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The Estimated Cost of a Loan Texas Finance Report, edited by Stuart Long and Mary Jane Bode, reported, as to the 17.5% bankers’ interest rate bill: “In an attempt to get some clear picture of the effect final passage of SB 59 [which did finally pass without rate or added-cost changes Ed.] would have on the average borrower, this reporter asked a Texas Regulatory Loan Act lender what interest and charges could be made of a person who wanted to borrow $903.25 from a banker, savings and loan association, or other notemaker, repayable over 36 months. “His estimate was this: If the loan were secured with a 1962 Chevrolet and the borrower’s household furniture, he would pay $405 in interest; $46 for life insurance; $89, health insurances; $34, fire and EC insurance on the furniture; $1.50, filing fees; $1.25, corrected title; $15, attorney’s opinion ; $15, appraisal fee; $50, atomic bomb disaster insurance. “That would bring the borrower’s interest and cost to $656.75, and since he would be required to carry comprehensive and $50 deductible insurance on the car which would cost $345, he would sign a note for $1,905, payable in 36 monthly installments of $52.90 each, and get only $903.25 in cash. The other $1,001.75 of the $1,905 note would cover interest and charges.” shocked when the bill came out of the House banks committee excluding them from its terms. The regulatory loan act under which they operate, their spokesmen contended, is stricter in the insurance and others charges permitted. Penalties for usury were much milderdouble interest and attorneys’ fees onlyin the bankers’ bill than apply to the “whales,” as some wags in the House call the makers of middle-size loans. Perhaps nothing keynoted the fervent, four-hour House debate better than the first words spoken in it. House sponsor David Haines, Bryan,. said, “Mr. Speaker and members, this is the bill concerning the banks of this state.” To the press table Rep. Bill Hollowell, Grand Saline, said, “This bill is a special interest bill, and everybody knows it.” Handling the bill on the floor was Rep. Terry Townsend, Bryan. He ‘said the bill’s rates were maximum ceilings and “will not be reached because of the intense competition in the lending.” He said Sears charges 19 to 25%; small lending institutions charge a minimum of 37%; the 17.5% bill “gives the borrower a choice.” Hollowell sought to get -Townsend to say what the bankers’ present maximum interest is. Townsend said about 19 to 23% under the Morris Plan, but admitted the court held a version of this plan invalid in 1960. “You think they need this 17% rate?” asked Rep. Menton Murray, Harlingen. “I think the people of Texas need the opportunity to borrow it from a regulated, respected lender instead of paying 18, 20, or 37%,” Townsend answered. “You mean today banks won’t lend $1500 at 10% ?” Murray said disbelievingly. “To some people they would,” Townsend answered. “To you they undoubtedly would, sir. You have accumulated enough to have become a good risk.” Rep. Jack Crain, Nocona, said other “identifiable costs” might include a periodic fee for inspecting his tractor to see that he still owns it. Townsend answered, “The bank itself would want to keep these charges down because any increase in these charges would decrease your ability to pay back the loan.” This was the only discussion on the House floor of the ‘charges, other than interest, that the legislature was legalizing. Savings and loan institutions would be put into the small loan business by the bill, charged Rep. Felix McDonald, Hidalgo. “We would make them available for these loans,” Townsend corrected him. Finney then lost in amendments to take out savings and loan companies, reduce the charge to $7 add-on, and exclude certain loans. Rep. John Alaniz, San Antonio, proposed that banks overcharging lose their principal, but at this point the House rejected this idea. The first major change was initiated by Rep. Alonzo Jamison, Denton, whose amendment excluded real estate-secured loans. \(The Senate had excluded only first Rep. Charles Wilson, Trinity, said builders make nice profits at 9% on home improvement second-lien loans: he is in the building business and knows, he said. Rep. Dick Cory, the conservative who swings as much weight in the House this session as any member and is chairman of state affairs, rose to support Jamison and Wilson, to the members’ surprise. He challenged the members to “tell your people you authorized a 17.4% loan on real property” and predicted their opponents would take “nice, big, fat” ads so advising the people. The Jamison amendment, subsequently mis-called the Cory amendment because of the drama of Cory’s support for it, was adopted 112-28. Opponents at first thought this would kill the bill, since the Senate would have to concur. “That bill is whupped!” Wilson exulted. \(They were wrong; the Senate went along with all House amendments, For years 10% was the constitutional interest ceiling in Texas, but the legislature recently proposed to the people that it be abolished, and they agreed; the 1963 small loan act, legalizing interest charges of 117 to 320% on loans under $100, ensued. Hollowell now proposed that the bankers be limited to 10% again. He found the 17.5% rate “illegal, immoral, and unethical,” he said. “I consider myself a conservative, but I’m not a pick pocket or .special interest conservative. I had stock in a Dallas bank, and it doubled in value in three years, and they were getting 4%. Don’t let anybody tell you the banks are in bad shape because they’re not. I want banks to make a reasonable profit, but 10% is a reasonable profit.” Townsend said the amendment would “kill the bill.” It was tabled 100-36. In proposing that loans secured by personal property be excluded from the bill, Rep. Jim Markgraf, Scurry, was aiming at the car-financing business. It was brought out that G.M.A.C. car loans now cost about 13% simple interest. Cars were left in as Markgraf lost 94-40. HARING then began the nearest thing to a filibuster House rules permit. Refused an extension of his permitted ten minutes on his first amendment, he ran with ‘other amendments to get more time. “We’re here trying to legalize usury,” Haring began, reading passages against “They want to charge 14% on a $5000 loan! How would you like to pay 14% on a $5000 loan?” he asked. “They just say, ‘the loan sharks are doing it, why can’t we?’ ” He said the Federal Reserve System interest rate is 4%, but the Texas legislature wants 17% “from the people. . . . This is robbery. Is there any justice in the land? You laugh at it . . .,but you tell the people. “Two weeks ago the legislature said if a man steals a loaf of bread he can be sent to jail for two years. You are telling the bankers, ‘You can steal many millions of dollars and you don’t have to go to jail.’ This bill will legalize the banks’ stealing.” \(Rep. Maurice Doke, Wichita Falls, a supporter of the bill, appeared in the balcony at this point and conferred with Sam Kimberlin, the lobbyist for the Texas Bankers’ Assn., which was all-out for the pending bill. A few members pointed up to Doke and Kimberlin and laughed. Doke later explained to the Observer, “I went up to see Sam about this amendment.” Members often consult lobbyists in the midst of debate, but usually in the lobbies, Haring continued, citing interest rates in other countries from 4.5 to 12%. “Why June 11, 1965 3