Obama cracks down on credit card companies

WASHINGTON, April 23 (UPI) -- U.S. President Barack Obama told top executives from 14 American credit card companies Thursday their days of free wheeling and dealing are over.

Obama and the Democratic majority in both chambers of Congress are moving fast to push through tough legislation to prevent credit card companies from arbitrarily raising their interest rates and require greater transparency from them.

But critics argue these measures could undercut Obama's ambitious plans to jump-start the U.S. economy out of its current depression spiral.

There is no question that scores of millions of Americans are deep in credit card debt with increasingly little hope of getting out of it unless urgent action is taken. National Economic Council Director Lawrence Summers said Sunday on NBC's "Meet the Press" that the credit card companies had deceived unwary customers and were milking them dry.

Summers said Obama was "going to be very focused, in a very near term, on a whole set of issues having to do with credit card abuses, having to do with the way people have been deceived into paying extraordinarily high interest rates that they wouldn't have paid if they knew what that they were getting themselves into."

The Financial Services Committee of the House of Representatives approved Wednesday by an overwhelming 48 votes to 19 new legislation backed by Obama that would impose on the credit card companies the reforms Obama lectured them about on Thursday. House Speaker Nancy Pelosi, D-Calif., is prepared to move fast on expediting the legislation, and it could be approved by the House as early as next week.

There is no surprise in these moves. Getting relief for cardholders and protecting them from sharp interest-rate rises is widely popular. Nine Republicans on the House Financial Services Committee broke ranks and voted for the legislation. Obama also spelled out during his election campaign his support for this kind of measure and for a credit card bill of rights to help protect consumers.

Obama adviser Valerie Jarrett said Wednesday that the aim of the new legislation would be to "promote simplicity, require transparency, demand fairness, and ensure accountability so that we can strengthen consumer protections against abusive and deceptive practices."

The Senate is moving much more cautiously so far; it has yet to craft a comparable piece of legislation. But two Democratic senators -- Sheldon Whitehouse of Rhode Island and Richard Durbin of Illinois -- are pushing a much more limited bill that would allow anyone declaring bankruptcy to write off their credit card debt if they had to pay interest rates that were at least 15 points higher than the interest paid on a 30-year U.S. treasury bond. Today, that would operate for credit card interest rates that are higher than 18.5 percent. However, that Senate bill is too cautious and narrowly focused to attract widespread popular support. The House measure can.

Throughout history, lending money at high interest rates has always become wildly unpopular in times of economic hardship and recession. The Book of Leviticus in the Bible bans all interest rates in Chapter 25, Verse 36 -- a measure that, if enacted, would wipe out any free market, capitalist economy. Jesus' Parable of the Talents, however, has often been cited as justification for bank lending and earning profits on investments.

Economic growth and prosperity are only made possible by investment of wealth and the prospects of profits generated by it. Therefore, critics of Obama's proposed reforms argue they could disastrously dry up the very credit and liquidity he is desperately trying to generate to revive the imploding U.S. economy.

Summers acknowledged Sunday on NBC that home foreclosures have soared by 24 percent and that the U.S. economy is still losing 650,000 jobs a month, as it has since Obama was elected on Nov. 4.

Reining in the credit card companies is an essential part of the Democratic economic vision of protecting the ordinary American and leveling the economic playing field. If it is perceived as bringing widespread relief, it will be an important victory for Obama. But it remains to be seen if the critics will be proved right in their warning that it could also deal a massive blow to the prospects for economic recovery.