I thought that the title would get your attention.
If you’re upset by the title, well, my response will be tempered by your political affiliation. If you’re a Republican or an independent, my response is “Yes, it really is that awful. Here’s a list of some of the possible-to-plausible fallout from the CARD Act and Dodd/Frank (and its associated Durbin Amendment):
- Credit-card rates for new card-holders range from 14.72% to 20% for the range typically associated with young people to starting at 24% (and the sky’s-the-limit) if your credit rating is bad;
- Annual fees on debit cards;
- Limiting debit card reward programs;
- Creating a price cap on transactions using a debit card;
- Raising ATM non-customer fees;
- Increasing fees on checking accounts;
- Increasing minimum balance requirements for debit and checking accounts;
…and those are just the most obvious possibilities. There’s undoubtedly half a dozen that should have been listed, but weren’t.
What’s going on? Well, it’s a handy primer in why government interference in markets is something not to be entered into lightly. For the last few years Congress was run by the political party whose members are just ever-so-slightly more willing to believe in conspiracy theories about the evil, evil big banking industry and its quiet plan to turn us all into techno-serfs*. When times are good, this isn’t that much of a problem; when times are bad, though… well, that’s when the Democrats’ economic paranoia can bubble up, and the results ain’t always pretty. And so it was in this case. Regulating an industry – and banking is an industry – needs to be done dispassionately if it’s to be done at all; if you want to go in and punish groups, you end up being sloppy. The CARD Act and Dodd/Frank were both punitive bills dressed up as ‘reform:’ so it’s not surprising that the laws’ immediate targets are not going to reform. Predictable, in fact.
Equally predictable is the fallout. From, of all places, the Huffington Post:
The biggest problem with these changes is that they fly right in the face of low-income Americans. These are the people who have typically been forced to rely on prohibitively expensive alternative financial services, like prepaid debit cards, payday loans, and check cashing services. Now, they will no longer have any cheaper alternatives in the traditional banking industry.
Increasing fees and minimum required account balances is a way of saying that only those with a lot of money should be allowed the convenience and security of using a bank. And raising the bar just means that more and more will fall under the heading of “unbanked.”
Which leads one to two conclusions:
- There are far too many people in government who don’t understand that for every action there is an equal, and opposite, reaction; and
- The Democratic party must love poor people; they go through considerable time and effort to create as many of them as they possibly can.
PS: By the way… I mentioned earlier what my response was to a Republican/independent upset by the title. If you’re a Democrat, my response is simpler: “Sit down. Shut up. This is your doing, Sparky.”
Not very nice, but then I have to live in this Brave New World of semi-literate financial regulation that will be the legacy of the 111th Congress – so I don’t really care all that much.
*Because serfs, of course, are renowned in history for their ability to generate and transfer revenue. Almost as much as they are known to historians for their habit of picking up and moving to a different demesne every six months.