Big banks’ ‘briar patch’ strategy

Remember the Uncle Remus fairy tale in which Br’er Rabbit pled to his captors not to throw him into the thorny briar patch, the very place the conniving rabbit wanted to be all along? Representatives for big banks seemed to have that tale in mind when they cried crocodile tears and warned of disastrous consequences if Congress passed the so-called credit card reform bill.

The banks got their secret wish last week when Congress passed the bill and President Obama quickly signed it into law.

The bill was dressed up with seemingly consumer-friendly features like eliminating over-the-limit charges and a few other no-brainer reforms that even most Republicans supported, like advance notice of rate increases and prohibiting abuses like double-cycle billing and universal default. But some of the bill’s provisions were already scheduled to go into effect anyway by order of the Federal Reserve. Congress and the President merely jumped onto the moving bandwagon and claimed credit.

As a whole, the bill is a Trojan horse that will hurt consumers and give the banks the cover they need to make even more money at our expense. The bill left untouched the banking industry’s single largest abuse, its right to charge usurious interest. Banks locate their credit card operations in South Dakota because that state has no usury laws, and other states are helpless because the legality of the charges is determined by the law of the state of the lender, regardless of where the consumer lives or the transactions take place. Congress could have changed that, but didn’t. So, every charge that banks will no longer be allowed to levy will be made up by higher interest.

The bill also provides cover to the banks to deny credit to young consumers by prohibiting them from issuing a card to anyone under the age of 21, unless the application is co-signed by a parent or guardian or proof of ability to repay the debt can be supplied. The briar patch, indeed! Congress has imposed its elitist judgment that 18-20 year olds who can vote, drive, go to war and carry a gun are somehow incapable of making a decision about getting a credit card! It means that young people will now have to delay building up their credit. Obama and congressional Democrats hosed the very voters that supported them the most!

And let’s not forget the unrelated rider that got enacted with the bill, allowing people to bring loaded guns into national parks and wildlife refuges. Hmm, endangered species and hunting rifles. What could possibly go wrong there?

Of course, the bill’s biggest problem is its impact on our vulnerable economy. Banks will clearly extend a lot less credit, especially to the very people who need it the most. People will buy less, so businesses of all kinds will sell less, and real people will lose their jobs. The recession will get worse instead of better.

But the banks will be sitting pretty.