Off the Kuff Rotating Header Image

Endorsement watch: Prop 5

Well, we may or may not ever get back to the contested races in City Council districts A, H, and I, but it does at least appear that we’ll get a recommendation on all the constitutional amendments on the ballot. Today’s featured proposition is Prop 5, which gets a nod of approval from the Chron.

The proposed amendment, with wide support from business leaders, would eliminate interest rate caps on commercial loans above $7 million. In doing so, Texas would join 46 other states that do not put caps on what banks can charge commercial customers.

Currently, Texas business owners needing high-dollar loans for commercial enterprises often must bank outside Texas because the constitutionally mandated interest cap makes a Texas loan infeasible or unavailable. Doing business across state lines means companies must employ attorneys versed in the banking laws of other states. It can require travel outside Texas to negotiate terms. If a deal initiated in another state goes to court, legal fees and interstate litigation costs can spiral.

Even when companies find a Texas-chartered lender to arrange their big-ticket loan, the constitutional interest cap drives up costs. Such deals, often entailing complex elements such as equity participation in which the lender takes a stake in the enterprise. In Texas, this requires additional legal scrutiny to avoid busting limits on interest rates. Such deals have been challenged in court when profits to the lender have been construed as interest payments above the mandated cap.

One of nine amendment proposals on the ballot, Proposition 5 would relieve businesses of these burdens and uncertainties. The proposition is narrowly tailored so that small business owners needing financing under $7 million will retain protections that exist under present law.

Consumers need not worry: the amendment will not affect loans for cars, home improvement or college.

“Wide support from business leaders” is not necessarily a good thing in my book (two words: tort “reform”), but off the top of my head I don’t see anything terribly objectionable about this. If you can give me a good reason to vote against it, leave a comment and let me know.

According to the Texas Civil Rights Review, Maria Alvarado, currently the sole Democratic candidate for Lite Gov, is advocating a vote against all nine propositions as a means of expressing discontent with the unresponsiveness of the Legislature. I don’t fully agree with this approach and will do my best to evaluate each proposition on its own merits, but I can understand it.

Today’s news coverage is on the five-way race in At Large #2. I confess, I hadn’t realized there was a fifth person in this race – I knew about Acosta, Aiyer, Elford, and Lovell, but had never heard of James Neal before now. He’s also the one candidate for whom I’ve not seen any campaign signs around. Greg has a concise summary of the article.

Later today, or maybe tomorrow morning, I hope to give my endorsements for all the races, for what they’re worth. Early voting starts today – more info is here, a map of early voting locations is here, and the early voting schedule is here.

Finally, there will be an anti-Prop 2 rally at the Metropolitan Multi-Service Center (an early voting location) on West Gray today at 3:30, along with an announcement of breaking news regarding the amendment. That’s all I know about it, so follow the link and I’ll report back when I hear more.

Related Posts:

  • No Related Posts

4 Comments

  1. Bryan says:

    The breaking news is that Prop 2 has the potential to annul ALL marraige.

    Go to http://wwww.savetexasmarraige.com for more info.

    Also, for people in Fort Bend County, there will be an anti prop 2 rally at the First Colony Conference Center at 3232 Austin Parkway in Sugar Land today from 5-7PM.

  2. Mateo Jungman says:

    The enabling legislation on Proposition 5 only removes the interest rate ceiling on large commercial loans, but the amendment removes the usury requirement for all commercial loans. If the amendment passes, future legislatures could remove the interest rate caps for small business loans as well. The claim that the proposition (i.e., the amendment) is narrowly tailored to protect small business owner is simply false.

    Also, the ballot language for Prop 5 says that it would “allow[] the legislature to define rates of interest for commercial loans.” Article 16, Section 11 of the Const. already specifically authorizes (and requires) the legislature to do that. Prop. 5 would remove the requirement that the legislature define interest rates—almost exactly the opposite effect of what the ballot language says.

    This pattern of deception makes me very suspicious of this amendment and I’ll be voting against it.

  3. Kent says:

    Just got back from early voting and ended up voting no on all but two amendments, prop7 (reverse mortgages) and prop9 (allowing mobility board members to serve staggered 6 year terms).

    Having moved to Texas from Alaska I must say I’m rather amazed at all this annual amending of the constitution by the voters. Seems rather odd, as if the entire State Code is written into the constitution for some reason. Most other states have short constitutions that rarely ever get amendeed, and certainly not for this sort of nickle and dime stuff.

    My inclination was to vote everything down, knowing as I did that they came out of our so-called legislature. But I couldn’t come up with a compelling reason to vote against 7 and 9 so I gave them the benefit of the doubt on those two.

    The hardest one to decipher was prop 8, the property deed amendment. I gave up trying to understand it and voted no on the principle that this sort of stuff really shouldn’t be in front of the voters anyway.

  4. Mathwiz says:

    Having moved to Texas from Alaska I must say I’m rather amazed at all this annual amending of the constitution by the voters. Seems rather odd, as if the entire State Code is written into the constitution for some reason. Most other states have short constitutions that rarely ever get amendeed, and certainly not for this sort of nickle and dime stuff.

    Oklahoma’s constitution is about as bad as Texas’s, as I can attest after having lived there 40 years.

    Nevertheless, I’ll be taking your advice: no on everything but 7 and 9, unless I come across a compelling counterargument before I vote early later today. (“Vote early later today:” sounds like an oxymoron, doesn’t it?)