Image by minifig via Flickr
Headlines seem to be a bit like movie titles. I understand there is no prohibition or law against using a movie title that has been used before, and I think book titles are the same. Similarly, headlines are apparently made up at the whim of editors and their staffs, probably with as much concern for space as for accuracy. Some headlines give me a chuckle. Take for instance, “Pope Condemns Middle East Violence.” Wow, that’s a shocker, isn’t it? Or how about, “As Bull Market Passes 2 Years, Rate Of Return May Slide.” There’s a revelation for you. Flash news: the market might go down. Hmm.
Image via Wikipedia
Back on February 22 there was a Globe headline, “Looking For A Credit Card?”, followed by a smaller caption, “It pays to be rich: Best rates reserved for A-list consumers”. Judging by the headline one would assume that budget-challenged consumers are being treated unfairly. The underlying AP article reveals that new legislation, called the “CARD Act“, is resulting in predictable behavior by banks. They are raising fees and interest rates, but are treating A-list customers better than ever. Why? The new legislation prohibits banks from hiking rates on existing balances or in the first year an account is open, caps late fees and requires users be told explicitly about projected interest costs if only minimum payments are made. So, the banks are scrambling to make up for lost revenue.
What is an A-list customer? It’s someone who uses their card a lot but does so responsibly and therefore has excellent credit. Presumably such users pay off their full balances each month. So, what, I ask, does this have to do with being rich? Do users pay off their balances because they’re rich, or because they’re smart? I submit that both reasonings fit equally well. Hence, a better sub-caption might have been, “It now pays more than ever to be smart with credit”. The editor’s choice of phrase is telling because it seems to assume that only the rich can afford to not carry a balance. Bunk.
Elizabeth Warren, via Wikipedia
As a nation we all stand to benefit from efforts like the CARD Act. The more sensibly consumers manage their money the more stable will be the economy and the less likely we are to have millions of future homeowners under water on their mortgages. While I favor smaller government in general, and government getting out of the education business altogether, the creation of things like Elizabeth Warren’s new Consumer Financial Protection Bureau (CFPB) is a clear exception. Anything that promotes responsible financial behavior is downright patriotic in my opinion. This is a good example of how government is needed to serve as the governor on the engine of capitalism.
Still Skeptical After All These Years 
Jim,
We’ve got to stop agreeing like this. The CFPB, much needed and appreciated, has been and continues to be under attack by Republicans and their media mouthpieces.
The latest was by the shameless Fred Barnes—Fox “News” commentator and writer for The Weekly Standard. He attacks the agency for being “powerful, hard-nosed, and unaccountable.” The fear is that the eventual director, whether it is Warren or someone else, will be some kind of dictator, going after those fair-minded banks.
Barnes quotes the usual Republican suspects, but the truth is that the CFPB’s structuring and mandate gives us real hope—at least while Democrats control the executive branch—that someone is really—really—defending the interests of consumers.
For a short critique of Barnes and Republicans on this issue, see here.
And by the way, the headline on the first photo sounds intriguing. But not as intriguing as if it said,
Duane
LikeLike
“Holy crap!”, as Ray Romano’s daddy might have said, Duane. You have out-headlined ’em all! W. R. Hurst would have liked the cut of your jib! LOL.
Jim
LikeLike
PS,
I just read your link on the “critique of Barnes and Republicans . . . ” by Simon Johnson. It is balanced, candid and worth reading. I want to recommend it to other readers. Thanks, Duane.
Jim
LikeLike
To all,
Interesting link and usual perspectives, from right and left. One wants more from government the other wants less. For me the act has been passed so I will now wait and see what happens.
I do believe the premise of the “act” was and remains wrong.
First, Duane’s link, states that “banks” caused the GR. Wrong, dead wrong in my view if by “banks” one means the buildings or web sites that I use to have direct deposits credited and withdrawals made at my direction. Even the “investments” called loans by such banks by and large did NOT cause the GR.
It was INVESTORS that put their money into bad “things” created by and large on Wall Street (but not “banks” as I describe above) INVESTMENT BANKS. Different laws and regulations applied to such institutions that did NOT apply to say Konrad’s “bank” or wherever you deposit and withdraw your own money.
INVESTORS, “investing” (buying) HOUSES was the primary cause of the GR and other elements derived from that “industry” resulted in near financial collapse of many INVESTMENT BANKS, like Lehman Brothers, which in fact “went down” and others that nearly did so.
