Credit Cards: Democrats Eying Shylocks

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And its about time the green flush credit card industry got a mowing by our government. Deregulation of the credit card industries in the late 1970's has seen an ever increasing, out of control, spiral of higher interest rates, higher debt limits, higher tolerance for high risk card holders, followed by higher interest rates. And this spiral culminated in a bankruptcy reform law passed by Republicans to better protect the credit card issuers in the event of consumer bankruptcy filing.

Corporate usurers capable of scalping millions more families of their last available dollar in interest rates as high as 36%, has Joan and John Q. Public finally speaking up. And for good reason. No working American in need of borrowing could hope to pay off the principle on a 30 to 36% interest note, without winning a state lottery.

It is as if the hero of every Republican and many Democratic politicians was Shakespeare's Shylock, demanding interest or a pound of flesh. Or in our case, payment or suffer a lifetime of servitude paying the principle and even interest off after successfully filing bankruptcy. Shylock has been very busy in the lobbying the halls of Congress inching up those usury rates to the point that America is witnessing the highest bankruptcy rates involving credit card debt in its history. It has become a bubble, and the mortgage industry meltdown is the pin that is bursting this Credit Card bubble.

Most middle class Americans today are but a major medical necessity, or several credit card interest rate bumps, or loss of job away from filing for bankruptcy relief from creditors. And this is not news. In 2006, the FDIC reported on a conference discussing the next potential recession. In their FYI publication they reported:

...there are at least three widely acknowledged areas of near-term concern that could pose risks to the economy going forward: a spike in energy prices, a decline in home prices, and a retrenchment in consumer spending arising from record consumer indebtedness. The consequences that any of these developments might have for economic growth could range from modest to severe, depending on how events play out over the next few years.

As 'bad luck' would have it, we are witnessing all three dire scenarios unfold simultaneously. It was not really bad luck. What it was was poor management, poorer regulation and intervention, and a Republican Congress and President transfixed on the positive economic data of international corporations to the exclusion of the rest of the economy and plight of consumers. To this day, the Bush White House still reports that the economy is strong, we are just going through some rough spots.

The simple fact is that we are entering a period when those Americans with the most life savings are entering retirement years in an environment that will eat their savings away in record time via energy and food inflation, unconscionable health care inflation when they need health care the most often, and when their working children will be facing enormous national and personal debt in a global marketplace that will continue to pressure their real wages lower.

The entitlement crisis looming threatens large increases in federal taxes or widespread financial and medical hardship for 10's of millions of Americans. At at time when we should be facing this crisis with enormous cooperative and creative national effort, and larger still financial set asides to meet looming demands, we are instead exporting 100's of billions of borrowed dollars overseas to benefit poor and wealthy alike in other nations favorable to our international corporation's profitability who increasingly employ foreign workers instead of American workers.

Someone needs to take a stand and begin defending America's future and American workers, their children and their retiring parents, and it has to begin somewhere. I can't think of a better place to begin than the usurers profiting from 30+ percent interest loans to millions of persons who should never have been issued unsecured debt in the first place. If this sounds familiar, this is precisely what critics have been saying about the sub-prime mortgage lenders who saw such profitability in lending to borrowers sums they could never hope to pay back a few years down the road.

The Credit Card lenders of usurious rates like Bank Of America who lured consumers in at 7 to 12% credit cards only to raise those rates to over 30% as credit limits were approached following President Bush's plea for help from consumers in supporting our troops by going shopping. It was a bubble or house of cards that has been building since the deregulation of the industry 3 decades ago.

And the Bankruptcy Reform of 2005 (PDF) is not going to save millions of Americans or lenders as consumers find themselves through unexpected life events turning to creditors out of desperation at any interest rate to buy that needed replacement vehicle, or pay those enormous uninsured medical expenses, or those months of gravely reduced income while looking for another job to replace the one just outsourced to India, China, or Malaysia. The cure is going to feel like the loss of a pound of flesh in one cutting. If only politicians would embrace an ounce of prevention as their guide, instead of a pound of cure, they would not find themselves apologizing for their Shylock campaign donors.

Yes, it is time our government turned an inspecting eye upon the Shylocks of the Credit Card industry, as they should have turned an inspecting eye upon the sub-prime mortgage industry back in 2006 when the FDIC reported this could have a very bad outcome.

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This page contains a single entry by David R. Remer published on May 8, 2008 2:53 AM.

Suffrage: Not what we expected. was the previous entry in this blog.

GOP Out: Voter's Defense Guide is the next entry in this blog.

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