Roll Back Interest Rates Now!

Washington has spent trillions of taxpayer dollars to bail out the Money Industry – not just the $700 billion cash life preserver, but also loans at near zero percent interest. Then the banks and credit card companies turned around and loaned us our own money at ten times the interest rate they paid, forcing us to pay through the nose coming and going.

And there’s no sign of relief. The New York Times reports that interest rates on mortgages, car loans and credit cards are reaching historical records. Credit card rates could climb another three points by the fall, according to one expert.

And that doesn’t include the endless creation of other techniques to fleece beleaguered consumers – ATM charges, minimum balance requirements, and my personal favorite, “billing fees.” That’s a fee you pay the company for the privilege of receiving a bill. To catch a glimpse of where this is all headed, just look at how the airlines are unbundling their services. Last week, Spirit Airlines announced that flyers will be required to pay up to $45 for carry on baggage.

Having abetted the financial collapse with decades of deregulatory coddling of Wall Street (PDF), Washington spared no expense to rescue its patrons. But regular Americans never got any relief.

In fact, now that Washington has declared “mission accomplished” on the economy, it's shutting down programs that were designed to benefit Wall Street but indirectly affected the rest of us. For example, last month the Federal Reserve stopped buying risky mortgage-based securities from banks – a two-year, $1.25 trillion bailout that relieved the banks of the risks of these speculation-driven investments. It was intended to encourage the firms to expand their lending. The end of this federal subsidy is one reason why experts are saying mortgage rates are going to go up.

On the very day in 2008 that the Bush Administration first proposed the $700 billion bailout, I urged that Congress slap a cap on the interest rates that recipients of any bailout would turn around and charge American consumers. And I’ve repeated that call since. But there was no quid pro quo for the public in the deal. Even in the so-called Credit Card Reform Act of 2009, Congress not only placed no cap on credit card rates, it gave the industry months in which to raise interest rates through the roof before the new rules kicked in.

Congress has gone back to work on “financial reform.” The purpose, supposedly, is to pass new laws that would prevent another financial collapse. There’s no reason why Congress can’t include some relief for Americans who are still suffering from the last debacle. My proposal: a rollback of credit card interest rates. Although there’s no reason to do it, lets be generous and let the banks and credit card companies earn three percentage points more from us than they have to pay when they borrow our money from the Federal Reserve. That would knock interest rates down to around 4%. Citibank, which is alive today only because it got $45 billion of taxpayer support, is charging upwards of 15% for its best credit card customers. Most of the other big card companies are doing the same.

Lowering interest rates would provide needed relief for tens of millions of American families, and would jumpstart the economy by stimulating more spending. No doubt some would say that we should not return to the era of “cheap money” when everybody was encouraged to spend more than they had by putting lifestyle improvements on plastic. I’m not advocating fiscal irresponsibility, but right now that argument sounds more than a little patronizing. True, some Americans got in over their heads, but the financial collapse itself was the fault of greed-driven Money Industry speculators, many of whom walked away with millions of dollars in pay and bonuses. So they’re all set; they got theirs – in fact, are still raking it in – but now average Americans are told they need to scale back at a time when many are struggling to put food on the table and might need to use a credit card to pay for a doctor’s visit? Why should Americans pay exorbitant rates to fatten the coffers of the firms that got us into this mess?

I say, roll ‘em back!

Harvey Column / Outrage / Uncategorized - 04/14/2010

One Reporter's Fight With the Fed

I didn’t know Mark Pittman, a reporter at Bloomberg News. We emailed a few times about the landmark lawsuit he instigated challenging Federal Reserve secrecy. I do know that Pittman is a genuine hero in a story which has very few.

He died too young last year, at 52. From what I gather, Pittman combined rumpled style, intellectual firepower and fierce persistence. The fight he waged to get the Fed to open its books serves as a lasting legacy and a strong reminder that one savvy, dogged person can make a real difference.

Earlier this month, Pittman’s employer, Bloomberg News Service, won yet another round in its fight with the Fed.

Federal Reserve / Martin Column - 03/31/2010

Don’t Dump the Government, Sue It!

When our government institutions fail us through incompetence or corruption – the financial collapse being Exhibit A – what is the solution? That’s the question I posed a few weeks ago.

The Tea Partyers increasingly seem to advocate getting rid of government altogether, or at least the federal government. They (and the health insurance industry) are getting a lot of mileage these days by arguing that the Wall Street debacle shows government cannot be trusted to regulate health care. It’s not a crazy argument, but their solution is.

When government fails, the answer is not to get rid of government, but to force it to work better. How?

To start, citizens should be given “standing to sue” the federal government. It might surprise you to learn that the courts have often rejected the right of citizens to go to court to enforce state and federal laws. When I worked for Congress Watch, the D.C.-based lobbying group founded by consumer advocate Ralph Nader, back in the late 1970s, one of our top goals was to make sure that when Congress passed a law, no matter the subject, it gave Americans the right to sue if a federal agency failed to enforce that law, conducted itself in an arbitrary manner, spent taxpayer money improperly, or if the law was unconstitutional. We were often unsuccessful, defeated by lobbyists for big business who hoped to later subvert the agencies with impunity. Nader has written frequently about this tool of democracy, and it’s also covered in an excellent biography of the Nader consumer organizations by David Bollier that is now available online.

Can you imagine how much economic damage could have been  avoided if citizens had been able to sue the federal agencies that unilaterally stopped regulating the Money Industry over the last decade?

A lot of Americans don’t like litigation – because they have never seen how it can work to protect their interests as consumers or taxpayers. But suing the government is a crucial, even life-saving right that is part of the law in some states, including California. For example, my colleagues at Consumer Watchdog and I sued the California Department of Managed Health Care when it suddenly started permitting HMOs to evade state laws and deny autistic children medically-necessary treatments. The agency’s misconduct began after intense behind-the-scenes lobbying by the heath insurance companies. The trial will be held this fall in a Los Angeles Superior Court and based on a recent preliminary ruling by the judge, we are looking forward to forcing this renegade agency to follow the law.

No doubt the prospect of litigation against the government raises fears of wasted taxpayer resources. But court rules allow judges to block truly frivolous cases. And I believe the costs would be more than offset by the benefits to Americans.

Standing to sue is one of many proposals for systemic reform that you don’t hear much about, because they aren’t sexy. They involve changes to the internal mechanisms of government. But if they were adopted, government would operate far more effectively and with much greater accountability to the public.

Harvey Column - 03/23/2010

Size Matters

The administration that promised change we can believe in and the highest level of transparency in history now delivers “too big to fail” banks - bigger, more complicated and secret than ever.

First, the Obama administration and the Democratic majority in Congress continued policies that assured a number of large financial institutions that taxpayers had bailed out after the financial collapse got even larger and more powerful.

Now the administration and congressional leadership have proposed a scheme that leaves the big banks in place, with a regulatory scheme that provides more questions than answers, with secrecy that treats the banking system like a CIA covert operation.

Martin Column / Too Big To Fail - 11/09/2009

Sympathy For The Devil

After all the poor bankers have been through, they can’t even go to Chicago for their annual conference and enjoy their Roaring 20s cocktail party without having to contend with a bunch of protestors.

What do these protestors want, for Pete’s sake?
It wasn’t like the bankers were partying and playing golf the whole time. A hundred of the more than 1,500 in attendance took time off to help fix up a house they had foreclosed on.

Martin Column - 10/29/2009