And as I repeatedly point out “investors” are not all or nearly all “fat cats”. Each of us little guys are “investors” of a sort in our pension funds, SS checks, etc whether we know it or like it or not. When people invest unwisely, prices go up, bubbles are created and down the house of cards ultimately comes. It is a “normal” cycle of an economic “system” and call recessions which routinely happen every decade or so in the U.S.
This last one was a real “biggie” driven by lousy investments in lots of “stuff”.
Now do you want government force to prevent YOU from making a bad investment? It could be your choice to obtain a credit card. With such an instrument, everytime you use it you are in fact getting a “loan” from a financial institution. Don’t pay the debt of that loan and both you and the bank suffer the consequences.
So now some want government to step in and either disallow you from “getting a loan” or regulate to a greater degree how the banks extend such loans and/or collect the legal payments do in accordance with the “contracts” regulating such loans legally.
Every time you obtain a new credit card or buy a house or car on credit, etc you either click “yes” online or sign your name to a legal document saying that you have read and understand the terms and conditions of ANY loan from ANYONE that is in such a business.
Note the word “business” above. People conduct business to make loans to make money. People use such “businesses” to get money for “things” of their choosing.
Democrats primarily want to regulate the business end of that two party contract with little or no restraint to the other party in the contract, the borrower.
Republicans want both parties in the contract to be as unfettered as possible to serve their own best interests, get money or make money.
I have NEVER heard of a lender holding a “gun to someone’s head” to TAKE a loan, at least not legal businesses. I HAVE heard of “greedy” lenders taking legal action, strong legal action sometimes, to get “their money plus interest” back. I have also heard of lots of borrowers that have told lenders to take a hike with their high interest rates, escalating payments scales, etc and refused to borrow the money from such lenders.
Borrowing and lending money has been going on forever (since “money” was invented at least). As with most matters between individuals the more government gets “into it” the more screwed up things become. And that is particularly the case when government force takes only one side of the argument that always will occur between borrowers and lenders.
But for those that remain firm in calling for MORE government intrusion, beware, I say. PEOPLE lending money will always make money doing so or simply stop lending money. And NOTHING that government does other than get out some really big guns and start lending the money itself, will change the nature of what will remain a two party contract between individuals.
And even if government does become a “lender of sorts” guess who pays when borrowers do NOT pay back the money borrowed and interest accumulated. Why of course, dummies, it is the TAXPAYERS that ultimately become the “loosers” in that case. Just look at the TAXPAYER liabilities for Frannie Mae and Freddy Mac right now to the tune of around $200 Billion for EACH of those “quasi-government” institutions.
And those liabilities were ALL caused, each and every nickle, by someone, a borrower, that failed to uphold their side of a two party contract intially agreed upon.
Anson
LikeLike
I get where you’re coming from here, DQ. Unfortunately, purity of principle in this case is no match for clever corporation lawyers who draw up voluminous sets of “rules”, often nowadays called “Terms of Agreement”. You have doubtless encountered such things when downloading software and software updates. When is the last time you read all of a Terms of Agreement document before checking “yes, I agree”? I think I know the answer.
Such “Terms of Agreement” are ubiquitous. When Mollie and I took a guided 7-day vacation tour a few years ago I was required to agree to a similar thing before going. Having some time, I read some of it and scanned the rest. (The print was so fine I needed a magnifier.) What it amounted to of course was that the tour company was responsible for very little, whatever happened. If people took the time to read these things and objected to anything unreasonable, banks and tour companies would see them as a problem, but of course people don’t do that. These things are blindly signed because they are tedious, full of arcane legalese, and treated as routine. Credit card issuers require such things as well, as you must know. We the public are not inclined to get a lawyer every time we download software or apply for a credit card, so what are you going to do? Who is going to protect the public from unreasonable fine print if not the government?
In some distant future when the whole population is well-educated and consumer-savvy, maybe we won’t need protection, but I don’t expect to live to see that. I expect to continue to live in a world where businesses offer payday loans and instant-tax-refunds, and where you can buy your furniture now and defer all interest for five years. What a deal! You and I may not need that protection, but Barnum’s masses still do, IMHO. Such crap is financial cannibalism.
Jim
LikeLike
Jim,
No I have not always read all the terms and agreements. But I have also never been screwed by a bad loan. Wonder why that may be.
