Tuesday, April 28, 2009

Take Off The Gloves, Mr. President

President Obama should mince no words when telling the credit-card companies to stop jacking up the rates and jacking around the American consumer. Not only does he have the moral authority - and obligation - to lecture them, he has the legal authority and duty to step in and force them to change their ways.

Much ado was made about the President of the United States forcing the CEO of General Motors to step down a few weeks ago. “Should we have a politician dictating to private industry who should run the company” was the rant. No, we shouldn’t.

But President Obama, in the case of GM, the car-makers, the bankers, the credit card companies, the investment houses and anybody else who took bailout money, is much more than a politician. He is now a de-facto member of that organization’s board of directors, representing the interests of the American citizens whose tax dollars (and borrowed money) bailed them out.

He gets a say, and he gets a big say, in how they do business, in who runs their organization, and in what policies they follow in their business model.

Anyone who’s ever owned a business that borrowed money knows exactly how big a “say” the lender has in how you run your business…whether the lender is a bank, a venture capital group, or simply a person who owns a significant amount of your debt or equity. The level at which you can compensate your key employees, the earnings standards by which you are allowed to issue dividends, the amount of other debt you can carry, and the balances you must keep on deposit are all typically dictated by your lender, if your lender has even a moderate stake in your operations.

As taxpayers, we have a huge stake in the operations of the carmakers and financial houses of America. While we call them “bailouts”, they’re really LOANS. And anybody who’s ever taken a loan from a bank knows there are TERMS with the loan.

One of the biggest mistakes both the Bush and Obama administrations made with the bailouts was the failure to act like a responsible lender, and dictate clear terms with the loans. This failure to act as a responsible lender crippled their efforts to make changes in the culture of greed and excess that brought them to the brink of ruin in the first place.

We don’t even know what most of the banks did with the billions we gave them. Has no one in congress or the administration ever parented a child? Do they not know the difference between a request and a plea? If your kid says he needs to "borrow" 200 bucks for a brake job, a different set of principles applies than if he asks for a couple hundred bucks for Badger Hockey tickets.

So take the gloves off, Mr. President. Tell the credit card companies there’s a new set of rules. Tell them it’s NOT OK to double the interest rates on their cardholders, and that until they pay back the loans, you’re not just a politician - you’re a member of their board, and will act as such.

Even the Limbaughs and Hannitys should be able to understand it, if you explain it that way.

1 comment:

  1. The good news is that some of those reforms (if requiring a band of thieves to cut back on plundering can be called "reform") are already in the works. Have been since last December when Congress, apparently overcome by the urge to do something for the rest of us, passed a brace of rule changes. It must have been the political zeitgeist because even President G. Dubya Bush did not try too hard to thwart them. Oh but the credit card industry fat cats did yeowl. The industry managed to bamboozle Congress into believing it would take two whole years for them to stop picking their customers' pockets. So the rules adopted in 2008 don't go into effect until 2010. Check out the link below.

    It certainly didn't take years for the industry to roll out such features as universal default or shortened billing cycles or Byzantine late fees, complete with arbitrary deadlines for payment. Their computers were not challenged when it came to implementing such innovations as making sure the lower-interest charges were paid before your cash was applied to stuff bought at juice-loan rates.

    This is where the congressional watchdog's teeth turn to rubber: An industry spokesman says the new rules will have the effect of RAISING everyone's interest rates by two percentage points. That's Washington-style reform for ya.