1:31 PM, May 14, 2009
President Obama is using a town hall meeting in New Mexico today to make two points on credit:
- The U.S. needs to get serious about kicking its borrowing habit --
- but banks shouldn’t be able to make credit card borrowing any harder on consumers.
Anyone see a disconnect here?
From Bloomberg News:
President Barack Obama, calling current deficit spending "unsustainable," warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.
"We can’t keep on just borrowing from China," Obama said at a town-hall meeting in Rio Rancho, N.M., outside Albuquerque. "We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt."
Holders of U.S. debt will eventually "get tired" of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. "It will have a dampening effect on our economy."
He’s right on all counts. The day of reckoning for massive federal deficits is out there, somewhere.
Yet at the same meeting, Obama pressed Congress to send him a bill restricting banks’ ability to boost credit card rates and fees.
Obama called on Congress to pass a credit-card bill he can sign into law by May 25 that would clamp down on what he says are sudden rate increases, unfair penalties and hidden fees. He wants the measure to protect consumers, strengthen monitoring and impose penalties for credit-card company violations.
The House of Representatives passed the credit-card bill last month after adding a provision requiring banks to apply consumers’ payments to balances with the highest interest rates first. The bill also imposes limits on card interest rates and fees.
The Senate is debating its version today. It also would require credit-card companies to give 45 days’ notice before increasing an interest rate. It would prohibit retroactive rate increases on existing balances unless a consumer was 60 days late with a payment.
"The days of any time, any increase, anything goes -- rate hike, late fees -- that must end," Obama said. "We’re going to require clarity and transparency from now on."
I imagine that's going to be the language foreign creditors will use when they've finally reached their limits with our debt: "The days of any time, any increase, anything goes with your borrowing -- that must end."
At that point, bank late fee charges on credit cards will be the least of our worries.
-- Tom Petruno