In the Money Crew Rams Viewers Like a Bus With anti-Banking Bias
While Serwer agreed with Mierzwinski that the newly-enacted minimum balance requirement is a good policy because it forces heavy credit card spenders to pay back more of their debt each month, he also tag-teamed with him to attack the banking industry, asking why Congress doesnt impose a national cap on interest rates.
Why not regulate the interest rates that the banks charge on these cards, the CNN business contributor asked Ed Mierzwinski, consumer program director for Ralph Naders advocacy group. It's usury, you know, its seven, 16 percent APRs why dont they attack that, demanded the Fortune magazine editor, echoing Cafferty.
USPIRGs spokesman replied that federal courts have ruled that credit cards companies are governed by state law based on where they incorporate, so that a bank can move to South Dakota where there are no usury ceilings and treat everybody around the country as if they lived in South Dakota with those bad laws.
Mierzwinskis argument rang hollow. South Dakota may have no usury law, but credit card-holders enjoy rates similar to the nationwide average, according to figures available from BankRate.com.
Additionally, economists argued that to impose an interest rate cap would do more harm than good. The Federal Reserve Bank of Chicago explained on its Web site that when the legal ceiling is below the market rate of interest, the regulation can affect the market outcome. An interest rate cap at about seven percent, for example, would lead to a credit crunch. [E]stablishing a lower-than-market interest rate by means of a usury ceiling will also bring about a decrease in the quantity of credit supplied. Given lenders costs, the amount of credit they will provide when the interest rate is held down is limited, according to the Chicago Feds Web page.
Towards the end of the interview, Mierzwinski whose political leanings were never disclosed by the In the Money team charged that marketing practices of credit card-issuing banks were deceitful and dishonest before plugging a USPIRG Web site critical of credit card issuers. At no point in the program was a banking industry representative brought on to challenge the anti-industry views pushed by USPIRG or to talk Cafferty down from the ledge, or out of the bus lane, as the case may be.