The US Senate just rejected a 15 percent ceiling on credit card rates. Here’s the link to The New York Times article. Ordinarily, I would agree with the decision.
Senators, let the markets run their course.
In this case I’m outraged. Senator Bernard Sanders, a Vermont independent, championed the cap. The debate he kick-started makes me wonder:
What’s going on with the credit card industry?
NYT: “The banking industry, which had some heavyweight representatives monitoring the vote, warned that an interest rate limit could cause a sour reaction in the financial markets.”
Norb: Sour reaction? Did I read that correctly? Citigroup is trading under $5. Bank of America hit a 52-week low of $2.53. They’re worried about a sour reaction?
NYT: Senator Sanders of Vermont “said one-third of all credit card holders are paying interest above 20 percent and as high as 41 percent.”
Norb: Is this right? If so, credit card companies are a “short.” Borrowers can’t afford to pay interest rates ranging from 20 to 41 percent. And lending at these rates is an unsustainable business model. The last I looked, it doesn’t make sense to bankroll borrowers that go broke.
NYT: “ ‘When banks are charging 30 percent interest rates, they are not making credit available,’ ” said Mr. Sanders. ‘They are engaged in loan sharking.’ ”
Norb: Are these TARP banks? If so, where’s the outrage—borrowing from Uncle Sam at market rates and re-lending at 30 percent? These rates are guaranteed to make trouble for borrowers.
Somehow, I can’t help but wonder whether there are distortions in the numbers. But that said, I’m glad the Senator from Vermont raised the issue.
The New York Times describes my novels as “money porn,” “a red-hot franchise,” and “glittery thrillers about fiscal malfeasance.” Through fiction I explore the dark side of money and the motivations of those who have it, want more, and will steamroll anybody who gets in their way.