromin

 of the Chicago Fed,

Souphala Chomsisengphet

 of the Office of the Comptroller of the Currency (OCC

Douglas D. Evanoff

 of the Chicago Fed have written Predatory Lending and the Subprime Crisis.   Here's the abstract:

It is typically argued that predatory lending generated significant social costs and played a central role in creating the subprime crisis. However, there are few estimates of its true effect. We estimate the effect of predatory lending on the residential mortgage default rate using an anti-predatory program implemented in Chicago in 2006. Under the legislation, risky borrowers and risky mortgages triggered mandatory counseling. Following the legislation, market activity decreased by about 35%, where risky borrowers, risky products, and lenders who typically made riskier loans were most affected. Despite the sharp decline in market activity, 18- and 36-month default rates in the treated group exhibited a relative improvement of 12% and 7%, respectively. We estimate that predatory loans have a 6-7% higher default rate than nonpredatory loans. Our results suggest that predatory lending may have not been instrumental in precipitating the financial crisis as often believed.

CFPB Report on Reverse Mortgages

Consumer Reports explains that

A report today by the Consumer Financial Protection Bureau shows that an increasing number of homeowners are taking out reverse mortgages at a younger age, putting them at risk of using up the funds prematurely. The financial watchdog also announced plans to collect input from the public on rules to rein in reverse mortgage abuses. The CFPB report found that half of reverse mortgage borrowers are in their 60s, and that 73 percent of all borrowers took all or almost all of their available funds up front. Overall, almost 10 percent of all reverse mortgage borrowers are at risk of foreclosure. Non-borrowing spouses are especially vulnerable.

Here is the CFPB's report, which was mandated by the Dodd-Frank financial reform legislation. Go here for the CFPB's 4-page brochure on reverse mortgages. More information can be found here. HT to Craig Briskin.

Affordable Care Act upheld

The coverage is everywhere by now, but for readers of the blog, a quick summary of the major points in today's decision:

1. The ACA's individual mandate is constitutional under Congress's taxing power and therefore upheld. (Five justices agree that the the commerce power does not sustain the mandate, but there is no one opinion for this group.)

2. The ACA's expansion of Medicaid eligibility impermissibly coerces states by threatening to withhold all Medicaid funding (not just funding for the expansion) if the states do not comply. But this problem is remedied by limiting the penalty to the withdrawal of funding for the expansion only (as opposed to all Medicaid funding).

3. No other provision of the ACA is affected.

So, overall, the ACA is upheld, by a 5-4 vote (Roberts, Ginsburg, Breyer, Sotomayor, Kagan). The dissenters (Scalia, Kennedy, Thomas, and Alito) would have thrown the entire law out.

Supreme Court Decides First American Financial Corp. v. Edwards

The case has been dismissed! More later.

New Student Loan Costs, Despite The Deal on Interest Rates

We reported here that congressional negotiators had come to a deal that prevented federal student loan interest rates from doubling on July 1 (from 3.4% to 6.8%). But as the Washington Post explains in this article there's some fine print that students are going to hate:

College students are facing a roughly $20 billion increase in the cost of their federal loans, despite a much-heralded deal in Washington to contain the expense of higher education. Starting Sunday, students hoping to earn the graduate degrees that have become mandatory for many white-collar jobs will become responsible for paying the interest on their federal loans while they are in school and immediately after they graduate. That means they’ll have to pay an extra $18 billion out of pocket over the next decade. Meanwhile, the government will no longer cover the interest on undergraduate loans during the six months after students finish school. That’s expected to cost them more than $2 billion.

 

Which Lenders Have Been the Subject of the Most Complaints Reported in the CFPB's Credit Card Database ?

by Jeff Sovern

The Charlotte Observer created a chart, which you can see here.  Looks like the winner is Cap One. But the Observer's chart is not ideal, though it's an improvement over the way the Bureau presented the raw data.  Ideally, the chart would indicate the resolution of the complaints, at least to the extent the Bureau's data included that, as well as the number of credit card customers each issuer has, since, all other things equal, we would expect issuers with more customers to generate more complaints.  Put another way, if a lender with few credit cardholders has, say, twenty complaints, and another lender with five times as many customers has forty complaints, the second lender would have fewer complaints per account and so would appear to do a better job of satisfying consumers.  The number of credit cards each lender issues may not be publicly available, however.  You can read another story about the database here.

Apparent Deal on Student Loan Interest Rates

Federal student loan interest rates will double from 3.4% to 6.8% on July 1 unless Congress intervenes. As reported this morning in the Washington Post, a deal Senate has apparently been struck. The sticking point has been how to pay for the government subsidy that creates these below-market rates. Here's what the deal provides on that score:

The extension would be paid for by raising premiums for federal pension insurance, an idea acceptable to businesses because rules on how companies calculate their pension liabilities would be changed. [Ed note: Does this mean that pensioners are actually paying for the subsidized interest rates?]  A senior Democratic aide said the pension proposals, which came from [Senator Harry] Reid, would generate $5.5 billion. Meanwhile, students would be limited in how long they could receive a federally subsidized loan to 150 percent of their program length — so, six years for a four-year undergraduate degree — a suggestion from Republicans.

More on D.C. Circuit Ruling Upholding Greenhouse Gas Rules

We posted yesterday about the D.C. Circuit's ruling upholding the Obama Administration's regulations on greenhouse gas emissions. For reaction to this major ruuling, go here, here, here, and here. The LA Times reminds us of the political volatility of the issue:

The fuel economy standard crafted with the auto industry, built on EPA's decision to regulate greenhouse gases, may have been the signature environmental accomplishment of the Obama administration. But the EPA's greenhouse gas efforts may end up being curtailed down the line. Presumptive Republican presidential candidate Mitt Romney has vowed, if elected, to strip the EPA of its authority to regulate the emissions.