January 29, 2008
Down, Out, and Empirically Interesting
Posted by David Zaring

The Times is right: bail bonds are weird. 

“It’s a very American invention,” John Goldkamp, a professor of criminal justice at Temple University, said of the commercial bail bond system. “It’s really the only place in the criminal justice system where a liberty decision is governed by a profit-making businessman who will or will not take your business."  ...

Most of the legal establishment, including the American Bar Association and the National District Attorneys Association, hates the bail bond business, saying it discriminates against poor and middle-class defendants, does nothing for public safety, and usurps decisions that ought to be made by the justice system.

But the Times likes to report on bottom feeding finance, and economists like to study the same thing.  I'd pair this story on the bail bonds industry with the same paper's not-so-recent story about new consumer suits against mortgage brokers to the poor.  And, heck, its obsession with Wal-Mart, which is an important part of one reporter's retail beat

On the economist side, I'm confident Alex Tabarrok will have something to say about bail bonds, given that he has written on the subject.  It is, of course, at least possible that financial institutions that target the poor (payday lenders, bail bondsmen, subprime lenders, and so on) do not enjoy windfall profits from the high-risk loans that can put their borrowers in difficult straits.  And those people who worry about the interest should have a look at the rates that noble microcredit institutions in the mold of the Grameen Bank charge.

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