State-enforced egalitarianism in borrowing and lending has been a key component in the economic meltdown. But Barry the Bolshevik is intent on preventing any market corrections from taking place.
Financial institutions are attempting to reverse lending socialism. That means charging clients commensurate with the risk they pose to their lenders. Or not lending to the risky. Increases in late fees and in interest rates on existing balances, as well as requiring greater disclosure—these are all necessary, and to be expected, if a correction is to occur, one that incentivizes savings and solvency.
But not if Obama can help it. At Obama’s behest,
Both the House and Senate are considering a credit card “bill of rights” to limit the ability of credit-card companies to raise interest rates on existing balances and to require greater disclosure.
“These practices need to be stopped. … They cannot continue to use and do practices that are unfair to people,” Rep. Carol Maloney, D-NY, told CBS News.
Readers discuss “Survival On the Road To Serfdom.”
Update (April 25): The federal Frankenstein’s latest folly caught Peter Schiff’s attention, and is the subject of his latest column (great minds…). Writes Schiff:
“The bottom line is that credit card lending is a very risky business. The debts are unsecured and the probability of default is high, meaning big losses should borrowers choose not to pay. In addition, should a borrower file for bankruptcy, credit card debt is often the first to be discharged. Given the risks, interest rates need to be very high to keep lenders in business.
One way to keep a lid on rates for those who do pay is for lenders to weed out those most likely to default. This can be accomplished through higher rates. Not only does this discourage riskier borrowers from taking on more debt, but it gives lenders a bigger cushion to absorb losses. However, by interfering with card issuers’ attempts to better price risk and limit losses, the government will reduce credit availability.”