MONEY is like a ballon. Try to control how one side makes money or another side receives it and that point of the ballon changes shape. But guess what. The air in the ballon, the money, just goes somewhere else.
Government can push on the ballon all it likes and change the point of contact when it so pushes. But smart lenders, smart borrowers, smart lawyers, etc will always find a place to “go” to continue to make money or borrow it.
Note that I said “smart” people, not rich ones, poor ones, big ones or little ones, just “smart” ones and government can poke and prode all it likes to little avail. Here is yet another case where government does best when government does the least, in my view.
Interesting that I write this after my weekly lunch bunch including Konrad Heid, whom Duane cannot tolerate. He is however a very successful and “smart” banker. He was unaware of my thoughts herein. But he did point out that banks are soon going to start charging customers about $3 per month for Debit Cards. AH, those greedy bankers you say.
Well, here is his side of the story. Before recent legislation banks charged stores $0.44 per debit card transaction. Consumers never saw those charges. As a result of new legislation government is about to dictate that such charges are too high and will restrict such charges to only $0.12. Banks thus come up short 32 cents on every debit card transaction with the new government ruling.
So f… the government ruling, “they” say. Now you and I get to pay $3 every month for each debit card we use. If we don’t like that then we have to stop using debit cards.
So what next? Will government decide that $3 per month for use of a debit card is too much? Then guess what as the ballon continues to change shape everytime government pokes at it.
But like health care, THERE IS A SOLUTION. Universal, government controlled health care and now universal, government controlled banking, right!!!! Maybe we can foresee OBAMABANK instead of Obamacare. OMG.
Anson
LikeLike
Anson,
I have good reason to think that you’ve never been screwed by a bad loan for two reasons. One, the government has already mandated that the lender HAS TO TELL YOU THE APR of the loan in a section on or near the signature page and has DEFINED APR so that the lender can’t otherwise weasel-word it. That’s the law and I can still vaguely remember that “interest rate” was defined many ways before the government intervened. Two, you are smart enough and educated enough and well-read enough to ask the right questions. These include things such as, what is the APR, what is the term of the loan, how does that APR compare with other possible sources, is there a prepayment penalty, are there fees connected with missing a payment and how much, and so on.
But what about the 25% who never finished high school, or the bottom 25% who did and didn’t learn basic arithmetic anyway? Tough darts, farmer? It’s nice to bask in your own success, but it is injurious to the nation’s financial health, IMO, to tolerate predatory practices. And, speaking of that, I expect you are old enough to remember having to deal with debt problems of your sailors back in the day. I know I am.
As far as poor Konrad goes, I don’t really care what his bank charges for a debit card as long as there is true competition in the industry. I love capitalism. Banks are a business and they must decide how to compete. (I have personally changed banks because mine raised fees.) One way is to restrict their business to people with good credit scores and another is to cast a wider net, accept more careless customers, and compensate with fees. The latter is, I’m sure, exactly why the fees have to be raised, i.e., to provide a profit in spite of customer overdrafts. As a consumer I know how to react to that. (I personally avoid debit cards because they lack the protections of the credit card and they usually DO carry a fee.) Bottom line, regulation doesn’t need to mean no competition. If done right, it simply means a transparent playing field for competitors and customers alike. If Konrad doesn’t like that, then he’s hiding something. (A banker wouldn’t do that, would he?)
Jim
LikeLike
Am I too “something” to suggest that people that cannot do arithmetic should not be candidates for loans, as an entering assumption???
Someone incapable of “doing arithmetic” cannot among other things balance a checkbook or perhaps even read a credit card statement and understand it.
Yet government pushes harder and harder for “banks” to make loans to such folks. And you know as well as I do that many, but certainly not all, of those folks end up in default of big deficits on such loans.
How about a “witten test” before giving someone a loan. They “get” the test as you indicate with the loan paperwork, but do they really understand it and the impact on their lives. Of course many do not and are thus incapable of making sound financial judgments, in my view.
And yet government keeps hammering on “banks” to provide MORE written guidance in hopes of preventing potential deadbeats from becoming real deadbeats.
And guess what with some of MY sailors. They knew full well how to deal with financial matters BUT Momma, left unattended while the man was at sea “bought” her happiness with credit cards while hubby was away.
Now how in the hell does government fix that???
Anson
LikeLike