Credit CARD Act penalizes thrift and entrepreneurship; interchange fee controls would compound harm to consumersFebruary 22, 2010Today, the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 goes into effect. While the law, passed last May, is being hailed as a boon for consumers, it's already causing a slew of unintended consequences.
Congress should carefully consider how the CARD Act will harm consumers and entrepreneurs and revise the law’s flawed provisions. Furthermore, Congress should resist populist proposals that would further distort the credit card market, such as interest rate caps or price controls on payment card interchange fees.
The CARD Act will make it harder for consumers to get credit just as policymakers are trying to get credit flowing. Ironically, the bill will result in higher interest rates for many cardholders, because it limits the ability of banks to properly price the risks associated with cardholders who make late payments. Even...
January 21, 2010
President Obama’s proposal today to bring back 1930s-like separation of commercial and investment banks, dubbed Glass-Steagall II or Glass-Steagall 2.0, would do little to prevent the problem of financial institutions being too big to fail. What it would do is hurt economic recovery, reduce types of financing available to businesses big and small and give European and Asian financial services firms a huge competitive advantage over their U.S. counterparts.
January 14, 2010The so-called Financial Crisis Responsibility Fee is a tax in search of a target. Today, the President declared, “We want our money back.” Yet his proposed tax on financial institutions with assets of $50 billion or more would be levied on the banks that paid back the bailout money – with interest – and on institutions that may not have even taken TARP funds, while most likely exempting Fannie, Freddie and the car companies that still owe billions upon billions to taxpayers.
The hypocrisy doesn’t end there. At a time when President Obama and his administration have been cajoling banks to make more loans, this tax would directly hit that ability, particularly if it’s levied – as the President suggested today – on the level of debt an institution has. This would be contractionary and put a big crimp on economic expansion. And as a multitude of economic studies have shown, taxes on...
January 13, 2010John Berlau, director of CEI’s Center for Investors and Entrepreneurs, offers the following thoughts on what’s missing from the first hearing of the Financial Crisis Inquiry Commission:
“The Financial Crisis Inquiry Commission, established by Congress to look into the causes of the mortgage meltdown, has the opportunity to explore the mistakes of the policy and business worlds and ensure that those mistakes aren’t made again. Unfortunately, the lineup of the commission’s first hearing today indicates that the hearing will be little more than a partisan sham that skips over politicians’ own role in enabling the crisis through the government-sponsored enterprises Fannie Mae and Freddie Mac.
Testifying at today’s hearing are executives from Goldman Sachs, JPMorgan Chase and other big banks. This is all well and good, but the commissioners called no one from the mortgage giants Fannie and...
December 22, 2009If you want to see how Obamacare will hit you and your family in the wallet, look no further than the inside of your medicine cabinet.
December 14, 2009Statement of John Berlau, director, Center for Investors and Entrepreneurs, Competitive Enterprise Institute:
President Obama's twin goals of more bank loans and more heavy-handed regulation are in conflict with each other. Large financial institutions, such as the ones represented at the White House, as well as smaller regional banks and credit unions, may be holding back their lending due to uncertainty—both about the economy and about what Washington is going to do.
The House bill that passed Friday creates a new Consumer Financial Product Agency with largely undefined powers and broad jurisdiction. The bill contained a $150 billion bailout fund that would institutionalize “too big to fail,” and force prudent banks to pay hefty fees to subsidize the failure of reckless ones. This "prefunding" for the resolution bank failures are really taxes that will be passed on to...
December 9, 2009Statement of John Berlau, Director of CEI's Center for Investors and Entrepreneurs, on extending TARP for small business and on Rep. Barney Frank's plans to kill a measure providing small businesses relief from Sarbanes-Oxley:
President Obama's announcement that he will extend TARP -- the Troubled Assets Relief Program -- and keep spending its proceeds could not have come at a worse time. Credit rating agencies are looking at dropping the "Triple A" rating from the U.S. because of the trillions in spending on bailouts, stimulus and other big-government programs. The rationale put forward seems to be that because we spent this for undeserving big banks, it's only fair to spend the rest of taxpayer dollars on small businesses, But two wrongs don't make a right, and this money belongs to taxpayers, not to the favored recipients of politicians. Whether TARP funds go to small or...
October 28, 2009After months of talk about solutions that would rev up job growth and the economy, today the House Financial Service Committee may finally adopt a true bipartisan stimulus. Led by Democratic Reps. Carolyn Maloney of New York and John Adler of New Jersey, two amendments will likely be introduced to the Investor Protection Act that would truly stimulate the economy by partially liberating investors, entrepreneurs and innovators from the shackles of a seven-year-old “investor protection” law that has added billions in costs while providing little if any benefits to investors and doing nothing to prevent the recent financial crisis: the Sarbanes-Oxley Act of 2002.
Maloney, whose most recent legislative accomplishment was the Credit Card Holders Bill of Rights that was signed by President Obama in May and hailed by liberal groups, has teamed with conservative Rep. Scott Garrett, R-N.J., to...
September 29, 2009Tomorrow, 7-Eleven Inc. and other big retail chains will hit Capitol Hill to offer Congress members and their staffs a supersize serving of hypocrisy. Retailers, who rightly complain about costly government mandates in health care and other areas, are now calling for Congress slap price controls on the interchange fees they pay to banks and credit unions for services associated with the credit and debit cards of retail consumers.
7-Eleven has fine stores that offer many conveniences to their customers, but in this case, they are trying to force down the throats of American consumers a “big gulp” of big government. If Congress acts on 7-Eleven’s misleading petition to put price controls on interchange fees, consumers will pay the price through the reduction of reward programs such as frequent flier miles, and the possible return of annual fees. Credit unions and community banks will pay...
September 15, 2009
One year after the Wall Street meltdown, President Obama is touting new regulations he says are urgent for preventing a crisis like this from ever happening again.
"Obama challenges Wall Street to support his regulations," reads the headline of a story from McClatchy...