Joke of the day: Obama scolds the credit card industry
Today's Financial News - Posted April 23, 2009
The credit card industry is getting an earful from Washington. Unfortunately, our leaders are not looking out for you and me, they are merely campaigning for more votes.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): So long free markets and consumer choice. If Washington has its way, competition will be curtailed and the greedy, evil credit card companies will be forced into financial submission.
I am having an incredibly hard time digesting the fact the president of what was once the freest nation on the planet has called the nation’s top credit card issuer to the White House to discuss how they should run their businesses. His apparent goal is to strong-arm them into agreeing with his politically motivated view of the industry.
In one breath, the current administration complains the credit markets are too tight and banks should be lending more, then in the next they want to increase regulations and decrease profitability.
Hold my hand Mr. President
I have had a credit card or two tucked into my wallet for almost half my life. Yes, the horrendous interest rates and hidden fees can be painful but nobody ever said you absolutely must have a credit card.
In all my years of owning a credit card, only once did I ever pay interest or a fee. Why? Because it is absolutely stupid to pay that kind of interest. Yet people do it all the time. Right now, median household credit card debt is over $3,000.
Sadly, this is not a debate about interest rates or usurious fees. It is about the government’s manipulation and regulation of American businesses.
The way I see it, the free markets should rule. If you don’t want to pay an exorbitant fee, don’t. Cancel your card and use cash. Or better yet, find a competing card with better rates. If enough people cut up their cards, the “greedy” card issuers will surely change their game.
But that is not the way the Obama administration sees it. Apparently Washington believes it is an American right to have cheap and easy access to credit, whether we deserve it or not.
Obama wants to make it illegal for a card issuer to raise its rates if you miss a payment on another bill. What a joke.
What if, oh say, General Motors (NYSE:GM) misses a bond payment on June 1, wouldn’t you expect all the company’s lenders to raise their borrowing costs? Everybody but credit cards, I guess.
If I don’t pay my car payment next month, it surely means my creditworthiness has changed. And if the contract I signed says the lender has the right to change my interest rates, then I had better expect an increased rate.
Or how about quick-moving interest rate or fee changes? Obama says they are unfair as the customer has no way of fighting back. I guess it would be too much effort for them to call the company and say, “Cancel my card.”
All but the most ignorant of consumers know when they sign the back of their card, they are putting themselves at risk for huge interest rates and fees. Instead of chastising the credit card industry, maybe our government should work at ensuring these financially uneducated consumers better understand how the world works.
Chances are, if you can’t understand how a credit card works and the myriad risks involved, you can’t manage your own finances and you certainly can’t run a business.
If we save these guppies from this shark attack by telling the predator to stop, won’t the next shark simply eat the little fish?
But maybe that is the way Obama wants it. A nation dependent on its government is a surefire way to ensure an ever-growing government. He is not protecting us from predatory lenders, he is campaigning.
As investors, this is a monumental problem. The markets will never reach efficiency if the government is constantly changing the rules in the middle of the game. Profits will be hard to come by and investors will suffer.
But maybe that is the way they want.
Next Article: Listen to what the market is telling you
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April 25th, 2009 at 4:23 am
If you miss a credit card payment, it does not mean that your credit worthiness has changed as your article states. It might only mean that any of a million situations took over for that one month. You don’t need to think long of a past personal situation that may have interfered with a payment not making it’s way to the credit card company on time. Death and illness are only two quick examples.
The credit card companies look for situations like these and know that they are opportunities to raise rates, resulting in what is often a doubling of the current payment.
I can certainly understand the credit card company raising rates after a pattern of missed payments that might indeed signal a decline in credit worthiness, but not after a single payment. This is not only unreasonable, but abusive and in my opinion un-American. I believe this is what President Obama is out to stop.
By one only needs to look at the situation our country is currently in with AIG, Citigroup and many other major financial institutions that partook and played in the disastrous derivatives markets to understand that regulation of financial institutions does have a place in this country.